• We also remain committed to transitioning to a business that is 80% fee driven as we continue to monetize our high value, owned hotel portfolio and complete our transformation from owning hotels to building great relationships with guests and customers”
  • “The Company’s three year financial scenario assumes a normal cyclical recovery with annual worldwide RevPAR increases of 7-9% through 2013, and would result in:
    • Annual EBITDA growth of 14-18%
    • Annual EPS growth of 35-42%
    • Excess Cash Flow of $1.7 billion to $2.2 billion (not inclusive of cash proceeds from any asset sales) over this time period
  • At today's meeting, the Company will also reaffirm its current full year guidance for 2010, which was detailed in its third quarter 2010 earnings press release.”




Opening Comments

  • Focus on a fee-based global revenue model
  • 2011 and beyond they are focused on:
    • Getting hotel profitability past peak levels (given cost cuts and limited supply growth)
      • Despite unemployment close to 10%, they are seeing occupancies close to peak levels - evidence of benefit from limited supply growth 
    • Owning their guests - not just hotels
    • Global advantage- over 80% of HOT's pipeline is outside the US, skewed towards EM 
  • 20% of their reservations come from online sources
  • Why HOT?
    • Global with well-recognized brands and a large international pipeline
      • Advantage when the balance of power and growth is shifting towards emerging markets
    • Fee-based model with little capital at risk
    • Will generate huge free cash flow 

Global Operations

  • 1,025 properties and 304,000 rooms
    • 57% of rooms in NA
    • 21% in EMEA
    • 18% in Asia Pacific
    • 4% in LA
  • 54% of rooms are managed and SVO, 39% franchised, 7% owned
  • Earnings allocations before overhead:
    • 57% fees
    • 25% owned
    • 18% SVO and other
  • In 2010 Sheraton generates 44% of HOT's fees, followed by Westin at 27%, Le Meridian at 10%, W at 6%
  • 49% of fees come from NA, 27% from EMEA, 21% from Asia Pacific, 3% in 2010
  • NA has 543 hotels with 174,126 rooms
    • Pipeline: 13,000
  • Asia Pacific has 169 hotels and 55,128 rooms
    • Pipeline: 52,000
  • EMEA has 250 hotels and 61,619 rooms
    • Pipeline: 14,000
  • Latin America has 63 hotels and 13,169 rooms
    • Pipeline: 5,000
  • Expect supply growth to be about .4% in 2011 in North America and will help drive pricing power
    • 2% supply growth is the 40 year CAGR
  • Think that their best opportunity to grow in NA is through their select service brands - a category where they are under-penetrated
    • Have 40 Alofts in NA already
  • In Asia Pacific, their operating portfolio is over 40% larger than MAR's - their second largest competitor in the region
    • In 2009, domestic trips in China were already on par with those in the US
    • HOT has 62 hotels in China compared to 48 for MAR
    • They are the largest 4/5 star hotel operator in India with 30 hotels compared to only 12 for MAR. When you add their pipeline - they will have 45 hotels in India (42 by the same metric for MAR)
  • EMEA - see a lot of conversion opportunities in Western Europe given the brand fragmentation.  Are focusing on growing their footprint in Eastern Europe through management contracts.
    • Occupancies are approaching peak levels
    • Only 34% of European hotels are branded in Europe, but 82% of the new build pipeline is under construction. In the US - 70% of hotels are branded.
    • In Africa and ME, HOT has 91 hotels compared to HLT with 46 hotels and MAR with 28 hotels. Current pipeline represents +30% unit growth.
  • In Latin America, HOT has 63 hotels open compared to 43 at HLT and 42 at MAR
  • Global Revenue Management:
    • Introducing dynamic revenue management and other tools to maximize yields
    • Sales maximization initiatives - like having a single point of contact for customers for a particular metro area
  • Lean operations - identified 5 key opportunities
    • Staff to demand
    • Consistency of management structures
    • Leverage economies of scale for procurement
    • Brand Standard rationalization
    • Sustainability
  • Food and Beverage is a big opportunity for them - $4BN of annual revenue.  Feel that they can drive additional growth in this area by optimizing menu pricing and have a better product to keep guest $$ at the property
    • In Asia - 40% of hotel revenues come from F&B.  They manage all the restaurants at their hotels, which have over 40% profit margins for F&B. 

Global Brands

  • Basically went through defining the target market for each of their brands and some of the new concepts like - green design and heavenly bed
  • HOT is the most global branded hotel company
  • 1/2 customers are Starwood Preferred Guests
  • In 2010, 200bps market share gain for Sheraton brand in China

Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more