• Platforms – Starwood accelerates asset-light journey

Starwood has completed two significant asset sales, as it bids to further its asset light ambitions. The company has stepped up the pace of sales in 2014, already outstripping the USD248m of sales in full year 2013, when it sold six hotels. Chief executive Frits van Paasschen has promised more announcements, as soon as the ink is dry on deals.

In Australia, the company has sold its Sheraton on the Park in Sydney, yielding AUD463m from buyer Sunshine Insurance Group Corporation. The deal leaves Starwood with a long term management contract for the 557 room property to continue operating as a Sheraton.

And in Monterrey, Mexico, the company has sold its Sheraton Ambassador hotel to local Reit FibraHotel for USD13.5m, to include a comprehensive refurbishment due within the next two years. Again, Starwood will retain the management of the 229 room property for the long term.

“We are pleased to advance our asset-light strategy with the sale of the iconic Sheraton on the Park hotel and look forward to working closely with SIG to ensure its continued success,” said Simon Turner, president of global development for Starwood. “The terms of this sale underscore the strength of the Sheraton brand and the success of this hotel, as well as the tremendous value of this property in a high barrier to entry market.”

Turner added: “We’re continuing to see strong investor interest around the world for our remaining assets, and remain committed to finding the right owners and partners while securing long-term management contracts in order to create value for our shareholders.”

“Sheraton on the Park will help diversify our holdings by giving us a trophy asset in Sydney – a leading travel destination and an important financial center in Asia Pacific,” said the executive director of SIG’s acquisition team. “As Starwood’s largest and most global brand, Sheraton has cultivated a loyal following by offering travelers a stylish, comfortable atmosphere and a social guest experience.”

The Monterrey deal signals plans for FibraHotel to work more closely with Starwood on a number of new Mexican hotels. “We are proud to add the world-renowned Sheraton brand to our expanding portfolio and look forward to collaborating with Starwood on this hotel and are excited about the possibility to grow this partnership in the future,” said Simon Galante , CEO of FibraHotel. “Starwood operates many of the industry’s most well-respected and innovative hotel brands, and also has a leading operating platform and we are excited to partner with them as we grow our portfolio in Mexico with leading international brands.”

FibraHotel recently signed a development deal to add five new hotels across Mexico, and the collaboration planed with Starwood intends that these will open under Starwood’s Aloft brand. Turner added: “We very much look forward to working closely with FibraHotel to ensure the future success of this hotel and as we broaden our relationship to expand our presence in Mexico.”

Other significant recent sales include the EUR110m sale of the St Regis hotel in Rome, earlier in the autumn. At the beginning of the year, the company realised USD213m from selling the St Regis Bal Harbour in the US.

Starwood’s accounts at the end of 2013 show it still has some way to go to realise an asset light structure. Building assets stood at USD2.895bn in the books, and the company currently has 31 hotels remaining listed as wholly owned. Of these, 12 are in the US, 4 in Mexico, and 3 are in Canada. The increasing collaboration with FibraHotel could possibly lead to them taking on the 3 Westins and remaining Mexico City Sheraton, in due course. The Canadian assets include the substantial 1,371 room Sheraton in Toronto.

In Europe, Starwood has Westins in Florence and Rome, and St Regis or Luxury Collection properties in Florence, Venice, Seville, San Sebastian, and in Salzburg and Vienna. As the markets in Europe lift, so Starwood will be hoping to attract further investors who are happy to hold mature assets that leave Starwood managing the buildings.

 

HA Perspective [by Chris Bown]: Starwood is a long way behind peers such as IHG, when it comes to moving to an asset light structure. Even setting aside the need to invest directly to support the introduction of newer brands such as Aloft and Element, there is clearly more than USD2bn to be released from sales – for return to shareholders in one form or another.

There is plenty of cash around for investing into hotels right now. But finding buyers who are interested in the long game, and don’t want to impose their own (often Asian) imprint on the building, is a tougher call. Partners such as FibraHotel are harder to find in the mature European markets.

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