Hotel Management sat down with Simon Turner, Starwood Hotels and Resorts Worldwide's president of global development, at ALIS, in January, for an in-depth discussion of Starwood's development plans, it's ongoing property sale strategy and his career in hospitality. Below is a truncated version of the story. To read it in its entirety, please visit our digital archives, via this link.
Unlike some, Simon Turner, the president of global development for Starwood Hotels and Resorts Worldwide, is quite content doing what he does. He harbors no dreams of trying his hand as an artist or running for elected office—and he never imagined playing striker for Manchester United (he is, after all, a Brit). No, real estate is what gets his blood pumping—it’s his raison d’être.
“It’s nice to roll up your sleeves, kick some dirt around on a site and get some mud under your fingernails and really test yourself as to how to make an investment work for an owner,” Turner told Hotel Management during the Americas Lodging Investment Summit in January.
THE EARLY YEARS
The latter portion of the 1980s was a freewheeling time in finance: high risk, big bucks. In 1987 Oliver Stone released “Wall Street” and spawned a generation of Gordon Gekko wannabes. The allure was not lost on Turner. “The siren of Wall Street got me,” he said. That year, he took a job with Salomon Brothers, ultimately leading the company’s hotel investment banking unit.
He was there nine years before making yet another move. This time he teamed up with Chuck Henry, a classmate of his at Cornell, who in 1994 founded Hotel Capital Advisers. In doing so, Turner came in contact with one of the hotel industry’s more notable real estate owners. That’s because Hotel Capital Advisers was explicitly set up to manage the hotel investment affairs of one man: Prince Alwaleed Bin Talal of Saudi Arabia, who has interests in such hotel companies as Four Seasons Hotels & Resorts and Fairmont Hotels & Resorts. (Of Prince Alwaleed, Turner said he had a knack to be able to sit in a room full of people, extract the best opinions, synthesize them and come up with the best approach or plan.)
Turner’s biggest role with Hotel Capital Advisors was developing the famed Four Seasons George V in Paris. “It’s a crown jewel,” he said. “We took an existing classic hotel, ripped it apart and reassembled it.”
In 2008, Frits van Paasschen, the CEO of Starwood Hotels and Resorts Worldwide, phoned Turner. He picked up, and six years later he remains with the Stamford, Conn.-based company, leading its global endeavors, both developmental and transactional.
Today, one of his most pressing duties is following through on Starwood’s asset-light approach, a strategy that calls for disposing of owned real estate and instead concentrating on fee-generation business from management and franchising. One of the latest examples of this is Starwood’s $213-million sale of the St. Regis Bal Harbour in January to a unit of Qatar’s Al Faisal Holding Co. Starwood will continue to manage the 207-room property, a key point, Turner said.
Starwood does have a systemized, established approach when it comes to selling assets. Consider the sales of four W hotels in Chicago and New Orleans to Chesapeake Lodging Trust, all within the past three years. “We look at our portfolio and we know where capital is coming from,” Turner said. “In the case of Chicago and New Orleans, we said these are top 10 markets, they don’t have a huge capital need and REITs are filling up with cheap capital looking for places to deploy it.”
What Starwood did was send what Turner called a rifle shot to the five REITs it thought would be the most aggressive payers from a price standpoint and who had a like-minded vision for the future direction of those assets. Chesapeake won out. Turner likes doing business with REITs. “[They] are great owners,” he said. “They have a long-term hold mentality, know the industry and push us to be a better manager.”
Starwood’s trophy assets—The Gritti Palace in Venice, The St. Regis Florence, The Imperial in Vienna, to name three—may be more in the purview of sovereign wealth funds and high-net-worth investors, Turner said. “There is a real desire to allocate their capital in safe havens,” Turner said, counting the U.S., where Starwood owns The St. Regis San Francisco, as one of those.
As Turner steers Starwood along its divestment path, he is also guiding its brand growth. In 2013, Starwood signed a total of 152 new hotel management and franchise agreements, which represents an increase of 16 percent over 2012 signings levels. Further, nearly 75 percent of the company’s development pipeline and 60 percent of the 2013 signings were in fast-growing markets, including Bangladesh, Malaysia, Indonesia, Colombia and Saudi Arabia. In China, where Starwood has 130 hotels, the pipeline is close to 100 hotels.
Geographically, Starwood did about a third of its deals in the United States, 50 percent in Asia Pacific and the remainder in Latin America and EMEA. Turner said his pipeline nirvana is to have the spread be more even. “It’s never going to be perfect. You never know what’s going to happen, so I want a balanced portfolio approach,” he said.
In emerging markets, growth predominantly is via managed new builds. In North America the growth vehicle has been franchised conversions. “In Europe, we are seeing more franchised and conversion growth,” Turner said.
Starwood also relies on its Starwood Preferred Guest program to dictate expansion. “There is demand for Starwood properties where we don’t have a presence,” he said. “There’s a list and that’s driven from the guest side.”
W, for instance, which is close to 50 hotels strong, isn’t in Tokyo. There isn’t a big-box Sheraton in Washington, D.C., or a Westin in London. The message is clear. “There should be,” Turner said.