Starwood Hotels & Resorts Worldwide Inc.
) announced that more than 10 North American properties of one of
its high-end brands, W, will undergo extensive makeover in the
coming 18 months. The renovation will cost more than $100 million.
Starwood will carry out the project in association with its several
ownership groups, including
Host Hotels & Resorts Inc.
), Rockpoint Group and Estein & Associates USA.
Starwood remains on track to spread its W operations globally
through more than 50 hotels by the end of 2013. The brand was
launched in 1998, in New York. The W brand has a high growth
trajectory and is already present in every region including North
America, Europe, Latin America, Asia-Pacific, the Middle East and
The brand has been on an uphill ride in terms of revenue
generation, reflecting its strength and growing popularity. In the
first quarter of 2012, RevPAR growth at W was 8.5% or 8.8% in
constant dollars, second highest among all the other Starwood
Starwood mainly considered older properties operating in dynamic
markets like New York City, Seattle, Chicago, New Orleans and Los
Angeles as ideal candidates for upgradation in order to maintain
consistency with the newer ones. Apart from renovation, these
properties will also unveil some bar and restaurant concepts to
attract neighboring guests.
Since late 2010, hotel companies are working hard on guest
satisfaction to uplift their positions in a cutthroat environment.
Brand conversion and remodeling became the trend. Following the
facelift trend, in March 2011, Starwood embarked on a two-phase
$150 million remodeling program for The Sheraton, New York, one of
the largest hotels in New York City. Apart from refurbishment,
Starwood also focuses on brand conversion via remodeling.
Renovation work, however, hurts revenue in the near term when
construction is on. Starwood's management commented that extensive
renovation at various properties lessened its owned EBITDA by
approximately $5 million in the first quarter of 2012 and it
expects a similar impact in the second quarter as well. But after
the overhaul work, existing properties pay off more.
Many of Starwood's peers like
Marriott International Inc.
InterContinental Hotels Group
) are also walking the same path. Starwood currently retains a
Zacks #2 Rank, which translates into a short-term Buy rating. We
are also maintaining our long-term Neutral recommendation on the
STARWOOD HOTELS (HOT): Free Stock Analysis
HOST HOTEL&RSRT (HST): Free Stock Analysis
INTERCONTL HTLS (IHG): Free Stock Analysis
MARRIOTT INTL-A (MAR): Free Stock Analysis
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