Marriott Starwood Acquisition Update Call

Arne Sorenson

We think we can accelerate unit growth

“On Unit Growth Opportunity, we think there are a number of places where we can accelerate growth in the Starwood portfolio, first we should commend the Starwood team for the growth that they have already accelerated over the course of the last year or so, it’s great to see that and great to see the momentum that’s already underway. But again we think that with the relationships we have with owners and franchisees around the world, with the development team that we have all around the world and with a proven track record we have for growth, we can bring that growth to St. Regis and The Luxury space, we look at what’s happened with The Luxury Collection and compare that on launch of the Autograph Collection just about five years ago, ”

Debt to EBITDAR will be 3.5x after the deal

“cash is obviously the cheaper currency for us to use, it does drive a bit higher debt level at closing we think roughly will be between 3.5 times and 3.6 times adjusted debt to adjusted EBITDAR at debt close, but given the power of the cash generation machine that these companies represent, we believe we’ll be well within our 3.0 to 3.25 target by year end 2016.”

There are opportunities for synergies

“With respect to the Hotel top-line and margin performance, this was an area that I carry in my briefcase actually about a dozen of very specific ideas for each one of those things which we’re optimistic we’ll be able to achieve, but because we are still competing with each other until this deal is closed, we will continue to compete. We have not had a chance to go through Starwood’s hotel level P&L for example and sit down and compare them side-by-side as if this was already our business. But we do know that there are areas like procurement, there are a number of system areas where we can combine two systems into one and share it across a broader platform and therefore deliver efficiencies to the hotels. And we also know that there are opportunities through the loyalty programs and through the salesforce to drive incremental share for those hotels.””

Leeny Oberg

Managed full service hotels have performed particularly well ytd

“Thanks, Arne. In a separate release today, Marriott announced that we have reiterated guidance for comparable system-wide RevPAR growth of 2% to 4% for the first quarter and 3% to 5% for full year. Year-to-date through February, we saw a constant dollar RevPAR at our comparable system-wide hotels increase 3.4% in North America, 3.9% outside North America and 3.5% worldwide. Couple of comments overall is that, the managed full service hotels performed particularly well year-to-date, rebounding from some renovations and with some great Group outperformance. Outside the U.S. we’ve seen very nice performance in Asia-Pacific and although Europe is still perhaps lower growth than we’d all like to see, is still a bit stronger than expected. Not surprisingly in the Middle East we’ve continued to see struggles there.”

Smith travel projects that demand growth will be higher than supply in 16 and 17

“And just kind of from a perspective from the whole industry in the U.S., we continue to see that Smith Travel projecting that on demand side that growth would be higher than supply for ’16 and ’17. And with supply still under its long-term average of 2 to a little bit over 2.”