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Starwood Hotels & Resorts Worldwide Inc.(HOT - Analyst Report) recently announced that it is on track to introduce a W brand hotel in Panama City. This will mark the entry of W, one of the high-end brands of Starwood in Central America. It is slated for inauguration in early 2016.
The company has struck a deal with Evolution Tower Corp., a joint venture between F & F Properties and EFC Group Inc., to develop the new hotel. W Panama will feature 203 stylish guest rooms including 24 suites, three Wow suites and one Extreme Wow suite. The hotel also possesses two signature restaurants, a spa, a nightclub, a WET pool deck, 8,400 square-feet fitness facility and a meeting space of more than 21,000 square feet.
This new hotel marks Starwood’s ninth hotel in Panama. Panama is poised for growth in both business and tourism based on its ideal location. Located on the southern most part of Central America, this country is on the isthmus connecting North and South America.
According to Jones Lang LaSalle, the Panamanian economy grew significantly in 2011, spurred primarily by the expansion of the Panama Canal as well as residential and commercial construction. Gross Domestic Product (GDP) and foreign investment grew by approximately 10% and 30% year over year, respectively, over 2010. Steady growth is likely to continue through 2012, though at a more moderate pace.
W Panama will be constructed on the 50th floor of Evolution Tower which is located in the heart of Panama’s financial district. This hotel is expected to have an impressive impact on the Panama City skyline. Thus, we believe that the hotel will enjoy one of the most strategic locations and drive traffic from all over the world.
Starwood set a new trend in the hotel industry with its W Hotels brand and has spread its operations globally. The company has opened more than 42 W hotels worldwide since its inception in 1998. The W Hotels brand is viewed as a trend setter and generally caters to the young.
Starwood remains on track to spread its W operations globally with more than 50 hotels by the end of 2012. 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’s strength and growing popularity can be validated by its strong RevPAR metric. In the second quarter of 2012, RevPAR growth at W was 7.3% or 8.8% in constant dollars, the second highest among all the other Starwood brands.
The company is poised to benefit from the reviving economy and consequent increase in demand for hotels. More than half of the hotel’s properties are located outside the U.S., an international exposure that not many of its peers such as Wyndham Worldwide Corporation (WYN - Analyst Report) and Hyatt Hotels Corporation (H - Snapshot Report) can boast of.
Additionally, over 80% of the company’s 95,000 room pipeline will be built in international markets. The demand for hotels in the international market is strong, as the pace of economic recovery is particularly fast outside the U.S.
Starwood currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We also reiterate our long-term Neutral recommendation on the stock.
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