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Starwood's Luxury Brand in Jakarta

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White Plains, New York-based Starwood Hotels & Resorts Worldwide Inc (HOT) is all set to expand in the Asia Pacific with its Luxury Collection brand. The company’s Luxury Collection brand recently debuted in Jakarta with the inauguration of Keraton at Plaza; the capital of Indonesia.

This new hotel marks the 80th Luxury Brand hotel across the globe and first of the four hotels planned to open in Asia Pacific in the next six months. Out of the remaining three hotels in the pipeline, two are scheduled to open in China and one in India.

Keraton at The Plaza features 140 guest rooms and suites, Keraton Lounge and Bengawan restaurant. The hotel is also expected to provide the Luxury Collection’s signature Concierge service to all its guests.  

Jakarta is Indonesia’s economic, cultural and political center. As the third biggest economy in Indonesia, Jakarta attracts a large number of visitors. Jakarta is served by the Soekarno-Hatta International Airport and the hotel is just 30 km away from the airport. Additionally, hoteliers can enjoy the sightseeing, as all the important sites are at close proximity to the hotel. Management views it as an excellent venue for both social and corporate events. We expect Starwood to benefit from its strategic location going forward and will drive traffic from all over the world.

The Luxury Collection brand was launched in 1906 and remains on the track to spread its operations globally through its 80 hotels in more than 30 countries. The brand is well known for its great service, style and class along with individuality of each hotel. Management believes that the brand adds ideally the luxury hotels into the system and hence is investing over $100 million for restoring the brand. In five years the footprint of the brand has grown by 40% and gained 270 points in RevPAR index.

The company is poised to benefit from greater demand for hotels in the international markets compared to the U.S., especially in the Asia-Pacific region, where the pace of economic recovery is faster. Starwood can capitalize on this trend as its international exposure is wider than most of the other hoteliers such as Wyndham Worldwide Corporation (WYN) and Hyatt Hotels Corporation (H). Of its total pipeline, 60% is focused toward the Asia-Pacific markets. In Asia, the company currently operates 220 hotels and plans to open approximately additional 20 hotels for the remainder of the current year. The key growth markets in Asia-Pacific are China and India.

Starwood is a leading worldwide hospitality company with primary focus on property ownership, management and franchising. Starwood derives the majority of its revenue from its full-service, luxury/upscale brands such as Sheraton, Westin, St. Regis, The Luxury Collection, W, Four Points by Sheraton, Le Meridien, AloftSM and ElementSM.

Starwood currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. We are also maintaining our long-term Neutral recommendation on the stock.

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