Starwood Hotels & Resorts Worldwide (HOT)

Q2 2011 Earnings Call

July 28, 2011 10:30 am ET


Frits van Paasschen - Chief Executive Officer, President and Director

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Vasant Prabhu - Vice Chairman, Chief Financial Officer, Executive Vice President, Chief Financial Officer of Starwood Hotels & Resorts and Vice President of Starwood Hotels & Resorts

Jason Koval - Vice President of Investor Relation


Shaun Kelley - BofA Merrill Lynch

Smedes Rose - Keefe, Bruyette, & Woods, Inc.

David Katz - Jefferies & Company, Inc.

Alistair Scobie - Atlantic Equities LLP

Janet Brashear - Sanford C. Bernstein & Co., Inc.

Mark Strawn - Morgan Stanley

Joseph Greff - JP Morgan Chase & Co

Harry Curtis - Nomura Securities Co. Ltd.

Joshua Attie - Citigroup Inc

Steven Kent - Goldman Sachs Group Inc.



Good morning. My name is Sylvia, and I will be your conference operator today. At this time, I would like to welcome everyone to the Starwood Hotels & Resorts Second Quarter 2011 Earnings Release Conference Call. [Operator Instructions] I would now turn the call over to Mr. Jason Koval, Vice President of Investor Relations. Sir, you may begin.

Jason Koval

Thank you, Sylvia, and thanks to all of you for dialing in to the Starwood's Second Quarter 2011 Earnings Call. Joining me today are Frits van Paasschen, our CEO; and Vasant Prabhu, our Vice Chairman and CFO.

We will be making statements on this call related to company plans, prospects and expectations that constitute forward-looking statements under the Safe Harbor provision of the Securities Reform Act of 1995. 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. All such statements are based on our expectations as of today and should not be relied upon as representing our expectations as of any subsequent date. Actual results might differ from our discussion today.

I point you to our 10-K and other SEC filings available from the SEC or through our offices here and on our website at for some of the factors that could cause results to differ.

With that, I'm pleased to turn the call over to Frits for his comments. Frits?

Frits van Paasschen

Thank you, Jay, and thanks all for joining us on our call today. Following the format of previous calls, I'll start with our take on the current business environment, the highlights of our Q2 results, followed by our outlook for the rest of the year. I'll close with some thoughts on the month we spent in China.

Here's how we see the business environment. Like many of you, we find ourselves once again looking at an uncertain global economy. As euro rose, our net with stopgap accords, worries grow at a real estate bubble in China. Social unrest woes in the Arab world and U.S. lawmakers play at fiscal brinksmanship.

Reading headlines, it's easy to feel skittish about the near term. And to be sure, there are many factors that could upend this recovery. At the same time though, from our vantage point, drivers of our business paint a more robust picture. At least for now, trouble spots are contained while underlying growth and demand for travel continues to build.

Developers in many markets around the world are eager to invest in hotel projects. This reflects both their confidence and their access to capital. Our biggest customers: global corporations, professional firms, growth companies and high-income individuals are telling us that they have earnings power and little debt. And perhaps most importantly, our customers are busy and look to stay busy. This has led us to conclude that the recovery continues to play out as a tale of 2 cities. We've known for a while that emerging markets are growing fast while developed ones are languishing. But the split is increasingly clear even within developed markets. Times are good for successful companies and highly skilled individuals. For companies with looming debt maturities and for people out of work, the crisis lingers.

On a global level, this tale of 2 cities that persists is not healthy for any of us. But for our business today, it explains why tepid U.S. economic growth and persistent high unemployment have not dampened our own business momentum.

I'm making this point for 2 reasons: first, to address the observation that our stock fluctuates in the short term, based on day-to-day sentiments about the state of the world, without considering whether our core customers are going to be affected; and second, our conviction that the value of our company is set to rise with an unprecedented and seemingly unstoppable growth in the ranks of a new class of affluent global business and leisure travelers. This major secular trend will continue to fuel demand for our brands well into the future.

And it's this second point on economic growth that prompted us to move our leadership team to China for part of the summer. More about that in a few minutes. But our time there has left us as bullish as ever about our long-term growth prospects in China and other rising markets around the globe.

As a company, we're confident that we have the right foundation for realizing this growth. We've talked before about our global brands and local smart teams. Less well known outside of our company is that we've created a corporate culture that has a global perspective, a collaborative style and alignment around our direction.

I should also add that during the financial crisis, we weren't just cutting costs and reducing debt. We were also busy launching a slate of initiatives aimed at boosting our performance in these growth markets. Today, we're 2 years into realizing the benefits of those efforts.

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