Starwood Broadens Russian Exposure - Analyst Blog

By Zacks Equity Research,

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In order to ramp up its presence in Russia and the Commonwealth of Independent States (CIS), Starwood Hotels and Resorts Worldwide Inc. ( HOT ) recently collaborated with Remstroyintour LLC and Ludmila Kudryavtseva to unveil one of its contemporary hotel brands, Aloft, in Russia in 2015.

Starwood currently operates five hotels in Russia and CIS under the brands of Luxury Collection, Sheraton, W and Four Points by Sheraton. Management now plans to more than double its portfolio in that region by 2015 with seven new hotels.

Located in St. Petersburg, the new Aloft hotel will feature 200 guestrooms, along with several other amenities. St. Petersburg, which is often known as the "Venice of the North" and most visited by tourists during the White Night Festival, is a strategic fit for new hotels.

Starwood also has a W hotel in St. Petersburg. Further, the location is a promising business destination enabling the properties to attract both leisure and business travelers.

Starwood has set a new trend in hotel designs with one of its lifestyle brands Aloft. Aloft has spread its operations globally with more than 60 hotel openings since its launch in June 2008. The brand rides on a high growth trajectory and has already left its mark in every region including North America, Europe, the Middle East, Latin America, India, Southeast Asia and China.

In the second quarter of 2012, RevPAR growth in Aloft was 8.7% or 9.7% in constant dollars, the highest among all the other brands. The urban concept of Aloft mainly caters to the modern travelers seeking a unique experience. Its affordable price point in the mid-market hotel category is another reason for the growing popularity.  

Why Russia?

Since the U.S. market is somewhat saturated, hoteliers are tapping international opportunities especially in the faster growing emerging markets. Starwood sees a huge untapped potential in the secondary and tertiary markets across Russia and CIS, where the mid-market category is under-served.

According to Starwood, Moscow is one of the richest cities in the world with a healthy population of billionaires. The middle income population in Russia is also growing. This fraction of the population has an inclination to spend on leisure. Additionally, with its rising importance in the global travel market, the pent-up demand considerably lags the current availability of just 28- upscale hotels.

Starwood which competes with the likes of Marriott International Inc. ( MAR ), currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: CIS , HOT , MAR

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