Hotel Chains Positioned to Profit in China

NEW YORK (TheStreet) -- Shareholders of Marriott International (MAR), Wyndham Worldwide (WYN), The Intercontinental Hotels Group (IHG) and Starwood Hotels and Resorts (HOT) can sleep better at night given the economic reforms and urbanization taking place in China.

As detailed in a previous article on TheStreet, the ruling Communist Party is moving to open the Chinese economy more to meet market demand. Combined with the perpetual urbanization in the world's most populous country, as covered in another TheStreet article, this should greatly increase the demand for hotels from both business and pleasure travelers. All four hotel chains have significant growth expansion plans for China and the rest of Asia.

Marriott International, for example, is looking to double its presence in Asia by 2016.

Arne Sorenson, President and Chief Executive Office of Marriott International remarked in a statement that, "Our explosive expansion across the region reflects the popularity of our brands in Asia with owners and customers alike, and with a hotel opening almost every week across the continent, we will be poised to welcome travelers from the world over." Sorenson expects about 330 hotels to open in the region over the next three to four years.

Sorenson continued: "China remains our biggest market in the region with 64 open hotels and signed contracts for an additional 89 hotels, which will take us to more than 150 hotels in the country in the next three years or so."

It is much the same story for Wyndham Hotel Group, The Intercontinental Hotels Group, and Starwood Hotels.

Wyndham, the world's largest chain, recently opened the 500th Super 8 hotel in China. The company now has a "strong presence" in nearly 200 Chinese cities. John Valletta, president of the Super 8 Brand, said in a press release that, "We will continue to collaborate with Super 8 Hotels (China) Co. Ltd. to capitalize on the opportunities inherent in the market to strengthen and expand the Super 8 Brand."

The Intercontinental Hotels Group recently announced "ambitious growth targets" for China.

Overall, the plans include almost doubling the number of hotels in the People's Republic, which currently count as 200 in more than 70 cities. Between now and 2015, the company plans to hire another 110,000 employees. Richard Solomons, the Chief Executive Office of Intercontinental, stated that, "China is IHG's second largest market after the United States, and is likely to surpass the U.S. to become out largest by number of rooms by 2025."

China is home to the largest number of Starwood hotels outside of the United States.

There are over 250 hotels in Asia Pacific. The goal of Starwood Hotels is to double its presence, as noted on the website, "Asia Pacific continues to fuel Starwood's growth." With upscale hotels such as the W and St. Regis, Starwood is situated well to profit from the increasing spending on luxury items in China.

According to a report from Arvind Subramanian, a senior fellow at the Peterson Institute for International Economics, China now has the world's biggest economy in terms of purchasing power. That should increase greatly with urbanization, which takes gross domestic product much higher due to the economic efficiencies of cities. The Institute for Sustainable Communities remarked about this trend in Southeast Asia, that "cities are the drivers of this economic growth, and they are producing a rapidly increasing share of the gross domestic product (GDP) of their respective nations."

Just like many other sectors, China is a huge chunk of the projected expansion for the hotel industry. Marriott International, Wyndham Worldwide, The Intercontinental Hotels Group, and Starwood Hotels and Resorts are all committed to profiting from the higher spending that should result from the urbanization and economic reforms in the People's Republic. That should lead to increased revenues, and higher share prices for each hotel chain.

At the time of publication, the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Jonathan Yates is a financial writer who has had thousands of articles appear in periodicals and Web sites such as TheStreet, Newsweek, The Washington Post and many others. Much of his career was spent working on Capitol Hill for Members of Congress in both the House and Senate, on both committee and personal staff.  He was also General Counsel for a publicly traded corporation.  He has degrees from Harvard University, Georgetown University Law Center and The Johns Hopkins University.