STAMFORD, CT—Frits van Paasschen’s seven-year reign as president and CEO of Starwood Hotels & Resorts Worldwide came to an abrupt end last month as the company’s board of directors identified a need for improvement in both overall execution and net rooms growth going forward.
Van Paasschen—who came to Starwood with a deep consumer branding background with companies like Nike and the Molson Coors Brewing Company—resigned by mutual agreement with the company’s board. Adam Aron, a Starwood director since 2006, has been named CEO on interim basis as the board conducts a search for a permanent CEO that will include internal and external candidates.
In a conference call with investors, Bruce Duncan, chairman of the board, Starwood Hotels & Resorts Worldwide, stated, “We have come to the conclusion that now is the right time to turn to new leadership to drive execution of Starwood’s growth strategy, improve performance and sharpen our focus on operational excellence.”
Duncan further added of the decision: “Let me be clear that this change has nothing to do with any disagreement over strategy. It’s about putting the right team in place to ensure effective execution.”
Van Paasschen was reportedly at odds with shareholders and board members in recent months, primarily due to what was seen as his failure to significantly increase the number of hotels in the system. For example, the company added 74 hotels in 2014, but lost 28 during the year to competing franchise companies.
During his tenure, van Paasschen oversaw the 2008 launches of Starwood’s boutique Aloft brand—which has grown to some 85 properties—and its eco-friendly, extended-stay Element brand. However, the publicly traded company—which is comprised of nine brands—has been relatively quiet in recent years, while a number of its competitors have deepened their commitment to the lifestyle segment with new flags.
Van Paasschen received a $7.2-million severance payment, a prorated bonus and other payments, according to the company. In addition, he will remain on as a consultant to assist in the transition.
The company now turns to Aron, who has a lengthy hospitality background and is intimately familiar with the company. “In eight-and-a-half years, I’ve seen close up and first-hand the company’s strategies, goals and growth potential. I’ve seen what we do well and, candidly, what we can do better,” he said.
Aron’s experience includes stints with Apollo Management and Hyatt Hotels Corporation, and he served as CEO of both Vail Resorts, Inc. and Norwegian Cruise Line. Duncan touted his attributes: “Adam has been a Starwood director since 2006 and has a unique vantage point. Not only is he very familiar with our company, but he has deep knowledge of the hospitality business and years of CEO experience in our industry. We’re very fortunate to have someone of his caliber on our board and available,” he said.
Aron insisted that, while it may be at the helm temporarily, he plans to make an impact. “I’m someone who has a bias for action—prudent and wise action, to be sure, but action nonetheless. In taking on this challenge, even on an interim basis, I have no intention of merely being a caretaker. Our board has given me a clear mission and charge to get certain things done,” he said.
Part of the mission, according to Duncan, is for the company to more aggressively use its balance sheet and continue on its asset-light business plan to sell $3 billion in assets by 2016. The company also recently unveiled plans to spin off its Starwood Vacation Ownership business into a public company by the end of this year.
Aron, for his part, did acknowledge the company might have some gaps in terms of its brand offering that need to be addressed. “We’re well aware that there’s been great strength in our luxury and upper-upscale brands. We are not as strong in select-service as we might be, but we do have two brand entrants that are quite respectable. Four Points by Sheraton’s been around for a long time, and Aloft has been well-received in the marketplace as there are nearly 100 properties open. However, that’s a very small number if you look at the size of select-service properties offered by our competitors, so we are mindful of this as we look ahead,” he said.
While Duncan declined to specify whether Aron was in the running for the full-time position, he did elaborate on the company’s wish list. “I think we’re looking for someone with hospitality experience; and we’re looking for someone in terms of brands, and someone who is a good operator. It’s a wide skill set we’re looking for. We also want someone who is a leader that can galvanize the troops and move them forward to achieve our goals. We’re going to take our time and find the right leader for this company,” he said.
Aron thinks the company is on the right track. “Speaking as the person now in the CEO hot seat, I think it’s important that I also personally reiterate that I endorse and embrace the company’s current strategies. Indeed, I voted for them on the board. However, like my fellow board members, I do think we can execute and implement better than we have of late,” he said.