I came across a story from the South China Morning Post today which stated that Starwood Capital is planning on opening at least 20 hotels in China over the next 5 years under the 1 Hotels and Baccarat brands.

The article had a lot of conflicting information – perhaps due to the language translation, but it stated that the 1 Hotels projects will all be hotels, where as the Baccarat projects will primarily be residential – apparently the response to the Baccarat Residences, Shanghai has been great which gave Starwood the optimism they needed to expand that project.

Starwood is using $2 billion dollars it's raised, evenly split between it's non-hotel fund and it's hotel fund to create these projects, each one is expected to cost between $10 and $200 million dollars, and they are expecting a 12-20 percent yearly return on investment – a pretty high number considering the state of the worldwide economy, but a very logical number for most developments. The timing just seems to be too soon for this to all work out.

The first project which will be under development is the Baccarat Residences Shanghai, which apparently Starwood "will sell" next week. It's unclear if Starwood is selling the entire project to another developer while still being involved with the project via management and its use of the Baccarat name, or if its inferring that Starwood will start selling units to the public at that time. I tend to think next week will be when they start selling the units to the public since the Baccarat Residences, Shanghai website is still incomplete.

The article also goes on to mention how the first Baccarat project will open in Hawaii next year – but I've heard many rumors that the project hasn't even broken ground and was indefinently delayed.. In fact the projects website has been down since at least the beginning of 2009 – redirecting to the main Baccarat Hotels website.

It also states that the Baccarat Dubai project is on schedule for a 2011 opening – another fact that I find hard to agree with since almost all development has stopped or been considerably scaled back in Dubai due to the economic climate.

Over all, this article seemed to be too optimistic – since I've heard many stories that just don't add up to what this story states. Additionally, I find it a little hard to believe that the only place that Starwood is focusing the development of its hotel brands is within China.

Something the article didn't really touch on – except for a simple sentence stating Starwood would see to own or manage the projects, is the status of Starwood's newly created SH Group.

SH Group was created earlier this year with a very small initial investment of $100 million, with the purpose of opening and managing new 1 Hotel, Baccarat and Crillon locations (more on that here). It's not very clear what the status of SH Group is, and $100 million is a very small investment – compared to the $2 billion that Starwood is apparently spending in China.

So whats going on here? Anyone have any insight?

andrew@alconic-inc.com

Andrew Calvo is a 26 year old Commercial Real Estate Advisor in New Jersey. I live in Tinton Falls, NJ. This blog is about my passions - primarily hotels, commercial real estate, and development, etc.

Since I have been in High School I乫ve had numerous jobs, but the field which has always interested me is Real Estate, Hotel Development and Construction. I consider myself a zealot in that area - I try to absorb as much as I possibly can, take the experiences that I learn, or read about and use them in my life. 

www.passionsofazealot.com