Recently, Starwood Hotels & Resorts Worldwide Inc. (HOT) signed an agreement to open Sheraton Reserva do Paiva Hotel and Convention Centern in Pernambuco state, located in the northeast region of Brazil. Scheduled to open in March 2014, it is Reserva do Paiva’s first five star hotel, which will feature 289 guest rooms including 21 junior suites and 7 deluxe suites along with other amenities.
Owing to the saturation in the U.S market, major hoteliers are exploring growth opportunities abroad. The current trend shows that the economic balance of power has been shifting from the developed world to the rapidly growing economies and this transition has not escaped Starwood’s notice. Latin America is one of those regions which promise solid growth going forward. Therefore, Starwood sees more construction opportunities in Latin America with over half a billion people and an abundance of natural resources.
Among Latin American countries, Brazil is set to witness a surge in demand driven by the resurgence of the middle class. Besides, a renowned consulting firm, Jones Lang LaSalle, specializing in real estate believes that hotel investment in Brazil will be around $2.4 billion by 2014. According to the firm, a large number of hotels will be constructed in the country to cash in on the FIFA World Cup, which is scheduled in 2014 along with the Olympics in 2016.
We believe Starwood would continue to expand its presence in Brazil, and build upon its 37 years in the country. Currently, Starwood possesses six properties in Brazil including four Sheratons and two Four Points by Sheraton. One of Starwood’s closest competitors Marriott International Inc. (MAR) also has a significant presence in that country. Starwood currently retains Zacks #3 Rank, which translates into a short-term Hold rating.
STARWOOD HOTELS (HOT): Free Stock Analysis Report
MARRIOTT INTL-A (MAR): Free Stock Analysis Report
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