WOLF Great Wolf Resorts, Inc. (MM)

Starwood Hotels & Resorts Worldwide Inc. (HOT) recently closed the sale of the 275-room Atlanta Perimeter Hotel & Suites to RockBridge Partners, a division of RockBridge. Post sale, the property will undergo an extensive makeover in the coming 18 months and will be run under the name of Starwood’s Le Méridien brand. The property will be managed by Wischermann Partners, Inc.

Atlanta enjoys the status of being an international hub and attracts deluxe customers. This makes the location strategically fit for repositioning the property as Le Méridien. Starwood set a new trend in hotel designs with its Le Méridien brand, which has spread its operations globally with 100 properties in 43 countries. Initiated in Paris, this upscale brand was acquired by Starwood in November 2005. Since the purchase, Le Méridien underwent a thorough brand re-launch. Following its strong acceptance in North America, several owners and developers seek to capitalize the brand name in primary locations across the continent.

Starwood has a longstanding relationship with RockBridge. In July 2011, Starwood’s Sheraton brand came up in Stamford, which is owned by a joint venture between RockBridge Partners and affiliates of Davidson Hotels & Resorts. Another rebranding was done by RockBridge at Ann Arbor Four by Sheraton that flied the Sheraton flag after renovation. The latest deal with RockBridge underscores the third Starwood’s conversion with this company. Conversions continue to remain a sweet spot in Starwood’s expansion strategy. Last year, management’s new deal signings comprised 63% of expansion while 75% of Starwood’s openings included brand transfers.

The asset sale is part of Starwood’s long-term strategy to strengthen financial flexibility, which in turn will maximize shareholder value. A higher concentration of franchise fees reduces earnings volatility and provides a more stable growth profile. Since late 2010, transition to an “asset light” business model has gained momentum in the hotels and REIT industry. Many of Red Lion’s close competitors, Red Lion Hotels Corporation (RLH), Morgans Hotel Group Co. (MHGC) and Great Wolf Resorts Inc. (WOLF) have embarked on this strategy. Starwood currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

 
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