Robert E. Riley

'This is the conclusion to a story that began with the highly-leveraged buy-out of the group in 2001 by Nomura,' explains chief executive officer Robert E. Riley.

'It splits the management and ownership sides of the group, and gives the Le Meridien brand a new life as a part of Starwood. I am convinced the brand will thrive.'

Middle East clients of Le Meridien may feel a trifle bemused by this saga. For in this region the management has just carried on working with the local owners as though nothing were amiss with the group. Indeed, delegates to the Arabian Hotel Hotel Investment Conference voted Le Meridien the best at keeping good relations with its local owners.

The hotel chain is also very popular with local clients in the region, and its dining and fitness clubs are well patronized and genuinely appreciated. But all has not been well for the group as a corporate entity since the ill-fated buy-out that left it financially overstretched just as business plunged globally post September 11th.

'In 2002 the group defaulted on its debt, and in 2003 negotiated an agreement to give 11 hotels back to the Royal Bank of Scotland to clear 50% of the debt problem,' says Dr. Riley who was appointed chief executive officer in December 2003 at the time Goldman Sachs brokered a deal which left Lehman Brothers with the recapitalized group debt.

Since a provisional agreement in February 2004 Lehman has been negotiating an agreement with Starwood Hotels. A few days ago Starwood Hotels & Resorts agreed to buy the Le Meridien brand and manage all 135 Meridien properties.

At the same time Starwood Capital Group and Lehman Brothers are to jointly buy the 36 owned and leased Le Meridien properties and Lehman Brothers will buy one more hotel separately. Starwood Capital Group is privately held and separate from Starwood Hotels & Resorts, although Barry Sternlicht is the chairman of both of them.

'It is not as though the group has stopped growing in this period,' says Dr. Riley. 'We added 10 hotels to bring us to 135 properties. But now for the first time the Le Meridien brand will be owned and managed by a hotel group.'

Too true, Le Meridien has had five owners in the past 10 years. The group was originally a subsidiary of Air France, and then passed to Forte which was bought by Granada and sold to Compass and then Nomura.

'Now the strategic management and property management are separate and I think we will be able to use the Starwood infrastructure to strong advantage with additional sales and cost saving and a larger platform for human resources,' says Dr. Riley.

The first test in the Middle East will be the launch of the new Grosvenor House property in the Dubai Marina next month, a 45-storey tower with just over 200 rooms and 200 apartments to the highest luxury standards.

Dr. Riley will doubtless be hoping that he will be able to repeat the success he enjoyed as the chief executive officer of the Hong Kong-based Mandarin Oriental Hotel Group.

During his tenure from 1988-98 the company doubled in size and tripled its profits, growing from its traditional Asian base into a successful global luxury hotel group. So perhaps Le Meridien's fortunes will now look up, and its difficult years are over.