By Craig Karmin
Starwood Hotels & Resorts Worldwide Inc. is launching its
first new brand in nine years, the biggest initiative the lodging
giant has announced since its chief executive, Frits van Paasschen,
left in February.
The Stamford, Conn., company will spend $20 million to launch
the Tribute portfolio, which will be made up of independent hotels
that affiliate with Starwood. Under the agreements, Starwood will
get about 10% of a hotel's room revenue.
The hotels will keep their names and get access to the marketing
and distribution network of the hotel giant, which has more than
1,200 hotels in about 100 countries. Guests at the Tribute hotels
will also earn Starwood loyalty points.
Starwood said that the Royal Palm South Beach Miami is the first
hotel to join Tribute, with hotels in four Southeastern cities to
follow. It aims to have 100 hotels in the group by 2020.
The properties "will get a powerful distribution network but get
to remain independent," said Adam Aron, Starwood's interim chief
executive.
Plans for the new brand began while Mr. van Paasschen was still
chief executive and Mr. Aron was a board member. Mr. van Paasschen
stepped down after months of tension with some Starwood
shareholders and hotel owners, say people familiar with the
situation. At the time, the company said his departure was by
"mutual agreement."
Starwood's board is searching for a permanent CEO. Many of the
company's shareholders and franchise partners believe that Mr.
Aron, a hospitality veteran and a part owner of the Philadelphia
76ers basketball team, is interested in the job, according to
people familiar with the matter.
Hotel brands like Tribute are increasingly popular in the hotel
industry because they allow giant hotel companies to expand their
reach and increase fee revenue with minimal investment costs.
Marriott International Inc. and Hilton Worldwide Holdings Inc. also
offer the affiliations with independents that the industry calls
"soft brands."
Starwood was the first of the major hotel companies to offer a
soft brand when it started the Luxury Collection, comprised of 93
luxury hotels, in 1994. Tribute is focusing on what Starwood says
will be high-end hotels that are a notch down in price.
Marriott launched its soft brand, the Autograph Collection, in
2010, and it has grown quickly to more than 80 hotels world-wide,
including the Triada Palm Springs and Cotton House Barcelona.
Hilton introduced its brand, Curio, last year and says it has
five hotels open and agreements for 23 more. Curio recently added
the Hotel Astor Saint-Honoré in Paris to the collection.
Some hotel owners have stayed away from soft brands, preferring
not to pay the fees. Other owners of branded hotels have been
disappointed that a nearby independent property can join a soft
brand and then compete for loyalty-club members and have access to
the same distribution network.
"That certainly has become an issue," says Robert Habeeb, the
CEO of First Hospitality Group, which owns hotels branded by
Marriott, Hilton and others.
Independent hotels generally have occupancy rates that are about
5% lower than similar properties that are branded, says Chad
Beynon, a hotel analyst at Macquarie Securities. Soft brands help
to close that gap by boosting group-travel business and appealing
to guests who want loyalty points, he added.
The fees associated with joining a soft brand can also be half
as much as the amount an independent hotel would pay to online
travel agents.
The chief operating officer at Chesapeake Lodging Trust, owners
of the Royal Palm South Beach Miami, say his firm partnered with
Tribute because it believed that independent hotels had more cachet
in South Beach than those that went the traditional brand
route.
But he also wanted brand support during tough times. "When the
market gets soft, the brands do much better than completely
independent properties," says Rick Adams, the COO.
Write to Craig Karmin at craig.karmin@wsj.com
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