Slower than expected growth has led to the resignation of Starwood Hotels and Resorts chief executive Frits van Paasschen in February this year. The hotel group is replacing him with a new leader to accelerate Starwood’s growth and focus on the implementation and improvement of its expansion plan.
Starwood’s net profit for Q1 this year fell 27.7% y-o-y to US$99 million, and 2.9% lower than the previous quarter, according to its Q1 fiscal report. By comparison, Hilton Worldwide Hotels Group’s Q1 revenue exceeded analysts’ forecasts and Marriott International also reported 20% growth in its overseas operational revenue in Q1 this year.
Previously, Starwood was expanding overseas at a faster pace than other hotel groups, and had built up half of its 350,000 room inventory outside of the US. However, Starwood’s Sheraton brand, which accounts for 40% of the group’s total room count, is now losing its market share amid fierce competition.
In China, Intercontinental, Marriott and Hilton are upping the ante in the luxury hotel segment as well as carving out significant territories in the mid-range hotel segment. Yet Starwood’s growth in the mid-range hotel segment is lagging behind. For example, it opened only 20 Four Point hotels, less than half of Holiday Inn’s openings, and no t even 10 Aloft Hotels, far less than the number of Holiday Inn Express's openings.
Starwood’s president and CEO Bruce W. Duncan said: “We are considering every option and will have to spend some time to assess the opportunities before us and bring the best results for our shareholders, business partners and affiliates.” Starwood’s sliding profits and slowdown in growth has led many observers to believe it will seek an external buyer. However, Hilton and Marriott, by all accounts, have shown no interest in acquiring Starwood, which leaves only IHG as a potential buyer.
On May 12, Starwood announced major changes to the management teams of its 10 global brands. It let go of its senior vice president for original brands and shared services and the global brand leaders of Sheraton hotels and Tribute Portfolio, St Regis, The Luxury Collection and W Hotels. Only the brand leader of Specialty Select brand - Brian McGuinness and global brand leader of Westin and Le Meridien- Brian Povinelli were kept on.
Starwood acting CEO and director Adam Aron will be hard pressed to pull the group out of the doldrums and its inability to break into the mid-range segment.
It has now been announced that Nong Xia will replace 30-year veteran Jing Qian to head of expansion in the greater China mid-range hotel market. Mr. Xia has previously displayed excellent leadership and negotiation skills in directing and implementing 65 successful Hyatt projects. He has also successfully launched Hyatt’s Select Service brand in the Chinese market.
As one of the top three international hotel brands in China, Starwood is hoping for a new lease on life after 30 years in China.
Meanwhile, the industry will be closely watching Mr. Xia to see if he lives up to expectations.(Translation by David)