In order to ramp up its presence in the flourishing Singaporean market, Starwood Hotels and Resorts Worldwide Inc. (HOT - Analyst Report) recently debuted its W brand at Sentosa Cove, Singapore in collaboration with its owner and development partner – an affiliate of City Developments Limited. The property highlights W brand’s 43rd global and 7th Asia-Pacific opening.
Located in Sentosa, The new W hotel offers 240 guest rooms and suites, and more than 1,500 meters of modern meeting space along with several other amenities and enjoys a prime location. The company also opened The Residences at W Singapore – Sentosa Cove, featuring 228 ultra-deluxe residences. Starwood currently has three other brands in Singapore – Sheraton, the St. Regis and Westin.
Singapore is one of the fastest growing economies in Southeast Asia. According to a global market research company Euromonitor, Singapore recorded gross domestic product (GDP) growth of 5% in 2011 on the top of a robust GDP growth of 14% in 2010. Moreover, the country is a famous stop over for international fliers, which boosts the demand for its hospitality industry.
With its rising importance in the global travel market, Singapore is witnessing a gradual upward trend in the number of tourist visits. According to Euromonitor, demand for casinos is also higher in Singapore, especially due to travelers from Malaysia, Indonesia and China.
Nearly five million people travel every year to Sentosa – a renowned island resort in Singapore, making it a strategic fit for new hotels. Close proximity to Singapore’s central business district as well as easy accessibility to various shopping centers displaying international brands and travel destinations will help the new W property at Sentosa attract both business and leisure travelers.
Starwood remains on track to open about 60 W hotels globally by the end of 2015. 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 Africa.
The brand has been on an uphill ride in terms of revenue generation, reflecting its strength and growing popularity. In the second quarter of 2012, RevPAR growth at W was 7.3% or 8.8% in constant dollars, second highest among all the other Starwood brands.
However, the market is not free from competition. Many of Starwood’s peers like Las Vegas Sands Corp. (LVS - Analyst Report), Marriott International Inc. (MAR - Analyst Report) and Hyatt Hotels Corp. (H - Snapshot Report) have their presence in Singapore.
Furthermore, a sluggish macroeconomic environment acts as another short-term deterrent. According to the Monetary Authority of Singapore, the GDP growth is expected to be decelerating to 1–3% in 2012.
Starwood 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.