Case ID: 800194
Solution ID: 2508
Words: 1661
Price $ 75

Astor Park Hotel

Case Solution

This report provides a solution to Astor Park Hotel case study. Starwood, the world’s largest hotel operator, intends to purchase the Astor Park Hotel out of the bankruptcy proceedings. The Vice President of Starwood sees potential in the business as well as the market for a luxury hotel and that is why decides to reposition the current positioning of the hotel. According to the analysis conducted, Starwood should reposition the hotel in financial distress as a luxury hotel, in line with W hotels which is an existing brand of Starwood. As a part of the deal, Starwood should take over the management of the property for a fee equal to 3% of revenue. Moreover, Starwood wants to take 11% preferred return while the remaining share will be divided between Starwood and Pimentel in a 90 to 10 ratio to preserve a carried interest of Pimentel. Finally, the sensitivity of the proposed option is not very high with respect to the demand, tax rate or payment to Equitable. So, even if Equitable settles for a little higher than $ 33 million, the investment is still highly profitable.

Excel Calculations

·         Financial Assumptions for Repositioning of the Astor Park Hotel                                       

·         Occupancy

·         Average rate

·         RevPAR

·         Total revenue

·         Cash flows

·         Capital Expenditure for Repositioning

·         Repositioning as Westin

·         Repositioning as Sheraton

·         Repositioning as W

·         As Is

·         Cash Flow from Operations

·         Free Cash Flows

·         WACC

·         Terinal Growth rate

·         NPV

·         IRR

·         PI

·         NPV without terminal value

·         Weighted Average Cost of Capital                                       

·         Cash Flow Analysis   

Questions Covered

1.      Weighted Average Cost of Capital

2.      Summary of Results

3.      Sensitivity of W

4.      Sensitivity of Sheraton