A name and a ticker symbol can have a very powerful meaning in the marketplace. Case-in-point: Starwood Hotels & Resorts Worldwide (HOT).

Beginning with “Star” and ending in “Worldwide” the company certainly got it right with a name that has brand recognition in the hotel and hospitality industry.

Starwood Hotels & Resorts Worldwide even enforce their brand with a ticker symbol that, short for hotel, has powerful implications when abbreviated. The company trades on Wall Street as “HOT”. Unfortunately for investors, the same cannot be said of the stock’s performance over the past year.

Chilly Forecast

Shares are down from a high of $60 last September to just over $40 today. That’s a 35% haircut that happens to coincides with the start of the economic slowdown in the United States. Such a decline is surprising; however, as HOT is an operator of luxury and upscale properties that are supposedly insulated from a slowdown in the broader economy. Unfortunately for many investors, it looks like HOT is starting to chill.

Due to rising oil prices have put a damper on travel worldwide, it looks like HOT’s time in the sun is starting to chill.

Sure, shares of Starwood Hotels & Resorts Worldwide have rebounded after approaching the $30 mark. But this was due strictly to the drop in oil prices. I’ve become leery of the hotel industry, recently even though I’ve recommended hotel stocks in the past (see, “Time to check Out Marriott International“).

Not Star Struck on Starwood Hotels & Resorts

Capacity over the last year has been increasing in many large cities due to the collapse of the condominium industry. Developers at a time of peak travel a few years ago, made an easy transition from condo to hotel on projects that had difficulty selling. However, much of the new capacity has been in the luxury and upscale market given the success of operators like HOT.

See, success brings imitation and that competition may result in lower revenue growth if luxury hotels like HOT are forced to lower rates just to keep rooms filled. Although I am a believer in the forthcoming economic recovery story, the drama in the hotel industry is far from over. With HOT trading at a fairly healthy valuation, reductions in future growth or lower revenues could result in a stock that deflates down the road.

As a Rational Investor, I would look to sell HOT during rallies like we have seen over the last few weeks. The market has yet to fully price-out the impact of more capacity and greater competition in HOT’s luxury space. Time will tell if the name can keep the mojo with strong revenue and profit growth.

This article was written by Jamie Dlugosch, Editor, InvestorPlace.com. For more actionable insights likes this, go to: www.InvestorPlace.com.