Spin-off Puts Starwood at the Top of the Industry

Last Tuesday, October 28, Starwood Vacation Ownership announced that the big spin-off had gone through. Starwood Vacation Ownership will be acquired by Interval Leisure Group (ILG) who also owns exchange subsidiary, Interval International. The transaction was not a total surprise. Starwood Hotels & Resorts, the parent company of the Westin, Sheraton and W Hotel brands, had announced in February 2015, that they would be looking to spin off its vacation-ownership business into a separate company. In a just released letter to owners, the company stated that the spin-off would, "put Starwood at the forefront of the industry, and would offer owners even more choices for unique and memorable vacation experiences."

Starwood offered assurances in a letter to owners that they will continue to be the exclusive provider of vacation ownership for Westin and Sheraton brands, and will still provide all the features and benefits of current ownership. Access to Starwood Preferred Guest® (SPG) program, current guidelines and fees, exchange rules reservation rights and all exchange options will all remain the same.

The letter also stated that five transferring Starwood properties are part of the transaction: The Westin Resort & Spa, Los Cabos; The Westin Cancun Resort & Spa; The Westin Resort & Spa, Puerto Vallarta; Sheraton Kauai Resort; and Sheraton Steamboat Resort. These resorts are anticipated to provide additional inventory for owners over time.

Starwood says ILG is committed to invest in new Westin and Sheraton properties. In 2016, the Westin St. John Resort is scheduled to convert 96 poolside hotel rooms into vacation ownership villas. The Westin Nanea Ocean Villas on Ka’anapali Beach in Maui, is currently under construction and due to open in 2017.

On the same day that Starwood made its spin off announcement, the Wall Street Journal ran an article that stated, "at least three big Chinese companies are competing to win Beijing's approval to bid for Starwood Hotels & Resorts Worldwide Inc. According to people with knowledge of the discussions, it could be the largest-ever Chinese takeover of a U.S. company." The article said that the Chinese government might discourage bidding for Starwood if the price is considered too high. The interest in Starwood is the latest sign of China's global ambitions in the hospitality sector. The report sent Starwood stock soaring.

In related events, around the time the spin off was first announced in February 2015, Starwood Chief Executive Frits van Paasschen, left under pressure. Paasschen failed to move quickly enough to increase the number of hotels in the Starwood system through franchise or management agreements, according to Starwood Chairman Bruce Duncan. In April 2015, Starwood hired investment bank Lazard to help the company explore strategic alternatives such as a sale or merger. Its decision to explore strategic alternatives to create value, sparked speculation of the potential for broader merger activity in the hotel industry. 

The latest news on Thursday, October 29, showed shares of Starwood Hotels and Resorts Worldwide continuing to soar following a report by CNBC that Starwood is in merger talks with Hyatt Hotels and a deal could be a week away. Hyatt management would take control of the combined company if the deal goes through. We can't wait to see what happens next! Whatever the future brings for the company, it looks like big changes are in the works.
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