Adrian Loveridge, Peach and Quiet

The Adrian Loveridge Column – Anbang Chinese Marriott’s Connection

Anbang ChineseIt has now been around five months since Marriott set out to acquire Starwood Hotels and Resorts Worldwide Inc., initially at a price of US$10.8 billion which would creative a new world’s largest lodging group with a mind boggling 1.1 million rooms, 5,500 hotels spread across over 30 brands.

But there is another offer on the table, with the Beijing based Anbang Group founded only in 2004 to specialise in automotive and property partnering with J.C. Flowers and Company, and Primavera Capital countering with a bid of US$14 billion. Anbang is no stranger to the hospitality business having bought the Waldorf-Astoria in New York and more recently paying Blackstone US$6.5 billion for Strategic Hotels and Resorts Inc, which owned 16 luxury properties including the Four Seasons in Washington, D.C.

Of course there are concerns. Marriott calculate that the ‘merger’ would produce cost savings of at least US$200 million per year in the second year after closing, but this could well be brought about by various means including downsizing current staff levels. Loyalty members of both current groups are also expressing that such an arrangement would lead to a devaluation or dilution of existing ‘points’ or rewards.

This has become almost common practice among both hotels and airlines companies, seeing miles disappear or setting new restricted qualifying levels and expiry dates, making it even more difficult to redeem. If the Marriott deal goes ahead, it will also create the worlds’ largest hotel loyalty programme.

If Starwood decides to accept the increase revised Marriott bid of US$14 billion they would have to pay a US$400 million ‘breakup fee’ to Marriott. But it would also allow Marriott access to billions in real-estate assets that the company could sell to offset the cost of acquisition.

According to David Loeb, managing director of Milwaukee-based Baird Equity Research, the offer by Anbang is an all cash one and points out that ‘many investors prefer cash deals so they can decide whether or not they want to own Marriott stocks’.

Stock watchers currently estimate that the Marriott deal values Starwood at around US$62-$67 per share, versus the US$76 per share being offered by the consortium.

It’s easy to see the Chinese interest. Back in 2011, Starwood, then under the leadership of President and CEO, Frits van Paasschen, opened a new hotel in China every two weeks and currently approximately 12 per cent of the Starwood’s global portfolio is based in Greater China alone. There are also a number of potential ‘flies in the ointment ‘related to the Anbang deal, including the fact that their Waldorf-Astoria Hotel is managed by arch rival Hilton Worldwide.

Are there any possible ramifications for Barbados? Marriott of course has a small presence with its Courtyard brand. With the substantial Chinese investment in the new branded Wyndham Sam Lords Resort and possibly any interest they may have in the proposed 12 storey Hyatt Towers, would the Anbang acquisition be better for us?

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27 Comments on “The Adrian Loveridge Column – Anbang Chinese Marriott’s Connection”

  1. Bernard Codrington. March 23, 2016 at 8:51 AM #

    Thank you Mr. Loveridge for bringing this to our attention. It underscores my view that it is foolhardy to try and manage an open economy such as Barbados without a good analysis of the players and decision makers who own businesses in Barbados.

    Like

  2. Due Diligence March 23, 2016 at 11:09 AM #

    Seems like the battle for Marriott is not over yet

    Marriott wins back Sheraton-owner Starwood with new offer

    http://www.theglobeandmail.com/report-on-business/international-business/us-business/sheraton-owner-starwood-accepts-higher-offer-from-marriott/article29309009/

    http://www.reuters.com/article/us-starwood-hotels-m-a-marriott-idUSKCN0WN13N

    Either way, it will effect Barbados’ efforts to attract investment by international brands.

    Like

  3. Due Diligence March 23, 2016 at 12:57 PM #

    Adrian

    A bit off topic (and a bit long winded, BUT

    Recent media reports are a bit confusing.

    The on-line Nation newscast March 18 included this “Sandy Lane records its lowest occupancy in 15 years.”

    The article, “Sandy Lane still at the top” in the March 19 Nation at http://www.nationnews.com/nationnews/news/65031/sandy-lane paints a rather rosy picture.

    “Wilkie revealed their occupancy rates were also high and, despite the recession, they were doing better than last year.

    “Our occupancy for last year averaged 69 per cent. While our competitors battled with diminishing occupancy figures, Sandy Lane was able to maintain our occupancy. As we stand today, for the month of April we are more than 14 per cent ahead of the same period last year.”

    Curiously, the March 19 Barbados Today story “Sandy Lane maintains high ratings despite tourism challenges” is less rosy. See http://www.barbadostoday.bb/2016/03/19/sandy-lane-maintains-high-ratings-despite-tourism-challenges/

    ““Unfortunately, with every high comes a low, and Zika, the mosquito-borne virus, which has prompted worldwide concern because of an alarming connection to neurological birth disorder, has been our Achilles heel, negatively affecting our pace and revenues for the first quarter of 2016, with the month of February recorded as the lowest occupancy on record,” he reported.

    The hotel executive also pointed to the weakening of the British Pound, which has caused short term instability in the UK market, as well as the referendum on whether Britain will remain in the European Union (EU), saying those developments “also unsettled the marketplace”.

    However, Wilkie said that with the promise of a dismal outcome looming overhead, “we continue to challenge ourselves to be successful even when it seems most impossible”.

    “Through creativity, due diligence and a commitment to excellence we will battle the storm,” he told the ceremony, which was held under the theme ‘Pride in Excellence’.

    …………..

    “Like so many companies across the world, we recognize that in this prevailing gloomy economic environment our focus needs to be on talent development, geared at advancing the organization from within through specific learning and development strategies,” Wilkie said.

    So the Nation reports Sandy Lane “occupancy rates were also high and, despite the recession, they were doing better than last year.”

    And BT reports that for the month of February Sandy Lane recorded as the lowest occupancy on record, and refers to an “unsettled the marketplace” and “the promise of a dismal outcome looming overhead” and ‘this prevailing gloomy economic environment”

    So, which paper got the story right?

    Off course Sandy Lane’s lowest February occupancy on record may not be representative of the industry, but it sure makes one question some of the stuff coming from the Three Ss – Stuart, Sinckler and Sealy.

    What say you Adrian?

    Like

  4. Adrian Loveridge March 23, 2016 at 2:42 PM #

    DD, Thank you. I found it interesting too and knowing Randie I do not question his views at all.

    I also read the recent article on Sandals Barbados (last Sunday’s Nation Liefetime supplement) where the new GM of Sandals Barbados was stating how much they thought that TripAdvisor was helping them. The sad truth is that they are now rated (by their guests) as No. 20 out of 97 Barbados hotels, having fallen from No. 16 since the renovations. It is going to be an interesting summer.

    Like

  5. David March 23, 2016 at 2:50 PM #

    How far we have come, not long ago the BRA head as it was known then took delight in rubbishing TripAdvisor. One wonders the impact such a mindset served to push us back.

    Like

  6. NorthernObserver March 23, 2016 at 3:29 PM #

    @DD
    the author dodged yah a lil bit?
    ….”Wilkie revealed their occupancy rates were also high and, despite the recession, they were doing better than last year.”
    Personally I get so tired of reading performance reports from Bim which constantly keep referencing recession. Are not all competing in the same market? Don’t managers get paid to manage? Just give apples to apples comparisons and move on.
    Re the article itself, I have learned via experience to be highly cautious of the Chinese. Give me marriott and their flaws any day.

    Like

  7. David March 23, 2016 at 3:39 PM #

    Also success must be discussed bases on matrix other than arrival numbers.

    Like

  8. David March 23, 2016 at 5:49 PM #

    McClean pleads for help from China
    Added by Emmanuel Joseph on March 23, 2016.
    Saved under Local News
    inShare
    1

    Barbados is looking to China to help pull it out of its massive debt burden.

    Minister of Foreign Affairs and Foreign Trade Senator Maxine McClean this morning made a case for assistance from Beijing when she addressed the opening ceremony of the 6th round of Caribbean-China consultations at Hilton Barbados Resort.

    McClean pointed to past examples of support, citing funding for “a number of economic sectors” including tourism, education and agriculture. She added that the Asian country’s development programme in the Caribbean went beyond “bricks and mortar” investments.

    China’s economic growth rate slowed to a 25-year low in 2015. However, the world’s second largest economy still grew by 6.9 per cent last year.

    The Minister of Foreign Affairs acknowledged this development and argued that Beijing still had the ability to help bail out the struggling economies of the region.

    “Even within the context of this ‘new normal’ . . . we are confident that the Chinese economy remains resilient and stable,” she said.

    McClean emphasized that the partnership between China and the Caribbean “continued to be strengthened in several concrete ways” and stressed that the gains derived from people-to-people contact had been immeasurable and had helped to strengthen the bonds of friendship.

    In pressing her case to the Chinese delegation led by Vice Foreign Minister Wang Chao, McClean said the Caribbean was facing new challenges at a time when many of the territories had yet to recover from the “catastrophic” economic crisis dating back to 2008.

    “Among these new challenges confronting our economies are the issues of de-risking and correspondent banking as well as the debt burden,” the minister stated.

    She contended that these issues constituted an existential threat to regional economies and saw the talks as an opportunity to explore possibilities for cooperation.

    She recommended climate change adaptation and mitigation as a priority issue for consideration, contending that both sides had been affected by climate change and were committed to mitigating its impact. (EJ)

    Like

  9. Due Diligence March 23, 2016 at 6:30 PM #

    Senator Maxine, as usual, grovelling to China for financial bail-out.

    Beware Greeks (Chinese) bearing gifts.

    Welcome to Chinados

    Like

  10. David March 23, 2016 at 6:48 PM #

    Let us learn from Baha Mar.

    Like

  11. Due Diligence March 23, 2016 at 7:01 PM #

    Adrian

    Interesting you should mention Sandals.

    Butch is sure flexing his marketing might up here in the Great White North (though it is now Green)

    Television is bombarded with Sandals/Beaches ads.

    And the newspapers have full page ads, that probably cost CAD $15,000.00 each.

    Here are full-page, full-colour, ads in the last few days.

    March 15 Globe & Mail – Sandals La Source Grenada
    March 16 Toronto Star – Beaches Ocho Rios
    March 17 Toronto Star – Beaches Ocho Rios
    March 23 Globe & Mail – Sandals La Source Grenada
    March 23 Toronto star – Sandals BARBDOS

    I think I am missing a couple.

    Can you tell me, other than repeat visitors who keep coming back to their favourite property, how do the other properties compete against Sandals, subsidized with concessions from the Barbados taxpayers, for new guests without advertising in Canada?

    Particularly when BTMI is virtually invisible, except through the Breakfast in Barbados give-away promotion in which the Barbados taxpayer pays to have lucky winners spend a week of sun ‘n fun in Bim.

    Like

  12. NorthernObserver March 24, 2016 at 2:11 AM #

    @DD
    How much do you think the Ont govt and the feds paid to keep car manufacturing jobs [read…concessions]
    I will suggest another 5 destinations would gladly give Stewart what Bim did.
    This game is as old as business. The entire lumber industry in NB blossomed in 1898 when Quebec refused to provide tax concessions, so they set up in Bathurst NB who gave the investors a better deal.
    Yes they spend a small fortune on advertising, that’s how you build a brand.

    The proposition is simple. To any gov’t…what is the cost to you, plus benefits and severance of taking on an additional 200 staff? Give us X,Y & Z and we’ll do it for you. Never forget, jobs win elections.

    You cannot compare low budget, poorly managed tourist boards and associations with Sandals. They are a marketing juggernaut by comparison, with deeper pockets.

    Like

  13. Bush Tea March 24, 2016 at 7:05 AM #

    @ NorthernObserver
    You cannot compare low budget, poorly managed tourist boards and associations with Sandals. They are a marketing juggernaut by comparison, with deeper pockets.
    ++++++++++++++++++++++++++++++++++++++++++++++
    True.
    That is like comparing a Bush Hill pimp with an on line dating service….

    Like

  14. Due Diligence March 24, 2016 at 7:12 AM #

    David – Baha Mar

    Bahamas government still working to open Baha Mar resort

    http://www.caribbeannewsnow.com/headline-Bahamas-government-still-working-to-open-Baha-Mar-resort-29727.html

    Meantime, Halkitis said he is grateful to the bank (Chinese EXIM bank) for positively responding to the request to use the Baha Mar convention center.

    Clearly China is calling the Baha Mat shots

    Like

  15. Due Diligence March 24, 2016 at 7:25 AM #

    NorthernObserver March 24, 2016 at 2:11 AM #
    You cannot compare low budget, poorly managed tourist boards and associations with Sandals. They are a marketing juggernaut by comparison, with deeper pockets.

    I would like to suggest that, Instead of giving Sandals the concessions cocktail, the money would be better used to give BTMI an adequate budget and better management (from abroad if necessary) to MARKET the Barbados product, instead of relying on Butch to market the Sandals product.

    BTW, another Sandals Barbados full page ad in the Star today.

    Like

  16. David March 24, 2016 at 8:27 AM #

    @DD

    Bear in mind the same Chinese state own FI involved in the Baha Mar deal is also linked to Sam Lords.

    Like

  17. NorthernObserver March 24, 2016 at 10:41 AM #

    @DD
    You cannot assume that “sans concessions” Sandals was coming, as painful as that may be. They carry a big stick. So there isn’t much money to be gained from a no/reduced concession entry to Bim; that can be directed to BTMI or other. One either coughs up the concessions and gets them and their jobs, OR you say no, and they will open elsewhere.

    The Stewart group wants YOU and your money. They don’t care whether YOU go to Bim, Jamaica, Bahamas, Antigua etc They want YOU today, and can offer YOU other destinations tomorrow. And they have multiple price points for YOU.

    One can discuss promoting Barbados, but it is a completely separate issue.

    And you live in the GWN, what do Cdns think of Bim?

    Really nice place, would love to go………..but………its very expensive. True or not?

    Like

  18. NorthernObserver March 24, 2016 at 11:03 AM #

    @David
    The question you need to think about is……what exactly is the benefit in all these financing deals for the Chinese?

    Like

  19. David March 24, 2016 at 11:16 AM #

    @NorthernObserver

    Interesting question, any thoughts?

    Like

  20. Bush Tea March 24, 2016 at 2:18 PM #

    What is the benefit to a fisherman of casting bait all over the ocean….?

    Like

  21. Hants March 24, 2016 at 3:19 PM #

    @ Bush Tea,

    no benefit…..

    A lot of fish will get fed but very few will be caught.

    Like

  22. Due Diligence March 24, 2016 at 4:26 PM #

    NorthernObserver March 24, 2016 at 11:03 AM #

    The question you need to think about is……what exactly is the benefit in all these financing deals for the Chinese?

    About 12 years ago, I took a bit of a tour of Saint Lucia in a taxi. When we came upon a spanking new stadium out in the middle of nowhere I asked the taxi man why was it way out there. He said it was built for them by the Chinese.

    When I asked the taxi man why would the Chinese build a stadium for Saint Lucia, he said “to get our vote at the UN”

    Wise taxi man

    I think it was the George Oldum Stadium.
    https://en.wikipedia.org/wiki/George_Odlum_Stadium

    Make you think of the Gary Sobers Auditorium?

    Like

  23. Well Well & Consequences March 25, 2016 at 5:14 AM #

    Will the hard headed government ministers on the island listen to this advice…when a person or product matures, it eventually shrivels and dies, then has to be buried…sugar industry comes to mind…next will be the too depended on tourism.

    All because everyone wants easy money, no one wants to use their brain to create, unless they can steal it from someone else, or diversify.

    http://www.barbadostoday.bb/2016/03/25/too-much-tourism/

    Like

  24. colonel Buggy March 25, 2016 at 10:28 PM #

    Is there any news on the Carnival Cruise ship pull out of Barbados?

    Like

  25. colonel Buggy March 26, 2016 at 10:25 PM #

    Now we are beginning to understand what the Barbados ISO code BB stands for.

    Like

  26. Bush Tea March 26, 2016 at 11:19 PM #

    It is not ‘begging’ Colonel ….. BRASS…

    Like

  27. Hants March 29, 2016 at 10:21 AM #

    “In fact, tourism sources disclosed yesterday that the Gordon “Butch” Stewart-led Sandals chain would shortly begin adding 282 rooms to the 240 it opened just over a year ago in a $100 million-plus reconstruction of the former Casuarina Beach Hotel at Dover. ”

    http://www.nationnews.com/nationnews/news/79510/bigger-sandals#sthash.MXpHeTzT.dpuf

    Like

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