Skift Take

Starwood is a leader in the lifestyle sector, but its international footprint and select-service room volume falls short of its competitors' at a time when the entire industry is looking forward to greater growth and profits.

News of Starwood Hotels & Resorts CEO Frits van Paasschen’s resignation surprised the travel industry Tuesday morning.

Van Paasschen was considered a leader in the hospitality industry and had led the lifestyle hotel group for eight years before a “mutual agreement” with the board of directors led to him stepping down.

The hotel group also announced that Starwood board member Adam Aron would take over as interim CEO until a permanent replacement is found. Aron has been on Starwood’s board since 2006 and has previously held CEO roles at Vail Resorts and Norwegian Cruise Line.

Related: Read Skift’s interview with former Starwood CEO Frits van Paasschen here.

A conference call led by Aron cited the need for better execution, greater room growth and a broader footprint as the driving factors behind the company’s decision. There was no disagreement over the strategy, according to the call, but a need to put the right team in place to deliver on it.

“It’s something that’s been building over the past few months,” Aron said on the call. It was decided over the weekend that now is the right time for van Paasschen to step down.

Net room growth was 2 percent in 2014, well below the target of 4 percent to 5 percent.

During the full-year earnings call on February 10, van Paaschen said, “As we mentioned on recent calls, this was driven by three factors. Longer development times and important growth markets like China, fewer in the year for the year conversions and a higher proportion of Select Serve hotels with lower average room count.”

Starwood also announced during the call that it was spinning off its 22 timeshare resorts into a separate and publicly traded company. The timing of van Paaschen’s departure was in no way related to the time share announcement, the company says.

Aron also touched on possible brand expansions saying that Starwood is not as strong in the select-serve market as some of its competitors. Aloft and Four Points are considered entry points to the brand, but room volume for these are below the select service brands of their competitors.

The company has formed a search committee that will look internally and externally for CEO candidates. Aron; however, was emphatic in saying that he plans to take action for however long his interim role lasts.

“I have no intention of merely being a caretaker,” he says.

The decision comes two months after InterContinental Hotels Group agreed to acquire Kimpton Hotels & Restaurants for $430 million. An acquisition by Starwood would have expanded its inventory by 133 hotels and strengthened its position in the boutique and lifestyle market.

During the third-quarter earnings call in October, van Paasschen said that acquisitions would be “key is to find new ways to accelerate our growth in the specialty select segment in North America and that’s something that we’re intent on doing.”

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Tags: starwood

Photo credit: Starwood Hotels CEO Frits van Paasschen rides his bicycle in New York's Central Park, Tuesday, Oct. 8, 2013. Richard Drew

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