Recently, Starwood Hotels & Resorts Worldwide Inc. (HOT) has inked a deal with Serka Turizm A.S, an affiliate of Adali Holding, to open a Sheraton hotel in Turkey. Starwood plans to open more than 65 Sheraton hotels around the world over the next three years.
The hotel will be located in Adana, the fifth most populous city in Turkey and an agricultural and commercial hub. This marks Starwood’s debut in the city. Sheraton, Adana is also strategically located on the bank of the River Seyhan and is in close proximity to the airport (4.5 km) and the historic center of Adana (1.5 km). The new hotel will feature 237 guest rooms including 28 suites along with other amenities and is expected to open in 2013.
We believe Turkey is a strategic fit for new hotels, as it is an important tourist destination and boasts incredible landscapes and natural wonders bordered by four different seas. Starwood currently operates 6 hotels in Turkey, out of which four are Sheraton. Moreover, Starwood has three new openings in the pipeline, out of which one is scheduled to open in Istanbul this year and the remaining two are expected to open in Bursa by 2013.
Since the last couple of quarters, Sheraton is spearheading Starwood’s market share growth. The brand covers 30% allotment of the company’s current total global pipeline. Notably, the brand leads the company’s China portfolio, making it one of the largest international hotel operators in that country. Sheraton is currently investing another $5 billion to add more new hotels by year-end 2013.
One of Starwood’s major competitors Marriott International Inc (MAR) already has a presence in Adana.
Starwood has over half of its hotel properties outside the U.S., an international exposure that not many of its peers can boast of. Over 80% of the company’s 85,000 room pipeline is in the international markets, with more than 60% focused toward the Asia-Pacific market. Within Asia-Pacific, China promises immense growth potential. Starwood intends to triple its China business over the next five years. The other markets that Starwood is eyeing for expansion are Brazil, the United Arab Emirates and India.
Starwood currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. We also reiterate our long-term Neutral recommendation on the stock.
STARWOOD HOTELS (HOT): Free Stock Analysis Report
MARRIOTT INTL-A (MAR): Free Stock Analysis Report
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