starwood hotels & resorts worldwide,...
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Starwood Hotels & Resorts Worldwide, Inc.
JP Morgan ConferenceJason Koval
Vice President, Investor RelationsDecember 2008
These presentations contain forward-looking statements within the meaning of federal securities regulations. These forward-looking statements generally can be identified by phrases such as Starwood or its management “believes,” “expects,”“anticipates,” “foresees,” “forecasts,” “estimates” or other words or phrases of similar import. Similarly, statements in this release that describe the Company’s business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties and other factors that may cause actual results to differ materially from those anticipated at the time the forward-looking statements are made. Future results, performance and achievements may be affected by general economic conditions including the severity and duration of any downturn in the US or global economy, the impact of war and terrorist activity, business and financing conditions, including the availability of mortgage financing, foreign exchange fluctuations, cyclicality of the real estate, including the sale of residential units, and the hotel and vacation ownership businesses, operating risks associated with the sale of residential units, hotel and vacation ownership businesses, relationships with associates, customers and property owners, theimpact of the internet reservation channels, our reliance on technology, domestic and international political and geopolitical conditions, competition, governmental and regulatory actions (including the impact of changes in U.S. and foreign tax laws and their interpretation), travelers’ fears of exposure to contagious diseases, risk associated with the level of our indebtedness, risk associated with potential acquisitions and dispositions, and other circumstances and uncertainties. These risks and uncertainties are presented in detail in our filings with the Securities and Exchange Commission. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be attained or that results will not materially differ. We undertake no obligation to publicly updateor revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Please note that these presentations include non-GAAP financial measures. For definitions of certain terms used herein and a presentation of the most directly comparable financial measure calculated and presented in accordance with GAAP and a reconciliation of the differences between the non-GAAP financial measure disclosed and the most comparable financial measure calculated and presented in accordance with GAAP, please refer to the Company’s web site at www.starwoodhotels.com.corporate/investor_relations.html.
forward-looking statements
Starwood’s Growth Strategy
Powerful Hotel Brands
Global Upper Upscale and Luxury Platform
Best Global Hotel Pipeline
High Value, Global Owned Hotel Portfolio
Leading Vacation Ownership Business
Powerful Hotel Brands
Luxury:• 13 hotels and resorts• 2,832 rooms• 6 countries• Uncompromising, Address, Bespoke
• 59 hotels and resorts• 9,810 rooms• 18 countries• Culture, Indigenous, Experience
• 25 hotels • 7,453 rooms• 4 countries• Flirty, Insider, Escape
UpperUpscale:
• 162 hotels • 63,964 rooms• 31 countries• Personal, Instinctive, Renewal
• 411 hotels • 142,240 rooms• 68 countries• Warm, Comforting, Connections
• 110 hotels • 27,648 rooms• 52 countries• Chic, Cultured, Discovery
SelectService:
• 10 hotels• 1,495 rooms • Sassy, Refreshing, Oasis
• 1 hotel• 123 rooms • Smart, Renewing, Haven
• 134 hotels • 23,554 rooms• 23 countries• Honest, Uncomplicated, Comfort
EBITDA (pre-overhead)
Starwood in 2007
SVO/Residential
Owned Hotels
Managed, Franchised
Hotels & Other
Well Balanced Across Three Complementary Lines of Business . . .
UJV
35%43%
16%
* Based on 2007 full year results
6%
Enormous brand value
Global distribution platform
Capital efficient growth
Less cyclical
Managed and Franchised Hotels
Complementary Lines of Business
High Value Portfolio
Facilitates innovation and serves as brand “Standard Bearers”
Enables capture of mixed use/SVO opportunities
Owned Hotels
Taps high growth opportunities
Leverages owned properties
Strengthens customer loyalty
Starwood Vacation Ownership
. . . and Internationally Diversified
Managed and Franchised Fees
US
EAME
AP
56%
19%
20%
5%
Americas
* Based on 2007 full year results pro-forma for asset sales as if they had occurred on January 1, 2007* Americas include Canada and Latin America
Owned EBITDA110,000 room Pipeline Breakdown
US
AME
Europe45%
12%
18%
AP16%
Americas
9%
US
Americas
AP38%
16% 5%
41%
EAME
Industry Leading Fee Growth
Managed and Franchised Growth Strategy
Leading Pipeline in the Upper Upscale & Luxury segments
• Brand strength & investing in our development team
Leverage Strong International Platform
Significant Penetration Opportunity in the US
Think Like an Owner• Margin / Return focus• Signature service• Skin in the game
Industry Leading Fee Growth
Leading Global Hotel Pipeline
Starwood’s share of the Upper Upscale and Luxury pipeline in North America (according to September 2008 Smith
Travel Data)
23%
24%
39%
Growth Potential
483,000
550,453
281,573
Existing Rooms (1)
10%36%111,000Hilton
27%40%130,000Marriott
62%66%110,000Starwood
% Outside of the US (2)
% Upper Up/Luxury
Pipeline
(1) Room supply is from 3Q08 earnings release for Starwood and Marriott and 1Q07 for Hilton, excluding timeshare(2) Hilton’s 10% number excludes Latin America and Canada
27% =
Industry Leading Fee Growth
Leading Global Hotel PipelineStarwood’s Current Pipeline = 110,000 rooms
• This should result in industry leading growth rates on our existing base of rooms
66% of Pipeline is in the Upper Upscale and Luxury categories (as of 3Q08)
• Management and Franchise contracts are calculated based on a percentage of revenue, which is driven by RevPAR
• RevPAR in the Upper Upscale and Luxury segments is roughly 2X that of the Upscale segment (e.g. Courtyard by Marriott and Hilton Garden Inn), implying that the rooms in Starwood’s pipeline are more valuable than the predominantly select serve pipelines of our competition
Leading Global Hotel Pipeline
0
20
40
60
80
100
120
China India Middle East
Hot
els
3Q082010
Industry Leading Fee Growth
Starwood has a “Best in Class Platform”
Roughly 62% of the pipeline will be built outside of the United States – expanding our lead in international markets
Experienced local development & operating teams lead our global efforts worldwide, including high growth regions such as China, India & the Middle East
60
70
80
90
100
110
120
130
Starwood Marriott Hilton
Roo
ms
(000
's)
Luxury & Upper UpscaleInternational Room Supply (000s)
* Room supply is from 3Q08 earnings release for Starwood and Marriott and Hilton’s 2006 10-K
Management Fees by Region (1)
US
AME
AP40%
16%
17%
Franchise Fees by Region
Europe19%
13%Americas
10%AP 15%
Europe
US
61%
Americas8%
AME
Leverage Strong International Platform
1%
Franchise Fees
Base Management
Fees
IncentiveFees
48%
26%
26%
Total Fee Split
* Total management fees are combined base management and incentive fees.
2007 Fees
Significant Penetration Opportunity in the US
“Significant Growth Opportunity”
1675Le Méridien
Additional Tract Opportunity
Existing Tracts
9
10
42
121
St. Regis & The Luxury Collection
W
Westin
Sheraton
129
169
35
79
United States
High Value, Global Portfolio of Owned Hotels
Owned Hotel StrategySuperior growth / IRR opportunities
• Re-development• Re-positioning
Brand “Standard Bearers”• Flagship hotels• Centers for innovation
Continue to sell non-strategic hotels and opportunistically sell high-value assets, such as the Westin Turnberry and three Lido hotels that closed on October 31st, 2008 for roughly $500K/key
High Value, Global Owned Hotel Portfolio
Mix of Owned Hotel EBITDA
St Regis/ Luxury
USAmericas
AP
W
Westin
Four Points
Other
UrbanResort
Suburban21%
33%
15%Airport
56%29%56%
20%
19%26%
5%
EAME
* Based on 2007 full year results adjusted for asset sales as if they had occurred on January 1, 2007
7%
8%
Sheraton
High Value, Global Owned Hotel PortfolioTop 40 Owned, Lease, and Consolidated Joint Venture Hotels (For Year Ended December 31, 2007)
Top 40 hotels represent approximately 90% of owned, lease and consolidated joint venture earnings before depreciation
US Hotels Location Rms
St. Regis Aspen Aspen, CO 179St. Regis New York New York, NY 229
The Phoenician Scottsdale, AZ 643
W Chicago – City Center Chicago, IL 369W Chicago – Lakeshore Chicago, IL 520 W Los Angeles Westwood Los Angeles, CA 258 W New Orleans New Orleans, LA 423W New York – The Court & Tuscany New York, NY 318 W New York – Times Square New York, NY 507 W San Francisco San Francisco, CA 404W Atlanta Atlanta, GA 275
Westin Maui Resort & Spa Lahaina, HI 759Westin Peachtree Plaza Atlanta, GA 1068 Westin Horton Plaza San Diego San Diego, CA 450Westin San Francisco Airport San Francisco, CA 397
Sheraton Bal Harbour Beach Resort Bal Harbour, FL 645Sheraton Kauai Resort Koloa, HI 394Sheraton Manhattan Hotel New York, NY 665
Boston Park Plaza Hotel Boston, MA 941
International Hotels Location Rms
St. Regis Grand Hotel, Rome Rome, Italy 161
Hotel Alfonso XIII Seville, Spain 147Hotel Gritti Palace Venice, Italy 91Hotel Imperial Vienna, Austria 140Park Tower, Buenos Aires Buenos Aires, Argentina 180
The Westin Excelsior, Florence Florence, Italy 171The Westin Excelsior, Rome Rome, Italy 319The Westin Resort & Spa Cancun Cancun, Mexico 379The Westin Resort & Spa, Los Cabos San Jose del Cabo, Mexico 243The Westin Resort & Spa Puerto Vallarta Puerto Vallarta, Mexico 280Westin St. John Resort & Villas St. John, Virgin Islands 174
Sheraton Buenos Aires Hotel & Convention Ctr Buenos Aires, Argentina 739Sheraton Centre Toronto Hotel Toronto, Canada 1377Sheraton Gateway Hotel in Toronto Int’l Hotel Toronto, Canada 474Sheraton Maria Isabel Hotel & Towers Mexico City, Mexico 755Sheraton on The Park Sydney, Australia 557Sheraton Paris Airport Hotel Charles de Gaulle Roissy Aerogare, France 252Le Centre Sheraton Hotel Montreal, Canada 825The Park Lane Hotel London, England 305
Four Points Sydney Hotel Sydney, Australia 630
Hotels SVO
LeverageResources
Amenities
Management
Infrastructure
•Access to guests for tour flow•Access to great brands•Leverage existing assets & infrastructure
•Rooms for preview and explorer packages
•VOI Sales to hotel & vacation package guests
•Guaranteed occupancy year round•Additional revenue from preview
guests, renters and owners•Leased hotel space•Concierge services•HOA shares in certain hotel
operating costs
Benefits to Hotels
Benefits to Timeshare
Starwood continues to gain incremental system value by aligning Timeshare & Hotel assets
Vacation Ownership Business
Product portfolio well balanced and addresses the needs of a vast demographic audience
~$400,000~$32,400~$16,400Average 2007 Contract Amount
>$150k35-74$1M+
>$75k35-64
$150k - $1M
>$50k35-54
$75k - $750k
Target CustomerHousehold Income
AgeNet Worth
$176K - $760K/Fraction
$14K - $125K/Week
$8K - $120K/WeekPrice Range (2)
5%60%35%% of Total YTD 2008
Contract Sales (1)
(originated sales)
(1) Excluding Harborside at Atlantis(2) Price ranges based on annual products and of resorts in sales through September 2008
Vacation Ownership Brands
Timeshare sales are the main driver of segment profitability and they account for over two thirds of segment income
Financing income is a valuable income stream which is typically comprised of the following components
Interest IncomeRetained Interest AmortizationGain on Sale of Receivables
Resort operations income continues to grow as new resorts are added to the system
Equity earnings is driven by our joint venture with the Kerzner group at the Atlantis Resort
Timeshare Sales
67%
2007 Operating Income Distribution (1)
Financing Income
22%
Resort Income
7%
JV Equity Earnings
4%
(1) Timeshare sales also includes G&A, Depreciation & Amortization, Net Interest Expense and Other Income
Vacation Ownership Operating Income Distribution
Balance Sheet and Liquidity
•Investment Grade Rating (Baa3/BBB-)•Debt/TTM EBITDA at 3Q08 of 3.3X•Ample Liquidity
•$321 million in cash and restricted cash as of 3Q08•$1.9 billion committed revolver (matures 2011) with $1.6 billion available as of 3Q08 •Closed on four asset sales on October 31, 2008 with additional proceeds of $310 million
Existing borrowing capacity will be augmented by proceeds from additional asset sales and free cash flow generation
Starwood’s Use of Funds
Fund Growth
$0.90 dividend declared for 2008− C-Corp leading dividend yield of
6.0%
Share Buybacks− The Company has reduced the
diluted share count by 20% over the last three years.
Return Value to Shareholders
Acquire/Develop New Brands− Complement existing brands for
consumers and developers− Significant growth potential when
added to our system
Acquire/Reposition Real Estate− Growth and monetization potential− Meet/Exceed Hurdle Rates
Industry Leading Shareholder Value Creation
2008 Guidance*
• WW Owned and Managed RevPAR: +2-4%• Managed and Franchised Revenues: +4-6%• NA Owned RevPAR: -1 to +1%• Margin Improvement: -250 to -150bps• EBITDA: $1.135-1.150B• EPS: $2.07-2.13
* 2008 guidance given during 3Q08 earnings call on October 23rd, 2008