Starwood Hotels Worldwide has experienced a massive increase in its stock price over the past few months, which has pushed the multi-billion dollar luxury hotel chain to its market peak. The brand seeks to expand dramatically worldwide over the next few years to the opening of over 30 more hotels worldwide. This has set a large profit growth for the company’s future, and should ultimately lead to an increase in investors for the fourth quarter.
Shares in Starwood (Ticker: HOT) have been perceived as a hot commodity, with the company’s stock increasing 43% in the past year alone. As of November 6th, its stock price was at a whopping $75.26 a share, which has gradually passed the 75.09 per share from the company’s peak in 2007. This is also the highest share price in comparison to other hotels, Hyatt Hotels Corp was at $41.99 per share, coming in second, and Hilton Hotels Worldwide is at $21.52.
One major circumstance for why the company’s shares are due to its plans of massive expansion have been confirmed from the company’s third quarter conference call held on November 18th. Three hundred and thirty three hotels are expected to open within the next two years alone and Starwood is now accounted for nearly 1 in 5 of all new-branded, upper upscale and luxury hotel openings or conversions worldwide.
2014 is set to be a big year in development for the company, from setting to own around 30% of property in Africa to building its 100th Sheraton Hotel in Asia Pacific and its 500th hotel worldwide. “Our pipeline of about 400 hotels and 100,000 rooms has translated into about 70 to 80 new properties a year. That number is likely to grow,” Frits D. van Paasschen, Chief Executive Officer, President and Director of the company, said.
Starwood’s rate of occupancy (RevPAR) also remains at an all-time high and is expected to increase during the holiday season. Van Paasschen also mentioned that while the United States and Canada had record occupancy levels, Starwood saw it’s RevPAR rate increased in a similar fashion on a global scale. “As such in North America, we’ve had very steady REVPAR growth between 6% and 7% for the past 2 years in a macroeconomic environment,” he said.
Starwood stated that it predicts 80% of earnings coming from various additional fees the company plans to implement by the end of 2016. The company has already maintained a 74% increase and if it continues to maintain its current up streak, there is a very limited downside risk in investing.
Vasant Prabhu, Vice Chairman and Chief Financial Officer, assured that while group revenue growth has been slower, it has been steady, at around 3% to 4%. “This, in our view, is healthy, balanced and sustainable revenue growth,” he said. “With no meaningful change in the supply situation evident in the near term, we expect these trends to extend into 2014,” he said.