Starwood Launches Element in Europe

In order to expand the global presence of its eco-friendly hotel brand, Element, Starwood Hotels & Resorts Worldwide Inc. ( HOT - Analyst Report ) recently struck a deal with Bari Gruppe GmbH & Co. KG to unveil a ‘Element’ branded hotel in Frankfurt, Germany in October, 2014. This property will mark the entry of the Element brand in Europe.

Located near the Frankfurt Airport which is Europe’s third busiest airport, the new Element hotel offering 133 studios and one-bed room suites along with several other amenities will enjoy a prime location.

Strategic positioning in Frankfurt’s newly developed business district as well as easy accessibility to the global headquarters of companies such as Lufthansa, Condor and DB Schenker will help this new Element property attract business travelers. Moreover, the close proximity to several sight seeing venues will likely make the property attractive to leisure travelers.

Starwood currently has five other brands in Germany operating 25 hotels and resorts. In Frankfurt alone, Starwood has four other brands including Le Méridien Parkhotel Frankfurt, The Westin Grand Frankfurt, Sheraton Frankfurt Congress Hotel and the Sheraton Frankfurt Airport Hotel & Conference Center.

Starwood set a trend in hotel designs with its Element brand, which is LEED (Leadership in Energy and Environmental Design) certified. This upscale and contemporary brand was introduced in 2006 and its first property appeared in 2008.

Starwood’s management was on a lookout to spread the Element brand in markets like Germany, where affordable and innovative hotel brands are in demand. Management remains focused to spread the brand across Europe.

Even though Europe remains the epicenter of the global crisis due to the continued Euro-zone debt problem, Starwood is hopeful about the overall European hospitability environment. Management did not notice any acute slowdown in the latest second quarter of 2012, with RevPAR growing 2% involving 70% of occupancy level which remained unchanged from the year-ago period. In fact, excluding the most troubled zone – Greece where RevPAR was down 20%, Europe witnessed a modest 4.5% growth in second quarter 2012 RevPAR.

There are more visitors to Europe compared to the U.S. because it is easier to get a visa for the European countries. At present, the continent is experiencing more visitor arrivals than both the Middle East and Asia. A stronger dollar has led to an increase in visitors from America as well.

On a positive note, we have observed that the effect of the sovereign debt is not uniform across the European region and among the affected countries, Germany, where the deal is based, remains comparatively well positioned. A year ago, Starwood also inked a deal to acquire a 49.8% stake at Design Hotels AG in Germany. Further, management expects to witness an easy comparison in the fourth quarter of 2012.

Starwood, which competes with Marriott International Inc. ( MAR - Analyst Report ) , currently retains a Zacks #3 Rank that translates into a short-term Strong-Hold rating. We also maintain our long-term ‘Neutral’ recommendation on the stock.