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Sheraton Enters Azerbaijan

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Starwood Hotels & Resorts Worldwide Inc. has signed an agreement with Silk Way Airlines LLC to open a Sheraton hotel in Azerbaijan. This marks Starwood’s debut in that country. Starwood plans to open more than 60 Sheraton hotels around the world over the next three years.

The hotel will be located in Baku, the capital of Azerbaijan. Sheraton, Baku will feature 207 guest rooms including 14 suites along with other amenities and is expected to open its doors this fall.

We believe Azerbaijan is a strategic fit for new hotels, as it is an important tourist destination and boasts of an abundance of natural resources. The hotelier is all set to tap the market, particularly because Baku is an oil-rich city. Its petroleum exports make it a large contributor to Azerbaijan's economy.

Since the last couple of quarters, Sheraton is spearheading Starwood’s market share growth. The brand covers 30% allotment of the company’s current total global pipeline. Recently, Sheraton completed a $6 billion brand-wide revitalization program, including $400 million in signature brand initiatives. Sheraton is now investing another $5 billion to add more new hotels by year-end 2013.

One of Starwood’s major competitors Hyatt Hotel Corp. ((H - Free Report) ) already has a presence in Baku. Another of its peers Marriott International Inc. ((MAR - Free Report) ) is also slated to open its property in Baku in December 2011.

Starwood currently operates 72 hotels in East Central Europe, including three hotels in Moscow and two in Georgia. However, apart from Sheraton, Starwood is also promoting its other brands in East European countries. As a point of reference, earlier this month, Starwood partnered with Real Estate Development Ltd to open its first W Hotel in Russia.

Starwood currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We also reiterate our long-term Neutral recommendation on the stock.

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