Originally Posted by
cfabar1
I”m not convinced that Starwood’s model was unsustainable. I think that they had they been private for example, they would have been a lovely chain and been able to stay that way. As far as I know (and maybe I’m wrong), if the merger had not gone through with Marriott, Aanbang, Hyatt, etc. no one was saying Starwood should be liquidated.
I actually think that Starwood could have existed even as a smaller hotel chain if they wanted - they could have sold off Sheraton and Four Points too if they wanted and had a small network of hotels - St. Regis, Luxury Collection, Westin, Element, W, aLoft, and called it a day.
I think the bigger mistake SPG made right before the merger was the huge expansion of hotel brands very quickly - and those that had limited service benefits - the so-called “tribute portfolio”, the Design Hotels thing, and others.
The asset light model made/makes a lot of sense in the aftermath of the 2008 financial crisis. I’m curious how people will feel about that in the next recession/economic activity. These hotel chains may decide that owning the assets is more to their advantage the next go around.
Starwood was missing EPS and had mounting debt. Chasing after highly profitable limited service hotels makes sense (we've seen Hyatt do this too). No flags deliver higher average returns than brands like Hampton Inn and Residence inn do. The super-majority of Starwood stays were completed by SPG. Bonvoy has been an unprofitable venture for Marriott. Imagine what SPG was like for Starwood.
The asset-light model makes sense for these chains because it allows them to expand their portfolios quickly and massively without needing to seek leverage for / underwrite the risk for each new hotel opening. I find it very unlikely we ever shift to world where hotel chains once again begin buying assets heavily. Even Hyatt's strategy is entirely around F&M over O&L.