Starwood Hotels & Resorts said it is exploring strategic alternatives, sparking speculation about a possible sale—and the potential for broader merger activity in the hotel industry. On Wednesday Starwood said first-quarter profit fell to $99 million, or 58 cents a share, from $137 million, or 71 cents, a year earlier. Revenue slipped 2.9% to $1.4 billion.
Speculation about Starwood’s future has swirled since February, when chief executive Frits van Paasschen resigned amid concerns over the company’s slow growth. Director Adam Aron has been interim CEO while the company searches for a successor.
Starwood, which controls the St. Regis, Westin, Sheraton and W Hotels brands, on Wednesday said its board has decided to “explore a full range of strategic and financial alternatives to increase shareholder value,” retaining investment bank Lazard to assist with the process. “No option is off the table,” Starwood chairman Bruce Duncan said.
Investors read the statement as Starwood being open to a takeover offer, although the strategic review could also result in a sale or spin-off of any of the two dozen hotels that Starwood will own after its previously announced spinoff of its vacation ownership business. The review could also result in an acquisition of another company or brand, say people close to Starwood.
Historically, Starwood has been a strong performer in the high-end hotel market. The company has expanded overseas faster than its rivals; roughly half of its more than 350,000 rooms are outside the U.S. Its W brand is known for having a stylish, modern edge. Starwood also has been ahead of the curve in testing smartphones as room keys at select hotels.
Starwood Hotels has only half the number of rooms of Marriott International Inc. or Hilton Worldwide Holdings Inc. And Starwood has struggled to make its mark in the limited-service hotel sector, where its rivals’ mid-market brands such as Courtyard by Marriott and Hilton Garden Inn have helped power earnings and drive growth.
Meanwhile, its Sheraton brand, which accounts for more than 40% of Starwood’s room total, has lost ground to peers. Mr. Aron on Wednesday said Starwood would soon unveil a plan to reinvigorate the Sheraton brand. “It took some time for the Sheraton brand to get in its current state and it will take some time to improve,” Mr. Aron said on the analyst call.
adapted from the WSJ