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Starwood Hotels & Resorts Worldwide Inc. (HOT - Analyst Report) is set to beef up its Mexican portfolio. The company recently announced plans to extend its hotel base in the region by 30%.  Starwood has a considerable presence in Mexico. Featuring 24 hotels under 8 brands, Mexico is Starwood’s biggest market in Latin America.  

At present, Starwood has 8 new upper-upscale hotels under construction in Mexico, which will add nearly 1,100 rooms to its current count of 4800 rooms in the country. The Mexican market will play a pivotal role in Starwood’s aim to open as many as 100 hotels in Latin America by the end of 2013. Starwood targets to ramp up its luxury portfolio in Mexico by 50% over the next three years.

In fact, to gain a competitive edge in Mexico, Starwood formed a global partnership with Aeromexico, the national airline of Mexico to bolster their respective loyalty programs –Starwood Preferred Guest and Aeromexico Club Premier. This strategic alliance, signed on Jul 15, will allow Starwood members to redeem their points at Aeromexico and vice versa.

Why Mexico?

Owing to the saturation in the U.S market, major hoteliers are exploring growth opportunities abroad. The current trend shows that economic strength has been slowly shifting from the developed world to the rapidly growing economies and this transition has not escaped Starwood’s notice. Going by this trend, Central and South America promise solid growth going forward.

Among Latin American countries, Mexico is set to witness a surge in demand driven by the resurgence of the middle class, a fraction of which spends considerably on travel and leisure. Apart from tourism, the region is also emerging as a business hub. Also, lower crime rates in the country have ensured that U.S.-groups are once again taking an interest in Mexico.

Solid performance in Mexico led the company to post flat revenue per available room (RevPAR) in Latin America in the first quarter of 2013, despite the Argentinian issues. Mexican RevPAR was up 10%. The region is expected to continue performing well in the near future.

Moreover, thanks to a long-standing presence in this country, Starwood enjoys a stable relationship with owners and developers across the country. Therefore, Starwood sees more construction opportunities in Mexico with an abundance of natural resources.

Bottom Line

Pent-up demand both in the luxury and mid-market segment in Mexico is making Starwood broaden its exposure in that country. However, this Zacks Rank # 1 (Strong Buy) should be wary of its competitors, as major hoteliers like Marriott International Inc. (MAR - Analyst Report), InterContinental Hotels Group (IHG - Snapshot Report) and Hyatt Hotels Corp. (H - Snapshot Report) too have a considerable presence in Mexico.
 

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