Starwood’s Changing Plans for their San Francisco Airport Property in Millbrae, CA

Andrew Calvo | January 23, 2008 | 1 Comment

UPDATE: I’ve written a new post which describes the latest on Starwood’s Millbrae property.

Over the past few years Starwood Hotels & Resorts has undergone a major transformation in their business; Starwood changed focus from being a hotel developer and owner to being a hotel operator and brand owner. In other words, instead of actually owning the majority of their hotel properties, Starwood choose to make earn money via fees from management and franchises of the hotels. This enables Starwood to focus on perfecting their brands and the experience they give to their guests, rather than be involved in the nitty-gritty of being a property owner and developer.

With that change, Starwood slowly started divesting of the majority of it’s hotel assets, but stated their intention of holding on to a few prime properties and leaving open the possibility of purchasing properties where its return would be extremely beneficial to their shareholders. You can view a list of their owned assets right on their Corporate website.

While browsing through the list there are a few patterns in which Starwood’s owned properties fall under: historic, large, and unique properties within an area, and also properties surrounding an airport where more than one brand may be placed, such as Philadelphia Airport (where Starwood owns the Four Points and Sheraton Suites, and is currently constructing an aloft), and the San Francisco Airport (SFO) where Starwood currently owns and operates the Westin Millbrae, and a Clarion Hotel.

Aerial Photograph of the Starwood’s Clarion (on the left) and the Westin Millbrae (on the right)

The other day Juliana over at HotelChatter.com alerted me to a news article about Starwood’s changing plans for their SFO property. The SFO location, which is just south of the airport in Millbrae, was supposed to go under some major changes, the Westin Millbrae was to be converted into an Element, and the Clarion Hotel was supposed to be torn down and replaced with an Aloft and a Four Points. This location was supposed to be the second Element to be opened – the first being the Element in Lexington, MA.

Similar to how aloft is “based upon the DNA of W Hotels”, Element, is based upon the DNA of Westin, and if you compare the images of the Element prototype with the exterior of the Westin Millbrae – the similarities between the existing building and the Element prototype are very striking! I really wouldn’t be surprised if Starwood used the Westin Millbrae for ideas on how the Element prototype should look.

The Element Prototype

The Westin Millbrae

The article Juliana pointed out is a very contradicting, and confusing article published last week in the San Mateo Times (a local paper in the area). According to the article, all plans for the property are currently on hold, and a hearing is scheduled for this evening where Starwood intends to ask for an extension on project.

Another part of the the article goes on to say:

The project is dead, according to Tim Lusher, general manager for the Clarion and Westin hotels in Millbrae. Instead, Lusher said Friday that he extended a franchise agreement with Choice Hotels, which maintains the Clarion brand.

Then the article continues:

Meanwhile, in phone conversations with Scott Thrun of Starwood, Jaeck [The Millbrae City Manager] said the company now wants to ditch the two hotels and just make Aloft bigger and provide office and retail space.

There are a few points which I’d like to point out.

First and foremost, that property is in an excellent location for an Airport hotel. It practically borders the southern part of the airport property, and is one exit away from the airport on Highway 101. Starwood is sitting on a potential gold mine for hotel rooms, and by cutting the property from three hotels to one hotel (even though it has more rooms than originally planned) would be stupid for Starwood.

Secondly, Starwood Hotels & Resorts is in the hotel business – not the office or retail space business. Starwood would not build or own office or retail space – its not the business they are in! I think the Millbrae City Manager misunderstood his Starwood contact.

Thirdly, Starwood’s Millbrae property is in the middle of an warehouse/distribution development – besides the obvious zoning issues that may or may not preclude an office or retail development, who in their right mind would want to build (and then actually occupy) office space or retail space right next to warehouse space. It simply is not the highest and best use of the property, which should be the end goal of anything which eventually occurs on the property.

Personally, here’s what I think will occur on that site. Starwood will continue running the Westin Milbrae & Clarion for the time being – perhaps another year or so. Once the overall economy picks up Starwood will without a doubt demolish the Clarion, as the last thing they want to do is run a hotel under a competitors name (Clarion is a Choice Hotel), and probably build an aloft on the site. Lastly, I think Starwood will convert the Westin to an element – but the Four Points may not be built. There are a few locations throughout America where both an aloft and element are being built on one property – some locations will actually have both hotels within one building, and some (such as Lexington, MA) will have each hotel in its own building, but right next to each other. Starwood’s market for both aloft and element is business travelers, Four Points is also catered toward travelers – yet, I see Four Points opening up less as an airport hotel and more in a suburban location.

If I am able to find out anything about tonight’s City Planning meeting, I’ll be sure to post it here.

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