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HOT Brings Le Meridien to New Orleans

Zacks Equity Research

As part of its continued brand revitalization strategy, Starwood Hotels & Resorts Worldwide Inc. (HOT) plans to introduce one of its upscale brands, Le Meridien, in New Orleans, North America in fall 2014. The Le Méridien hotel will be unveiled after brand conversion and renovation of an existing Starwood W branded hotel.

Starwood offloaded W New Orleans to Chesapeake Lodging Trust (CHSP) for $65 million this April following which Chesapeake decided to take up a refurbishment and conversion project worth $29 million in Apr 2014 and finish it off by the end of the fourth quarter.

Acquired in Nov 2005, the French brand – Le Meridien rides on a high growth vehicle and already has a global presence with nearly 100 hotels in more than 40 countries. Well known for its upscale hospitality, management sees the brand as a lucrative addition to its luxury hotels. The brand has considerable demand in North American markets.

New Orleans, the largest city and metropolitan area in Louisiana, is among the top 10 most visited cities in the U.S. Strategically positioned in the city’s renowned French Quarter, the rebranded hotel will enjoy a prime location and is expected to attract both business and leisure travelers. The new Le Méridien property will feature 410 guest rooms along with several other amenities.

According to the New Orleans Convention & Visitors Bureau, this city presently welcomes more than 9 million visitors annually and is expected to host around 13.7 million visitors by 2018.

According to Smith Travel Research, New Orleans was one of the cities, which experienced revenue per available room (RevPAR) growth of at least 10% in 2012. Last year, this city witnessed RevPAR growth of 14.6% to $89.81, the second best in the U.S. hotel industry. Occupancy went up 5.5%, which is the third best growth rate registered in the industry.  These attributes make the city a strategic fit for new openings.

However, the market is not devoid of competition. To tap the increasing potential, many of Starwood’s peers including Marriott International Inc. (MAR) and Intercontinental Hotels Group plc (IHG) have established their presence in the market.

Starwood currently retains a Zacks Rank #3 (Hold).

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