In order to beef up its Canadian portfolio, Starwood Hotels & Resorts Worldwide Inc. (HOT - Analyst Report) is all set to introduce a Four Points by Sheraton property, one of its select service hotel brands in Edmundston, New Brunswick. The property is slated for a July 2013 opening.
Located in the center of downtown Edmundston, the new property will enjoy a prime location and is scheduled to be unveiled after a $2.5 million renovation of the former Clarion hotel. This property will feature 102 guest rooms, 671 square feet of meeting space along with several other amenities.
We view New Brunswick as a strategic location in Canada due to its positioning as a major tourism hub. The fact can be validated by the recent data from Smith Travel research which said New Brunswick recorded an increase of 240 basis points in occupancy to 69%, for the week ending 15, September, 2012, second highest after Alberta.
Further, the hotel will be in close proximity to the 14,000 square feet Edmundston Convention Centre used for meetings and special events as well as to numerous shops and restaurants, the University of Moncton - Edmundston campus, Centre Brunswick Mall, Regional Sports Complex and Saint Basile Arena that will in turn attract both business and leisure travelers.
Starwood set a new trend in hotel designs with its Four Points by Sheraton brand and has spread its operations globally with more than 160 hotels. Starwood plans to open as many as 23 Four Points hotels in 2012, thus making it the second largest pipeline across the company’s brands.
Starwood’s expansion plan in Canada is mainly propelled by strategic conversion projects at Four Points which is the most important brand to drive the company’s Canadian growth. In Canada, the brand is present in cities like Alberta, British Columbia, Manitoba, Nova Scotia, Ontario, Quebec and Saskatchewan.
Apart for international travelers, the Canadians are also exploring the domestic travel options for leisure purpose. One reason for such may be that after the recession, consumers could afford to increase their discretionary spending on leisure travel. Further, owing to the strong business outlook, the U.S. groups are once again taking interest in Canada.
Moreover, a long-standing presence in this country allows Starwood to enjoy a steady relationship with owners and developers across the country.
However, a strong Canadian dollar in recent times is discouraging U.S. groups from traveling to Canada, which in turn has an unfavorable impact on Starwood’s Canadian business. According to a report issued by the Canadian Tourism Commission, trips from the U.S. to Canada declined around 3% versus 2008, while trips out of Canada were up 17%.
Starwood will also face stiff competition from its peers Marriott International Inc. (MAR - Analyst Report) and Hyatt Hotels Corporation (H - Snapshot Report) in that market. Starwood currently carries a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. We are also maintaining our long-term ‘Neutral’ recommendation on the stock.