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Starwood to Introduce Aloft in Ukraine

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In a bid to ramp up its presence in Russia and the Commonwealth of Independent States (CIS), Starwood Hotels and Resorts Worldwide Inc. (HOT) will introduce one of its contemporary hotel brands, Aloft in Kiev, Ukraine in 2015.

Starwood currently operates just one hotel in Ukraine under the Four Points by Sheraton brand in Zaporozhye. Taking into account Aloft Kiev, Starwood has three hotels in the pipeline in the region including a Luxury Collection hotel in Odessa, slated to open in 2014, and a Sheraton hotel in Kiev, due for a 2016 opening. The latest Aloft Kiev hotel will feature 310 guestrooms, along with several other amenities.

There is ample scope for expansion as Starwood operates less than 10 hotels in Russia and CIS. Management now plans to broaden its portfolio in that region by 2017 with 11 new hotels in Moscow, St. Petersburg, Rostov-on-Don, Perm, Kaluga, and Krasnodar in Russia, as well as in Kiev, Ukraine and Ismayilli, Azerbaijan. In fact, the year 2015 will also witness the entry of the Aloft brand in Russia. So far, Starwood brands such as Luxury Collection, Sheraton, W and Four Points by Sheraton have managed to enter the region.

Why Aloft?

Starwood has set a new trend in hotel designs with one of its lifestyle brands, Aloft. Aloft has spread its operations globally with more than 75 hotel openings since its launch in Jun 2008. The brand rides on a high growth trajectory and has already left its mark in every region including North America, Europe, the Middle East, Latin America, India, Southeast Asia and China.

In its five years of journey, Aloft has performed satisfactorily in terms of guest satisfaction, which reflects the brand’s strength and growing popularity. The urban concept of Aloft mainly caters to modern travelers seeking a unique experience.  Its affordable price point in the mid-market hotel category is another reason for its increasing popularity. In the second quarter of 2013, revenue per available room (RevPAR) growth at Aloft was 8.2% in constant dollars, the third among all the other brands.

Why Russia & CIS?

Since the U.S. market is somewhat saturated, hoteliers are tapping international opportunities, especially in the faster growing emerging markets. Starwood sees a huge untapped potential in the secondary and tertiary markets across Russia and CIS, where the mid-market category is under-served. On the other hand, Starwood is gaining increasing momentum off this category as evident by the fact that its mid-market portfolio has grown over 60% since 2009. Hence, the hotelier seeks to capitalize its potential in full.

The middle income population in the region is also growing. This section of the population has an inclination to spend on leisure activities. Additionally, Russia and CIS are gaining popularity in the global travel market. Consequently, the existing hotels are struggling to keep pace with the increasing number of visitors to the region  Ukraine alone plays host to more than 20 million foreign citizens every year, primarily from Eastern Europe. A large section also comes from Western Europe, the U.S. and Canada.

Kiev, the capital and largest city of Ukraine, is a sought-after industrial, educational and cultural center of Eastern Europe and has been visited by foreign tourists over the years. The latest Aloft property will be strategically positioned in the Central Business District of the city and in close proximity to public, retail, sports, culture and historical sites, thus making it ideal for both business and leisure travelers.

Other Stocks to Consider

Starwood currently retains a Zacks Rank #3 (Hold). Some players in the hotel industry, which look attractive at current levels include Hyatt Hotels Corp (H), China Lodging Group, Limited (HTH) and Marriott Vacations Worldwide Corp. (VAC), all carrying a Zacks Rank #2 (Buy).

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