Nothing explains the relative popularity and respect that the Le Meridien Hotel brand has in the industry as the enormous investment and sacrifice that Starwood Hotels & Resorts Worldwide, inc. expended for its acquisition.
Starwood is an international group of brands which already owns Sheraton, Four Points, Westin, W Hotels, Saint Regis, Luxury Collection and Aloft.
Throwing more light on the acquisition, the General Manager of Le Meridien Hotels in Nigeria (Le Meridien Abuja, Le Meridien Ogeyi Place Port Harcourt and Le Meridien Ibom Resort Uyo), Gerard Bouchereau, painted a picture of a company that is held in high esteem for its reputation of high standard and quality services
Le Meridien is the latest addition to the Starwood family, adding 130 property to its collection worldwide. But in none of those hotels before , did it pay as much as what it paid for Le Meridien.
For absorbing the Le Meridien brand and the related management and franchise business for the portfolio of 130 hotels and resorts globally, Starwood paid approximately $225 million.
This amount is roughly equal to the amount of Starwood's current investment, including accrued interest, in the debt of Le Meridien. For a long time, Starwood was negotiating the acquisition of Le Meridien. The international group was willing to pay the high cost, knowing that this acquisition will significantly increase the company's footprint in Europe, Africa, Middle East and Asia Pacific.
So proud of the Le Meridien heritage, Bouchereau said that Starwood is doing everything possible to retain the brand consciousness in the mind of customers. It seeks to do this by communicating the importance of the brand in every customer's decision at the time of buying.
Management and franchise fees from the hotels expected to operate under the Le Meridien flag in 2006 are estimated to be approximately $45 million on a full year basis. Incremental steady state costs associated with operating the Le Meridien brand are estimated to be approximately $15 million per annum. Excluding transition costs, the deal is expected to be earnings neutral for the remainder of 2005 and slightly accretive in 2006.
Essentially, while the ownership of Le Meridien may have changed hands, the new owners, Starwood are conscious of the sensitivity of established tradition for excellence for which Le Meridien has become favoured worldwide. Comfortable with the rating of its services by customers, Starwood has encouraged the existing Le Meridien staff to remain and to continue to render the same high standard of services for which it is known.
Starwood will continue to operate the Le Meridien flag and anticipates that the alignment of the Le Meridien brand with a larger, stable, multi-branded hotel group will enable the brand to thrive by enhancing revenue, accelerating growth and providing a robust career path for Le Meridien's associates worldwide.
"The acquisition of the Le Meridien brand is an exciting and significant development for Starwood that we believe further defines us as a truly global hotel operator," said Steven J. Heyer, CEO of Starwood Hotels & Resorts. "We love the Le Meridien brand which is why we have pursued it over the last couple of years - we see great potential”.
On its own, the Le Meridien management is making
efforts to put in place an aggressive advertising campaign on the actual renovation of its facilities.
The acquisition of the Le Meridien brand management and fee business further supports Starwood's strategic shift from its significant real estate ownership to management and franchise fee focused model, one of the strategic pillars that underpin Starwood's future direction.
Le Meridien is a perfect complement to the Starwood portfolio, with its international footprint and unique guest culture. Le Meridien hotels and resorts represents both a great growth opportunity, alongside Starwood's W and Westin brands, and extends the number of destination choices of travel to Starwood loyalists across the world".
With 43 properties in Europe, 47 in Africa and the Middle East, 28 in Asia Pacific and India and 12 in the Americas, the brand is also a perfect complement to Starwood's current geographical footprint, securing its position as one of the leading consumer lifestyle hotel and leisure companies in the world.
"Le Meridien hotels are located in many markets where we don't already have a strong presence. This, coupled with the brand's excellent reputation and its strong European DNA, is what made it such an attractive proposition, for us," added Heyer,
"In addition, we have great plans to expand the brand - particularly in the United States, Latin America and Asia Pacific – to enhance the brand itself, and build on its great reputation and people. It provides us with another growth engine for our development team, bringing the current hotel brand portfolio to eight, including our recently announced aloft."
Le Meridien's predominantly European customer base is a perfect complement to Starwood's existing customer base. The 130 high- end properties will bring Starwood over $24 million. Starwood’s Preferred Guest (SPG), customers more choice in key markets such as Paris, Nice, Dubai, and London.
In addition, it will add destinations where there is no Starwood property at present such as Monte Carlo, Barcelona, Budapest, the Seychelles and Mauritius.
This match will also bring access to some 750 exciting new destinations for Le Meridien's loyal customers.
Le Meridien has a healthy development pipeline already in place, including the recently opened Le Meridien She Shan Shanghai, a luxury 325 form hotel in the city. There are over 10 hotels planned to open in 2006, in destinations such as India, Thailand and China. Starwood anticipates significant business benefits from Le Meridien's alignment with Starwood, following what Heyer says will be a "smooth and speedy" transition period. The transition will be led by Michael Wale, Senior Vice President Le Meridien Operations. Based in London he and the Starwood integration team will leverage Starwood's global scale and infrastructure to quickly bring about operating efficiencies for Le Meridien and to integrate it into the Starwood business within six to eight months.
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