Update: According to Reuters, the hotels being purchased are the 12 Concorde Hotels in France. Hotel de Crillon, Hotel de Louvre, and Hotel Ambassador (which is being sold to another investor) are not included in the transaction. Most likely the other remaining Concorde Hotels will stay as-is, as Starwood is only selling the hotels – not the Concorde Brand.

I just found out that Starwood Capital is in talks to sell some of their hotels under the Concorde Hotel brand. For those unfamiliar with Concorde Hotels, it is a group of 25 luxury hotels throughout the world, with 16 of them located in France. Most of the hotels do not include the “Concorde” name in their title, since they are historic and well-known hotels in their own right.

The purported buyer is a Saudi businessman who owns JJW Hotels and Resorts – and supposedly the purchase price for these hotels is 2 billion dollars. If that’s true, Starwood would have made almost all of their initial 1.27 billion in vestment (3.3 billion with today’s rates) in Groupe Taittinger by only selling small parts of the organization.

I’ll explain a little more in a minute – but first I want to mention that some hotels are not going to be sold, such as the Hotel de Crillon, and the Hotel de Louvre, nor are any of the hotels within the Louvre Hotel Group brands – Premiere Classe, Kyriad and Campanille, it’s also not very clear at this point if any of the Concorde Hotels outside of France are included.

If this deal does end up closing, and the price is anywhere near the 2 billion dollar range – Starwood Capital has once again proved itself by being adept of purchasing under utilized assets, turning them around, putting a branding push on them and just running with it.

When Starwood purchased Groupe Taittinger in 2005 it purchased a lot of assets in one transaction, the Concorde Group, Taittinger Champagne, Baccarat Crystal, Envergure Group which was Europe’s largest budget hotel company with 805 hotels at the time (now its second), and Annick Goutal perfumes. After the purchase was completed – Starwood quickly sold the Taittinger Champagne for almost 1 billion – by selling Concorde Hotels for 2 billion, Starwood has made back almost all of its initial investment in three years which is great.

In those three short years, Starwood has done a lot with Groupe Taittinger. It renamed the firm Groupe Du Louvre. It has reinvigorated its economy hotel brands, making new prototypes for Campanille, and giving the brands a decent internet presence which previously was almost non-existent. It also put the economy and Concorde hotel groups under the “Louvre Hotel Group” banner. It has taken Baccarat Crystal which was already a well-known worldwide brand and made a luxury hotel chain from it, and has proposed (although now it’s on the back burner due to the economy) to make the Hotel de Crillon the first of a 6-star chain of hotels throughout the world.

Lastly, the Annick Goutal perfume brand, almost unknown in America, is considered the most exclusive brand in perfume in the world. Starwood can potentially turn the brand into a line of high end spas within Baccarat or Crillon hotels, stock Annick Goutal amenities in the hotel rooms, but since it doesnt completely fit into the rest of the Groupe du Louvre umbrella, it can probably be sold for some ridiculous amount, further increasing the return on investment for Starwood Capital.

Starwood Capital’s ability to make a purchase and reinvent that purchase by almost turning it inside out, and then growing it into something amazing is always interesting to watch. Whenever Starwood announces a move, I always consider how that purchase will evolve beyond what is said and what is assumed.

andrew@alconic-inc.com