STAMFORD, CT—While it waits to see if its pending $12.2 billion sale to Marriott International will, indeed, be a done deal in 2016, it’s basically business as usual here for Starwood Hotels & Resorts Worldwide, Inc., albeit with one key exception.
Thomas Mangas, who joined the company in September 2014, now finds himself CEO of one of the world’s largest hotel chains encompassing 10 internationally recognized brands.
Mangas, the company’s former EVP/CFO, on Dec. 31 stepped into the C-suite most recently occupied by Adam Aron, who resigned late last year to become president/CEO of AMC Entertainment Holdings, Inc.
“I’m pinching myself a bit on the sequence of events that has happened here at Starwood… It certainly hasn’t been the 15 months I expected it to be when I hired on, but I’m incredibly honored that the board has asked me to take this on,” said Mangas.
While basically new to the hotel industry, Mangas is no stranger to the C-suite environment. Prior to joining Starwood, he was EVP/CEO of Armstrong Floor Products, a division of publicly traded Armstrong World Industries, Inc., where he served as SVP/CFO from 2010 to 2013. Previous to that, Mangas spent 20 years at The Procter & Gamble Co. in increasingly senior finance and accounting positions.
“It’s a challenge [for which]my experiences in the past prior to Starwood have helped prepare me and, certainly, my CFO responsibilities at Starwood have helped prepare me,” he said. “It is an interesting mix of building the strategy and executing against the strategy to create long-term shareholder value, while, at the same time, preparing for a likely sale of the company to Marriott, and creating the industry leader across some of the most important segments in the hotel business.”
According to the new CEO, most plans developed earlier this year are on track to be accomplished as the company transitions through the regulatory process inherent in being acquired.
“We constructed a strategy together as a leadership team in the summertime, and this was a strategy focused on winning for the next five years,” he noted, with concentration placed on consumer, customer, innovation and cost strategies. “We’re still competing in the marketplace until the Marriott deal closes and, frankly, that set of strategies is essential to creating the value that our current shareholders—and our future shareholders—want,” said Mangas.
The CEO termed the strategic plan a road map. “In the absence of a transaction, what would we be doing for the marketplace? It’s focusing on how do [we]grow our luxury brands? How do we continue to penetrate at a much faster rate in the upscale segments? How do we revitalize the Sheraton brand? Things we’ve been talking about all along but just at a faster rate of pace than we’ve been doing, and I think some of that has come through during the past nine months or so as Adam took on the interim CEO role and I’ve been CFO. So, I haven’t had to create a new plan from scratch,” he said.
Asked if the acceleration would experience any pauses by Starwood leadership to consider Marriott’s opinion, Mangas stressed, “They’re certainly interested in us continuing to advance against those growth goals because it only helps the combined company be stronger when we come together.”
He added there could be exceptions: “Big, new multi-year IT investments? Probably not going to kick one of those off in the next couple of months. But, signing new deals in parts of the world where we don’t have any of our 10 brands, plus Design Hotels? Absolutely. We’re going to do that. Keeping our cost structure lean? We’re going to do that. Engaging and training our employees so they can continue to delight our guests, driving guest satisfaction? Yes. All those things are essential. That’s what makes the hotel business work, makes our business model work and there’s no need to take a step back. When we negotiated the deal with Marriott, we ensured we could execute against this set of strategies: one, because it would be valuable for them, but two, in case the deal didn’t go through, we didn’t want to have a weakened business.”
While not closing the deal might seem unlikely, most investors know a deal is not done until the ink is dry, a fact Mangas is keeping top of mind. “This is not a done deal, which is why we essentially continue to compete against Marriott and everyone else,” he said.
Both companies’ shareholders need to approve the deal—it requires a majority vote—and Starwood needs to complete the spinoff of its Starwood Vacation Ownership business into a separate publicly traded business that would be renamed Vistana Signature Experiences upon completion and acquisition by Interval Leisure Group, Inc.
Additionally, Mangas said, “We need to secure antitrust clearance in the different jurisdictions where we have a meaningful presence. We think that’s a high probability.”
And, the CEO noted, there’s a scenario that could derail the current deal. “There could be another buyer that comes in over the transom and makes a superior offer, one that our board of directors considers superior, and trumps the Marriott offer. That’s also a possibility.”
Even against such speculation, however, right now the focus remains on what’s actual. “We have the capability to continue to invest in key money, to leverage our balance sheet against attractive new signings. I think you’ll see a business-as-usual approach from Starwood, and continue to see us perform better in the marketplace as we have the past six to nine months,” said the executive.
Pushing growth has been a rallying cry at the mega-chain, which, in recent years, fell short in terms of development, according to industry observers, and reportedly led to the departure last year of former President/CEO Frits van Paasschen.
While acknowledging past poor performance in this area, Mangas expressed confidence as the company moves forward. “I think when the [fourth quarter]numbers are out, people are going to be pleasantly surprised with our net rooms growth numbers. This has certainly been an area where we have fallen short of our competition beginning in the second half of 2013 and throughout 2014. That has been a significant area of attention that [President/Global Development] Simon Turner, our division presidents and Adam and I put against. Things that we have put in place are working, and they’re contributing to rooms growth,” he said. He noted, for example, the launch of the Tribute Portfolio brand last year, which, he said, “has brought in thousands of rooms.”
Additionally, the company has “reignited” its efforts behind The Luxury Collection and W, helping drive up the rate of new signings, said Mangas.
The CEO suggested a key way hotel companies can differentiate themselves vs. their peers in the eyes of investors and owners is in their ability to drive differentiated growth and signings, and converting those signings into openings.
“Part of the reason we like the merger with Marriott is Internet rooms booked has been very strong, running 7%, 8%… We’re tying a tremendous international footprint and great lifestyle brands at Starwood with the tremendous growth engine in the upscale and upper-midscale segments that Marriott has, and tremendous North American presence and franchising capability. [It] gives us significant opportunity to continue to differentiate our rooms growth.”
That said, Mangas emphasized, “It’s our strategy to win. We’re going to continue to compete in the marketplace. We want to grow our owners’ and hotels’ share of the marketplace. We’re going to deliver on our 4% to 5% net rooms growth target that we already set as a goal for 2016. We’re going to continue to deploy our balance sheet in ways that are good for our shareholders and incentivize owners to work with us, and we’re going to continue to train and empower our organization so it can delight our guests every day. We haven’t gone anywhere. We’re still planning how we can delight our guests and improve guest satisfaction and improve our owners’ economics. That’s winning to us in the marketplace.”