Reporting another quarter of declining revenue, the hotel giant announced cost-cutting plans, a complete redesign of its Sheraton brand, and the cancellation of its corporate jet lease.
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Hospitality giant Starwood Hotels and Resorts Worldwide will undergo a major restructuring, the company said today, including moves to "eliminate redundancies" — often translated as layoffs — and a comprehensive redesign of its signature Sheraton brand.
The company's executives will also give up their Gulfstream IV corporate jet "because cost cutting starts at the top," said interim CEO Adam Aron on a call with analysts. "I am serious about this."
Before the call, Aron released a statement about a plan to "explore all strategic and financial alternatives to increase shareholder value." That had some analysts speculating about a possible sale of Starwood, currently valued at about $13.8 billion, to a rival hospitality company or private equity firm.
Starwood shares were trading up almost 9% in the wake of the news, hitting a record high.
Aron and Starwood CFO Thomas Mangas did not discuss the possibility of a sale on the call, but did reiterate that cost-cutting measures were in the works and would be deployed in the very near future, and that the company would stay on track with the sale of $800 million in hotel assets by the end of 2015.
"We must better manage the costs of our business," Aron said on the call. "We have an internal task force in place putting programs under a microscope to see which we will jettison and which we will sunset to eliminate redundancies and reduce our overhead costs."
Added Mangas, "We expect to implement a plan to restructure our business to eliminate redundancies and become a leaner company, which we plan to launch in the next two weeks. This initiative is expected to end in 2016, but most of it will take place in the second quarter of 2015 as we expect to move quickly with our plan."
Another part of the plan is a major revamping of the company's Sheraton brand.
"We're going to turn the company on its head and focus on Sheraton, which brings in $9 billion each year," Aron said. "Sheraton needs a boost to elevate it to a brand of choice globally and crystalize the brand standards for the hotels. We have some terrific Sheraton properties around the world and some that need some help, and we will lay out a broad and sweeping, comprehensive plan to implement in 2015."
Starwood will unveil the brand new Sheraton at a conference next month, and in the interim will also be announcing the specifics around its restructuring plan.
But something the company didn't address on the call, and showed no signs of acknowledging in the future, is Airbnb. The home rental site has chipped away at the hotel business, especially in New York and among international travelers. Even when the issue of declining revenues in New York came up, Mangas failed to mention Airbnb's impact on Starwood's properties.
"[Revenue per available room] declined in New York City, which has seen a large increase in supply over the last year," Mangas said. "We have seen the decrease in average daily rate in New York from international travelers, which we see as a result of the strong dollar."
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