Le Meridien, Starwood in win-win deal

Riley ... optimistic

EVEN as the Le Meridien group is being taken over by Starwood in a deal expected to close July 1, the company continues to thrive.

Testimony to that is the opening of the new Grosvenor House property in Dubai, one of 21 in the pipeline.
The merger, which splits the management and ownership sides of the group in line with international trends, will only benefit both brands, CEO Robert E Riley, who was in Dubai recently, told TTN. “The (Le Meridien) brand will end up not being burdened with property and will thrive. Starwood, too, needs another brand for the market.”
The deal is the tailpiece in a story that began with Nomura’s highly-leveraged buy-out of the group in 2001, says Riley. That buy-out left it financially overstretched just as business plunged globally post September 11. “All through, however, business has been great, it’s our balance sheet that was the problem. We’ve opened 10 properties in this period and 21 others more are in various stages of construction,” he says.
“In 2002 the group defaulted on its debt, and in 2003 negotiated an agreement to give 11 hotels back to the Royal Bank of Scotland in settlement of 50 per cent of the debt,” says Riley, who was appointed CEO in December 2003 to bring to the group some of the magic that doubled size and tripled profits for the Hong Kong-based Mandarin Oriental Hotel Group, where he was CEO from 1988-98. Starwood will buy the brand and manage all 135 Meridien properties, effectively letting the Meridien out of the hotel ownership. At the same time Starwood Capital Group and Lehman Brothers are to jointly buy the 36 owned and leased Le Meridien properties and Lehman Brothers will buy one more hotel separately.
This separation of operations and property management, Riley says, will allow the brand the Starwood infrastructure. “Hotels all over Europe are selling their assets and moving towards multi-brand companies that maximise customer offerings while rationalising costs. Loyalty programmes need to be complex, which is expensive, so once you get the customer’s attention, you want to keep it, to provide him with a solution for each of his travel needs.”
New openings to watch for are two in China (“We’re also very close to signing two additional hotel deals in that country,” says Riley), one in Bangkok with another under construction, several in India, as well as properties in Cambodia, Hong Kong, Stuttgart and Miami.
The company was also voted the brand with the best working relationship with local owners at the Arabian Hotel Investment Conference in Dubai earlier this year, the result of a survey of 525 hotel group directors and top management executives.
By Keith J Fernandez