Marriott International has sold the St. Regis San Francisco hotel to the Qatar Investment Authority for around USD175m.
The sale, the first since the company’s takeover of Starwood Hotels & Resorts, proved that it was very much business as usual at the group, which is proceeding with the integration of its latest buy as it searches for USD250m in savings.
In San Francisco, the company will continue to manage the hotel under a long-term contract. Arne Sorenson, Marriott International’s president & CEO, said: “This hotel will remain a flagship for the St. Regis brand, a jewel in the Marriott International portfolio and one of San Francisco’s most desired places to stay.”
The group confirmed at its third-quarter results that it would continue to pursue the asset disposal programme begun at Starwood Hotels & Resorts, planning to raise USD1.5bn to USD2bn over two years. Of that, Starwood Hotels & Resorts had already completed the sale of five hotels for USD325m at the time of the results.
At that point, the group owned 15 hotels operating under Starwood Hotels & Resorts’ brands. Eight of the hotels are in North America, with the remainder largely located in Latin America. Sorenson said that he believed the group could sell the hotels for north of USD1.5bn, “with the North American assets likely to be sold relatively faster”. He added that some of Starwood Hotels & Resorts’ joint venture interests could also be sold, although a figure was not mooted.
The company hopes to make USD250m in annual general and administrative savings, with Sorenson commenting: “We’re really trying to set up the organisation as quickly as we possibly can so that the change to people is behind us and so that people can be looking forward.”
Thirteen months after Marriott International announced its plan to acquire Starwood Hotels & Resorts, the two companies are now in the process of integrating. Hotel Analyst understands that some regions of the company’s portfolio are further along in the process than others.
In the US, Starwood Hotels & Resort’s Connecticut office is downsizing, but not closing completely. In a letter to the state’s Department of Labour, Marriott International said that there would be a layoff of “approximately 163 employees” most likely at the end of the year. The local press have reported that the majority of the layoffs would be in senior management. Around 600 employees work in the office.
Spokeswoman Felicia McLemore told the Hartford Courant: “When we announced the merger in November 2015, we said that there would be some duplication of functions – mostly at the corporate level.
“We anticipate having a presence in Stamford for the foreseeable future; we will begin to explore longer term options and needs now that we have completed the acquisition. We also anticipate that many associates will find new opportunities within the company and we will be working closely with them through this process.”
The comments ring true with sources close to the deal, who told Hotel Analyst that Marriott International had been working its way through the senior employees, assessing duplications, but that the size of the combined group meant that there was a need for more staff in the lower echelons.
It is thought that part of the thinking behind maintaining the Stamford office is linked to the tax breaks that Starwood Hotels & Resorts received for moving the corporate offices from White Plains NY, which are reliant on maintaining staffing at above 400 employees and that, were it to cut further, would be repayments.
The company’s Asia Pacific headquarters is in Hong Kong. Singapore will remain open as a regional office supporting Asia Pacific Exclusive of China (APEC). Stephen Ho, who was president of the Asia Pacific region under Starwood Hotels & Resorts, is now CEO, Greater China.
In Europe, the process has some way to go, with Belgian employment law meaning that consultation over redundancies could not begin until the deal was completed. It is thought that Marriott International will close the Brussels office when the lease expires in 2017, but that employees will be offered the chance to relocate to the company’s offices in London, Zurich or Frankfurt.
The company told us: “Following the legal close of the merger, we evaluated the needs of the Europe division with the goal of optimising the business to operate as efficiently as possible, deliver sustainable growth and ensure a strong future. As such, in accordance with Belgian law, Marriott provided notice of its intent to no longer have an above-property presence in Brussels and close the office. The collective consultation process is underway.”
HA Perspective [by Katherine Doggrell]: A takeover on such a scale is never going to be a cause for universal celebration and, as Marriott International has said, the changes will be in the main at the top. Where, after all, the big wage savings are to be made.
Our source told us that, out of deference to the difficult atmosphere, Marriott International has eschewed staff Christmas Party and instead give a day in lieu. A reminder, perhaps, for many, that more days off may be on the way. The company confirmed to us that it had instructed teams to “hold departmental holiday events”.
After the dust has settled, owners and, to a lesser extent, guests, will be able to asses the new corporate culture at the combined group. Marriott International is known to have a very defined culture, one which may have made it harder for senior executives at Starwood Hotels & Resorts to make the move over, but one in which the new owner would welcome more malleable, junior staff.
There will, inevitably, be some filtering-down of Starwood Hotels & Resorts’ culture, much of which can be traced back to Frits van Paasschen, who came into the group from Nike and bought with him a focus on branding, and defending that brand, which will be critical to the group’s success as it leans on its 30-strong stable of flags.