Starwood Hotels & Resorts Worldwide Inc. (HOT) recently revealed its intention to open 20 more hotels in India by 2015. Starwood currently operates 33 hotels in that country. The hotelier sees significant opportunities for growth in India, which is under-hoteled to meet its future demand.
Starwood’s emergence in India dates back to 1973. Being one of the largest international hotel operators of four and five star hotels, Starwood has become one of India’s most sought after global brands. In fact, since 2009, Starwood has opened nearly as many hotels in India as rivals Hyatt, Hilton and Marriott combined.
The demand for hotels is greater in international markets than in 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. Around 80% of the company’s 85,000 room pipeline is outside the developed world. The key growth markets in Asia-Pacific were China and India.
The middle income population in India is growing, presently accounting for more than 200 million people. Indian consumers continue to enjoy double-digit growth in per capita income, while the population of high net-worth individuals has grown over 80% in the last five years. This fraction of the population has also an inclination to spend on travel and leisure. Moreover, a long-standing presence in this country allows Starwood to have a stable relationship with owners and developers across the country. All these factors testify to Stawood’s second largest Asian hotel development pipeline in India.
Initially, the mid-market, tech-savvy and affordable brands like Aloft and Four Points by Sheraton stole the show in India. But now the company focuses on its high-end brands as well targeting India’s rapidly growing high net-worth individuals who seek sophistication in travel experience. With the opening of the ITC Grand Chola Rajputana in 2012, Starwood’s Luxury Collection brand will have nine hotels in India, making it the brand’s second largest market next to the U.S.
Starwood’s another high-end brand W will step into India in 2015 with the opening of the W Mumbai and the W Retreat & Spa Goa, followed by the W Noida, Delhi NCR in 2016. St. Regis will also debut in India with the opening of The St. Regis Noida, in 2016. With those aforesaid entries, Starwood will operate eight of its nine brands in India including W, St. Regis, The Luxury Collection, Le M?ridien, Westin, Sheraton, Four Points by Sheraton and Aloft.
However, the market is not free of competition. Several major hoteliers like InterContinental Hotels Group (IHG), Hyatt Hotels Corporation (H) and Marriott International Inc. (MAR) are poised to beef up their portfolio in that country.
Starwood currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. We are also maintaining our long-term Outperform recommendation on the stock.
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