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Starwood to Unveil W in Colombia

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Starwood Hotels & Resorts Worldwide Inc. recently struck a deal with Terranum Hotels to unveil a W property in Bogota, Colombia in 2014. The new hotel will feature 168 guestrooms, including 20 suites and one presidential suite, more than 12,000 square feet of meeting space along with numerous other facilities.

This upcoming property at Bogota will mark the debut of W in Colombia. The other Starwood brands currently operating in Bogota are Aloft and Sheraton. The place is considered a popular destination for leisure and business tours. Management remains focused on opening more hotels in Colombia going ahead.

This is not Starwood’s first association with the Bogota-based real estate company Terranum that deals with investment, development and management of commercial real estate through six business units. Starwood’s Aloft properties at Bogota and San Jose are also owned and developed by Terranum Hotels.

Starwood remains on track to spread its W operations globally with more than 60 hotels by the end of 2015. The brand was launched in 1998, in New York. The W brand has a high growth trajectory and is already present in every region including North America, Europe, Latin America, Asia-Pacific, the Middle East and Africa. The brand’s strength and growing popularity can be validated by its strong RevPAR metric. In the first quarter of 2012, RevPAR growth at W was 8.5% or 8.8% in constant dollars, the second highest among all the other Starwood brands.  

We believe Bogota is a strategic fit for openings, as it is the capital and largest city in Colombia and one of the leading locations in Latin America. Located in a prime location adjacent to the El Dorado International Airport, the Bogota property will have access to Colombia’s most important companies that will in turn attract business travelers. Further, the hotel will be in close proximity to several contemporary restaurants and shopping centers that could aid the growth of leisure travel. This multi-use property will house several corporate offices, premium retail spaces and many other high-end amenities.  

Starwood has long been binging on South and Central America. The affluent middle class population in Latin America and greater inclination of global travelers to spend on leisure in that zone has caught the attention of Starwood. Apart from tourism, the region is also successfully emerging as a business hub.

Excluding currency effects, in first-quarter 2012, Latin America was the highest contributor in worldwide RevPAR with a 14.4% growth rate. All these factors testify to Starwood’s one of the largest hotel development pipelines in Latin America, where the company opened 7 new hotels in 2011, and has more than 15 new hotels slated to open by 2014.

But the company should be wary of its competitors, as they too are in an expansion mode. In fact, Starwood’s major competitors, Hyatt Hotels Corporation (H - Free Report) and Marriott International Inc. (MAR - Free Report) also have their presence in Bogota.  

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

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