Significant Oil Price Increase is needed to Affect Hotel Demand Says Starwood Chief Executive

Frits Van Paasschen, Starwood Hotels & Resorts’ worldwide chief executive, said that there has to be a significant rise in oil prices compared to its present levels in order to affect hotel demand.

The CEO said that the present rise in oil prices shows that the United States and the global economy is obtaining speed, a generally promising factor for hotels. In particular, Starwood’s high-end market deals mostly with such names as including Sheraton, Westin and W, limiting its exposure to the broader economy to some degree.

There was a recent rise in oil costs with Brent current crude oil prices reaching more than $125 per barrel as worries on Iranian oil supply disruptions and weaker dollar lowers the chance of U.S. interest rate increases that can improve the risk appetite of investors for commodities.

The chief executive expressed that he was not very much worried about the current levels of oil prices. In a recent phone interview, he reported that the occupancy in North America and worldwide is relatively strong in the past days. He further added that the only time to be concerned is if the prices of oil reach levels that are unheard of, but there is no reason to be concerned if the rise occurs from its current rate.

Moreover, Van Paasschen said that there are no indicators of a decline of the Starwood business in China. The company is anticipating the opening of its 100th Chinese hotel within this year, the result of decades of strategic investment in the developing world.

Recently, China decreased its GDP target to its lowest in eight years and said that increasing demand from the consumer sector was a main priority for the year.

According to Van Paaschen, China’s economy stays strong in all aspects particularly in terms of essential hotel measures such as demand, development and revenue momentum for every available room.

The chief executive said that the scale of China’s economy is likely to bring about some fluctuation in performance as it catches up to the developed world.

By Chris Termeer

Chris Termeer

Chris Termeer is an oil and gas consultant, industry commentator and analyst. His book, Fundamentals of Investing in Oil and Gas provides a comprehensive overview of all aspects of the oil and gas industry, including exploration, drilling, production, storage, transportation and refining, to name but a few.

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