Host Marriott Corp. said yesterday that it is buying 38 luxury hotels -- including more than a dozen Sheraton locations and two W Hotels -- from Starwood Hotels & Resorts Worldwide Inc. for $4 billion in a move that will shift the company's focus from Marriott-branded properties.
Executives from the Bethesda real estate investment trust, which became a sister firm of Marriott International Inc. in 1993, said they plan to drop Marriott from the company's name. The firm will be called Host Hotels and Resorts, marking a symbolic break from its past.
"Our brand diversification is greater now and we think it's appropriate" to change the name, said Christopher J. Nassetta, president and chief executive of Host.
The purchase of 38 Starwood hotels would make Host the country's dominant lodging owner. But it also would tie the firm's future to a direct competitor of Marriott International, the world's largest hotel operator. Typically, hotel operators collect management fees from hotel owners.
Marriott brands have made up about 80 percent of Host's portfolio of more than 100 hotels. That would shrink to about 60 percent. Under terms of yesterday's deal, Starwood would continue for 40 years to manage the properties it plans to sell.
In New York, Toronto and other cities including the District, that would create a situation where the company would have more than one similarly upscale hotel in the same market, managed under different brand names.
Host owns New York's Marriott Marquis, for example, which is operated by Marriott International. If shareholders approve the deal, Host will also own a Marquis competitor, the Sheraton New York Hotel, but it will be managed by Starwood.
"We have a strong relationship with Host and look forward to that continuing," said Tom Marder, a Marriott International spokesman. "We wish them well."
Host's board chairman is Richard E. Marriott, the brother of Marriott International chairman and chief executive J.W. "Bill" Marriott Jr. In 2002, Richard left Marriott International's board and Bill left Host Marriott's after questions arose over some management charges.
Executives at Host said their purchase of Starwood's hotels would be in keeping with their strategy to acquire signature properties in large cities where the supply of hotel rooms is tight. In September, the firm said it was buying the Hyatt Regency Washington from a unit of Blackstone Real Estate Advisers for $274 million.
The deal with Starwood would give Host 18,964 new rooms, 80 percent of which are in major urban areas. The hotels include the Sheraton Centre Toronto Hotel (1,377 rooms), the Sheraton San Diego Hotel (1,216 rooms), the Sheraton Boston (1,216 rooms), and the Westin Seattle (891 rooms). Host would also be purchasing two of Starwood's hippest properties -- the W New York and the W Seattle -- and the Westin Grand in the District. The deal also includes the Capitol Hill Suites.
"These are strong growth markets with supply problems," Nassetta said.
Host also would gain a foothold in significant international markets, including Rome, Madrid, Milan, Venice and Santiago, Chile. Thirteen of the 38 hotels are located outside the United States.
The cost of the deal per room is $213,000. Host said it intends to pay for the hotels using $2.3 billion in stock and about $1 billion in cash. It would also assume $700 million of Starwood debt.
Host said it expects the 38 additional hotels to generate between $355 million and $365 million in calendar year 2006. The firm recorded $3.6 billion in revenue last year.
Host's move comes as the nation's largest hotel owners and operators seek to take advantage of a recent resurgence in business travel, which has driven hotel room rates up sharply. Revenue per available room -- a standard measure of the industry's health -- was up 13 percent earlier this month.