In order to strengthen its presence further in China, the leading global hotel chain Starwood Hotels & Resorts Worldwide, Inc. (HOT - Analyst Report) has recently declared that it is on the verge of unveiling 20 new hotels in the region in this year. This will lead to the opening of one hotel every 20 days on an average in China.
Starwood has been focusing on this rapidly growing economy for quite some time. The global hotel chain sees more development opportunities in China with around 1.3 billion people and its emergence as a business hub.
As per the United Nations World Tourism Organization (UNWTO), China promises immense growth potential, with visits expected to increase substantially by 2014 making it the world’s leading tourist destination by 2020. The affluent middle class population in China, which is 25% of the region’s total population, caught the attention of Starwood.
Starwood enjoys a first-mover’s advantage in China as it opened the first branded hotel, The Great Wall Sheraton Hotel, in Beijing way back in 1985 and is preparing to take a lead with a pipeline, significantly larger than other hoteliers such as Marriott International Inc. (MAR - Analyst Report) , Hyatt Hotels Corporation (H - Snapshot Report) and Wyndham Worldwide Corporation (WYN - Analyst Report) .
Over the past three years, Starwood’s Chinese portfolio has increased two-folds to 120 properties. Nearly 100 hotels are under construction, 70% of which belong to the tier 1 and tier 2 cities. Leveraging its first-mover advantage, Starwood has become one of the most sought-after global brands in the company’s second largest hotel market, China.
Starwood intends to double its luxury portfolio in China within a few years to cash in on the increasing demand for luxury hotels. Among all other Chinese cities, Beijing and Shanghai are expected to lead the growth trajectory. Starwood is also focusing on improving its loyalty program, Starwood Preferred Guest (SPG) to attract more guests. Currently, of SPG’s total members, 50% belongs to China.
On the flip side, although China promises solid growth, Starwood witnessed weak results in the region in 2012. However, we believe that following the Chinese government’s leadership transition the company’s business will improve in the future.