Sternlicht building operating company

GREENWICH, CT— Overlooked in Barry Sternlicht’s announcement last month that his private equity firm, Greenwich, CT-based Starwood Capital Group Global, LLC, was creating a second luxury brand was an even more sweeping development: Chairman and CEO Sternlicht plans to create a hotel operating company out of Starwood Capital’s now two existing brands— the 1 Hotels and Residences brand announced in October and Crillon. Crillon is an outgrowth of Starwood Capital’s acquisition early this year of Paris-based Societe du Louvre, which had, among other lodging assets, the iconic Hotel de Crillon. Sternlicht, furthermore, doesn’t rule out creating or acquiring other brands for the new operating company, though he declined to cite specifics. Sternlicht talked exclusively with HOTEL BUSINESS® last month about the challenges of moving past being purely a development team and creating an organization that can run the hotels. In conversing, he referred only obliquely at first to Starwood Hotels & Resorts Worldwide, Inc., the multi-brand public company he headed in the 1990s before relinquishing day-to-day responsibility in 2004. “It’s a matter of being able to execute. I had a no-hire agreement from the hotel company that was my alma mater, so for me it’s a matter of building a team,” he said. “In a way, it’s fun for me to start from scratch because this time we get to build it from the start with passion, energy and enthusiasm. With both of the brands that we have announced, building a team is almost self-selecting. Hopefully, we’ll be able to pick people who really want to razzle dazzle.” Sternlicht said that he’s giving himself a fairly tight timeframe, even though the first hotel that was announced— a 1 Hotel and Residences in Seattle reportedly consisting of 110 hotel rooms and 91condominium apartments— isn’t scheduled to open until late 2008. “We already have a COO on staff and should have an operating team assembled in the next six months. We’re still a year-and-a-half in front of the first hotel, so this is still the initial phase,” he said. While he wants to build a team quickly, Sternlicht is also cognizant that for the time being there’s not yet a hotel generating revenues to pay for things like staff salaries. “I’m carrying all these people, right?” he said. As for what to call the new operating company, Sternlicht is sure of one thing: it won’t have the name Starwood in it. “We could name it the 1 Operating Company,” he offers. “Right now, Crillon is being managed out of Societe du Louvre, so it’s already got a home for the time being. The name certainly is not going to be Starwood Capital. I certainly don’t want the market to be more confused about the relationship between Starwood Capital and Starwood than it already has been. Calling it the 1 Operating Company will give it clarity of purpose and focus.” On the development side, Sternlicht is feeling especially good about two recent hires: Gary Raymond, who had been the head of development at Intrawest; and James Motta, formerly CEO of Arvida, a property company based in Florida. “They’re learning the branding game and I’m learning the development game— physical plant development— from them,” Sternlicht noted. Sternlicht said that he is targeting a market like New York for both 1 Hotels and Crillon. “We’re looking at several sites in Manhattan and will probably do more than one for 1 Hotels and Crillon,” he noted. Yet some sites are more appropriate than others in a market, particularly for Crillon, which Sternlicht has described as a six-star brand. “Crillon is likely not to go to Tribeca, for example. Crillon is going to try to go to the premier sites in the premier cities. There’s absolutely no pressure on us and I’m not going to sacrifice Crillon for a bad site. It has to be a great site. The architecture, size of the rooms and the location all have to be perfect.” Sternlicht acknowledged that the market right now is very expensive. “Construction costs are r