Starwood Founder Laments the Decline of the Hotel Brand He Once Led

Starwood founder Barry Sternlicht, who left the company a decade ago, thinks the chain fell behind its peers but thinks things will turn out well in the end for the company, which is in the midst of a strategic review.

“They are not always easy to do business with,” said Sternlicht, who currently is the chairman and CEO of Starwood Capital Group, referring to Starwood. “You just can’t hand someone a form and expect them to sign it.”

Sternlicht credits Frits van Paasschen, the Starwood CEO who departed under a cloud in February, with the attention he paid to backend technology in recent years. But both Sternlicht and Jonathan Gray, Blackstone’s global head of real estate, concurred that Starwood came to be lacking in select service and other lower-end categories.

Both were addressing Starwood’s situation and other industry trends at the 37th Annual NYU International Hospitality Industry Investment Conference in New York City June 1.

Sternlicht said it could make strategic sense for another big chain to gobble up Starwood but it might not make financial sense because Starwood’s stock price is trading fairly high. He added that neither Hilton Worldwide nor Marriott International need Starwood.

Still, consolidation is taking place in “all industries,” Sternlicht said, and competition, including that from Airbnb, is making things tougher. Speaking of the Internet, Sternlicht quipped, “You can’t lie to your customers as easy as you could 20 years ago.”

Sternlicht said he doesn’t think private equity or sovereign wealth funds will make a play for Starwood, and perhaps after the review Starwood will end up making no strategic moves.

Gray of Blackstone said it makes sense for Starwood to find a merger partner as it is under-represented in select service brands, and both he and Sternlicht said it is a major trend that the hotel industry is emphasizing this sector.

Gray cited Hilton Worldwide as an example. The core Hilton brand is growing at around a 25 percent clip while sister brands Hilton Garden Inn and Doubletree are growing at around 200 percent, he said.

Gray added that he could see LaQuinta, which Blackstone spun into a public company last year, eventually merging with a larger chain.