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Expect Rapid Growth in Luxury Hotels: Starwood CEO

Tuesday, 12 Mar 2013 | 11:13 AM ET
Starwood CEO Eyes Future Growth in Dubai
Tuesday, 12 Mar 2013 | 10:22 AM ET
Frits Van Paasschen, President & CEO of Starwood Hotels & Resorts Worldwide, discusses the growth and value of his brands.

Starwood's luxury brands have doubled in scale over the last five years and will continue to be a major growth area for the company, Frits van Paasschen, CEO of Starwood Hotels & Resorts Worldwide, told CNBC's "Squawk on the Street" Tuesday.

Starwood said Monday it will add 50 luxury hotels over the next five years in 12 countries, making the announcement ahead of the company's investor day in Dubai. The hotel operator described this move as part of its "laser focus on luxury," as it looks to target younger customers. Starwood also estimates that 90 percent of its future luxury hotels will open in emerging markets, van Paasschen said.

After the company announced a continued expansion of its luxury hotel portfolio, investors in the options market made bullish short-term bets on the company as Starwood shares neared two-year highs. According to OptionMonster, bullish option volume on Starwood was seven times its daily average compared to the past month, with calls outnumbering puts 9 to 1. Starwood shares were down slightly in morning trading Tuesday.

(Read More: Bulls Look for Fast Money in Starwood)

Along with the strategy of expanding luxury hotels across the world, Starwood also has recently relocated its global headquarters to Dubai.

"Getting closer to the market, listening to hotel owners, listening to our hotel owners is the key," van Paasschen said. "As it turns out right now, some of our highest guest satisfaction scores across our whole system are in the Middle East. We want to learn from our operators here and take those lessons around the rest of the company."

He added: "Last year, we signed 131 owners across the world with owners and developers that want to work with us. When we take a hotel into our system that was previously independent, because of our reservation system, loyalty program and revenue management systems, we see increases in revenue of 10 to 30 percent for those hotels."

(Related: Airlines Soar in Typically Slow First Quarter)

He said that the company is also seeing an increased use of its loyalty program.

"Over half the beds that we fill in any given hotel on any given night are through our loyalty program. It's about knowing which of our guests to treat in an extra special way," he said, estimating that the top 2 percent of Starwood guests account for 30 percent of the company's profitability. "We know who those people are, we know what they personally want and taking care of them is good business for us."

—By CNBC's Paul Toscano. Follow him on Twitter and get the latest stories from "Squawk on the Street" @ToscanoPaul

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