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Yet Another Starwood in San Diego

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Starwood Hotels & Resorts Worldwide Inc. (HOT) recently inaugurated a property in San Diego Downtown under its Four Points by Sheraton brand. The latest opening marks the second Four Points by Sheraton hotel in the city.

Managed by Pinnacle Hotels USA, the property features 220 rooms, 1,400 square feet of flexible meeting space along with various other facilities. However, the lobby, restaurant and in-room amenities are expected to be renovated by the fall of 2012.

San Diego, the second largest city in California, is a strategic fit for new hotels, as it is an important business as well as tourist destination. Further, the property is in proximity to several popular sightseeing spots as well as San Diego International Airport.

Starwood has set a new trend in hotel designs with its Four Points by Sheraton brand, which has spread its operations globally with more than 160 hotels. Starwood plans to open as many as 24 Four Points hotels in 2012 itself, thus making it the second largest pipeline across the company’s brands.

Recently, Starwood put in $1 billion in order to revitalize the Four Points by Sheraton brand that primarily serves value-seeking guests. In first-quarter 2012, RevPAR growth was a sound 6.4% at Four Points by Sheraton (6.3% in constant dollar). 

The company should be wary of its competitors, as they too are in expansion mode. Several major hoteliers like Marriott International Inc. (MAR), InterContinental Hotels Group Plc (IHG) and Hyatt Hotels Corporation (H) also have considerable presence in that region, thus making the market competitive.

Starwood currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.

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