Starwood founder plots return to combat ‘digital disrupters’

Starwood founder plots return to combat ‘digital disrupters’

By Cmichel67 (Own work) [CC BY-SA 4.0], via Wikimedia Commons

The founder of Starwood Hotels and Resorts more than 20 years ago is staging a come back to combat digital disrupters such as Airbnb and OTAs like Expedia.

Barry Sternlicht, who left the group in 2005, has since built up real estate investment firm Starwood Capital with $51 billion-worth of assets under management.

He has also created ultra-niche, design-centric chains in the US and UK, in an attempt to cater to the individualism of modern travellers.

The strategy is a response to an industry threatened by the likes of home share site Airbnb and online travel agents, such as and Expedia, which have undermined brand loyalty in the hotel business, according to Sternlicht.

“To defend against the Airbnbs and the internet, you have to create distinct experiences,” he told the Financial Times.

“Consumers are too smart and it’s too easy to check if it’s a good Marriott or a bad Marriott. In a world that’s getting hyper-competitive, you have to create a more differentiated experience or you are simply a commodity. A lot of hotels have become commodities and they became indistinct from each other.”

Starwood Capital has attempted to create a distinct offering in the UK by acquiring about 40 city centre and country estate hotels, and spending £200 million to reinvent them over three years.

They are now being rebranded as the Principal Hotel Company.

The aim is to restore landmark “grande-dame style” hotels to their former glories, suffusing them with old British glamour to attract foreign travellers seeking venues with a sense of history, Sternlicht said.

At the same time he believes he can modernise the hotels’ bars and restaurants to appeal to well-heeled locals — turning them into vibrant “social centres”.

Principal will open hotels in Manchester, York and Edinburgh in November, each one in a building more than a century old.

Others undergoing renovation to be reopened next year include the Hotel Russell in London, and the Grand Central Hotel in Glasgow.

Sternlicht is also behind openings in New York and Miami under the 1 Hotels label, an eco-friendly chain that features plants on the walls.

As chief executive of Starwood Hotels, Sternlicht took over Westin Resorts & Hotels Worldwide and ITT Corp, which owned the Sheraton chain and the St Regis hotel in New York. He later turned St Regis into a high-end chain and launched W Hotels in 1998.

Marriott International agreed a $13.6 billion deal to take over Starwood Hotels in March.

Sternlicht suggests that the larger, newly consolidated hotel groups are preparing to trigger a “war” with the OTAs, by removing their hotels from travel websites unless the online middlemen agree to significantly lower their commission rates.

He said: “When you have as many rooms as Marriott-Starwood, you can just say: ‘I’m not going to play. I’m going to give the best prices only on my website’.”

He believes that “if Marriott can pull that off . . . I think you will see more mergers in the hotel industry as they move to get more scale and do the same thing”.

But he accepts that, as a smaller operator with a new hotel chains, he will require the help of OTAs to get off the ground.

“We don’t have nearly the clout to negotiate a special deal,” he said. “We’re too small to matter to anybody. Right now, we’re not even a pimple, we’re more like the head of a pin. But we’re cute and we’re good looking.”

Too many hotel operators now suffer from “brand creep”, whereby their separate chains start to look like one another and they fail to target different customers – a criticism he makes of his former company.

“We worked really hard on separating the brands at Starwood Hotels, whether it was Westin, Sheraton, W or St Regis, and I think we succeeded. I think they have lost a lot of that . . . even W got a little off point,” he said.

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