BRUSSELS Bart Carnahan, senior vice president of acquisition and development for Starwood Hotels & Resorts Worldwide in Europe, the Middle East and Africa, talks with HOTELS about the company’s aggressive development plans and its performance outlook across the vast region. Starwood plans to open 50 new properties in EMEA by 2012, increasing its portfolio in the region by more than 25% in the next five years.
HOTELS: Which markets within EMEA hold the greatest potential for future hotel industry growth in general and for Starwood specifically?
Carnahan: The Middle East, Africa and Eastern and Central Europe offer exciting growth opportunities for Starwood. Particularly strong markets include Russia, Turkey, South Africa and the Gulf states, with multiple signings in Saudi Arabia and the United Arab Emirates.
We currently have 50 hotels across the Middle East and a pipeline of 20 more due to open in the next five years, representing an increase of 40%. The Middle East will soon be the first region outside of North America to offer all nine of Starwood’s brands illustrating how integral this market is to our growth strategy.
We will more than double our footprint in Russia within the next three years with new hotel openings in St. Petersburg, Perm, Sochi and Rostov-on-Don. In addition, we will continue our expansion in Eastern Europe with plans to open a new Four Points by Sheraton in Zaporozhye in Ukraine in 2011, marking the debut of Starwood in the country.
HOTELS: Of the markets where Starwood has existing EMEA hotels, which are recovering the fastest?
Carnahan: Our business trends continue to improve beyond expectations; however, with continued economic uncertainty, we are planning for a wide range of scenarios.
Our average occupancies were above 72% in EAME in Q2, with midweek levels over 92% in gateway cities such as Paris, Rome and London, which are all performing extremely well. Furthermore, despite the eurozone crisis, hard-hit destinations are performing better than expected. Destinations such as Greece, Italy and Spain have benefited from the strong U.S. dollar.
Starwood recently opened two hotels in the new luxury destination of Costa Navarino in Greece. These hotels—The Romanos, a Luxury Collection Resort, and The Westin Resort Costa Navarino—have exceeded all expectations, with weekend occupancies above 85% since opening earlier this year. We also saw a significant rise in occupancies in Q2 in key cities in Spain and Italy in comparison to last year’s results. Take W Barcelona, for example: within its first year of operation the hotel exceeded all expectations, with average occupancies above 90% in July and August 2010. W continues to be a key contributor to growth in EAME, and we are planning to expand our portfolio with openings in London, St. Petersburg and Paris in 2011.
HOTELS: Are certain industry segments performing better than others within EMEA in recent months?
Carnahan: Business travel is certainly back. Group production in EAME is up by more than 10% percent on room nights, with an increase in revenue of more than 7% over 2009. We’re seeing our top global accounts in sectors such as financial services, management consulting, high-tech and pharmaceuticals back on the road, and some at pre-crisis levels. In addition, our luxury brands are enjoying the strongest RevPAR gains of any segment. This puts us in a great position ,as Starwood is the largest operator of 4- and 5-star hotels in the world.
HOTELS: How much of Starwood’s growth in the region will come from new-build projects as opposed to conversions?
Carnahan: As financing continues to be challenging for new-build projects, we are seeing more opportunities for conversions, especially in mature markets. Quality conversions have become a greater focus over recent months as our distinct and compelling brands and powerful systems offer developers added strength in this challenging environment.
We believe there are a lot of great hotels that can benefit from our industry-leading brands and global infrastructure to provide strong financial returns for both parties. Regardless of project type, size and scope, our goal is to be responsive and flexible to ensure owners can succeed.
For instance, consider the growth avenue we have with The Luxury Collection. With over 75 hotels across more than 30 countries, The Luxury Collection is a key that unlocks the world’s most treasured destinations by delivering indigenous, exceptional and collectable experiences. It is unique in that it is a major luxury hotel brand that is ideal as a conversion proposition for owners that treasure individuality and flexibility, but that seek to enhance their positioning by linking to the well-established Starwood engine. We aggressively target conversions in Europe under The Luxury Collection brand, and we will be able to announce exciting new projects soon.
Starwood remains focused on working with the right partners on the right properties in the right places to further expand our portfolio through the highest quality hotels everywhere our guests want to travel.
HOTELS: In Africa specifically, where are the opportunities these days? Are there any “under the radar” or emerging markets to watch there?
Carnahan: Today, Starwood has the largest portfolio of upscale, upper-upscale and luxury hotels on the African continent and we are actively seeking to further consolidate this leadership. We have a very strong presence across northern Africa, west Africa and the Indian Ocean, with a total of 38 hotels and another 11 new hotels in the pipeline. Starwood will continue selective growth in these regions; particularly in Nigeria, Ghana and the Ivory Coast. We are also strategically and aggressively targeting the southern African and east African countries as priorities in the medium-term. The climate for development in Africa is healthy and therefore we have increased our development resources.
HOTELS: Are there any markets within EMEA that, prior to the downturn, seemed attractive for expansion but which are less attractive today?
Carnahan: While we have seen a slowdown in some of the hotel projects we have in the pipeline, overall, we are on track to expand our portfolio in Europe, Africa and the Middle East by more than 25% in the next five years, and this is a major component of our worldwide expansion which at this time consists of more than 400 hotels coming online in the next five years. The majority of our development continues to be in the upper-upscale and luxury segments.
We continue to focus on fast-growing and emerging markets such as the Middle East and Russia. In the Middle East, for example, we have signed deals to open five new St. Regis hotels in the Middle East over the next three years—one in Bahrain, Doha and Dubai, and two hotels in Abu Dhabi.
HOTELS: What comes next for Starwood in EMEA?
Carnahan: We are currently bringing new brands to EAME. W hotels launched in EAME in 2008 with the opening of W Istanbul. This was followed by W Doha and then W Barcelona, which opened its doors last October. W continues to be a big driver of our growth in EAME, with flagship openings in London, St. Petersburg and Paris all scheduled for 2011.
EAME’s first Aloft Hotel opened in Abu Dhabi in October 2009. This September, Aloft launched in Europe with the opening of Aloft Brussels Schuman. This will be followed by the opening of Aloft London Excel in advance of the Olympic Games in 2012.
The global Sheraton revitalization effort is realizing results, and another US$5 billion will be spent on 60 new Sheraton hotels expected to open through 2012. In EAME alone, we have invested almost US$500 million in renovating our existing Sheraton hotels and over US$1 billion in opening new Sheraton hotels across the region. With the opening of the Sheraton Milan Malpensa Airport Hotel & Conference Centre in early 2011, we will add another flagship property to our Sheraton portfolio in EAME.
We continue to strengthen our Luxury Collection portfolio with key conversions including the iconic Grosvenor House Hotel in Dubai earlier this year and flagship openings such as The Romanos, a Luxury Collection Resort, in Costa Navarino, Greece. Just recently the brand added another jewel to its collection with the Al Maha, a Luxury Collection Desert Resort and Spa, in Dubai.