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Starwood's Aggressive Latin American Plan

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Starwood Hotels & Resorts Worldwide Inc. announced its plan to open 17 hotels in the Latin American region by 2016, thus increasing its portfolio by 20%. The company’s growth spurt in Latin America — backed by robust expansion in Mexico and Columbia has already made it the largest high-end hotel operator in the region.

Starwood’s Specialty Select brands (“SSB”) are the most appealing brands in Latin America, particularly in secondary and tertiary cities which boast strong demand for domestic business travel. Currently, the company has a total of 17 hotels under the Four Points by Sheraton and Aloft brands in Latin America. The development pipeline of eight SSB hotels in Latin America represents an increase of nearly 45% over the next couple of years.

The Sheraton brand is another of the attractive brands in Latin America, with 33 hotels operating under its banner. The company has plans to open three more within 2016. Additionally, the company’s Four Points by Sheraton brand has five hotels in the pipeline in the region along with three Aloft-branded hotels in the next two years.

Beefing Up the Mexican Portfolio

Mexico has evolved as one of the largest market for Starwood within a couple of years. With the opening of the 142-room hotel Aloft Guadalajara, in Avenida de las Americas — Mexico’s cultural and technology hub — Starwood brought the total number of hotels operational in the country to 26.

Further, the hotelier announced that it will open The Westin Cozumel — the eighth Westin hotel branded property in the country — in mid-2016. This opening will increase Starwood’s pipeline in Mexico to seven hotels, a 30% increase of its total footprint. With such robust expansion, the Connecticut-based hotelier has established itself as the largest operator of upscale hotels in the country.

Doubling the Columbian Footprint

Starwood plans to double of the number of Four Point hotels operational in Columbia by 2016. The company also announced plans to open two Four Points by Sheraton branded hotels in the region. While the 140-room Four Points by Sheraton Bogota will be unveiled in June, the 119-room Four Points by Sheraton Barranquilla will welcome guests in September.

Additionally, the hotelier plans to introduce its luxury brand W Hotels with the opening of W Bogota during the second half of 2014. Next year, Starwood will debut in Cartagena, with the opening of a beachfront Sheraton hotel. Cartagena, located on the coastal Columbia, ranks high as a tourist destination because of its sprawling beaches.

Revisiting Bolivia After Three Decades

Starwood announced its planned return to Bolivia, after three decades, with the opening of The Sheraton Santa Cruz Hotel. The 150-room hotel will expand the brand’s presence to 13 Latin American countries.

Latin America’s Tourism Boom

The continuous GDP growth, steady influx of direct foreign investment to high growth markets and the growing middle classes with sufficient disposable income have improved tourism in Latin America.

These factors and the greater resilience of the emerging economies to recession have strengthened the region’s growing dominance on the world tourism business and its potential as a hospitality market. In our view, Starwood’s aggressive expansion in the region will further strengthen its position as the leading hotelier in Latin America.

Stocks to Consider

Starwood currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same industry are The Marcus Corp. (MCS - Free Report) and Marriott International, Inc. (MAR - Free Report) . In the broader leisure services sector, Las Vegas Sands Corp. (LVS - Free Report) is also worth considering. All these stocks carry a Zacks Rank #2 (Buy).

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