LONDON (Reuters) - Starwood Hotels and Resorts Worldwide’s HOT.N plans to expand in Europe through management and franchise deals has been slowed by a liquidity squeeze that has caused some hotel developers to put projects on ice, an executive said.
“Developers not having access to liquidity has slowed us down,” United States-based Starwood’s Regional Director for Northwest Europe, Michael Wale, told Reuters on Monday.
European property developers are facing higher funding costs as banks cut real estate lending in a bid to meet more stringent capital requirements. On November 4, Commerzbank (CBKG.DE), owner of property lender Eurohypo, said it was stopping all loans not linked to Germany or Poland.
Some developers, which Starwood had signed management deals with, had been forced to put hotel schemes on hold after European banks cut back on real estate lending, Wale said, citing schemes in Birmingham and Manchester as examples.
He said the lack of development finance was most acute in west Europe. “We’re seeing very good growth in the Middle East, growth in Africa and growth in Eastern Europe, so we are still opening hotels,” Wale said.
At 1653 GMT, shares in Starwood were down 1.6 percent at
Starwood -- which owns, franchises and manages hotels under high end brands like Sheraton, W and Le Meridien -- said in March it was aiming to open 50 hotels across Europe, the Middle East and Africa (EMEA) in the next three years.
It has opened 12 so far in 2011, the latest in east London under its mid-market brand Aloft, which has rooms priced at 120-260 pounds ($193-$413). Starwood hopes to franchise the brand out to developers in secondary and tertiary cities.
While Starwood has focused the bulk of its global expansion plans on the fast-growing countries of India and China, Wale said there were growth opportunities in Europe particularly in key cities such as London, Paris and Rome.
“There’s still an awful lot of cities where we do not have full penetration of all our (nine) brands ... If you think about London, we don’t have a Westin and we’d like to have a Westin.”
Starwood been selling its real estate assets as part of an ongoing move to refocus its business on managing and franchising out its hotel brands. At end-September, it owned 59 hotels, 16 of them in the EMEA region.
Wale said Starwood would sell more hotels when prices, which had been ravaged by the global financial meltdown, had improved sufficiently. Last year, it sold two of its W properties in New York and a St. Regis hotel in Aspen, Colorado.
“The banks hold alot of distressed assets, they’re coming to the market and that may suppress pricing,” Wale said.
Last month, the company reported a third-quarter profit and raised its profit outlook for the year.
Citing the results, Wale said Starwood was in a position of “liquidity and strength” and could make acquisitions, though he added that was not Starwood’s strategy.
(This story was corrected in 8th paragraph to fix room rate to 260 stg. Share price in 6th paragraph corrected to $US)
($1 = 0.622 British Pounds) ($1 = 0.629 British Pounds)
Reporting by Brenda Goh; Editing by Andrew Macdonald