Original Source: FD (FAIR DISCLOSURE) WIRE
. Jason Koval, Starwood Hotels & Resorts, Vice President Investor
Relations . Frits van Paasschen, Starwood Hotels & Resorts, President, CEO . Vasant Prabhu, Starwood Hotels & Resorts, CFO . Bill Crow, Raymond James, Analyst . Jeff Donnelly, Wachovia Securities, Analyst
. Celeste Brown, Morgan Stanley, Analyst . Joe Greff, Bear Stearns, Analyst . Amanda Bryant, Merrill Lynch, Analyst . Jeff Randall, Black Creek Global, Analyst . Wong Kim, JMP Securities, Analyst . William Truelove, UBS, Analyst . Steven Kent, Goldman Sachs, Analyst
Co. announced 4Q07 adjusted EBITDA of $361m, resulting in EPS from continuing operations excluding special items of $0.79. Guidance was given 2008 EBITDA of $1.23-1.3b and 2008 EPS before special items of $2.32-2.57.
A. Key Data From Call 1. 4Q07 adjusted EBITDA = $361m. 2. 4Q07 EPS from continuing operations excluding special items = $0.79.
3. 2008 adjusted EBITDA guidance = $1.23-1.3b. 4. 2008 EPS before special items guidance = $2.32-2.57.
S1. 4Q07 Business and 2008 Outlook (F.P.) 1. 4Q07 Highlights: 1. Beat EBITDA guidance of $340m by $21m. 2. EPS was $0.79.
1. $0.12 ahead of consensus. 3. System-wide REVPAR jumped 13%.
4. Company operated international REVPAR increased 21%. 1. 12% excluding the impact of FX. 5. Europe, Africa and Middle East, and Asia Pacific were particularly strong with gains of 24%, 20% and 19% respectively. 2. 2008 Outlook: 1. Today there are no clear signs that economic conditions in the U.S. are adversely affecting Co.'s business. 2. In the face of uncertainty about the U.S. economy, have widened the range of expectations for 2008. 3. Today HOT is the most global of the major lodging companies, and not nearly dependent on the U.S. economy as it has been in prior cycles. 1. U.S.-owned hotels contribute about 20% of the company's profits. 4. Managed and franchise fee streams are now the largest contributors to bottom line and also increasingly international. 1. Over half of Co.'s hotels are located in international markets. 2. Almost 55% of Co.'s fees are generated outside of the U.S. 3. Expect this to continue as HOT contemplating selling additional assets and growing international pipeline. 4. Thinks HOT should be evaluated differently than during last cycle. 5. See worldwide REVPAR growth scenarios of 4-7%. 1. Expect international REVPAR will again out perform the U.S. 6. Have revised North American expectations to REVPAR in range of 3-6%. 1. Have not seen signs of slowdown in demand. 7. Fee business will see strong growth of at least 10-13% on the heels of robust new hotel openings during the year.
1. Still expect to open 80-100 hotels in 2008, in spite of recent delays. 2. Expect timeshares to deliver as expected and includes a plant securitization in 4Q08. 8. 2008 EBITDA is expected to be $1.23-1.3b. 9. Expected EPS is $2.32-2.57. 3. World Class Brands: 1. Successful delivery of the experience builds loyalty, which in the end drives REVPAR growth ahead of competition.
2. To measure success, must focus of REVPAR index by brand while
keeping an eye on economics for Co. and development community.
3. Should translate to pipeline growth and ROIC. 4. Operations:
1. Can measure effectiveness through tracking guest satisfaction
scores. 2. Are focused on growing not just the top line, but also margins. 1. Had worldwide increase of over 150 BP in 4Q07. 2. Prioritization is key to success. 5. Growth:
1. Poised to gain market share. 2. Building pipeline to increase penetration in U.S. 3. Exciting times for upscale and luxury segment, due to rise in global prosperity. 1. Most dramatic in China, India and Middle East. 4. With 120,000 rooms in the pipeline, room count can grow potentially by over 40% over the next 4-5 years. 1. Almost 70% of rooms are in upper upscale and luxury
categories. 2. Over Half in international locations. 5. Need to grow smart as Co. invests ahead of growth. 1. Expenses incurred today will result in income several years later, thus lag between expenses now and when fee revenues kick in. 6. Have additional expense of opening hotels, on time, on budget and full. 7. Are working off about half the base of rooms that Marriott and
Hilton have, so the best economies of scale are yet to come.
6. Building Great Teams: 1. Expect to announce additions to leadership team over the coming months. 7. Superior Returns: 1. As baseline, will continue to consistently beat financial targets.
2. Looking forward: 1. Need to invest in high growth areas that don't tie up the company's capital. 2. Manage expenses through discipline and prioritizing activities. 3. In today's market, see opportunities between underlying real estate value and share price. 4. In the coming years, are likely to favor high returns to continued rapid growth as the Co. concentrates on key existing markets. 5. Are launching a …