Tag Archives: HOT

Marriott Starwood Acquisition Update Call

Posted on by

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.”

Starwood 4Q14 Earnings Call Notes

Posted on by

Each week I read dozens of transcripts from earnings calls and presentations as part of my investment process. Below are some of the most important quotes about the economy and industry trends from the transcripts that I read this week. Full notes can be found here.

North America recovery should continue for a long time

“Group business continue to strengthen and the year saw an uptick in the volumes of near term smaller meetings building on the trend that we’ve seen for a while. The supply picture remains relatively benign, that is, not enough new supply to bring occupancies down. We’re seeing more construction activity in the Select Serve segment but almost no industry supply growth in the upper upscale and luxury segment. Against the backdrop of low oil prices and low interest rates, we see potential for the North America recovery cycle to continue to for some time.”

China’s economy is twice as large as it was in 2007

“Looking back, China’s economy is more than two times as big in 2014 as when I joined in 2007 and by 2018 its economy is projected to be another 40% larger, which is why we maintained a view that despite any near term challenges, there is more risk in staying on the sidelines in China than in pursuing that to grow.”

Room growth has slowed

“our net rooms growth during the year was only 2% which is below our target of 4% to 5%.

As we mentioned on recent calls, this was driven by three factors. Longer development times and important growth markets like China, fewer in the year for the year conversions and a higher proportion of Select Serve hotels with lower average room count.”

Spinning off time share business

“Thank you, Tom. I am Grateful to be here today to talk to you about the new company I have the opportunity to join as CEO following completion of the spin off and for the chance to be partnering with Steve Williams and the talented SVO team on what will be an exciting next chapter for our guests, associates and investors.”

A company built on acquisition

“we’ve been a company that’s been built on acquisitions, and we really haven’t done an acquisition since the Le Méridien deal back in 2005, 2006 other than the design hotels acquisition couple of years ago. And I think you’ll see us being a bit more intentional here adding that as a lever to drive net rooms growth, so inorganic lever to drive that.’

Starwood at Bank of America Lodging Conference Notes

Posted on by

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Cyclicality of business is less pronounced in fee based business

“And then finally, one of the things that history has also taught us is something I alluded to earlier and that is the difference in the volatility of our earnings in the face of a downturn fee business versus owned-real estate. And the simple number is there, and again nothing new to those if you’ve been listening to us talk, a 50% drop in owned EBITDA or in hotel EBITDA and a mid-teens drop in the fee-based part of the business.

So the cyclicality of our business, I think, is much less of a downside risk as we become increasingly fee-based in our business, which is why for some time we’ve talked about getting in excess of being 80% fee-driven in terms of our business”

Select serve is growth potential but we don’t need it

“I look at the U.S. select-serve businesses as a growth vehicle for our company. But on the question of do we need it, I would say we don’t need it from the standpoint of building the base and relationships that we have with guests and customers at the higher end”

” our focus on building a platform that we can deliver value to hotels by having the best reservation technology, by having the strongest app, by being able to understand and give people individually what they want, is the most critical factor we think in developing our business. I don’t believe that we need the select-serve business in North America as a pipeline to grow demand for our higher-end brands around the world. But we do see it as a growth vehicle for our fee business and a way to expand the platform that we already have”

Analyst comment: not talking about China anymore

Analyst comment: “Two years ago I probably would have led off this whole discussion with China. And now, I made it 30 minutes without bringing it up.”

China will continue to urbanize

“China, today, is probably halfway through the process of urbanization that begun 30 years ago. There’s no reason to think that that fundamentally will stop. And so – now the other thing that I think we’ve been very clear about when it comes to China is in an economy as large as China is, changing as quickly as it does and as opaque as it can be, there will be fits and starts, as there have been. And whether it was two years ago or now, I mean, China has been around for 5,000 years. I think it’ll be around for another 30 years. And the reality is that there is a pace of urbanization and growth, and a commitment now to expansion in Tier 2, Tier 3, and Tier 4 cities.”

Starwood 2Q14 Earnings Call Notes

Posted on by

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Record occupancy in North America

“REVPAR grew over 6% and occupancies were at a record 78%. That’s up over 170 basis points from last year and you might recall that last year in the second quarter we also reported record occupancy.”

We’re at capacity but the rest of the economy isn’t overheating, which is great

“the lodging sector is hitting record occupancy but the U.S. economy overall is showing no signs of overheating. This is very good news for us. It means that in this cycle we could enjoy full hotels and rising rates for some time before the rest of the economy catches up with lodging”

Latin America struggling outside of the World Cup

“World cup aside in Brazil as well as Argentina and Chile demand still struggles. Excluding Brazil for example we saw REVPAR decline across South America and in total across Latin America, REVPAR ex-Brazil was up 1%”

Sentiment continues to improve in Europe

“In Europe, overall sentiment continues to improve. Leading indicators suggest that the modest recovery will continue. This is good news on top of occupancies in Europe that remains strong, up 130 basis points to 73%”

Chinese demand is growing

“even without Macau China REVPAR was up 6%. Across China, demand is not just holding up but growing as the occupancy at our hotels excluding Macau increased year-on-year by over 5.5 percentage points and it now stands at 60%”

We could do this faster but we’d rather do it right

“t we are finding and we believe is that it will get better prices with owners that we want to work renovations and so forth by pursuing individual sales and so while we might be able to get to markets more quickly if we did a single portfolio sale, we would rather do this right and take a little bit more time and sell hotels individually in the way that we think is best fit for our long term fee business and for our brands.’

An opportunity in select serve

“where we are the smaller player in our industry is in what the North America called Select Serve or the other three or four star segment around the world, depending on where you are. And we think particularly a lot has – many of the characteristics against that segment that we saw in W a decade or decade and half ago, which brings – which in another words means we bring a fresh way of experiencing our hotel design language, color schemes the way that our associates deal with our guest, a focus on easy use of technology and a casual way of assembling in the living room or the lobby of the hotel. So all that I think is by way of saying that we think we have a brand and a [loft] that could make real inroads into a segment where we are small players.”

Starwood 1Q14 Earnings Call Notes

Posted on by
Reply

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

Mature markets continue to show steady improvement

“This year’s begun pretty much along the same trend line that we’ve been seeing since the end of the economic crisis. Across mature markets, namely North America, Japan and Europe, growth and demand showed a steady improvement on last year and from what we can see, conditions are set to stay along that same trajectory.”

Occupancy rates peak, late cycle dynamics at play, REVPAR growth through price increases

“Across North America, occupancies once again were pushed to record highs. At this point, you’d expect late-cycle market dynamics in North America with REVPAR growth predominantly coming through higher rates, which is generally what we’re seeing. Yet despite this, we’re still several years away from seeing any real increase in supply in most markets.”

High end supply especially tight

“At the upper end, new supply is especially scarce, so as long as the U.S. continues its even modest economic growth, it seems likely that high occupancy and rising rates are here to stay for a while.”

China stronger than expected

” in China. For this first time in over a year, performance was stronger than we expected…Our result was especially good in light of government austerity, not to mention a slight drop in inbound travel to China. We’ve also improved our profit margins despite rising costs.”

China will have challenges though

“We’ve maintained for some time that an economy as large and rapidly changing as China’s will see some fits and starts. And while we agree with our owner partners that the Chinese economy has many years left to grow, we also recognize that China will need to make significant structural changes along the way.

In the near term, we don’t have much visibility into where the business is headed as transient booking windows are short, and we also have fewer large customers from whom to get a general read on business, let alone a commitment to meetings and conventions with long lead times.

What we can see in China remains — that it remains a relatively low occupancy market. So it’s likely that our growth will be driven more by occupancy than rising rates. Wages have also been rising faster for some time now, so we’re adapting our staffing levels to maintain our margins.”

Tighter liquidity has tempered the pace of real estate development in China

“On the development front, our view is the tighter liquidity has tempered the pace of real estate development. Many of our new hotels are slated for Tier 2 and Tier 3 markets and are part of mixed-use developments. As a result, the time it takes between signing and opening new hotels has become longer.”

Make your customers happy

“our business model is to make global guests happy so we can deliver great returns to our owners.”

Sheraton going to some obscure cities

“Looking at Sheraton’s pipeline, nearly 1/3 of the hotel’s — of the brand’s new hotels will be in markets where we don’t yet have — that don’t yet have a high-end hotel. These are cities like Aktobe in Kazakhstan, Nouakchott in Mauritania, Erbil in Kurdistan. Around the world, we estimate, in fact, that there are about 200 cities that could support one or more Sheratons that don’t yet have one, and there’s, of course, great potential for the rest of our brands as well.”

Trying to sell hotels as fast as they can

“Moving on to asset sales. We continue to believe the market for hotel sales is becoming deeper with a larger pool of buyers and more buyers looking for portfolio deals. We have a significant number of assets on the market in North America, Europe and Asia. Our intention is to get transactions completed on acceptable terms as fast as we can.”

The growth in Airbnb is a real thing

“Yes. Look, I think that the growth in Airbnb is a real phenomenon. I think the perspective that anything that reflects on more healthy demand for travel and encouraging people to get out, just like discount airlines as well, is generally a good thing for travel, not the other way around.”

Private equity driving demand for hotels

“in the U.S. the buyer base is institutional. And what we’re seeing in the U.S., as we said on our last call is for the past several years, we were only able to sell hotels in ones and twos because the primary buyer was public REITs who would buy a hotel, issue some stock and then come back for another hotel. What we’re seeing now, of course, is much more private equity money and, therefore, a greater interest in portfolio sales.”

Starwood 4Q13 Earnings Call Notes

Posted on by
Reply

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.”

Starwood Analyst Day Notes March 2013

Posted on by
Reply

This post is part of a series of posts called “Company Notes.”  These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings.  The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call.  Other posts in this series can be found by clicking here.  Full transcripts can be found at Seeking Alpha.

“I want to welcome you also to our Investor Day here in Dubai”

“the secular demand that we’re seeing in growth markets, that’s continued unabated even during the crisis and certainly since that. If you look today at the mature markets around the world, and by that, I mean specifically Europe, North America and Japan, certainly for the last decade or so, there has been below trend line growth in the footprint for hotels overall. And what that means is even though we’re relatively, let me put it this way, if anything in the mid-cycle, not at the end of it, and yet we’re seeing occupancies that are consistent with far later in the cycle, if you look at our 3-year projection, we factor in the fact that even if you started building hotels today over the 3 years, you wouldn’t see meaningful additions to capacity. And if anything, fewer projects have been initiated over the last few years than even before that. So the relative shortage that we’ll see will have a significant impact on our ability to drive higher rates”

“outside of the U.S., for example, W has about a 10% REVPAR premium to Ritz-Carlton…W is capitalizing on a clear trend in luxury, which is towards each individual defining what luxury means for them. And so if there’s a social change going on here, it’s that today, luxury has less to do with formality and what one is supposed to do and more and more to do with what I want to do because I am saying, I as a traveler, have the means and the desire to enjoy a luxurious years experience, but I have no desire to wear a tie. I want to wear my jeans, I want to enjoy myself, I want to partake a popular culture and design and that’s really the idea behind the W brand. And the part about knowing and coming close to replicating, it’s our belief and we continue to see this playing out, none of our competitors have found a way to crack the code here.”

“No one, I think, today wants to fly 10, 12, 15 hours, land somewhere and feel like they could have gone down the street. But nonetheless, I think at the same time, people do look for a certain level of consistency and service across a portfolio of brands. And I think in many respects, they create a tension between local relevance and global consistency as one of the things that gives our individual properties their heart and soul.”

“So in 2000, we got 80% of our profits from what you might call the real estate business. Today, we are more than half, we are 62% actually, from managing and franchising, and our goal, and we’re establishing our objective now of getting to 80-20, which you Frits hear say many times as our ultimate goal. We want to get 80% of our profits from managing and franchising. We believe that we will take advantage of the improving market for selling real estate.”

“If you own hotels, the only way you grow is to buy more hotels or build more hotels. Of course, with the business model of managing and franchising, you can grow everywhere around the world without having to deploy large amounts of capital, and quite honestly, it is impossible to be as good at the real estate in Mumbai and Shanghai at the same time, it just can’t be done.”

“There has not been a hotel brand launched in the last 40 years that has gotten to 100 hotels the first, and will most likely get there, is W, following that is St. Regis.”

“The U.S. is 47% of our rooms. And as you can see, we are well represented in every major region of the world. If you look at our major competitors, 80% of their rooms are still in the U.S.”