Marriott embraces asset-light strategy

by | Apr 21, 2017 | Chains

Less than a year after finalizing a $13.3 billion acquisition of Starwood Hotels and ResortsMarriott Internationalis continuing to embrace an asset-light strategy, one that sees the world’s largest hotel operator selling off many of the properties which it has freshly acquired.

Marriott International finalized its massive landmark acquisition of Starwood Hotels and Resorts in September, giving it 30 brands and nearly 6,000 hotels spread across different countries throughout the globe. Now, however, the company’s tact seems to have shifted to what insiders throughout the global hospitality industry are calling an “asset-light” style of management.

Earlier this month, Marriott announced that it had made yet another move to push the company closer to achieving $250 million in annual cost “synergies,” or saving, associated with the aforementioned mega acquisition of Starwood Hotels and Resorts. What Marriott did, was complete the sale of its long-term leasehold interest in The Westin Maui Resort and Spa, Kaanapali, a transaction that netted $317 million for a 759-beachfront resort, which was sold to Trinity Investments and Oaktree Capital. Although those company’s motives for buying are really immaterial to a discussion of Marriott’s asset-light shift of management, those companies seem poised to invest in capital improvements that will bring The Westin Maui Resort and Spa a renovation of its Beach Tower, as well as updates for its public areas and food and beverage concerns.

What is far more relevant, is that The Westin Maui Resort and Spa is actually the second Starwood property that Marriott has sold since it completed the mega acquisition of Starwood. The first, of course, was the St. Regis San Francisco, a property that netted the company $175 million when it sold to the Qatar Investment Authority about two months after the Starwood acquisition last December.

“We are proud to announce the sale of this iconic resort property and to expand our portfolio with our strong global partners, Trinity and Oaktree,” said Leeny Oberg, chief financial officer of Marriott International. “The sale demonstrates the strength of the Westin brand and reaffirms our commitment to our asset-light strategy as we continue our merger integration.”

Oberg then went on to emphasize that Marriott is on track to sell more Starwood properties, enough to achieve somewhere between $100 million and $185 million of by the end of 2017, meaning the company will by that point likely have realize its cost synergies aspiration by the time 2017 comes to a close. Oberg also indicated that the asset-light strategy is one that his company has employed for a number of years now, and that there are 13 more hotels acquired as part of the Starwood deal that Marriott is currently evaluating.

Prior to the close of the merger, Starwood was also selling off assets in preparation for the coming mega deal. By going through with the sales of these properties, Marriott hopes to garner about $1.5 billion, money that can then be put toward growth.

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