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In preparation for the HOT Q2 earnings release tomorrow, we’ve put together the pertinent forward looking commentary from the company’s Q1 earnings release/call and subsequent conferences

“Despite all the good news and the better-than-expected REVPAR, we still see reasons to consider less sanguine scenarios. To borrow a phrase from Warren Buffett, we should be fearful when others are greedy. We want to avoid the mistake of taking actions born out newfound optimism. After all, the global economy remains volatile. China risks overheating. Greece and the eurozone are grappling with major fiscal and philosophical issues, not to mention the mountain of U.S. government debt. Finally, volcanoes in Iceland, Red Shirts in Thailand and unrest in Mexico remind us that our industry is susceptible to sudden changes from many unforeseen corners.”

YouTUBE from Q1

  • “While we feel good about projecting the current trend into Q2, giving you a definitive view of the back half is quite another matter. The engine of the recovery so far has been late-breaking corporate business, which is hard to see four to six months out. Even for group business, the booking window is unusually short right now. REVPAR comparisons get tougher in the back half, and exchange rates go from being a tailwind to neutral and potentially even a modest headwind.”
  • “Thanks to lower costs at equivalent REVPAR levels, our EBITDA would be at least $100 million higher than before 2009.”
  • “The favorable trends that we experienced in Q1 continued into April and bode well for the balance of the year.”
  • “Leisure and transient demand remained firm, more than offsetting group business that was canceled or not booked in 2009. Importantly, the strongest results came from our urban markets such as New York, London and Paris and in the four and five star categories, all of Starwood's sweet spots. Corporate transient revenue in London and Paris was up 43% in the quarter.”
  • “Group production was improving quickly off a low base. Remember that last year, we had little new bookings and a high cancellation activity. Our gross production, i.e. new bookings, is up 30% for 2010, and importantly, cancellations, block adjustments and wash at arrival are down from record levels last year, and in fact, are now trending below normal levels. This translate into net production, which is projected net revenue for the year and in the year, being up triple digits.”
  •  “Asia was already off to a strong start, up 11% in January. This momentum accelerated as REVPAR grew 16% in the quarter and is up 20% in April.”
  • “The return of corporate travel is of course the primary driver. In Asia as elsewhere, there was significant unanticipated late-breaking corporate business, both transient and group. Occupancies in the quarter were up 10 points, rate was down 3%. The rate trend through the quarter improved, down 10% in January, flattish in March and now up 2% in April.”
  • “Company-operated REVPAR was down 3% in January, flat in February. We then saw a sharp uptick in March, up 9%, which has continued into April. As you have heard from others, the major driver is late-breaking corporate business, both transient and group. The recovery is broad-based across sectors and across geographies.”
  • “In April, we are seeing the first positive ADR change in North America since this downturn” began.”
  • “It is fair to say that Europe did not outperform as much as the U.S. did. In March, European REVPAR was up 5%.”
  • “In Q2, Mexico will lap the huge H1N1 decline in 2009 so growth rates will turn positive. So far in April, Mexico is up 7%. Our five hotels in Chile have been impacted by the earthquake. Business is down significantly and the recovery will be slow.”
  • “In our Vacation Ownership business, conditions continue to stabilize. Price reductions helped both close rates and price realization in several markets.”
  • “Expected margin improvement in Q2 reflects the fact that REVPAR growth is driven primarily by occupancy, which does not flow through at the same level as ADR increases. Also 300 basis points of forex-driven top line growth does not drive margin gains.”
  • “We should point out some other items that impact year-over-year comparisons in Q2: Net asset sales through 2009, Bliss, the W San Francisco, the Fifth Avenue shops and now The Court, Tuscany. These assets contributed approximately $5 million in EBITDA in Q2 last year. Also, in the fees and other income line last year, we recognized other income of $7 million from a non-refundable deposit, which is non-recurring.”
  • Guidance
    • “Our newly revised mid-range scenario shows worldwide company-operated REVPAR to be between plus 5% and 8% in 2010 and REVPAR at our worldwide-owned hotels to be plus 4% to 7%.”
    • “For owned hotels worldwide, we're going from a range of minus 2% to plus 2%, to 4% to 7%. Exchange rates will add another 100 basis points to REVPAR as reported in dollars.”
    • “Full year company EBITDA of $810 million, up from $750 million.”

Post Earnings Conference Commentary

  • “Our most recent expectations on a global basis is a 5 to 8% RevPAR growth.” [reiterated in June] 
  • “As we get into June and July, last year we started to see a recovery, first with leisure travel and then later in the year with business travel, so in fact last year there was a meaningful reduction in the rate of decline in Q3 and Q4.” 
  • “I think what you should watch for is what’s happening to business confidence, consumer confidence and how corporate profit expectations are being adjusted. If you see those being adjusted downwards, then of course there will be an impact on our business.”
  • “So for the rates of growth we’ve seen to sustain themselves, the absolute level of growth would have to improve substantially. So it wouldn’t be surprising for us to see the rate of growth as you compare it to last year to begin to moderate from the level that it’s at right now. That’s still okay because absolute levels of growth still remain high. So our guidance for Q3 and Q4 in effect implied. In Q2 we said we’d have double-digit growth, but if you looked at our guidance in Q3 and Q4, we implied some moderation as you compare to better numbers from last year.”
  • “In terms of the euro itself, I think it’s too early to tell what the overall impact will be. It all depends on what the economic impact is…Our owned hotels have tended to be a very U.S. driven. We should be helped there. But more broadly, I mean we have 200 hotels in Europe, more broadly our hotels are fundamentally business driven and so it will depend on how the European economy does.”           
    • “When it comes to the euro, for the last several years, we’ve hedged about half of our exposure. And I think if you read the queue, the average rate that we hedged that for this year is something like 1.40.”
  • “We’ve been fairly clear I think in some of earnings calls that in fact getting back to investment grade is one of things we intend to do. When will that happen, I don’t know…”
  • Group Booking: “So, 2009, I will put it kindly, a disaster. 2010 has been a good solid rebound, and if what we’re seeing today from a bookings perspective continues, 2011 should be a stronger year.”

Miscellaneous comments

  • “In the U.S., over the last 40 years for which data is available, room demand has grown compounded at 2.6%.”
  • “So we really think of ourselves as a growth business that happens to have cycles along the way, and in fact if you look at the non-U.S. part of the business, we think the case for secular growth there is even more obvious because in most parts of the world the infrastructure that was built in the U.S. and in Europe over the last 50 or 100 years is only now being built.”