Starwood 4Q13 Earnings Call Notes

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A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

North America recovery continued unabated

“The lodging recovery in North America continued unabated, driven by strong corporate transient demand, empowering through the government sequester and shutdown.”

Pretty stable in emerging economies, some softness

“Across the rapidly urbanizing economies, we see the same wide range of performance as last year. India and Brazil, for example, are entering an election year with economies that are sagging. The recent QE tapering headlines have added to the woes of some other individual countries. Still, all indications are that the long-term trend lines of rising wealth, development and growing infrastructure are set to continue.”

China’s five year plan highlights

“The recent 5-year plan shows an awareness in China’s challenges: the environment, income inequality, corruption and a need to move to a more innovation- and consumption-driven economy.”

Second and Third tier cities continue to be developed

“the pace of development in second- and third-tier cities continues. In the coming years, these cities will represent more than 200 metro markets, with more than 1 million people. We’re on track to open more hotels this year than last year, and our signing pace for new deals last year finished at a record pace. Many of those deals are in these newly emerging cities.”

Corporate spending remains strong in China

“we see good sales momentum among our Chinese corporate accounts. We’ve tailored our sales efforts to their unique needs, being highly decentralized and tending to book the last minute. The result has been double-digit increases in our corporate business and a full pipeline of new prospects”

Smart check in

“Smart check-in is a great example of how we’re redefining the hotel experience. Our guests can completely opt out of the age-old check-in process, no more swiped credit cards or keycard. Keyless check-in by smartphone is being piloted today at 2 hotels.”

Chinese curbing spending by government officials

“In China, we believe the leadership remains determined to rein in spending by government officials. Consequently, we have aggressively moved to diversify our business. We feel good about the growth of our corporate and leisure business.’

Argentina crisis reaching an acute stage

“In Latin America, the Argentinian crisis is reaching the acute stage and will need to be monitored. Our business has already taken a big hit over the past few years. We’ll have to see what the impact of the recent devaluation will be.”

A great market to start selling assets

“We actually think that the markets are becoming deeper, and there are more buyers now seeking to deploy larger amounts of money. Our sense, as we told you earlier, was it used to be the public REITs in the U.S. who came in for one hotel at a time, issued stock, et cetera. We now think that there are people who are willing to do portfolio sales. We think private equity is back, had not been in the market before. Certainly the sovereigns are back. So we’re optimistic that — as I think I said in my comments, that this is prime time for asset sales, and we intend to fully take advantage of it.”

Cap rates ranging from sub-5% to 6 or 7

“Cap rates-wise, it’s purely a function of what hotel you’re selling. I mean, we’ve seen sub-5% cap rates on some of our better hotels, and 6% to 7% on some of the more suburban and airport hotels.”