The Wisdom of the Innkeeper
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Is Starwood (NYSE: HOT) missing something? Have they been taking their water at their desk and forgoing the water cooler altogether? That can really be the only explanation for their ignorance of Europe's imminent collapse and their stupidity in building a new hotel in the new epicenter of European dread: Spain.
The new Sheraton Madrid Mirasierra Hotel & Spa in Madrid, in partnership with Comercal Mirasierra, makes 17 hotels in Spain for Starwood. On top of this, Starwood is planning on opening another 24 hotels in Europe over the next four years. Really? I thought Europe was a wasteland of burned out buildings and rioting hordes.
Alas, no. Simon Turner, Starwood's President of Global Development said, “Even against a backdrop of uncertainty, Starwood’s pipeline of both managed and franchised deals for all nine brands in Europe is healthy and expected to grow in 2012. Eastern and Central Europe are particularly fertile ground for growth, primarily with new-build properties, while we see numerous ongoing conversion opportunities in established markets throughout Europe.” All told, the European commitment will total around $6 billion over the four year development plan. Pretty gutsy for an area of the world many have written off as dead.
It's just Starwood, though, right? They made commitments before Greece fell apart and can't back out now. No, again. Marriott (NYSE: MAR) is looking to double its presence in Europe by 2015. Amy McPherson, President of Marriott International Europe, said in late 2010, “Europe is the largest lodging market in the world and holds enormous potential for Marriott. Our talented new team here is aggressively accelerating our focus on growth.”
Both Starwood and Marriott and continue to enjoy consistent revenue growth, suggesting that maybe the European strategy isn't that crazy after all. In 2011 and 2010, Marriott grew revenue by 5% and 7%, respectively. Starwood grew by 11% and 8%. So, could it be the collapse of Europe is a tad overblown? It seems like these two companies are proving that the original point of a European Union actually is working.
Where there is potential there is investment. Starwood and Marriott see potential in Central and Eastern Europe for the most part, so the increased investment benefits the rest of Europe as a whole. While I am certainly the last person to advocate collectivism, I do see this as a promising sign for the future of the EU, and a way to put a little money in your pocket at the same time.
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