Starwood Hotels to Sell Caesars Pocono Resorts

Andrew Calvo | October 28, 2007 | 0 Comments

I came across this article from a Pocono area newspaper today. In the article, it describes how a lot of Pocono resorts – even bed & breakfasts - are popping up on the market lately due to the Casinos opening up in the Pocono Valley, current owners are trying to cash out since their properties are now more valuable, and developers and resort operators are all trying to get in on the market (there are no more Casino licenses available in PA – yet only a few of the licenses have actually opened their doors completely).

One of the most famous and largest of the Pocono Resorts – Caesars Pocono Resorts, (anyone remember the Champagne glass hot-tubs – this is where they came from) which made up of four different resorts – Cove Haven, Paradise Stream, Pocono Palace and Brookdale has been put on the market by its owner – Starwood Hotels & Resorts, yes, believe it or not, Starwood has owned Caesars Pocono Resorts for almost a decade since Starwood purchased Caesars World which at the time included both hotels, casinos and these resorts. After Starwood divested themselves of the casino aspect of Caesars – they continued to operate and own the Pocono Resorts as an independent resort property.

Back in 2005 I remember viewing a PowerPoint presentation that Starwood gave at one of their investor meetings, I don’t remember the exact details, but I think it stated that Starwood owns about 2,300 acres of undeveloped land in the Pocono area. In a powerpoint presentation from 2006 posted on Starwood’s Investor Relations Website there is a quick mention of Starwood’s Pocono property having 600 acres, and its listed on a slide titled “monetizing non-EBITA producing real estate”. (I’d like to point out that in the Times-Tribune article it states that the the Caesars Brookdale property alone is made up of over 900 acres, so it is not clear what is made up of the 600 acres of Pocono property.) Then in a another presentation from from October 2007, there is absolutely no mention of the Pocono resorts at all except for their being referred to as simply an “unbranded resort”.

No matter how much land Starwood owns in the Pocono area – 600, 900, 2,300, or even more, Starwood has so much development potential that I’m very surprised that they have not done much to the asset; I would have expected Starwood to convert it to one of their Vacation Ownership brands (Sheraton, Westin or something else), and build timeshares or condos, and since Starwood is currently rapidly expanding the vacation ownership side of the business – its a bit surprising to see them putting the Pocono resorts on the market.

The only reason I can see for Starwood to sell this asset is the development costs may be too high for it to make financial sense, or the regulations in the area are so stringent, it may be impossible to do what needs to be done to make it a profitable investment. It’s an interesting point to note that most of the resort developments in the Pocono area are not owned by major resort companies, possibly because even though the Poconos is a resort destination – great skiing in the winter – it doesn’t come anywhere near competing with Colorado, or California as a skiing destination, and during the summer season – besides outdoor activities like hiking, fishing, camping, etc there is not much to do (although – I’m sure outdoor enthusiasts would say that is PLENTY of activities).

According to the article in the Times-Tribune, bids on the Caesars property were due in mid-September, so things will probably be very quiet for a few months until Starwood has made its decision on what to do with the property.

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