Starwood Hotels & Resorts Worldwide Inc. (HOT) has taken a solid step to strengthen its Middle East operations. The company has decided to shift its management team, including president & CEO Frits van Paasschen, to Dubai for a month in 2013.
The step echoes Starwood’s intent to make Middle East one of its prime international markets. Before this, Starwood shifted its headquarters for a month to Shanghai, China in June 2011 to beef up its portfolio in that country.
The group will look into Starwood’s business pattern in Middle East and understand the market more closely through interaction with local stakeholders, while exploring new properties throughout the country. Such moves help Starwood in going beyond its domestic boundaries and develop as a global entity.
Since the U.S. market is somewhat saturated, hoteliers are exploring foreign opportunities. Over 80% of the company’s 95,000 room pipeline will be built in international markets. Starwood cited enormous growth potential in the Middle East, which is a compelling investment proposition given its rising importance as a global business and leisure hub. Also, its status of an important outbound travel market has made it a destination for upscale branded hotels.
Dubai itself has 15 Starwood hotels, the largest that the company has in any single city apart from New York. Management is especially keen on opening properties in Dubai as it connects emerging markets with the developed world. This is indicative of Dubai’s fast growing travel market.
We see this as the reason behind Starwood management’s keenness on local market knowledge. The company plans to open five more hotels in Dubai by 2017, including the entrances of the W and St. Regis brands.
At present, Starwood boasts of around 50 hotels in 11 countries in that region belonging to 8 of its 9 brands. It also has 30 hotels in the pipeline slated to open over the next 5 years. Once unveiled, these hotels will increase Starwood’s existence by 50% in Middle East.
Apart from the Middle East, Starwood is also big on North Africa, despite the political uncertainty there. On the whole, the Middle East and North Africa (:MENA) region accounts for 70 Starwood properties with 40 in the pipeline. The other markets that Starwood is eyeing for expansion apart from MENA are China, Brazil and India.
Geopolitical issues in MENA are improving. While fragile business environment is still noticed in countries like Egypt, Saudi Arabia and the Gulf area are giving strong performances. Sub-Sahara in Africa is yielding solid double-digit growth, and management expects RevPAR growth to accelerate in this region in the second quarter.