Solid Q4 tempered by modest guidance outside of the US.
CONF CALL
- In 4Q last year, projected 5-7% REVPAR growth for 2013. GDP in 2013 was slower than in 2012 and REVPAR growth reflected that.
- Latin America: +1%
- Mexico REVPAR continued its rebound
- Brazil uncertainty with elections
- Argentina: a mess with currency issues
- Egypt: civil war affected visitation
- Dubai/Gulf: booming business
- China: +2% REVPAR in 2013; market did not rebound as much as HOT hoped due to govt austerity, flooding in Sichuan, bird flu scares in East, soft govt business
- 13% of fee revenues
- Asia (ex China): REVPAR up 7%: strong performance in India; adverse FX impacted REVPAR by 80bps
- Strong corporate transient demand in NA
- 15 more properties coming to Africa in next few years
- Residental sales at Bal Harbour did well; Bal Harbour essentially sold out.
- Asset light: sold 6 hotels and one non-core asset for total of $263MM
- SVG share of occu stayed consistently above 50%. Global sales organization posted another year of double digit growth as well and for 2014 is set to bring in more than twice the revenue than it did in 2009.
- Repurchased 4.9MM shares for $216MM
- 2014
- US set to improve
- Europe will muddle through another year
- Customers telling them they are adding staff and plan to travel more
- China
- 2nd and 3rd tier city development continues
- Good sales momentum in Chinese corporate accounts
- Strong Chinese outbound travel
- Mobile accounts for 42% of site visits to Starwood, up from 16% two years ago
- Mobile bookings growing 5x faster than web bookings did 10 years ago
- New technology: smart check-in
- 2013 FX headwind: $17MM
- 2013 US REVPAR: 6.3%
- 4 condos left to sell at Bal Harbour
- Sold a hotel for over $1 million per key
- Net debt: $528MM
- Sale of St. Regis Bal Harbour added another $200MM to cash balance in January
- No longer report out Bal Harbour profits: will be ~5 MM in 2014
- Expect NA REVPAR trends (6.7% REVPAR) to continue; supply subdued, occu continues to climb helping ADR too
- Negotiated corp rates: up mid single digits for 2014
- Group rates: up mid single digits for 2014
- Canadian business remains sluggish and the weakening Canadian dollar will also be a drag.
- NA REVPAR 5-7% outlook: rate will account for 75-80% of the increase
- Despite the Harsh weather, January REVPAR at Company-Operated hotels in North America was up almost 8%.
- Q4: saw mid single digit REVPAR growth in Spain, Italy and the U.K. Only Germany was a little soft, offset by strong growth across eastern Europe. Occupancies continue to rise which is a good sign, and rate growth could accelerate. Nevertheless assume Europe REVPAR growth in 2014 will be at the low end of worldwide outlook range. Europe also had a good January but it's the low season.
- China: expect to outperform in 2014
- China: On track to get 200 operating hotels in near future
- Expect 2014 REVPAR growth in China to pick up from the Q4 trend of 3.1%
- Expect Asia REVPAR to continue to grow at the high end of global REVPAR outlook range of 5 to 7%
- Middle East and Latin America: expect REVPAR at the lower half of 5-7% range
- Mgmt and franchisee fees: 45% from US, 12% from Europe; 40% of fees from growth markets
- 85% of incentive fees outside of US; >75% of international hotels pay incentive fees vs 25% in US
- Expect Bal Harbour to be fully done selling by 1H 2014
- M&A: next 18-24 months could be prime time for asset sales. They intend to be active in the market.
- Cash flow priority: 1st is to pay down debt and achieve BBB rating
- Will move to a quarterly div payment schedule in 2014
- Will be aggressive buyers of stock. 614MM in buyback authorization availability
Q & A
- No buybacks in 4Q; hurting the stock?
- Reducing capital spending on owned hotels as they finish renovations
- On pace for $750MM in asset sales per year ($3BN by 2016)
- Transaction market: markets are becoming deeper. More buyers. Private equity/sovereigns are back.
- Sheraton: 50% US, 50% non-US
- Group: return of incentive travel in Europe; higher volume of smaller meetings
- China: no crackdown on luxury
- Half hedged to euro exposure at $1.36
- A plus or minus 1% move of the dollar uniformly against other currencies is still about 5 million.
- Portfolio sales may pick up
- Any future portfolio sale would therefore mark a significant uptick in that demand
- Will do a timeshare securitization in 2014 - around $250MM
- D&A guidance for 2014: It includes the proportion of the JVs so it's going to be higher than what you're seeing on our balance sheet...It will be a little higher because it's going to reflect the investments we've been making both in the renovations we've been doing and some of the technology...normalized will be +5-6%