Unlocking the True Value of the St. Regis Brand

The current value of the St. Regis brand is weighed down by associating the St. Regis brand so closely with Starwood Hotels & Resorts.

In 1904 Colonel John Jacob Astor IV founded the St. Regis brand with the opening of the St. Regis in New York, NY which at that time the was declared “the finest hotel in America” by The New York Times.

When John Jacob Astor founded the St. Regis it was known not only for it’s luxury, but for the new technology that was featured in every room. Each room had it’s own telephone along with central heating and an air-cooling system that allowed each and every guest to control the temperature in their room.

The hotel also featured one of the first central vacuum systems and a central fire alarm system which would improve the safety of the guests. These technological advancements under the leadership of Mr. Astor cemented the St. Regis’ brand as a leader in innovation and hospitality.

The St. Regis New York would stay independent until ITT Sheraton purchased the property and the naming rights to the St. Regis brand in 1960 for an undisclosed amount. In 1998, Starwood Hotels & Resorts Worldwide Inc purchased the St. Regis New York from ITT Sheraton and launched the St. Regis brand in 1999 with the debut of The St. Regis Aspen Resort and The St. Regis Houston.

Today in 2014 the St. Regis brand is over 100 years old and is wholly owned by Starwood Hotels & Resorts Worldwide Inc. with 31 properties in 20 countries with 21 future St. Regis openings planned in 5 new countries.

As Starwood embarks on their expansion of the St. Regis brand it would be prudent for them to take a step back and rethink the brand while channeling the innovative leadership of Mr. Astor. A rethink of the brand should start with a discussion about creating value by spinning out St. Regis as a stand alone luxury brand that is not part of the Starwood Preferred Guest program or central booking system.

The current value of the St. Regis brand is weighed down by associating the St. Regis brand so closely with Starwood Hotels & Resorts. As technology companies such as eBay, Hewlett-Packard and Symantec split into two publicly-traded companies, Starwood Hotels & Resorts would benefit by following the trend of creating value by spinning St. Regis out as a stand alone brand.

As famed investor Carl C. Icahn said about eBay spinning out PayPal “it is almost a no brainer that these companies should be separated to increase the value of these great assets and thus to meaningfully enhance value.” Mr. Icahn is correct. PayPal’s growth was weighed down by eBay and by spinning out PayPal, eBay is creating value for their shareholders.

While Starwood does not need to spin St. Regis out as a separate publicly traded company, they should spin the brand out as a stand alone brand that highlights the deep and rich history of the St. Regis dating back to 1904.

By spinning out St. Regis as a stand alone brand Starwood would be creating value for not only shareholders but also guests. A stand alone branded St. Regis would be able to command higher room rates and better directly compete with privately held Four Seasons Hotels & Resorts, Inc.

Isadore Sharp, Founder of Four Seasons Hotels & Resorts understood and still understands the value of a single brand with a single level of quality and how it reflects on the brand. In Mr. Sharp’s biography Four Seasons: The Story of a Business Philosophy published in 2009 he openly focus on the strategic advantages of managing only medium-sized hotels of exceptional quality and to make service the brand’s distinguishing edge.

What is the St. Regis’ distinguishing edge? Perhaps it is the brand. However, it is diminished by the close association with less stellar hotels that are included under the Starwood Hotels & Resort banner.

The time is right for Starwood Hotels & Resorts to have the discussion around the St. Regis brand as the competition for the global high-net worth traveler is heating up. Aman Resorts recently announced their first city hotel in Tokyo, Japan and The Peninsula Hotels recently unveiled The Peninsula Paris and the soon to be developed The Peninsula London.

Four Seasons Hotels & Resorts, Aman Resorts and The Peninsula Hotels all have one thing in common. They great brands that are not weighed down by association with less than exceptional quality hotels.

St. Regis could too be apart of this elite group of hotels, but it is up to Starwood management to make the decision to spin St. Regis out as a stand alone brand.

By spinning out the St. Regis brand Starwood would increase the value of the St. Regis brand. A stronger St. Regis brand would be able to command higher room rates which would in turn lead to increased revenue per room night.

Now is the time for Starwood to follow the tradition of innovation started by Colonel John Jacob Astor IV and spin out the St. Regis brand to create value for guests and shareholders.

Unlocking the True Value of the St. Regis Brand is an article written by Brulte & Company Co-Founder Grayson Brulte.

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