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Marriott Remodels Chicago Property

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Marriott International Inc. (MAR - Free Report) is on the verge of completing the renovation of its Chicago Marriott O'Hare property for $40 million. The Chicago hotel near O'Hare is likely to unveil its new look in January 2012. The renovation program covers 470 guest rooms and includes the addition of a state-of-the-art fitness center, 7400 square feet of meeting space and other amenities.

Marriott has embarked on an extensive remodeling program, which also includes its Riverside, California property. Renovation work on this property's lobby, bar and restaurant is scheduled to be over by September 2011. The lobby at the Courtyard Miami Beach hotel also got a facelift last month.

Since late 2010, hotel companies are working hard on guest satisfaction to uplift their positions in a cutthroat environment. Following the facelift trend, in March, one of Marriott’s peers Starwood Hotels & Resorts Worldwide Inc. announced similar plans for The Sheraton, New York, one of the largest hotels in New York City. Starwood will shell out $150 million for the renovation, which is being done in two phases. The first of these phases was completed in May.

Last month, another of Marriott‘s peers, InterContinental Hotels Group (IHG - Free Report) , also completed phase one of its Sao Paulo property renovation.

Coming back to Marriott, management believes that renovations can hurt revenue per average room rate on a same-store basis, when construction is underway. The renovation of the meeting space and some guest rooms at the Philadelphia Marriott downtown reduced RevPAR growth for the North American company-operated Marriott brand by about 0.5 percentage point alone in the first quarter 2011. This year, Marriott has 47 properties are under renovation compared with 30 hotels in the year-ago quarter.

However, renovation of existing properties will pay off more once the construction is complete. Marriott International currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. We are also maintaining our long-term Neutral recommendation on the stock.

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