Starwood Hotels & Resorts Worldwide's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Starwood Hotels & Resorts Worldwide (HOT)

Q4 2011 Earnings Call

February 02, 2012 10:30 am ET

Executives

Jason Koval - Vice President of Investor Relations

Frits van Paasschen - Chief Executive Officer, President and Director

Compare to:
Previous Statements by HOT
» Starwood Hotels & Resorts Worldwide's CEO Discusses Q3 2011 Results - Earnings Call Transcript
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» Starwood Hotels & Resorts Worldwide's CEO Discusses Q1 2011 Results - Earnings Call Transcript

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

Analysts

William A. Crow - Raymond James & Associates, Inc., Research Division

Joseph Greff - JP Morgan Chase & Co, Research Division

Charles Patrick Scholes - FBR Capital Markets & Co., Research Division

Steven E. Kent - Goldman Sachs Group Inc., Research Division

Alistair Scobie - Atlantic Equities LLP

Shaun C. Kelley - BofA Merrill Lynch, Research Division

Robin M. Farley - UBS Investment Bank, Research Division

Harry Curtis - Nomura Securities Co. Ltd., Research Division

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

William C. Marks - JMP Securities LLC, Research Division

David Loeb - Robert W. Baird & Co. Incorporated, Research Division

Presentation

Operator

Good morning, and welcome to Starwood Hotels & Resorts Fourth Quarter and Full Year 2011 Earnings Conference Call. [Operator Instructions] I will 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 today for Starwood's Fourth 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 starwoodhotels.com 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

Thanks, Jay, and thank you all for joining us. For the call today, I'll follow with similar format and cover 3 main topics: first, a recap of our results and our outlook for 2012; second, a look at the landmark changes we announced for SPG and how we'll make our brands even more appealing and relevant to global travelers; and third, an update on Westin and its journey from North American category killers to global hospitality brands, providing havens of wellness and renewal to travelers everywhere.

So let me begin with a high-level look back at the business travel marketplace. We've been seeing and saying more or less the same thing for the last couple of years. In February of 2010, we said our Luxury brands, owned hotels and global footprint would soon be tailwinds. We were cautiously confident near term and bullish long term.

Today, you can still see our caution in our cost control and in our lower debts. The prize events like the Arab Spring and the disaster in Japan, not to mention the chronic challenges in Europe made our caution seem warranted. In fact, the combined impact of those headwinds cost us on the order of $30 million in EBITDA for 2011. We nonetheless came in above the baseline scenarios that we provided at the start of the year.

We remain fiscally cautious but in the marketplace, we're far from timid. We continue to go on offense. In the last 2 years, we gained 240 basis points in REVPAR index and grew our room count by 10%, and we're still bullish about the coming years. Despite the uncertainty and slow recovery, all indications are that we're still early in the up cycle, and the secular trends that fueled our growth so far are only likely to accelerate over the longer term. The number of mega travelers is said to increase even faster in the next 20 years then in the last 2 decades.

That's it for the context for our results in 2011 and our outlook for 2012. We posted another strong quarter, beating expectations for EBITDA and EPS. We finished the year with EBITDA of $1.32 billion. That includes the St. Regis Bal Harbour residential project, and I have to digress for a minute to mention that the St. Regis Bal Harbour was described by Forbes as the most anticipated luxury hotel opening in the world for 2012.

The residential sales and interest in this property speaks of the great appeal of the St. Regis brand, the strength of our system and the spending power of very high-end consumers. Vasant will share more details on our progress but the key takeaways are that we came in under budget and on time for construction, and at the fourth quarter closing have us on track to deliver over $3 a share in cash to sell out.

Now back to our core lodging business. Worldwide REVPAR grew 6%, and hotel GOP margins increased 110 basis points in the quarter. In North America, REVPAR increased 8%, which is in line with the third quarter. Standout markets are Miami, up 23%; and San Francisco, up 14%. New York held steady at 7%. REVPAR was flat in Europe, which is no surprise as the recession was already taking hold in Q3. Softness looks likely to continue, even if decisive action is taken in resolving the Eurozone troubles. But to put it in perspective, Europe accounts for 12% of our rooms, 14% of our fees and 20% of our own EBITDA.

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