Starwood Hotels & Resorts Worldwide Inc. (HOT), with its Luxury Collection brand, is all set to explore Puerto Rico this November. The company will open its first luxury resort, St. Regis in Bahia Beach, Puerto Rico, following two other key Starwood hotel openings, W Vieques and Sheraton Puerto Rico Convention Center Hotel & Casino. With the addition of these three new hotels Starwood will double its portfolio in Puerto Rico in one year and plans to expand further.

St. Regis Bahia Beach features 139 luxurious guest rooms and suites, 26 estate home residences, and an 18-hole golf course. The hotel cost nearly $172 million and, riding on the back of a recovery in luxury hospitality, the hotel has already been booked for the upcoming December Holidays.

Puerto Rico has been playing a major role in Starwood’s Caribbean expansion.  With its easy accessibility and focus on eco-tourism, the location enjoys a more competitive advantage than any other Caribbean island. Moreover, the government of Puerto Rico exempts U.S. citizens from having to produce a passport. In the first six months of 2010, Puerto Rico saw a 10% increase in overall tourist traffic, according to industry sources. Therefore, we expect Starwood to considerably benefit from this strategic expansion going forward. 

In a separate development, Starwood announced at the end of June that it plans to open three Luxury Collection hotels in Peru, through a franchise agreement with Libertador Hotels, Resorts & Spas. Among these, two have already been opened.

The company is poised to benefit from the increase in demand for hotels. Over half of its hotel properties are outside the U.S., an international exposure that not many of its peers can boast of. Additionally, over 80% of the company’s 85,000 room-pipeline will be built in international markets. The demand for hotels in the international market is strong, as the pace of economic recovery is particularly fast outside the U.S.

Starwood is a leading worldwide hospitality company with a 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. 

We maintain a Zacks #2 Rank on Starwood, which translates into a short-term Buy recommendation.

 
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