Htm 485 - Hospitality Tourism Journal - Astor Park Case Study

HTM 485

Jeffery Yu

Cary Countryman

January 8, 2016

Astor Park Case Study

Case Background

Starwood Hotels & Resorts CEO has been assigned the task to vice president for purchasing Astor Hotel. As a vice president of the company, he responsible for initiating, structure and negotiates global development -related investment into the largest real estate investment trust. In these few weeks he has been considering and investigating from the quality of fire preparedness kitchen floors in 257 rooms. He persuaded Astor Hotel's senior management team. It is undervalued and not efficient, because of independent management.

The vice president thinks that Starwood Hotels chain will make Astor Hotel effective to manage, and he consider making a better strategy to buy the hotel. Taking account of repositioning of the hotel and offers an attractive agreement to Starwood and its equity partners. The stagey is take an advantage from bankruptcy order at a reasonable price, and generate attractive returns for shareholders.

Problem Statement

Astor Park has its managing operational difficulties, due to the poor market positioning and operational efficiency. In the assessment, it has been determined the average daily rate and occupancy rates are a key measure of the overall strength of the hotel. It generated only $ 175 of ADR, and not includes the relevant rooms of the owners. Only 65% of capacity compared to its peers, which has 70% of occupancy rate.

In the company reports, they do not observe management discipline, so allowed attributes flow from the Pacific Northwest's properties to the luxury market. It is due to inconsistencies and mix rooms with lower floors. Management turnover, over hiring staff and lack of trained staff contributed to poor performance.

Starwood recognized that change is not easy, because that residential, retail and office projects are likely to be the most uncertain and most complex real estate management development. It also requires high capital construction costs, complex design and construction and it increase the company's business risks.

Management is concerned that the valuation and forecasting returns from potential acquisitions. In addition, management is also concerned repositioning strategy, they are worried about whether the proposed strategy will be attractive to Starwood and its related equity partners or not. How much to acquire the hotel, how to reposition, and what is the reasonable deals to attract shareholders to invest are the major problems.

Recommendation

 To purchase Aston Hotel and revise to Westin Hotel is the best choice.