Starwood Hotels & Resorts Worldwide (HOT) Q2 2012 Earnings Call July 26, 2012 10:30 am ET Executives Stephen Pettibone - Vice President of Investor Relations Frits van Paasschen - Chief Executive Officer, President and Director
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Before we begin, I'd like to remind you that 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 on 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 van Paasschen Thank you, Stephen. Hello, all, and thanks for joining us today. Those of you familiar with our past calls will note that I'll follow the similar format today. I'll start with some comments about the global business climate, client travel, our Q2 results and our outlook for the rest of the year. And then I'll recap our long-term view and 3 key factors that will drive value for Starwood. This will lead me to a discussion of our overall strategy for managing through today's business landscape. So I'll turn out to my first topic, the global business climate. We began this year amidst fears of a U.S. double-dip, a hard lending in China and major conflict in the Middle East. By the end of Q1, fears subsided and our near-term outlook was more upbeat than it had been for sometime. Now here we are one quarter later and headlines are once again taking a more fearful turn. We read reports of slowdowns in China and India. Latin America seems to have lost momentum. Europe is in its third summer of discontent, leaving the U.S. as a safe haven despite its own slow recovery and fiscal questions. And yet, even then the face of these headlines, our business around the world has held up well. Worldwide REVPAR was up nearly 7% in local currencies. Occupancy was at a healthy level, over 71% and there is no talk among our corporate customers about cutting travel.
In other words, the climate for our business is not as bleak as the headlines would suggest. We live in a world where sentiment changes quickly. But we're convinced that long-term growth trends have not changed. Take Dubai as an example. It rebounded quickly after the crisis and has risen to become a leading global travel hub. That lies in the center of major new travel patterns, from China to Africa, and from Southeast Asia to Europe. And Europe itself is benefiting from more visitors, not just from the Middle East, but from Asia as well, not to mention Americans with their stronger dollars.We still hear is some talk in the press of a hard lending in China. We have seen a deceleration, but nothing precipitous. It appears to us that the slower growth has to do with upcoming government transition and excess supply in a few cities. You should also note that none of our 100 hotel projects has been put on hold, which, we believe, says a lot about local investor confidence in China and in our brands. Meanwhile, in North America, as well as Europe and Japan, we're still benefiting from tight supply, especially at the high end. For over a decade now, few new hotels have been added to these markets. So despite recoveries that are tenuous at best, occupancies in big cities are in the high 70s, levels that should keep pushing rates up. So in the context of this business climate, let's take a closer look at our Q2 business performance. Our momentum continued and we're on track to hit our 2012 baseline results. Worldwide REVPAR growth was led by Africa and the Middle East, up over 11%. Thanks, in part, to easier comparisons with last year's Arab Spring events. North American REVPAR was more than 7%, driven mostly by higher rates. Latin America slowed to 6%, primarily a result of instability in Argentina. And Europe, despite its woes, saw REVPAR of 2% and occupancy at 70%, which is virtually unchanged from last year. Read the rest of this transcript for free on seekingalpha.com