In a concerted effort to strengthen its position in a
Starwood Hotels & Resorts Worldwide Inc.
) has been striving to improve guest satisfaction for the past
few quarters. The entire hotel industry has mirrored this
strategy over the last couple of years and has witnessed a series
of brand conversions and asset renovations across the globe.
Starwood, one of the leading players in this sector, is committed
to refurbish most of its brands including W, The Luxury
Collection, Sheraton and Westin. Starwood has primarily focused
on repositioning its older properties operating in dynamic
markets in order to maintain consistency with the newer ones.
Apart from the proposed renovations, these properties will also
be provided with innovative bar and restaurant concepts to
attract neighboring guests.
In June this year, Starwood initiated an extensive remodeling
program for more than 11 North American W properties for around
$100 million. The project, slated to be finished within 18
months, recently unveiled the fully-refurbished W New Orleans
costing $9 million.
Starwood's another brand, Luxury Collection Hotels & Resorts,
will also undergo a $200 million project to reinvigorate some of
its most renowned assets in Europe. Luxury Collection has already
reopened the famous Hotel Alfonso XIII in Seville and Hotel Maria
Cristina in San Sebastian this year. This is likely to be
followed by the unveiling of the revamped Gritti Palace in Venice
and Prince de Galles in Paris in 2013.
In addition, Sheraton, one of the company's most important brands
that spearheads Starwood's market share growth concluded a $6
billion brand-wide revitalization program. It is currently
working on another three-year $6 billion international expansion
At the same time, Sheraton has other assets under renovation
namely Le Meridien, Kuala Lumpur and Jakarta as well as Sheraton,
Jakarta and Singapore. Starwood has one of the largest
collections of luxury hotels in the industry and seeks to retain
a market-leading position through continuous upgrade.
Starwood plans to reduce its exposure in owned real estate.
Market speculations are also rife that Starwood deploys its
capital into renovating the owned assets to prepare them as
lucrative acquisition targets in a more standardized acquisition
Though renovation work affects near-term revenue, comparable
sales and EBITDA, it is likely to boost returns once completed.
As a point of reference, one of the hoteliers,
MGM Resorts International
) planned to spend around $350 million in capital expenditures in
2012 for room remodeling at MGM Grand Las Vegas and the Spa Tower
at Bellagio. MGM had once commented that it expected an average
daily rate lift of $10-$20 for the new rooms at MGM Grand.
White Plains, New York-based Starwood currently retains a Zacks
#3 Rank that translates into a short-term 'Hold' rating. We also
reiterate our long-term 'Neutral' recommendation on the stock.
STARWOOD HOTELS (HOT): Free Stock Analysis
MGM RESORTS INT (MGM): Free Stock Analysis
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