Starwood Hotels & Resorts Worldwide Inc. (HOT) is expanding its portfolio in the Middle East with the launch of 35 hotels. The hotels are slated to be opened in the next three years, bringing the count to over 80 hotels in the region. The strategic expansion focuses both on the emerging as well as established Middle Eastern markets, with seven hotels scheduled to be opened in the United Arab Emirates (UAE), Iraq and Bahrain.
The UAE remains Starwood’s largest growth market in the Middle East with more than 30 hotels to be unveiled by 2017. Earlier this year, the hotelier forayed into the Emirate of Ajman with the opening of Ajman Saray. Dubai is another important market for Starwood. In fact, with a Sheraton hotel scheduled to be opened in September, Dubai will emerge as Starwood’s second largest market after New York City.
Starwood currently operates 10 properties in Saudi Arabia with 8 more hotels in the pipeline. With the opening of Sheraton Dohuk in October this year, the hotelier plans a return to Iraq, after closing operations in the country in 1990. Three hotels under the brands Sheraton, Aloft and Four Points by Sheraton will be opened in Erbil by 2017.
Additionally, Starwood will unveil three hotels post conversions in the later part of 2014. Opening in July, The Westin Bahrain City Centre and Le Méridien Bahrain City Centre will mark the debut of both the brands in Bahrain. Further, the first Luxury Collection hotel in Lebanon will open at Broumana in November after renovation.
Starwood’s contemporary W Hotels brand has witnessed strong growth in the Middle East, since its launch in 2009, buoyed by the demand for reasonably priced hospitality. The company plans to open five W Hotels in the upcoming few years and further intends to expand its mid-market portfolio in the Middle East with the opening of six Aloft hotels.
Starwood’s upper-upscale brands — Sheraton, Le Méridien and Westin — represent nearly half of the company’s pipeline in the Middle East. The company’s most popular brand, Sheraton, is leading this growth with seven hotels under development. Additionally, the Westin brand will almost triple its operations in the Middle East by 2017.
In our view, Starwood’s aggressive expansion will enable it to capitalize on the economic renaissance taking place in the Middle East, which is also boosting foreign investment. Additionally, growing political and economic stability is attracting more foreign brands toward the region.
Starwood currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the hotel industry include Marriott International, Inc. (MAR), Marriott Vacations Worldwide Corp. (VAC) and Wyndham Worldwide Corp. (WYN). All these stocks carry a Zacks Rank #2 (Buy).
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