Ritz-Carlton to Debut in Chengdu - Analyst Blog

By Zacks | December 17, 2012 AAA

In order to ramp-up its presence across the length and breadth of China, Marriott International Inc. (MAR), plans to unveil a new hotel in Chengdu in the Sichuan province, under its Ritz-Carlton brand. It is the first Ritz-Carlton branded hotel in South-West China. The property is scheduled to open in 2013.

The property will feature 353 rooms including 55 suites along with various other facilities. Chengdu, being the capital of the Sichuan province, is a strategic fit for the opening, thanks to its unique location in Tianfu Square.  The city is also a major transportation hub in south-west China. Additionally, this under-construction hotel is well-connected to the city's largest commercial districts, which in turn is likely to augment its demand from business travelers.

China is all set to bring about a recovery in global tourism and by 2020, it is expected to be the world's largest travel destination. Marriot, in order to capitalize on that opportunity, seeks to double its presence in China in the next 3 years.

Incidentally, Sichuan is also the home to an endangered species ??? the giant panda. Tourists across the world come to visit this specimen. Besides, the city of Chengdu has a glorious history of over 2000 years. Its fine traditional handicrafts get valued both at home and abroad, thereby attracting plenteous leisure travelers. Thus, the city is an important cultural, economic, and trading center. In February 2009, Chengdu was honored as one of the "best tourist city in China" by China National Tourism Administration and the World Tourism Organization (UNWTO).

At present, Chengdu is one of the most advanced cities in China with less market saturation compared to other cities in China.  All these factors justify Marriott's decision to expand in Chengdu. However, the company needs to be wary of its competitors. Starwood Hotels & Resorts Worldwide Inc. (HOT) and Intercontinental Hotel Group (IHG), two of the company's closest peers, already have a strong presence in the market.

We currently have a long-term Neutral recommendation on Marriott. Also, it carries a short-term Zacks #4 Rank (Sell).

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