People like Simon Turner. And he likes them back. Starwood Hotels & Resorts Worldwide's new president of global development, British native Simon Turner, has built the reputation of an executive who stays calm under pressure; a 30-year veteran of the hotel industry who prizes relationships, and a consummate professional who can connect the dots between brand and development.
Turner, 47, joined Starwood in May 2008, after spending the last decade as a principal of Hotel Capital Advisers Inc., an investment consulting and asset management firm based in New York. During his tenure, he sat on the board of directors of Four Seasons Hotels and on the board of Fairmont Raffles Hotels International.
It is in this role that many of his peers remember Turner, as the primary representative of Kingdom Holding Co., the private investment firm of Saudi Arabian Prince Alwaleed Bin Talal Bin Abdulaziz. Included in Kingdom's gold-plated global portfolio are ritzy hotels like the Hotel George V in Paris; the Plaza in New York; and the Savoy in London. Turner was responsible for the acquisition, financing and repositioning of the George V.
“When Simon was brought onboard, I said to some of the other folks on the management team, ‘What a great hire,’” says Michael Levy, managing director in the investment banking division of Morgan Stanley. “Because Starwood is growing its business through relationships with the real estate community, it is critical if you're not going to own real estate on balance sheet to have deep, long and broad relationships within the real estate community.”
Turner characterizes his work history as international. “I've focused on hotel investments both in North America and in Europe, and elsewhere in the world,” he says. It is on this stage that the executive gained experience in global hotel development and investment management, corporate and asset joint ventures, renovations, financing and asset-management.
In the process, he has carefully nurtured and expanded his global real estate Rolodex, which could prove useful given that 60% of Starwood's current pipeline of more than 400 hotels is located outside of the United States.
As of Dec. 31, Starwood owned 69 hotels, managed 436 and franchised 437 properties scattered across 100 countries and nine brands, including St. Regis, The Luxury Collection, W Hotels, Sheraton, Westin, Le Méridien, Element, aloft and Four Points by Sheraton.
And all weapons in Turner's arsenal are likely to be needed. Like its major competitors, Starwood Resorts & Hotels (NYSE: HOT) has felt Wall Street's pain. The company's stock price closed at $12.25 per share on Feb. 17, well below its 52-week high of $56.
Indeed, economic pain has been felt keenly among hotels across the nation. The average occupancy rate among the top 25 U.S. markets was 58.7% in the fourth quarter, down from 63.7% in the same period of 2007, reports Smith Travel Research. Revenue per available room (RevPAR), a closely watched industry performance metric, fell by 10.7% in the top markets during the same period.
Against this daunting backdrop, Turner faces the task of helping Starwood meet its goal of opening about 100 new hotels this year and in building his company's reputation as the “most developer friendly of the hotel brands.”
“One of the challenges for Simon and for Starwood is how to continue to monetize those assets in this market at a price that makes sense in the world we're in, where real estate finance is extremely challenged,” says Levy. “He's got to convince those people he's been doing business with his whole career to do business with Starwood versus Marriott or InterContinental or Hyatt.”
Brand management plays a big part in Starwood's strategy, adds Paul Wischermann, president of Wischermann Partners Inc., a Minneapolis-based development consultant that completed eight projects with Starwood and has six more in the pipeline. All are Westin or aloft brands.
“[Turner] is one who can connect the dots between brand management and real estate,” Wischermann says.
Turner's developer-friendly mantra — right property, right place and right partners — should play well. Even before he arrived at Starwood, the company was gaining the reputation of a brand that listens to its owners. That policy has become more pronounced with Turner in the fold, many owners report.
C.A. Anderson, executive vice president of acquisitions and development for Arlington, Va.-based Interstate Hotels & Resorts (NYSE: IHR), who has known and worked with Turner for more than a decade, cites an example.
“One of our partners who is developing a very large aloft hotel in a suburban Washington market as part of a mixed-use development was not able to execute some of the timeframes in the initial franchise application that they envisioned due to the changes in the economy and the changes in the capital markets,” he says.
The developer-friendly solution? “Starwood extended the area of protection at no cost to the applicant, which was very important to the lender. There are other brands that are not so accommodating, even in this particular time,” says Anderson.
Being more developer-friendly hinges on brand standards and how quickly a brand requires the owner to introduce those standards. “An awful lot of what we're doing is having conversations with our closest owners and developers and saying, ‘What would it take to put the brand Sheraton on these hotels?’” Turner explains.
“I think we recognize in this capital environment that's challenging, so we need to be open to consider a phasing in of those brand standards over a reasonable period of time.”
Marty Collins, president and CEO of Dallas-based Gatehouse Capital, and a veteran developer of the W brand, Starwood's hip New York-chic luxury offering, notes that Turner is effective in marshalling resources. Gatehouse's 350-room W in Hollywood, Calif., for instance, adjoins 143 large condominiums, branded as W Residences.
W Hotel & Resorts celebrates its 10th anniversary this year, and Starwood plans to triple the portfolio to more than 60 hotels by 2011. For 2009, the goal is to open 13 properties.
“The brand creates historically a premium on pricing,” says Collins. W provides amenities and receives a license fee. “As this residential environment has become more challenging, particularly in the last year, we've reached out to the brand through Simon on ways to utilize more brand — [using] Starwood resources in helping us achieve our sales objectives.”
One helpful branding tool is Starwood's database of frequent visitors, the Starwood Preferred Guest (SPG) program. “By assisting us in the utilization of the data base for the SPG customer, which we may slice and dice in a variety of ways, that's very helpful in generating new prospects,” Collins says.
Gatehouse is working with Turner on the W Hotel & Residences in Hollywood, Calif.; the W Hotel & Residences at Glory Park in Arlington, Texas, and an aloft in Jacksonville, Fla. Over the past 10 years, Gatehouse has completed nearly $1 billion in hotel developments, primarily Starwood brands.
Launching against the wind
Despite the worldwide economic meltdown, Starwood plans to continue rolling out its trendy aloft and Element brands this year.
“I don't think anybody can overcome the global credit market, so I think that these are headwinds [Starwood] will face as anybody rolling out a brand would face,” says Levy of Morgan Stanley, which covers Starwood as an analyst and serves as a banker to the lodging behemoth. The new hotels should do well over the longer term, he adds.
Sometimes dubbed ‘W Lite,’ aloft was designed to appeal to the twenty-something crowd, the ipod consumer hanging out at Starbucks as much for its wireless Internet access as the intense caffeine rush of its coffee.
Element, the extended stay select-service brand, and the company's incubator for sustainability, has opened its first green prototype, Element Lexington near Boston. It holds a gold leadership in energy and environmental design (LEED) certification from the U.S. Green Building Council. Three Elements have opened to date and another four are slated to come on line this year.
Despite intense media coverage of aloft — and to a lesser extent Element — Sheraton is a key part of the Starwood story. In 2009, 18 Sheraton hotels in high-profile destinations like New York City, Istanbul and Prague are slated to open. Another 100 hotels will be renovated at a cost of $1.3 billion.
With more than 400 Sheraton hotels open today, the brand is an industry icon worth protecting. “We're in year three of the Sheraton enhancement plan focused on taking this brand to a new level in the upper-upscale category,” says Turner.
“A remarkable $4 billion has been invested in the brand through new hotels, major renovations of nearly 100 hotels, and a robust pipeline of hotels in key international markets.”
Over the past few years Starwood has undoubtedly been a leader in the global expansion of its brands. Again, well over half of the company's pipeline, 60%, is outside the U.S. The focus remains on the BRICs — Brazil, Russia, India and China — high-octane economies with political and economic stability.
Despite China's slowing growth, from roughly 12% in 2007, down to about 10% in 2008 with an expected growth drop to 6% this year, it is a market that Turner qualifies as “unstoppable” on a long-term basis.
“The evolution of commercial real estate in China over the past few years has been so dramatic that there are new towns, new transportation hubs, there are new centers of office development. You need to be able to service that change in the whole real estate dynamic,” says Turner.
With 50 hotels in the pipeline, Starwood remains on track with plans to double its footprint of 47 existing properties in China by 2011. In 2009, the company will open more than 10 luxury hotels throughout China, including Le Méridien Xiamen, The Westin Nanjing, Sheraton Qingdao and Four Points by Sheraton Guangzhou.
Despite much heralded success in the land of the summer Olympics, Beijing has seen some of the worst deterioration in hotel fundamentals of any major market in the world. According to Smith Travel, Beijing occupancy rates declined almost 35% in December 2008 from December 2007, and RevPAR sank 37.5% to $38.04 over the same period.
Scott Berman, a consultant who leads the hospitality and leisure consulting practice for PricewaterhouseCoopers, and Turner's classmate at Cornell's prestigious School of Hotel Administration, says he doubts that even Turner “had any sense of how quickly the industry metrics would change globally.”
But Berman adds that Turner provides an encouraging presence because of his diplomacy and his ability to remain a pillar of calm in an otherwise anxious environment.
“I think there's a natural instinct to say a development officer in this environment has no chance of success. To the contrary, I think a development officer has every chance of success,” says Berman. “His peers may not realize that he started his career at PKF Consulting,” he adds. By working in research and analysis Turner developed a practical and informed approach to the hospitality environment, he says.
The Zell factor
As for rumors that Sam Zell might increase his 8% ownership stake in Starwood, Turner quickly acknowledges that any additional investment from the real estate icon, known as one of the savviest investors in the industry, would be a boon to the company. The fact that Zell already holds such a hefty interest, Turner believes, is a testament to Starwood's brand and strategy.
“Having Sam Zell as an active investor who is talking to us about what we're doing, where we're going — and challenging us — I think is very healthy for us as a public company,” says Turner.
Indeed, when the chips are down, it is relationships that matter, says Levy of Morgan Stanley. In the heady days of the last half-decade, when the market was soaking in liquidity, borrowers were easily wooed away by even cheaper debt.
“It became extremely ruthless from being on this side of the coin,” notes Levy. Strange as it sounds today, borrowers were mistreating banks in that they were willing to abandon long-term relationships for the promise of better terms.
“Simon has certainly been one of those people who always valued a relationship even when people were willing to throw money at them,” says Levy. “He always continued to treat me and treat us with the utmost consideration, and he's been there for us along the way.”
The executive's personal credibility may ultimately be his greatest asset to Starwood. After spending 30 years enmeshed in the fabric of the global real estate community, Levy says, “The attributes that come to mind with Simon for me is one, integrity, and two, he understands the value of a relationship.”
— Sibley Fleming is managing editor.
Starwood's green strategy won't waver with wind
While many industry experts say green building will be pushed aside until economic conditions improve, Starwood Hotels & Resorts Worldwide is taking a different tack. Just last summer the lodging giant (NYSE: HOT) launched its first all-green brand, Element, an extended-stay product in the limited-service category.
The brand's flagship hotel, Element Lexington, in Lexington, Mass., recently achieved gold-level LEED certification from the U.S. Green Building Council for superior performance in areas such as water, energy conservation and improved indoor environmental quality.
“One of the decisions that Starwood made vis-à-vis Element is we are firmly committed to the concept both as a company and as a brand developer of going green,” says Simon Turner, president of global development for Starwood.
Going green benefits Starwood's developers in two key areas, says Turner. First, a green design saves energy over the life of a building. “Number two, from a planning perspective, if you're going in for planning permission, you will tend to get a more favorable reception from the planners if you have a green intent.”
On the latter point, Turner says green projects often are approved up to five months faster than non-green projects. Starwood's goal is that every new Element will be at least LEED certified, says Turner.
“Candidly the reason that we're spending as much time on Element and the green aspects of Element is that for us, it's a concept lab for green.” Starwood will take the lessons learned from Element and attempt to apply them to its other brands.
While only three Elements have opened to date — in Houston, Lexington, Mass. and Lone Tree, Colo. — four more are slated to come on line later this year in markets like Irving, Texas and Ewing, N.J. What the markets have in common, according to Turner, is aging hotel stock from the '70s and early '80s.
“That's not to say the world has stood still,” Turner explains. “But essentially the design models for the competitors to aloft and to Element really are 20 to 25 years old at least.”
2009 Starwood Hotel Openings
Starwood plans to open at least 100 new hotels in 2009. Here is a breakdown by brand:
Thirteen properties are slated to open in markets that include Barcelona; Bali; Doha, Qatar; Santiago; Atlanta; South Beach; Hollywood; and Washington, D.C.
Sheraton Hotels & Resorts
Eighteen hotels are planned for high-profile destinations like New York City, San Jaun, Istanbul, Turkey, Prague and Qiandao, China. In addition, 10 hotels are slated for renovation at a cost of $1.3 billion
Westin Hotels & Resorts
Twelve hotels are scheduled to open in international cities such as Montreal, Mumbai, Shanghai, Mexico City and Houston
Twenty-two openings are planned for Houston, Phoenix, Abu Dhabi, UAE, among others
Among the four slated to open are hotels in Denver and Irving, Texas
Four hotels are planned in Atlanta; Park City, Utah; Mexico City; and Lhasa, China
The Luxury Collection
No planned openings in 2009
Four planned openings include Dallas and Philadelphia
Four Points by Sheraton
Thirty openings are slated, including one in Times Square; Albuquerque, N.M.; Winnepeg, Canada; and the brand's first new prototype in San Antonio
Starwood Hotels & Resorts Timeline
- Starwood acquires Hotel Investors Trust, keeping its NYSE stock sym- bol, HOT.
- The newly formed Starwood Lodging acquires Westin Hotels & Resorts and the ITT Sheraton Corp. and changes its name to Starwood Hotels & Resorts Worldwide Inc.
- Starwood launches W Hotels, dubbed the first “style hotel brand.”
- Starwood acquires Vistana Inc., later renamed Starwood Vacation Ownership Inc.
- The Starwood Preferred Guest program debuts with a policy enabling members to redeem points “anytime, anywhere.”
- Westin Hotels & Resorts introduces the Heavenly Bed, which triggers an intense industry bedding war.
- Westin begins selling the Heavenly Bed, which is now featured at more than 50 Nordstrom stores nationwide.
- W The Store brings the iconic W designs into clients' homes.
- Whatever/Whenever: W concierge service launches.
- Starwood divests more than 35 hotels in a deal valued at more than $4 billion as part of its “asset right” strategy to reduce investment in owned real estate, and expands brand presence through third-party licensing and franchise agreements.
- Starwood acquires Le Méridien brand, adding 130 hotels and dramatically increasing the company's footprint in Europe, Africa, the Middle East and Asia Pacific.
- Starwood launches W Retreats, an exotic island escape.
- Starwood launches W Card, which offers special perks 24/7 both on property and off.
- Starwood launches W Residences with first mixed-use project — W Dallas.
- Starwood re-launches two of its brands, Sheraton and Le Méridien.
- Starwood debuts its first aloft and Element hotels, signifying a new foothold in the select-service and extended-stay arenas.
- The first Element hotel earns LEED gold certification.
- aloft opens in U.S., Canada and China.
- Starwood Preferred Guest program expands ‘no blackouts’ policy to include SPG Flights, which allows members to book tickets with no blackout dates on airlines domestically and internationally.
- W celebrates 10th anniversary
- Starwood to open 1,000th hotel