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Starwood's Sheraton Reaches Fuzhou

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In order to ramp up its presence in the flourishing Chinese market, Starwood Hotels & Resorts Worldwide Inc. recently launched its Sheraton brand with the opening of the Sheraton Fuzhou Hotel in Fujian province. This marked the entry of Sheraton, one of the high-end brands of Starwood in Fuzhou – the capital of Fujian province.

The new hotel opening depicts the extensive expansion plan of Starwood in China. Starwood’s China business remains on track to triple within five years. This new hotel marks the second Starwood property in the city. The first was The Westin Fuzhou Minjiang hotel under its iconic Westin brand.

Located in the northeast coast of Fujian province, Fuzhou lies in the lower reaches of Minjiang River and connects with other cities of the province like Nanping, Quanzhou and Putian. Fuzhou is the major economic, political and transport center hub of the Fujian province. The city is also well-known for its local cuisine, cultural and historical background.

The tourism industry in Fuzhou has been rapidly developing, with over 80 hotels serving the domestic and international tourists. Moreover, Fuzhou is poised for growth in both business and tourism on account of its ideal location. To boost its tourism industry, Fuzhou government has planned a town which will be a blend of cultural performances, a theme park, a theme hotel and leisure amenities. The project is slated to open in October 2012.

Owned by Zhonggeng Group, The Sheraton Fuzhou Hotel comprises of more than 350 rooms and suites. It comprises essential basic and modern amenities for both business and leisure travelers. Positioned in the heart of Fuzhou's newly developed commercial district, the hotel is conveniently accessible to Fuzhou Changle International Airport and major commercial and industrial zones of the city. The hotel also well connected to the several popular sightseeing spots of the city.

Sheraton’s entry to China dates back to 1985 with the debut of Great Wall Sheraton Hotel in Beijing. Leveraging its first-mover advantage, Sheraton has become one of China’s most sought-after global brands. Given a surge in demand, Starwood is slated to open around 10 new Sheraton hotels by the year-end. The company is now scrutinizing its opportunities in various untapped but highly populated Chinese cities. Starwood recently inaugurated another Sheraton property - Sheraton Qingdao Jiaozhou Hotel - near Qingdao city in the Shandong province, China.

China is all set to bring about a recovery in global tourism, and by 2020, it is expected to be the world’s largest travel destination. Though Starwood’s current U.S. portfolio is roughly seven times the number of hotels in China, the company expects China to outpace the U.S. in the near future. We believe that openings in second and third tier Chinese cities will provide the company a competitive advantage over most of its peers.

Last year, Starwood shifted a management team to China to understand the market more closely through interactions with local stakeholders, while exploring new opportunities throughout the country. However, Starwood should be wary of its competitors. Recently, Hyatt Hotels Corporation (H - Free Report) opened its debut hotel - Hyatt Regency Chongqing – under its Hyatt Regency Brand in Southwest China.

Starwood currently retains a Zacks #2 Rank that translates into a short-term 'Buy' rating. However, we are maintaining our long-term “Neutral” recommendation on the stock.

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