It was quite a stunning day yesterday, as Starwood Hotels & Resorts Worldwide reported its first-quarter earnings. But the real news—surprise—was Starwood's admission that it had retained investment bank Lazard to explore a full range of strategic and financial alternatives to increase shareholder value, including the possibility that the company is sold.
This, of course, sent shockwaves through the hotel community. Who might step forward and be the buyer?
As The Washington Business Journal reports, Chris Nassetta, Hilton's CEO, took analyst questions on Hilton’s potential interest in acquiring Starwood, but each time reportedly pivoted and explained the company’s organic growth strategies, which has included, in recent time, the launch of a new lifestyle brand, Canopy, and Curio, a soft brand for independent hotels.
“Whatever brand or portfolio of brands that might be out there in play, we’re going to look at it through the lens [of], does it fit strategically and make us better where we are, and does it allow us to accelerate our growth over time,” Nassetta said. “Because whatever it is, big or small, there are always risks in doing things that are inorganic versus organic.
“The math is unbelievably compelling,” he said. “When we look at other individual brand opportunities, and we have looked at those in those cases, we usually found we were better off doing it organically, because that was going to drive better returns for shareholders. We have not seen returns that justified taking action.”
Nassetta also said he couldn’t see pursuing an acquisition in order to prevent a competitor from picking up market share. “I don’t wake up in the middle of the night losing sleep over that,” he said. “[An acquisition] is something I don’t think we should do in a defensive way ever.”
Meanwhile, Hilton’s earnings picture for the first quarter was positive, with a 22-percent increase over the same period last year. The other interesting tidbit was Hilton's acknowledgment that it would now look to launch a new brand in the economy space, “a mass-scale brand globally, with 2,000 hotels open,” as Nassetta put it.
What about Marriott International? The Bethesda, Md.-based hotel operator said its first-quarter earnings rose 20 percent on profits of $207 million, but interest in a possible Starwood acquisiiton seemed unlikely, according to CEO Arne Sorenson. Marriott, in recent times, has acquired hotel companies and brands, including AC Hotels and Protea Hotel Group.