Arne Sorenson, Marriott International’s unflappable president and CEO, nimbly navigated
In a nutshell, he said Starwood doesn’t fit the profile of a typical acquisition target for Marriott—of which there have been many in recent years (see: AC, Gaylord, Protea and Delta).
What was lacking in that answer was what he thought would become of Starwood regardless of Marriott’s interest.
Sorenson has one of the most astute business minds in this industry. His role also grants him a level of perspective and insider knowledge that many pundits lack—this wayward journalist included.
So imagine my delight when Sorenson pulled out the proverbial crystal ball during a “hard talk” (I always laugh at that descriptor in conference programs) on Wednesday at the Arabian Hotel Investment Conference in Dubai.
The way Sorenson sees it, there are four potential outcomes for Starwood:
1. Marriott or Hilton Worldwide Holdings acquires it
He included Hilton because, well, Marriott and Hilton are perhaps two of a very small handful of public hotel companies with the balance sheet and clout to pull off such a transaction.
Just don’t count on it. Both Sorenson and his counterpart, Hilton’s Chris Nassetta, publically and thoroughly downplayed the likelihood that either would actually pull the trigger.
2. Starwood acquires another company
This one caught me by surprise. While Starwood Chairman Bruce Duncan made clear the company was exploring all options, I never considered this to be one of them.
Sorenson said it could make sense for a company that boasts a strong portfolio of select-service brands but lacking in the higher-end segments. It’s no secret Starwood’s own select-service brands (Four Points, Element and Aloft) have been received less than enthusiastically in the market. There are only 300 of them combined. Hilton’s powerhouse Hampton brand, by comparison, has more than 2,000.
It’s also no secret Starwood’s strength lies in luxury with the W Hotels, St. Regis and The Luxury Collection brands.
By acquiring another company with proven select-service slate, Starwood could definitively answer that nagging question of unit growth once and for all.
3. Starwood gets snagged by a buyer from the Middle East or Asia
There’s certainly enough capital to go around among the sovereign wealth funds and other investors who have made similar splashes with big investments. Sorenson sees Starwood as an ideal inroad for a first timer to the hotel industry who wants to enter in a big, big way.
4. Steady as she goes
Just because Starwood is exploring strategic alternatives does not mean the company’s board will act on any of them, Sorenson said. They might very well maintain the current ownership structure, aside from perhaps spinning off owned assets into a real estate investment trust.
“I think they’re all potentially likely outcomes, except maybe the first,” Sorenson said in closing.
Before I close here, let me add one other: While Sorenson suggested Starwood might scoop up another public company with a strong select-service brand portfolio, I think it might be the other way around. Without naming names, I can think of two or three companies that would find synergies in such a move. And they wouldn’t have to give up control in the process.
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