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Solid Q and typically low ball guidance. Continue to like HOT due to European exposure, better transactions market, and cash returns to shareholders.

“We delivered solid results in the face of an uncertain global economic environment... In North America, where occupancies remained at all-time highs, REVPAR increased by 6.9% at our Company-Operated hotels... We remain bullish on the long-term trends of rising wealth and increasing demand for travel in fast growing economies, even in the face of slower growth in China, unrest in the Middle East, and economic challenges in Latin America.”

- Frits van Paasschen, CEO


  • Trends of increasing global demand for travel is helping them
  • In mature markets there is still low supply
  • Transient corporate and leisure is growing at a healthy rate
  • Gov't demand which is less than 2% of their business was negatively impacted in the quarter
  • Europe is also showing very low supply as demand is building. Excluding London, owned and leased hotel RevPAR was up 3%. 
  • Chinese SPG nights outside of China were up 20%. Occupancy in China was up over, but they did get hit on rate in China.
  • In Latin America - Mexico strength was not enough to offset Brazil weakness. Argentina improved.
  • Given that they have completed most of the renovations to their owned portfolio this positions them more attractively for potential buyers. 
  • In the past, they have sold hotels with minimal tax leakage and are working to continue that for future sales
  • SVO: $1BN of CF since 2009. Concentrating on markets where they can replenish inventory and maintain good profit market.  A larger portion of their business is generated outside of unit sales. Fees & resort operations account for about 30% of SVO EBITDA. 
  • Mgmt & franchise fees:  70% of their pipeline is UUP and Luxury. 70% are being built outside the US
  • Over the past few years they pulled over 60 UUP/Luxury hotels from their brand portfolio
  • HOT brands accounted for 1 in 5 new UUP/Luxury openings worldwide
  • Sales through their web channels have doubled over the last few years. Their global sales team sells 2x as much as a few years ago. Delivering over 50% of their occupancy.
  • Intend to return cash to shareholders
  • Net benefit from around $5MM from termination fees offset by some one-time expenses in SG&A
  • Bal Harbour Condos are 97% sold
  • North America- very steady RevPAR growth of 4-6% despite a weak macro environment given the lack of new supply.  Robust transient revenues have been growing by 8-9% followed by leisure and corporate travel.
    • Expect these trends to extend into 2014
    • Group pace remains in the mid-single digits and expect rate increases in the high to mid-single digits
    • Expect RevPAR to be in the 5-7% range for 2014
  • Europe:  Absent of new supply has allowed occupancies to reach record levels and keep RevPAR steady in the 2-3% range. Expect that to continue.  They have a good summer in Spain and strenght in E. Europe. Hope that demand situation will improve in 2014 which would increase their pricing power.
  • China: disappointing this year and in Q3. Saw a small increase in demand but not as good as expected. In the East and South growth has been better as the economies are less government dependant. 
    • 122 operating hotels and should end the year at 140
    • No change in pace of new openings and signing
    • Assume that RevPAR growth will be in the 2% range in 4Q
  • Asia: 9.3% RevPAR growth but they were hard hit by FX.  Expected continued strength in 4Q at the upper end of their 5-7% range.
  • Middle East/Africa:  Egypt declined 33% in 3Q. Nigeria was also impacted. The gulf continues to grow in the high single digits.  Trends are likely to continue in the 4Q.
  • Latin America: US travel to Mexico is back but Brazil travel is slowing - their business is impacted by renovations.
  • Finishing at the high end of their guidance range despite unfavorable FX movements that hurt them by $14MM and asset sale impact of $8MM
  • Expect to complete sell out of Bal Harbour this year
  • Have LOI's signed on additional hotels on top of the 2 they expect to close next Q
  • Have lowered their capital spend program for the year again - as a result of decisions to delay projects and asset sales
  • They will not be doing a securitization deal this year but will resume next year
  • They will be reducing their capex spend on owned hotel next year


  • Are putting more effort and seeing more interest in their assets than 6 months ago. They are motivated sellers perhaps than 6 months ago.
  • $12MM of EBITDA impact in 2014 includes the 2 that should close soon
  • Most of the international buyers are looking for trophy assets - 1 to 2 at a time.  In the US, it's mostly REIT buyers
  • They do have some larger hotels on the market than a year ago.
  • Appetite for exploring a spin-off of their assets to accelerate getting to asset light.  They continue to look at different options - but in the past this option has not been as attractive.
  • It's a bit premature to say that they are behind their goal of selling an additional $3BN of assets. Tax planning is part of it.
  • 90% of their incentive fees comes from outside the US and do not have preferred returns, hence their incentive fees are more stable. 2/3 of hotels are paying incentive fees WW and 80% of hotels outside the US are paying incentive fees.
  • Why not a higher dividend? 
    • want to be able to consistently grow it
    • can always do a special
    • want it to be safe and sustainable through out the cycle
  • Leverage target?  Just want to be investment grade.
  • Impact of government shutdown - have seen some cancellations in DC/ San Diego. Have some lead time to fill the cancellations from other business. Whatever the impact turns out to be, it will be transitory.
  • Net impact of pushing back the securitization this year is $100MM of cash
  • Their growth in China now is really in Tier 2 & 3 markets, so they are geographically shifting to the middle of the country.  West and central China is where the government is directing most of the development. Mix of business in those markets is more national.
  • Sheraton: UUP segment in NA is a challenging place to be. Their base of hotels is older than many of their peers.
  • In 2014, the hope is that Europe will begin to improve and that they begin to lap the weaknesses in ME, Latin America and China
  • Other Management Revenues: had higher termination fees - (sounds like the net benefit was $5MM net of the SG&A charges) - so that implies about $10MM of termination fees
  • Interest in selling assets is not solely in NA 


  • Starwood’s Board of Directors has declared the Company’s annual cash dividend of $1.35 per share. The Board of Directors has also decided to pay dividends to stockholders on a quarterly basis commencing in 2014.
  • In the third quarter of 2013, the Company repurchased approximately 2.73 million shares at a total cost of approximately $180.7 million and a weighted average price of $66.14 per share. As of September 30, 2013, approximately $443.3 million remained available under the Company’s share repurchase authorization. Subsequent to the end of the quarter and through October 18, 2013, the Company repurchased an additional 1.14 million shares at a total cost of approximately $75.9 million and a weighted average price of $66.69 per share.
  • During the quarter, the Company signed 36 hotel management and franchise contracts, representing approximately 7,800 rooms, and opened 15 hotels and resorts with approximately 3,700 rooms.
  • At September 30, 2013, the Company had approximately 400 hotels in the active pipeline representing approximately 100,000 rooms.
  • During the third quarter of 2013, 15 new hotels and resorts (representing approximately 3,700 rooms) entered the system and eight properties (representing approximately 1,400 rooms) were removed.
  • Special items in the third quarter of 2013, which totaled a benefit of $20 million (after tax), primarily related to a favorable adjustment to a legal reserve, tax benefits associated with a non-core asset sale and the reversal of a valuation allowance on deferred tax assets which are now deemed realizable.
  • Excluding special items, the effective income tax rate in the third quarter of 2013 was 31.3%
  • Total vacation ownership revenues increased 11.3% to $157 million in the third quarter of 2013, when compared to 2012, primarily due to increased revenues from resort operations, which included the transfer of the Westin St. John’s revenues from owned hotels to vacation ownership. Originated contract sales of vacation ownership intervals and number of contracts signed increased 1.2% and 2.3%, respectively. The average price per vacation ownership unit sold decreased 1.9% to approximately $14,000, driven by inventory mix.
  • The Company realized residential revenues from Bal Harbour of $40 million and generated EBITDA of $19 million, compared to revenues of $62 million and EBITDA of $12 million in the same period of 2012. During the third quarter of 2013, the Company closed sales of 12 units at Bal Harbour and realized incremental cash proceeds of $40 million associated with these units. From project inception through September 30, 2013, the Company has closed contracts on approximately 97% of the total residential units available at Bal Harbour and realized residential revenue of $1.1 billion and EBITDA of $268 million.
  • The increase was primarily due to the timing of expenses in 2013 when compared to 2012 and certain non-recurring expenses including an elective payment to maintain a management contract. The Company continues to expect selling, general, administrative, and other expenses to increase 2% to 3% for the full year
  • The Company recorded a favorable adjustment to a legal reserve of approximately $22 million in the three months ended September 30, 2013, related to judgment and settlement, interest costs, legal fees and expenses in regards to a long standing litigation. This adjustment was treated as a special item in the third quarter results.
  • Gross capital spending during the quarter included approximately $33 million of maintenance capital and $70 million of development capital
  • During the third quarter of 2013, the Company completed the sale of a non-core asset for cash proceeds of approximately $12 million and recorded a gain of approximately $4 million. The Company has also entered into an agreement to sell two hotels that is expected to close in the fourth quarter