Barry Sternlicht, who founded Starwood, reacquired the name that Marriott retired and plans to re-launch next month.
The Birth Of Starwood
Barry Sternlicht acquired a number of hotel brands. Westin hotels, founded in 1930, was acquired by ITT Corporation in 1966 and sold to Starwood in 1994. Westin’s first hotel was in Washington D.C., and so was Sheraton’s, in 1937. It too was acquired by ITT Corporation (1968) and merged with their Statler Hotels in 1972, and the brand was sold to create Starwood.
They launched W Hotels and reintroduced the storied St. Regis brand. In 1999, Starwood launched Starwood Preferred Guest, tying the brands together and bringing together Westin Premier and Sheraton Club International. Westin became a preferred chain with its “Heavenly Bed” which Starwood later leveraged across brands with the introduction of the Sheraton Sweet Sleeper and Four Points Four Comfort bed, and the branding with the “Heavenly Bath” whose main innovation was a curved shower rod.
Starwood was lifestyle hotels and innovated in loyalty: they were first to market with “true redemption” (any standard room was available for redemption on points) and suite upgrades for frequent guests, if available at check-in. Starwood also innovated with guaranteed late checkout.
Extreme Wow Suite Living Room At The Former W San Diego
Eventually Hyatt added suites and late check-out, and Marriott added late check-out only after acquiring Starwood. No capacity controls on standard room awards became commonplace throughout the industry. In 2012, Starwood added breakfast (taking a cue from Hilton, something Hyatt had already done but Marriott had not) and launched innovative loyalty features like 24-hour check-in (“Your24”) and Ambassador service. Starwood’s customer service, exemplified online by William Sanders, the ‘Starwood Lurker’, was consistently top of industry.
2016 Sale To Marriott Ruined Both Companies
Starwood was unique, and hit far above its weight. It delivered lifestyle hotels and earned a revenue premium, and took care of guests. The chain owned and largely protected the brand (out of U.S. Sheraton and Four Points, perhaps). Standards were enforced, at great expense to owners. W Hotels was famous for imposing rigorous style guidelines and purchasing requirements. And when a customer had a complaint, it was common for the chain’s customer service to compensate the customer with a free night’s worth of points – and bill the property.
The chain almost didn’t get sold to Marriott.
- Hyatt was arguably the high bidder, but the complex deal structure got in the way. The Pritzker family’s shares have 10 times the voting rights of ordinary shares. While Hyatt was going to restructure their stock in order to do the Starwood deal, the restructure wasn’t really going to give this away (privileging shares held for long periods with extra voting rights).
- China’s Anbang Insurance was also outbidding Marriott consistently but eventually backed out.
Marriott used to be known for consistency. It didn’t promise much, but it always delivered. That changed with the Starwood acquisition, where it promised everyone everything. Owners were promised lower costs. Guests were promised they’d love everything about the combination. Complaints were dismissed by Marriott’s CEO as “noise around the edges” and whenever hotels let down a customer, the chain’s customer service either backed the hotel or abdicated completely. Failure to deliver became the sine qua non of the brand.
Now, under CEO Anthony Capuano, the mantra is “net rooms growth.” They try to be as owner-friendly as possible, making promising to customers but enforcing relatively little, in order to attract more property and rooms to their brands. The only thing of value they own is those brands, and they’re sacrificing brand value for short-term growth. Hence the opportunity.
New Starwood Already Has 3 Hotel Brands
Sternlicht has three hotel brands today: Baccarat, 1 Hotels, and Treehouse. He reports “working on at least one more brand.” And they all have development pipelines:
The new Starwood has plans to open 22 hotels in the pipeline through 2028, including 1 Hotels in Austin, Texas; on Crete and in Seattle; Treehouses in Manchester, England, and Miami; and Baccarats in Dubai, United Arab Emirates; the Maldives and Rome. All three brands are expected to open locations in Riyadh, Saudi Arabia, as well.
That will add to 30 hotels today, bringing the chain to 52 hotels plus any additional they sign, develop or acquire. That’s merely the size of Omni Hotels & Resorts, and doesn’t approach the scale that will make them a challenger to Marriott, Hilton or IHG. But it’s a start.
1 Hotel Brooklyn Bridge
Unclear What Ties The New Starwood Together
Starwood was an innovator in loyalty. 1Hotels offers modest rebates, guaranteed late checkout, and upgrades – plus at top tier a complimentary personal training session each year. They’ll need to exceed the offerings of competitors in order to convince guests to stay loyal, since it’s always harder to remain loyal to a smaller chain. Loyalty and additional progress to scale would be the difference-maker.
I wonder if a concentrated approach to technical innovation could be a differentiating factor.
Marriott’s acquisition of Starwood is a secondary factor to why hotel loyalty plummeted and the brands switched from catering to guests to catering to owners.
The management consulting industry (McKinsey, Bain, BCG) was in its heyday at the exact time Starwood Preferred Guest came to being. This is an industry that puts its people in hotels 300 nights a year. And the people love travel so much that they spend the other 65 nights a year in Starwood hotels at their own expense.
Management consulting is not what it used to be; clients have finally wised up to the fact they’re charlatans who deliver nothing more than a slick PowerPoint. So rates are down. FAANG tech companies pay more and don’t ask for more than 40 hours a week. Sure, you don’t earn as many points, but you can cash out your RSU for the Aman hotels that don’t accept points anyway.
Ah, like the attempts to revive Pan Am or Eastern? Those went well…
I’m still angry with Marriott for wanting Starwood for the incredibly loyal elites then intentionally being hostile to those selfsame people.
There’s some small irony in that I reached Lifetime Platinum with Marriott a few days ago – most of that came from Starwood – so now I don’t have to have a minimum number of nights anymore with an increasingly antagonistic Marriott.
@1990 – It’s worth a shot. I think I’ve flown more miles on Pan Am than any other airline in my lifetime so I have a huge soft spot for it but reconstructing it in anything close to what it was is pretty much impossible.
I have a similar soft spot for Starwood but think that it’s vastly more viable to gather or build a network of hotels. Of course it initially would be vastly smaller than the original Starwood but give it time. After all, Omni is still around, which I would have bet against thirty years ago.
Hyatt to gobble this up in 3,2,1….
@Christian
For me, that’d be TWA, and honestly I’m glad the only revival of their brand is that overpriced hotel at JFK T5. Like, please, no more. Mercy! I will die happy if I never have to connect in STL again.
Wait what!?!? I keep saying I miss Starwood they were the best. Even as a platinum/titanium for eight years and a MVC owner FK MARRIOTT. Will Starwood have the old hotels too?
Starwood’s guaranteed late check out until 4PM for its Elites at all properties was second-to-none. The properties weren’t allowed to refuse the request, which made it an extremely valuable benefit.
Let’s hope they bring this back and force Marriott (and others) to match without exception.
I’m really shocked that Marriott sold Starwood since some Marriott subsidies or holding companies I thought still used Starwood in its name. Plus, Starwood must still have some cachet with customers who’ve been traveling for a while. I guess Marriott needed the money? It probably made up for the $100 million in cuts.
I just don’t know what markets the Starwood 2.0 is going to parachute into and open a new full-service hotel. Even Hyatt isn’t doing that.
Maybe Starwood 2.0 is about acquiring smaller brands. Off the top of my head, I’m think Omni, Loews, Pendry, Outrigger, and Grand America. That’s maybe 130-140 properties. I guess the real question is whether Starwood 2.0 is about owning properties or merely managing/franchising/licensing properties.
If I were the new Starwood I would take what they have now & grow it.
and in the meantime buy up chains like Omni etc and turn it into a new fangled Westin and bring it up to current modern standards.
Just acquire some other sleeper brands and develop a killer loyalty program to turn the majors on their head.
They did that in 1999 when they burst onto the scene with a brilliant guest program in SPG
Where many hotels and guests proudly wanted to be a part of
The industry now is them against us and its frequently ugly as they shoot at fish in a barrel
hungry for earning any points or status desperately.
Eliminating breakfasts and denying late check outs too in select properties
Once Starwood exited Marriott stayed cool calm and collected and then put the screws to all their members over time..Redemption’s near doubled in many hotels .Hilton and Hyatt now frequently more expensive on points then paying!Sad
@dwondermeant: The problem is there aren’t enough Omnis out there. Look at my post above yours. If you add up Loews, Pendry, Outrigger, and Grand America, which are among the only “independent” brands in the USA, that’s maybe 130 or 140 properties.
Google tells me there are 120 Westins in the USA. The total worldwide is supposedly 220-plus.
Obviously, not all of those 130 or 150 Loews, Pendry, Outrigger, and Grand America properties could convert to a Westin-level property. Some would be nice, some would have be more mid-level. Looking at the Starwood 2.0 brands, only 1 Hotel seems like a brand that could pretty much be put anything. Of course, 1 Hotel has zero brand recognition. If I were Starwood 2.0, I’d name my 4-star hotel “Starwood” since presumably that has the most cachet since there’s a certain segment of hotel customers who still remember Starwood.
@dwondermeant: And to build business, I’d advise Starwood 2.0 to go after meetings and events since that demographic is middle-class or upper-middle-class, probably already familiar with Starwood 1.0, and may be disaffected from Marriott or another big chain. They’re probably an easy target to build a big base of loyal customers who would go out of their way to stay at Starwood 2.0 properties if they were treated well. Kind of like some of the Hyatt globalists who drive 45 minutes out of their way to stay at a Hyatt property.
@nameredacted..funny comment about fancy consulting PowerPoints
did you live under a rock during covid which changed Consulting travel forever and yeah look at big 4 revenues if your not too busy working 9 to 5 (or less).
Unsure Sheraton started in Washington DC. According to Wikipedia, “The origins of Sheraton Hotels date to 1933, when Harvard classmates Ernest Henderson and Robert Moore purchased the Continental Hotel in Cambridge, Massachusetts.”
I call horse sh-** that Marriott would be so stupid as to cough up the name “Starwood.”
Kal – yes really surprised Marriott would sell the right to use the name for hotels again
Throwback idea: Bring back the hot shops.
Location, location, location.
I suspect that Sternlicht will have been observing the wreckage of the Marriott merger with some glee. Starwood 2.0 could well work over time if the overall motive is not excessive greed over hospitality. As other say it all comes down to what he has in mind. His timing may be perfect. I would imagine there will be many out there hoping the venture is a success after the contempt they have experienced from Marriott over the years
Loyalty Lobby is reporting that Starwood 2.0 paid $1 billion for 10 Raddison Blu properties in the UK. That’s very interesting.
Marriott is somewhat bait and switch. Hilton is expect mediocre service and be happy when you get better. Really hope Starwood brings back the heyday of hotel service.
Hotel companies don’t generally own their properties anymore. Hotel companies don’t generally run their properties anymore. They essentially franchise it out and charge for using the name. Sadly, they only thing they offer is their brand but the lack of consistency and enforcement of guidelines continues to tarnish their brand. For anti-trust reasons, the Marriott-Starwood merger should have never happened. Marriott now has so much market share, that the dominate most areas. Therefore, they don’t care as much about their brand as often as their dominance in locations is their only draw.