As part of its continued brand revitalization, Starwood Hotels & Resorts Worldwide Inc. (HOT - Analyst Report) recently completed an extensive makeover of four Hawaiian properties under its largest brand Sheraton Hotels & Resorts. The refurbishment cost was approximately $230 million.
This significant, multi-year project included refurbishments worth $188 million at the Sheraton Waikiki, $6.5 million at the Sheraton Maui Resort & Spa, $16 million at the Sheraton Kauai Resort and $20 million at the Sheraton Kona Resort & Spa at Keauhou Bay. The project was accomplished with the recent launch of the Sheraton Kona Resort.
Since the last couple of quarters, Sheraton has been spearheading Starwood’s market share growth. The brand covers around 30% of the company’s current total global pipeline. Recently, Sheraton concluded a $6 billion brand-wide revitalization program and is now working on a three-year $6 billion international expansion program.
Hotel companies across the globe have been diligently working over the last couple of years to augment guest satisfaction to uplift their positions in a cutthroat environment. Hence, brand conversion and remodeling has become a trend today.
Many of Starwood’s peers like Marriott International Inc. (MAR - Analyst Report) and InterContinental Hotels Group (IHG - Snapshot Report) are also resorting to the same strategy. Though renovation work affects near-term revenue, it boosts returns once completed.
Starwood is comprehensively working on its assets to offer an enhanced travel experience to its guests and primarily considering for renovation older properties operating in dynamic markets.
Hawaii is a popular destination for leisure travelers. Additionally, the Hawaii Tourism Authority (HTA) intends to market this region as a business hub, as tourism is the prime source of private capital in Hawaii.
As per HTA, total visitor spending climbed 10.8% year over year to $12.07 billion in 2011. This year business data for the month of September 2012 also reaffirms the trend, with total visitor spending increasing 15.6% to $146.5 million. Total arrivals in September grew 6.1% as well. Further, total tourists arrivals are expected to grow 9.4% in 2012. Hawaii is thus a flourishing business zone with the hospitality sector a major beneficiary.
White Plains, New York-based Starwood currently retains a Zacks #3 Rank that translates into a short-term ‘Hold’ rating. We also reiterate our long-term ‘Neutral’ recommendation on the stock.