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Not much to dislike for now. Here are our notes from the recently ended conference call.


“Starwood’s global footprint and strong brands drove the Company’s second quarter revenues and earnings above expectations. Average daily rates are back into positive territory as occupancy levels continue their steady ascent towards pre-crisis levels... While global lodging demand is solid, the economic outlook around the world remains unpredictable. We will continue to plan for a range of potential scenarios, but each entails a focus on driving top-line growth with strong discipline in our cost base. We remain cautiously confident in our near-term outlook and are bullish over the long-term given our growth prospects.”

- Frits van Paasschen, CEO


  • Longer term, they are bullish about getting more than their fair share of growth in emerging markets
  • Rebound in business travel is the story behind their growth - which makes up 75% of their revenues
  • Total group business on the books is actually not down. Business travel back to 2008 levels
  • Rebound in business travel will help in their corporate rate negotiations
  • Accruals for incentive comp have gone up due to better than expected results
  • So far, they haven't seen any slowdown from the global turmoil, but they wouldn't really see it until the fall anyway
  • 52% of their hotels are located outside the US. 85% of their pipeline will open outside the US
  • 2/3 of their hotels are either new or newly renovated (over the last 5 years)
  • They would consider splitting off a REIT but only under the right circumstances
  • Today, they are seeing an increased interest in lodging assets despite money being on the sidelines for now
  • 55% of owned EBITDA was generated outside the US. 2500 rooms are leased. 18,000 are wholly owned.
  • 18,000 rooms that are 100% owned:
    • 60% of those rooms don't need much capex
    • 2,500 rooms need renovations subject to sale
    • Transaction with partner hotels- big boxes that need renovations or repositionings - about 15% of their rooms
  • 3,000 rooms in unconsolidated JV hotels
  • Cash from timeshare expect to generate north of $500MM over the next few years from this business
  • Think that they can offset 50% of cost inflation and so far, they have not had to increase headcount despite the large increase in occupancy
  • SPG members account for 40% of their websites
  • Luxury brand RevPAR is up 15% YTD
  • Investor Day at the St. Regis NY on Dec 8th
  • Asia continued its sharp recovery - China led the charge with RevPAR up over 40%. Comparisons get tougher in 2H- so the rate of growth will slow down.  Accounts for 60% of their 80k room pipeline,
  • North America - RevPAR accelerated from 12.6% in April to 14.6% in June. NY, Chicago and Toronto were their strongest RevPAR cities.
  • Group room nights were up 16%, rate down 3%.  Transient rates were up 5%.
  • June owned hotel RevPAR grew 27%, with rates up 9%.
  • In the year, net room production is running at 3x 2009 levels.  Reducing less attractive leisure channels to manage yields.
  • YoY RevPAR growth will be lower in 2H given the more difficult comps
  • In Europe - London, Paris, Frankfurt and Vienna had strong occupancies- in the 90's in June. Trajectory of the recovery in Europe is slower than in the US.  Weak Euro will help them (volume wise) in 3Q, but timing of Ramandan will hurt ME travel demand.
  • Middle East - 3Q - Ramandan will impact August results
  • Latin America will lap H1N1 swine flu next quarter
  • Returning to peak margins is their #1 goal.  Expect margin improvement to continue into the back half.
  • SG&A growth had a funky comp, as in 2Q09, as they were reducing accruals for incentive comp
  • Vacation ownership business can best be described as sluggish.  With consumer confidence declining, they don't see any improvement in the back half.
  • Are aware and sensitive to some leading indicators turning negative.  However, at this point, there is no sign of a slowdown in their business.
  • Leverage ratio is now below 4x.  They are working on a securitization deal which should happen in 3Q.  Expect net debt of $2.5BN by year end.



  • Asia Pacific - 18% of their fee-based business, but a larger % of their pipeline (over 50%).
    • Right now RevPAR in Asia is approaching pre-crisis levels
    • Appreciation in the Yuan would help them
  • Their flat headcount commentary was referring to headcount at the corporate level.  At the property level, they continue to try to improve operating efficiencies and by doing so, they expect that they can keep expense growth to 50% of inflation. Productivity in NA hotels is up 7%.
  • Are seeing the impact of the Sheraton revitalization program. The Sheraton RevPAR is outperforming its peer group by 300 bps.
  • Selling hotels in 2010?
    • If the price is right and the agreement is right, they will consider it
    • If they get the point of considering a bigger transaction, they would consider a REIT spinoff vs. selling to an individual buyer
  • Looking for high single digit increases for corporate negotiated rates
  • Booking windows?
    • Corporate transient is always short and hasn't really changed
    • Sense is that group business is shorter given the pent up demand. Sense is that once they get to the back half of 2010 and 2011, that the pent up and catch up demand piece will go away and that the overall booking window here will return to a more normalized level.
  • Uses of FCF?
    • Past behavior should be a good indicator on what they would do... special dividend/ buybacks/ brand acquisitions.
  • How long can they keep selling timeshare without developing more?
    • A few years...