Starwood Hotels & Resorts Worldwide, parent of the St. Regis, Westin and Sheraton chains, said that Chief Executive Steven Heyer resigned after losing the board's confidence.
"While the board appreciates the good work Steve Heyer has done to position Starwood for the future, issues with regard to his management style have led us to lose confidence in his leadership," said Stephen Quazzo, chairman of the governance and nominating committee.
Chairman Bruce Duncan will be interim CEO while the board searches for a permanent replacement for Heyer, who signed a four-year contract with Starwood in September 2004.
"I don't think the company is going to be seriously hurt by this departure," said Susquehanna Financial Group analyst Robert LaFleur. "I think the strategy that's in place for operating the brands and expanding them is solid and yielding results, and I think that's going to survive his departure."
Heyer, who lives in Atlanta, traveled back and forth to Starwood's headquarters in White Plains, New York, on a company plane, according to company regulatory filings.
The hotel operator's stock has fallen almost 7% from a nearly 19-year high of $69.65 reached on Feb. 15. It closed at $64.85 on Friday on the New York Stock Exchange.
"Starwood is performing extremely well, and I am confident it will enjoy continued success in the future," Heyer, previously chief operating officer at Coca-Cola, said in a statement.
As part of the resignation agreement, Heyer will receive $250,000, or one-quarter of his annual salary. He will also be paid a cash bonus of $2 million for 2006, but he will forfeit all stock options and unvested restricted stock units, Starwood said in a filing with the U.S. Securities and Exchange Commission.
Heyer also agreed that he will not acquire shares in Starwood or participate in any acquisition of the company until March 31, 2009, the company said.
Starwood wasn't immediately available for further comment. Heyer could not be reached immediately.
The hotel operator forecast strong profit and revenues for the current quarter and for full-year 2007 when it announced results at the beginning of February, beating Wall Street's expectations.
The company reaffirmed its full-year and first-quarter earnings targets today. On Feb. 1, the company forecast earnings before special items of 38 cents per share for the first quarter and $2.50 per share for the full year.
Analysts, on average, expect Starwood to post earnings of 39 cents a share in the first quarter and $2.52 a share in 2007, according to Reuters Estimates.
"The board is confident in Starwood's prospects and focused on continuing to build shareholder value," Duncan said in a statement.
The White Plains, New York-based company, along with most of the U.S. lodging industry, has been enjoying strong travel demand and limited growth in the supply of rooms, allowing for
steady increases in rates.
It has also been selling hotels and retaining management contracts as well as franchising its brands -- a strategy that helps free up cash.