Starwood Hotels & Resorts has affirmed its asset-light intentions, announcing the sale of the leasehold of its Park Lane hotel as well as the marketing of the Sydney Sheraton.
The news of the sale came as Chopard acquired the l’Hôtel Vendôme in Paris which, alongside Hilton Worldwide’s lifestyle launch later this year, highlights the increased competition Starwood faces in the booming luxury sector.
The leasehold interest in the Park Lane Hotel was sold to Sir Richard Sutton’s Settled Estates for an undisclosed fee. Starwood will continue to operate the hotel under a new long-term management contract under the Sheraton flag, with the hotel due to undergo a full renovation beginning this autumn.
In Sydney, fellow Sheraton hotel Park Sydney is currently being marketed by JLL, with plans for Starwood to continue managing the site after the sale. Craig Collins, CEO of JLL’s Hotels & Hospitality Group Australasia, said: “Sydney’s five-star sector is currently experiencing the best trading conditions in many years with revpar growth of over 14% for the first three months of 2014, compared to the same period last year.
“We are anticipating very strong investor interest in this asset, particularly because of its trophy status, freehold title and exceptional trading profile. It’s important to note that a number of other five-star hotels have sold in Sydney over the past two years and are now in the hands of traditionally long-term holders.
As previously reported in Hotel Analyst, Starwood Hotels & Resorts used the opportunity of their first quarter results to announce plans to sell assets, with president & CEO Frits van Paasschen commenting that the company had more hotels on the market now “than we’ve had at in any time since the crisis, and that’s in response to what we see to be a deeper and broader market in terms of hotel asset sales, as well as strong performance of our properties”.
CFO Vasant Prabhu added: “We continue to believe the market for hotel sales is becoming deeper with a larger pool of buyers and more buyers looking for portfolio deals. We have a significant number of assets on the market in North America, Europe and Asia. Our intention is to get transactions completed on acceptable terms as fast as we can.”
In Paris, one company which was buying rather than selling was jeweller Chopard, which acquired Union Hôtelière Parisienne, the parent company of the l’Hôtel Vendôme in Paris, for an undisclosed fee.
The company said: “The restaurant, on the first floor, enjoys a very good reputation, and possibilities of synergies between the two worlds are numerous …the firm looks forward to further developing this gem of Parisian hotels.” Chopard is also thought to be considering other hotel assets as it diversifies into the sector, joining the likes of Bulgari.
HA Perspective [by Katherine Doggrell]: The Kit Kat Chunky is often hailed as the pioneer of the brand extension. It is a product in its own right and has helped boost the fortunes of its parent chocolate bar – now, according to Nestle, the brand as a whole is the biggest selling in the UK.
So it was with an eye, perhaps, to the Kit Kat Chunky that luxury brands started wondering whether they were more than just jewels or coats or bags and could be hotels too. The deal between Rezidor and Missoni may be no more, but Chopard is looking to Bulgari, Versace and Armani’s adventures in hotels for inspiration in Paris, a fitting location for its first hotel.
There was no word from Chopard as to who might be running the hotel – Bulgari uses Marriott International – but one assumes even if the jeweller has existing competency in polishing objects, it will still need to be plugged into a distribution system. A possible opportunity for Starwood Hotels & Resorts then, which is shedding assets while pursuing expansion at speed.
Starwood is at least in a strong position, with established brands – unlike Hilton, which will be making its delayed leap into the lifestyle sector later this year – but with anyone under the ‘luxury’ heading now looking at hotels, competition is getting fiercer. The likes of Chopard are unlikely to have chains into the hundreds (Bulgari has only three) but, at the very highest end, they attract the customer who already has a bond with the brand.
What the high end brands may lack in turn-down knowledge, they make up for in putting themselves in front of their clientele. Louis Vuitton has a store in Ulaanbaatar in Mongolia, sited to make the most of the money rolling in from the country’s mining boom. Hotels are not as a rule slow to get into a region on the up, but they could yet learn from the retail sector.
For the operators, the risk these high-end products pose is to their very highest-end customers, the ones who shop at Louis Vuitton and the ones who all those loyalty schemes are really aimed at. In 2012 Starwood Hotels & Resorts commented that, over the previous five years, it had doubled the number of elite members and that spending per elite member was up 60%. The top 2% of its guests accounted for 30% of hotel profits, with president & CEO Frits van Paasschen commenting: “Our Platinum SPG members give us nearly 50 times the business of our average guest”. At the group’s most recent results, van Paasschen hailed the success of SPG in bringing in guests in China, much-needed as the country’s economy softened.
It pays to have loyalty, as the likes of Chopard have noticed. Although the ranks of the super-rich are swelling daily, there is still not a lot of cream at the top. Unlike the Kit Kat Chunky, which remains within the ownership aspirations of most of us, this elite is prized and there is much competition to skim it.