BERLIN—Frits van Paasschen has his foot planted on the gas pedal.
A keen observer of the hotel industry’s sustained upturn, the president and CEO of Starwood Hotels & Resorts Worldwide is accelerating asset disposals and development with the aim of expanding the company’s reach throughout the globe under an asset-light umbrella.
As case(s) in point, one need only peruse the company’s recent news releases, which detail such growth goals as:
doubling the W Hotels portfolio in Asia by the end of 2018, bringing the brand’s footprint to 20 hotels and retreats;
adding an additional 50 hotels to the group’s existing portfolio of 82 in the Middle East/Africa region during the next five years;
hitting the 100-hotel mark in Latin America, a market in which Starwood has 71 hotels in operation; and
increasing the company’s presence in Europe by 30%, or 50 additional hotels.
Frits van Paasschen
Starwood Hotels & Resorts Worldwide
With regards to Europe, van Paasschen said the market is “still very interesting” despite persistent financial turmoil.
“While the economic situation in Europe is still somewhat uncertain—and I suppose that’s a nice way of putting it—but even with that you have global companies that are very strong … that have tremendous demand for travel,” he said during a break at the International Hotel Investment Forum earlier this month.
Van Paasschen added, “There will never be another place in the world to go to like London, Paris or Rome. And as more people around the world come into means to be able to visit, those kinds of cities are on their list. So our business in Europe, in spite of the difficulties even over the last few years, has held up pretty well.”
Starwood already has 31 projects signed and ready to go in Europe. “We could easily see our way to another 20 to add to that,” he said.
The company has 163 projects already open in 32 European countries, with a global footprint of more than 1,100 properties in 100 countries.
Dialing into Dubai
Building off the success of the company’s temporary relocation to China during July 2011, van Paasschen is guiding his executive team through a similar exercise in Dubai.
“My own philosophy is that when you do something like this it’s not to oversee the business better that’s there. … The goal is to make sure that the mindset of the center of our company is focused on what that team needs and to develop a dynamic where our local teams are very vocal about the opportunities that they have and ways that we need to adapt the way we work,” he explained.
“The logic for China was very clear. As it turns out, I think the logic for going to Dubai is equally compelling—and not just because … we have more hotels in Dubai than in any other city outside of New York. But Dubai is a shining example of what we’ve been calling the ‘dawn of a new golden age in high-end travel’: the creation of wealth in so many markets around the world, the creation of demand for high-end travel as a result of that, the fact that so many businesses today may be based in mature, low-growth markets seeking growth in rapidly growing markets around the world. All of these things are creating a travel intensity that’s much greater.
“There’s no better place to see as a crossroads of that than Dubai, where within an eight-hour flight you have two-thirds the world’s population and it’s functioning literally as a crossroads between China and Africa where trade has increased tenfold over the last decade, or between Southeast Asia, Australia and Europe. So it’s an exciting place to be,” van Paasschen said.
Spending a month in the emirate is also bolstering Starwood’s relationships outside of it.
“It’s also an exciting place to meet with partners who have capital not only for their own market, but for ideas and investment in North Africa, other places in the Middle East, certainly in Europe and the U.S.” van Paasschen said.
“We’ve been very clear that we want to get to an asset-light position,” the CEO said when asked about Starwood’s ongoing asset disposal program.
Van Paasschen’s goal is to have 80% of revenues be fee-based. Today, the company is closer to 62%, he said.
But Starwood’s executive team is making progress, selling off more than $1.3 billion worth of assets during the past three-and-a-half years.
“We still have a considerable amount to go,” he said. “As the market improves, it certainly makes it more likely that we would be able to sell more assets more quickly. I say that with some caution because one never really knows what’s going to happen and in the end it depends on individual assets.”
And if not individual assets, then entire portfolios of them. Van Paasschen pointed to a swell of recent portfolio sales as evidence of the investment landscape picking up steam.
“We’re now at a window where a few things have come together. First of all, the outlook for 2013 is slightly less uncertain than 2012. People have more confidence in what’s happening,” he said.
“The second is interest rates are still low, and there is long-term talk of interest rates rising. And there is a pent-up demand for transactions both on the seller and the buyer side. People are waking up in 2013 and saying, ‘Wow, there’s a market there. I can borrow money. The world looks pretty good. I haven’t done a deal in a long time. Maybe this is a time to do it.’”
When asked if some of Starwood’s assets could be packaged together in a similar transaction, van Paascchen did not rule out the possibility.
“If the transaction market continues to blossom as it appears to be doing, and given our desire to sell hotels and sell them more quickly than we have, we should be able to pick up the pace.”
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