Le Meridien Cedes Control To Starwood

White Plains, N.Y. — Starwood Hotels and Resorts has purchased $1.3 billion worth of debt from beleaguered Le Meridien Hotels & Resorts in what in all likelihood is a first step toward buying the brand.

It's unknown if Starwood would keep Le Meridien intact or fold some or all of the 126 hotels into its existing brands, including Sheraton, Westin, W, St. Regis and the Luxury Collection. A majority of the hotels are in Europe, though seven are in key U.S. cities: Chicago, Las Vegas, Los Angeles, Minneapolis, New York, Palm Springs and San Francisco.

Most industry analysts declined to speculate on the ramifications of the possible deal for meeting planners. But one, who requested anonymity, said it could strengthen Le Meridien hotels' relationships with group customers who also use Starwood properties. This could bode well for planners in their contract negotiations.

"This will give Le Meridien access to more data on a group's history, since it will be able to retrieve information from Starwood's records," said the analyst. "Hotels typically don't trust the data planners provide, and they sometimes will call the hotel that hosted the group the previous year to get this data."

A result could be the elimination of the need to call a competitor, and that could help on pricing and the overall treatment the planner receives. And it could help planners in other ways too.

"This brings added convenience because it gives planners more choices within the same company," the analyst said. "Often a group will want to go to a particular city, and a hotel company such as Starwood has to say it doesn't have any space available there. With this deal, there now will be more hotels to choose from."

Added Michelle Jones, meeting planner at Quadel Consulting in Washington, "I'm on the Starwood website all the time, so I may find information there about a Le Meridien property that I didn't even know existed. If I'm going to a city where there is a Le Meridien property but I don't know about it, I wouldn't have bothered to check."

Another possible benefit was offered by Caren Bigelow, manager of travel planning at USMotivation in Atlanta.

"If we're looking at a Le Meridien that we don't already have a relationship with, and we can now go to our Starwood global sales representative — who knows the volume that we bring to the table — to book the business, we'd likely get more concessions than if they were new to us and we were new to them," said Bigelow.

Other planners said it is too soon to say whether hotel negotiations would be impacted.

"It all depends on how Le Meridien is positioned, whether Starwood owns or just manages the hotels, and what the owner of each hotel wants," said independent planner Carol Krugman, president and CEO of Krugman Group International, a St. Petersburg, Fla., firm focused on international meetings.

For Starwood's part, it's not sure itself how it would structure its new inventory.

"We could buy and keep some of the hotels, we could make some of them Sheratons, Westins or our other brands, or we could even convert some to other [non-Starwood] brands," while possibly, but not necessarily, keeping the management contracts, said Allison Reid, Starwood's vice president of investor relations.

Le Meridien officials declined to comment.

"I would hate to see the hotels sucked up into the Starwood brands so they disappear," Krugman said. "A W hotel is different from a St. Regis, which is different from a Westin. Le Meridien is a distinctive brand in its own right."

Some people believe that Le Meridien and W hotels are both positioned as boutique brands, giving Starwood reason to tuck Le Meridien's hotels into its W line.

Bad idea, said Krugman.

"The W is hip and edgy, whereas Le Meridien caters to older travelers and has low-key service, giving it a very European feel. If they have the means to sustain the brand, that would be best," she said.

Incentive planner Bruce Tepper, vice president of Joselyn, Tepper & Associates in Sonora, Calif., said he believes it highly unlikely that Starwood will rebrand the Le Meridien hotels.

"Le Meridien already has its own, good reputation. Further, in Africa, Asia or even Europe it may be a more comfortable brand for people than Sheraton, Westin or another Starwood brand," he said.

Either way, Tepper expects the different brands to keep their contracts and policies intact, rather than blending them. "I doubt that they would try to consolidate or standardize contracts, because I could see Europeans or Asians saying on particular contract terms, 'We don't do that.' "

As an example, Tepper noted it is uncommon in Europe and Asia to receive free meeting-room rental when booking a room block, because hotels there do a lot of local function business.

Some observers just flat-out didn't like the idea of a Starwood-Le Meridien combination.

"Customers of Le Meridien might lose the personal touch that sometimes is easier to find with an independent or smaller chain than with a large company," said Tony Pastor, manager of conference services at McKinsey & Co., the New York-based consulting firm.

Anyone who feels that way should do as USMotivation's Caren Bigelow does in her hotel contracts.

"We stipulate that if there's a change of owner, we have the right to cancel, renegotiate or move the event," she said.



The Bottom Line

Right now, Starwood has gone only so far as buying $1.3 billion worth of Le Meridien's debt, in conjunction with Lehman Brothers. That allows Starwood to collect interest payments from Le Meridien and bail out a troubled company while conducting due diligence to see if it wants to take over ownership or management of some or all of Le Meridien hotels.

Starwood also could sell off Le Meridien assets. It gained the debt at a discount along with the offer of exclusive rights to determine what to do with Le Meridien.

"This is a good use of our cash right now," Reid said. "Next we're considering the best way to make Le Meridien profitable."

Le Meridien apparently has been looking to sell off its debt for some time and had been in talks with Hyatt that fell apart in November. Hyatt officials did not return calls for comment on this story.

Contact Rayna Katz at rkatz@meetingnews.com.