As part of its asset-light strategy,
Starwood Hotels & Resorts Worldwide Inc.
) recently closed the sale of the 97-room W New Orleans property
Chesapeake Lodging Trust
) for $25.5 million. Post sale, the property will continue to
operate under Starwood's W brand.
The asset sale is part of Starwood's long-term strategy to
strengthen financial flexibility, which in turn will maximize
shareholder value. The company aims to unlock real estate value
by giving away ownership of selective assets. A higher
concentration of franchise fees reduces earnings volatility and
provides a more stable growth profile.
Since late 2010, transition to an "asset light" business model
has gained momentum in the hotels and REIT industry. Many of
Starwood's close competitors such as
Red Lion Hotels Corporation
Morgans Hotel Group Co.
) have embarked on this strategy. Companies intend to use the
sale proceeds to invest in brand positioning as well as
restructure the company's balance sheet that includes paying off
The property was acquired by Starwood in 1997 and converted into
W New Orleans - French Quarter in 2000. It underwent extensive
makeover prior to its sale. In the last two years, Starwood
offloaded properties like St. Regis Aspen, the Westin Gaslamp
(San Diego), W City Center (Chicago), and the Boston Park Plaza.
Management indicates an increase in buyers' interests, which
coupled with improving lodging industry fundamentals will lead to
future asset sales. Starwood currently retains a Zacks Rank #3
CHESAPEAKE LODG (CHSP): Free Stock Analysis
STARWOOD HOTELS (HOT): Free Stock Analysis
MORGANS HOTEL (MHGC): Free Stock Analysis
RED LION HOTELS (RLH): Free Stock Analysis
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