Stronger incentive and other fees and lower below the line items lead to a "blowout" this quarter.  1Q guidance is at the low end of Street while 2011 is raised.


“We ended 2010 with a strong fourth quarter, and momentum has continued into 2011. Our robust REVPAR growth is fueled by strong global brands along with sales and marketing initiatives. By containing costs we are translating these higher revenues into higher profits.”

- Frits van Paasschen, CEO



  • "Worldwide System-wide REVPAR for Same-Store Hotels increased 10.1% (10.3% in constant dollars)" vs. guidance of 6.5% to 8.5%
  • "Management fees, franchise fees and other income increased 13.0%" vs. guidance of 4-6%
  • "Worldwide REVPAR for Starwood branded Same-Store Owned Hotels increased 10.1% (10.9% in constant dollars)" vs. guidance of 6.5% to 8.5%
  • "During the quarter, the Company received a refund from the IRS of approximately $245 million primarily for previously paid taxes and related interest relating to the settlement of a dispute regarding the 1998 disposition of World Directories, Inc."
  • "During the fourth quarter of 2010, the Company signed 37 hotel management and franchise contracts, representing approximately 8,000 rooms, of which 29 are new builds and eight are conversions from other brands. At December 31, 2010, the Company had approximately 350 hotels in the active pipeline representing approximately 85,000 rooms."
  • "During the fourth quarter of 2010, 23 new hotels and resorts (representing approximately 5,700 rooms) entered the system...Seven properties (representing approximately 1,400 rooms) were removed from the system during the quarter."
  • "Originated contract sales of vacation ownership intervals decreased 1.2% primarily due to lower average prices. The number of contracts signed increased 7.6% when compared to 2009 and the average price per vacation ownership unit sold decreased 7.0% to approximately $14,000, driven by price reductions and inventory mix."
  • "In December 2010, the Company received $75 million in connection with a favorable settlement of a lawsuit. The cash payment to the Company included the reimbursement of legal fees in connection with the matter."
  • 2011 Guidance:
    • Adjusted EBITDA: $975MM - $1BN (raised by $20-25MM; consensus $980MM)
    • WW SS Company Operated RevPAR (constant $): 7-9% (same as prior guidance)
    • WW Branded SS Owned RevPAR (constant $): 7-9%  (same as prior guidance)
      • margins: +150-200bps
    • Management, franchise and other income: +10-12% (raised by 1%)
    • Operating income from VOI & residential: $125-135MM (high end raised by $10MM)
    • SG&A: +2-3% (raised by 1%)
    • D&A: $325MM (decreased by $5MM)
    • Interest expense: $245MM (decreased by $5MM)
    • Tax rate: 25% (same as prior guidance)
    • EPS: $1.55 to $1.65 (raised by $0.10 to $0.11; consensus $1.57)
    • Capex:
      • (Maintenance, renovation, tech ex. VOI and Residential): $300MM
      • Investment projections and JV commitments: $150MM
      • VOI (ex Bal Harbor): Positive CF of $165MM
      • Bal Harbor: $150MM
    • Bal Harbor: Closings to commence in late 4Q11 but current outlook doesn't include any CF from potential closings but does expect revenue recognition in 4Q11. 
  • 1Q 2011 Guidance:
    • Adjusted EBITDA: $195MM - $205MM (consensus $206MM)
    • WW SS Company Operated RevPAR (constant $): 8-10%
    • WW Branded SS Owned RevPAR (constant $): 8-10% Management, franchise and other income: +12-14%  
    • Operating income from VOI & residential: $30-35MM
    • D&A: $78MM  
    • Interest expense: $60MM
    • Income from continuing operations: $43-51MM and an effective tax rate of 25%
    • EPS: $0.22 to $0.26 (consensus $0.24)



  • Results suggest that the lodging recovery has held steady in an uncertain world. Remain cautiously optimistic about the near term prospects and bullish on their long term prospects.
  • Continue to work hard to drive their hotels past former peak levels
  • Rising consumer confidence is reflected in their VOI business in higher tour and close rates
  • Feel like the Aloft is doing the same for limited service that W did for tiered upscale hotels
  • 90% of Westin's pipeline is outside the US
  • St. Regis has doubled its footprint in just 2 years
  • Business travel remains strong with 90% occupancy rates in most major markets.  This is a travel intensive recovery.
  • Group business is also strong; they are beginning 2011 with pace up double digits. Booking windows are slowly starting to lengthen. December crushed the all time record for group business.
  • Business travelers account for 75% of their business
  • Leisure travel has also been robust, affording them the option to cut out some expensive distribution channels - like the opaque ones
  • What will make or break 2011 is rate.  Expect rate to drive 50% of RevPAR gains. 
  • New corporate rates will be up high single digits
  • RevPAR is tracking double digits in January across the US
  • Expect some slowdown after the World Expo in Shanghai but haven't seen any slowdown as RevPAR was up 24%.  Australia is very strong. Japan is the only soft spot.
  • Starwood branded rooms in Asia are up 80% since 2005
  • Despite the concerns about Spain, their business was very strong, helped by the W Barcelona
  • Hedged 50% of their Euro exposure
  • Middle East was the only region that was down. Have 16 hotels in N Africa which are likely to be impacted in 2011 - account for about $10-12MM of fees
  • Local inflation is hurting their owned hotel margins in Latin America. Their US$ based hotel rates aren't going up as fast as hotel costs.
  • VOI business is stable. Delinquency and default rates are stable and improving.
  • Hope that Bal Harbor will be 65-70% sold by the time closing starts
  • 1 pt of RevPAR = $15MM of EBITDA
  • Expect to open 70-80 hotels in 2011 with 50% outside the US
  • Why aren't margins higher?
    • High inflation in emerging markets
    • Pre-opening costs at owned W London
    • Revenues lag RevPAR
  • Several significant renovations in 2011
    • Westin Gaslamp
    • Grandin Florence
    • Sheraton Kaui
  • $245MM from refund, $75MM from legal settlement + proceeds from JV sale
  • Moving rapidly towards achieving an investment grade rating - hopefully by end of the 2011


  • Group pace at this point is driven more by volume than by rate but as the new business comes in, they will benefit more from rate
  • US incentive fees are not a large number - relatively a small % of their hotels are paying fees. Only in the Middle East and Africa, incentive fees haven't grown.
  • Latin America is the only international place where they price in US dollars
  • Why did incentive fees grow 39%?
    • Powered by Asia, it was good in the US from a very low base. There are a few things that impacted the quarter but won't elaborate.
    • Lean ops helped them
    • Don't expect to continue at a 40% clip
  • Headcount - they are continuing the approach of flat headcount aside from large growth opportunities like in China
  • Real estate market has only partially recovered. Real buyers are from well capitalized REITs and high net worth buyers. You aren't seeing the PE funds back yet though. REITs are looking for stable assets in gateway cities. 
  • There isn't a whole lot of seasonality
  • Thinks that about 1/3 of hotels are paying incentive fees in NA and in international are 70%
  • 10 of their 16 hotels in N. Africa are in Egypt
  • For the full year, fees in ME & A was 12% of their total fees
  • Over 60% of their hotel base was either opened or recently renovated over the last 3 years
  • Not a large % of their business comes from expensive online channels - total OTA bookings are only 5%
  • General thoughts on the timeshare?
    • Starting to believe that it's starting to improve. Delinquencies are going down. So the business is in a rebound although perhaps not a rapid one

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