Sternlicht’s sharp critique of Starwood Hotels
03 JUNE 2015 8:28 AM
Starwood Hotels & Resorts Worldwide’s founder and former CEO, Barry Sternlicht, didn’t pull punches when asked to comment on his old company’s exploration of strategic and financial alternatives.
NEW YORK CITY—Conspicuously absent from the punditry and prognostication surrounding Starwood Hotels & Resorts Worldwide’s exploration of strategic alternatives has been thoughts from the company’s original founder and CEO, Barry Sternlicht.
The now-chairman and CEO of Starwood Capital Group, which has a long history of investment in Starwood Hotels and Resorts brands, was hit with the question head-on during a general session Monday at the NYU International Hospitality Industry Investment Conference.
So, what does Sternlicht think will come of Starwood Hotels?
“It’s unclear,” he said. “The stock trades pretty well. That’s one of the biggest issues; it’s not that cheap where it’s trading. There were strategic fits for the company when I was running it. … Those may still make strategic sense.
“Whether it can make financial sense, I don’t know,” he said.
“But there are other companies in this industry that are trading rich in multiples, and (Starwood’s) brands are attractive. But I think they can be better. My version of Aloft was a different product than what came out from (Frits van Paasschen’s) administration.”
Critical of Frits
Speaking of van Paasschen, the former CEO of Starwood Hotels who resigned in February 2015 amid lagging unit growth, Sternlicht was critical of his focus on back-end systems at the expense of guests.
“They spent more time on the back of the house and less time on the consumer-fronting stuff,” he said.
That hurt the company’s standing in the eyes of consumers, he said.
As a result, “I’d say Starwood fell a little behind,” Sternlicht said. “And also they weren’t easy to do business with.”
Not easy to do business with
Panel moderator and Wall Street Journal reporter Craig Karmin asked Sternlicht what he meant when he said Starwood Hotels was not easy to do business with under van Paasschen’s tenure.
In the era of asset-light strategies, Sternlicht said, owners are the ones funding the expansion of brand platforms. The most successful hotel chains—he named Marriott International and Hilton Worldwide Holdings, among others—view these owners as partners, offering some flexibility to satisfy certain situations in certain cities.
Starwood Hotels took a more rigid approach and turned off many owners in the process, Sternlicht said.
Hotel News Now reached out to Starwood Hotels for comment but had not received a response as of press time.
Still ‘a great company’
When all is said and done, Starwood Hotels still is a potentially lucrative investment, Sternlicht said.
“It’s a great company,” he said.
“There’s scarcity of these companies in the world. Will a sovereign wealth fund come behind somebody? … Very possible. These don’t come up for sale very often. (Starwood’s executive team) may do nothing. It’s not easy to find these companies. There are very few of them,” he said.