NEW YORK (The Deal) -- As Starwood Hotels & Resorts Worldwide (HOT) launches a strategic review following reshuffling earlier this year, an outright sale may seem like the most obvious choice for the hotel operator. But some company followers doubt that will happen any time soon.
Starwood Hotels announced Wednesday that it has retained Lazard to explore a full range of strategic and financial options. The Stamford, Conn.-based company declined to comment further Thursday. Matthew Lustig of Lazard will be leading the review, The Deal has learned.
"Ultimately, it makes sense for consolidation to occur in the space," said Chad Beynon, an analyst at Macquarie Capital. "The problem is they have five different avenues they're trying to walk down, and that's resulting in a higher price."
In fact, the announcement of the review comes as Starwood prepares to spin off its vacation ownership business and looks for a permanent chief executive.
Starwood, which owns and operates a number of high-end leisure brands such as St. Regis, Westin, Sheraton and W Hotels, announced in February that it planned to spin off its vacation ownership business.
Beynon explained that while there were talks about a potential marriage between Starwood and its U.K.-based peer InterContinental Hotels Group (IHG) over the past year amid the tax inversion wave, such a scenario is not as feasible today.
InterContinental has been a target of activist hedge fund Marcato Capital Management, which in November urged the hotel operator to consider a strategic transaction with peers, including Starwood. With stock prices up sharply since then, that deal would be much more expensive now. So Starwood is left to contemplate a range of other options.
"It would be difficult to see a merger occur based on where the stock is trading and all the other avenues they are walking down," Beynon said.
Still, InterContinental and Wyndham Worldwide (WYN) would be the most likely suitors for Starwood, based purely on the size, balance sheets and geographies, according to Beynon.
While Starwood could also look to divest some of its assets, what makes such scenario difficult is that the properties are "not painted with the same brush," he explained.