Tom Mangas, since mid-December the CEO at Starwood Hotels & Resorts and charged with bringing the “Marwood” deal to the finish line, told HOTELS on January 22 that the merger of Starwood and Marriott is on track for a mid-summer closing and he is spending the bulk of his time helping divisional and property teams win in the marketplace.
“The deal essentially is done so I am navigating the change of management that comes with the deal and taking care of people in the organization,” said Mangas, formerly Starwood’s CFO, who was very involved in the strategic review that led to the merger. “I am traveling a lot, dialoguing about the change and what to expect, and the milestones being met so the team feels informed about the journey. I am talking about being effective during the transition, driving training and the like – spending more time than normal on these subjects given the transition.”
At the same time, owner dialogue during the transition has been as robust and strong, according to Mangas. “They can see significant value and potential in this merger,” he said. “The combined pipeline of customers and strength of the sales force has potential to drive rate and occupancy, and they see the potential for better returns in the new environment. The owners I am talking to generally like the deal. However, they also want to know how the companies are coming together, and they want more specifics. I am talking a lot about how I see this deal as good for them, and I am trying to mitigate concerns of the unknown as we can’t do much joint owner planning until we are through the deal.”
Mangas was also eager to talk about Starwood’s final 2015 growth report, which closed with 220 new signed management and franchise agreements, a 26% increase over the prior year, marking the sixth consecutive year of increased signings and the most incremental signings in its history. The company also opened a record 105 hotels in 2015, representing approximately 22,500 rooms in 30 countries, also the highest number of openings in its history.
“The 43% growth for Americas signings was a tremendous result,” Mangas said. “Part of the secret sauce is that we have been bringing innovation back to brands and it has been paying off through accelerated growth. We are activating brands in a way that is bringing excitement to development community. We are changing the way we do business so we are more responsive and quicker on decision making – and that is showing up in faster growth.”
Mangas particularly pointed to the growth of Aloft. “We have a pipeline equal to the 100 hotels we have worldwide,” he said. “Aloft growth worldwide is at 60-some percent. We are getting the brand right in terms of economics for owners and consumer positioning. As a result, it has been a tremendous growth engine.”
At the other end of the spectrum is the Sheraton brand, which Mangas was quick to point out is doing very well outside North America, having signed about 40% more deal last year worldwide than the prior year. “The North American development community is not investing as dramatically in the upper-upscale segment and as we demonstrate a turnaround with our 2020 initiative people will start building more and driving more growth in the Americas. By the way, in Q3 we delivered the first quarter of RPI growth for Sheraton worldwide and in North America, and it is a direct result of the revitalization plan. As we put those types of numbers on the board it will further excite the development community.”
When asked about how 2016 was tracking, Mangas talked about how the worldwide market has wobbled a lot. “We will be taking a hard look at RevPAR expectations and business protections,” he said.
Following up, Mangas added that he, too, is watching the markets melt down with the entire sector’s valuation having been cut in half. “People are projecting some pretty negative economic environments in those valuations,” he said. “So I am parsing through the data on our business to see if our reality matches what the investing world believes to get a read on what that means for 2016. I have no particular operational concern or integration concern with the merger. When you look at how the market has punished the REITs and C-Corps compared to other sectors you have to think about what they know that you don’t.”