Back to top

Analyst Blog

We are reverting to a Neutral recommendation on the hotel company Starwood Hotels & Resorts Worldwide Inc. (HOT - Analyst Report) from Outperform given the pressure on revenues and lingering uncertainty in some geographic regions.

Why the Downgrade?

Starwood’s revenues have lost momentum in the last two quarters, increasing only 0.1% in fourth-quarter 2012 and plummeting 10.3% year over year in first-quarter 2013 due to reduced revenues at Starwood’s owned, leased and consolidated joint venture hotels and vacation ownership and residential businesses.

Despite its immense growth potential, a deteriorating political situation and inflation in Argentina and an over-valued Argentinian currency resulted in deceleration in Latin American revenues. Waning demand and rising local costs are hurting margins in the region. Moreover, revenue per available room (RevPAR) in Europe has been facing a tough situation due to austerity measures and fragile economic conditions. Long-term outlook is also not clear. Further, European corporate customers remain cautious when it comes to room rates.

With Europe and Argentina normally accounting for over 33% of owned rooms and almost 40% of owned EBITDA, we consider this sluggishness one of the major concerns in the near term. Further, in developed markets, high unemployment and mounting pressure of public and private debt has resulted in slower recovery.

However, despite these apathetic facts, some positive attributes prevent us from being too pessimistic on the stock. A strong developmental pipeline, significant international exposure, the hotelier’s asset disposition strategy, and limited asset supply in North America should prove beneficial over the long term.

Other Stocks to Consider

Other players in the same industry, which look attractive at current levels, include Marriott International Inc. (MAR - Analyst Report), Marriott Vacations Worldwide Corp.  (VAC - Snapshot Report) and Home Inns & Hotels Management Inc. (HMIN - Snapshot Report). While Marriott International carries a Zacks Rank #2 (Buy), Marriott Vacations and Home Inns carry a Zacks Rank  #1 (Strong Buy).


Please login to or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research


Are you a new Zacks Member or a visitor to

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
UNITED THER… UTHR 117.83 +28.51%
TRIQUINT SE… TQNT 20.67 +6.52%
VASCO DATA… VDSI 14.77 +4.68%
BANCO DO BR… BDORY 15.53 +3.95%
STRATTEC SE… STRT 80.24 +3.00%