Starwood Announces Record Third Quarter 2000 Results
Third Quarter Financial Highlights
-
Third quarter diluted EPS from continuing operations increased 32% to $0.50
when compared to pro forma comparable diluted EPS of $0.38 for the same
period of 1999.
-
Total revenues increased 16% to $1.11 billion and EBITDA increased 20%
to $406 million. Operating income increased 26% to $274 million.
-
REVPAR for Same-Store Owned Hotels in North America increased 14.2%.
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Occupancy rates at Same-Store Owned Hotels in North America increased 330
basis points to 77.7%.
-
EBITDA at Comparable Owned Hotels in North America increased 23% and EBITDA
margins increased 280 basis points to 32.4%.
WHITE PLAINS, N.Y., Oct. 31, 2000 - Starwood Hotels & Resorts Worldwide,
Inc. (NYSE: HOT) (�Starwood� or the �Company�) is one of the leading hotel
and leisure companies in the world with more than 725 properties in 80
countries and 120,000 employees at its owned and managed properties.
With internationally renowned brands, Starwood is a fully integrated owner,
operator and franchiser of hotels and resorts including: St. Regis, The
Luxury Collection, Sheraton, Westin, Four Points and W brands, as well
as Starwood Vacation Ownership, Inc., one of the premier developers and
operators of high quality vacation interval ownership.
Third Quarter Ended September 30, 2000
For the third quarter of 2000, total revenues increased 16% to $1.11
billion when compared to the same period in 1999. Earnings per diluted
share from continuing operations were $0.50 compared to pro forma comparable
earnings per diluted share from continuing operations of $0.38 in the corresponding
period in 1999. Excluding the unfavorable impact of the Euro and
the political unrest in Fiji (which has since ended), where two of the
Company�s three owned hotels in Asia are located, earnings per diluted
share from continuing operations for the third quarter of 2000 would have
been $0.53. Income from continuing operations increased 39% to $103
million in the third quarter of 2000 compared to pro forma comparable income
from continuing operations of $74 million in the same period of 1999.
Nine Months Ended September 30, 2000
For the nine months ended September 30, 2000, total revenues increased
18% to $3.27 billion when compared to the same period in 1999. Earnings
per diluted share from continuing operations were $1.32 compared to pro
forma comparable earnings per diluted share from continuing operations
of $1.02 in the corresponding period in 1999. Income from continuing
operations was approximately $270 million for the nine months ended September
30, 2000 compared to pro forma comparable income from continuing operations
of $199 million for the same period of 1999.
Operating Results
At the Company�s owned, leased and consolidated joint venture hotels,
excluding ten hotels sold since July 1, 1999 and three hotels without comparable
prior year results (�Comparable Owned Hotels�), revenues for the third
quarter of 2000 increased 8% to $900 million from $831 million in 1999
and EBITDA increased 15% to $302 million from $263 million in 1999.
EBITDA at the Company�s Comparable Owned Hotels in North America increased
23% to $214 million in the third quarter of 2000 when compared to the same
period in 1999. International results were unfavorably impacted by
continued weakness in the Euro, economic conditions in Latin America and
the political unrest in Fiji.
For the third quarter of 2000, revenue per available room (�REVPAR�)
at owned hotels worldwide, excluding hotels under significant renovation
or for which comparable results are not available (�Same-Store Owned Hotels�),
increased 10.5% when compared to the same period in 1999 as a result of
an increase in average daily rate (�ADR�) of 6.9% and an increase in occupancy
rate of 240 basis points.
ADR and occupancy rate increases in the third quarter of 2000 were strongest
at the Same-Store Owned Hotels in North America where ADR increased 9.3%
to $149 and occupancy increased 330 basis points to 77.7%, resulting in
a 14.2% increase in REVPAR when compared to the same period in 1999.
The Sheraton Same-Store Owned Hotels in North America experienced strong
occupancy gains, up 340 basis points, resulting in a 12.7% REVPAR increase.
Occupancy rates at the Westin Same-Store Owned Hotels in North America
increased 460 basis points, resulting in a 12.5% increase in REVPAR.
REVPAR at the St. Regis/Luxury Collection Same-Store Owned Hotels in North
America increased 19.1%; REVPAR at W Same-Store Owned Hotels in North America
increased 37.7%, while the Same-Store owned portfolio in North America,
operating under independent and other brands but typically managed by Starwood,
increased 9.1%.
The increase in North America for the Company�s proprietary brands was
primarily a result of previous and current investment spending for asset
renovations and repositionings, the Starwood Preferred Guest Program and
sales force realignment, as well as the bi-coastal concentration of the
owned portfolio, particularly in Boston, New York, San Francisco and Los
Angeles. In Europe, Same-Store Owned Hotel REVPAR increased more
than 15% excluding the unfavorable effect of foreign currency translation.
EBITDA margins at Comparable Owned Hotels worldwide increased 180 basis
points to 33.5%. In North America, EBITDA margins at Comparable Owned
Hotels increased 280 basis points to 32.4%. Internationally, despite
weak economic conditions, EBITDA margins remained at 36.7%.
During the third quarter of 2000, the Company added 14 management and
franchise contracts with approximately 3,300 rooms. The Company is
in various stages of negotiation to add management and franchise agreements
with approximately 30,000 rooms including ten hotels with more than 500
rooms each.
Starwood Vacation Ownership, Inc. operates 12 vacation ownership resorts
and is currently selling vacation ownership interest (�VOI�) inventory
at 10 resorts located in Orlando, Florida; Myrtle Beach, South Carolina;
Scottsdale, Arizona; Avon, Colorado; St. John, U.S. Virgin Islands;
Paradise Island, The Bahamas; St. Augustine, Florida; and Port St. Lucie,
Florida. New build projects are currently underway at the Harborside
Resort at Atlantis on Paradise Island in The Bahamas; Sheraton�s Mountain
Vista in Avon, Colorado; Sheraton�s Vistana Villages in Orlando, Florida;
and Westin Vacation Club Mission Hills in Rancho Mirage, California.
Additional VOI projects capitalizing on current Starwood locations are
targeted in markets such as Phoenix and Hawaii.
Dispositions
The Company continues its efforts to sell non-strategic assets around
the world, closing approximately $310 million of such sales to date in
2000 and will continue to review its portfolio for disposition candidates.
In the two years since the acquisition of ITT, the Company has completed
non-core asset dispositions with aggregate proceeds exceeding $7.1 billion.
Financing
On September 30, 2000, the Company had total debt of approximately $5.5
billion and cash of approximately $242 million. As of September 30,
2000, the Company had availability under its revolving credit facility
in excess of $1.0 billion. During the third quarter, Standard &
Poor�s upgraded the Company�s corporate credit rating to investment grade.
Other than $700 million of outstanding ITT Bonds maturing in November 2000
and the Euro loan discussed below, Starwood has no significant debt maturing
until 2003, and the weighted average maturity of the Company�s debt portfolio
exceeds five years. At the end of the third quarter of 2000, the
Company�s debt was approximately 71% fixed and 29% floating. On July
25, 2000, the Company entered into a one-year, Euro 270 million loan (approximately
$252 million) at an initial average interest rate of Euribor + 112.5 basis
points. The proceeds from this loan were used to further pay down
the Company�s revolving credit facility.
During the third quarter of 2000, the Company invested approximately
$134 million in capital improvements at owned hotel assets and for new
construction of timeshare inventory. The Company continued its aggressive
renovation program on its largest brand, Sheraton, and is on target to
reach its goal of having more than 60% of its North American owned Sheraton
rooms renovated by the end of 2000. Also, during the third quarter
of 2000, the Company declared a quarterly dividend of $0.1725 per share,
representing a 15% increase over the prior year. Pursuant to the
1998 Board-approved share repurchase program (the �Share Repurchase Program�),
to date in 2000, the Company has repurchased 2,525,600 shares at a total
cost of approximately $70 million. Under the Share Repurchase Program,
the Company has $230 million remaining authorization to repurchase shares.
At September 30, 2000, Starwood had approximately 203 million shares outstanding
(including partnership units and exchangeable preferred shares).
Comments from the CEO
�Despite several international economic and political challenges including
the continued decline of the Euro, social unrest in Fiji and the difficult
operating environment in Latin America, North America Division REVPAR,
EBITDA and EBITDA margin expansion resulted in the Company having its best
quarter ever, and leading the industry in REVPAR growth for the fourth
quarter in a row,� said Barry S. Sternlicht, Chairman and CEO.
�Looking to 2001, we are optimistic that we will achieve continued industry
leadership in REVPAR, EBITDA, and EPS growth. The ongoing repositioning
and renovation program for our owned portfolio, the success of marketing
innovations like the Heavenly Bed for Westin, the growing strength of the
industry�s number one rated frequent guest program Starwood Preferred Guest,
the financial success of W Hotels, the primarily bi-coastal location of
our owned North America portfolio, and the addition of new interval ownership
inventory prepare Starwood for continued growth. Additionally, 2001
will see the roll-out and implementation of our state-of-the-art yield
management system, enhanced training programs and important internet initiatives.�
�In 2001 our EBITDA and EPS growth should be enhanced by investments
made in 2000 including the expansion of the Westin Turnberry Resort in
Scotland, a full year of operations at the St. Regis Rome, the newly renovated
Sheratons in the Boston area, the two new New Orleans W Hotels as well
as a full year of the W Los Angeles. EBITDA growth should also be
driven by renovations at the Sheraton Bal Harbour, the Phoenician, Westin
Peachtree Plaza, Westin Maui and Sheraton Harbor Island San Diego.
In addition we currently anticipate a better than 30% increase in sales
year over year in our vacation ownership business.�
Concluding, Mr. Sternlicht said: �We consider our global diversification,
including our ownership of trophy international assets, a competitive advantage
that this year, given the decline of the Euro and Latin American economic
conditions, has adversely impacted our growth rate. A turnaround
in the Euro would not only directly benefit the translation of our European
earnings, but likely increase European travel to our important domestic
east coast markets. Improvements in Latin America would rapidly translate
into increased earnings given our high operating margins in the region.
Looking into the future, we are also encouraged by declining industry supply
trends and the difficult financing markets as our growth is not materially
dependent on unit growth.�
Future Performance
All comments in the following paragraphs and the comments from Mr.
Sternlicht above are deemed to be forward-looking statements. These
statements reflect expectations of the Company�s performance given its
current base of assets and its current understanding of external economic
and political environments. Actual results may differ materially.
Full Year 2000
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The Company is currently comfortable with EPS consensus estimates of $1.92,
a growth rate of 25%, for the full year. EBITDA is currently expected
to reach approximately $1.55 billion.
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Strength in North America should continue to offset weakness in the Euro
and other international challenges including recent unrest in the Middle
East.
Full Year 2001
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Full year 2001 North American REVPAR growth is expected to be in excess
of 6%. Worldwide REVPAR growth is expected to be in excess of 5%.
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Full year 2001 EBITDA is expected to be approximately $1.7 billion.
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Owned hotel EBITDA margins are expected to improve at or above the Company�s
100 basis point annual target.
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The Company is currently comfortable with consensus EPS estimates for 2001
of $2.22 which represents a 16% growth in EPS over expected 2000 EPS.
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The Company produces substantial free cash flow.
The Company has completed a multiyear capital plan and divided these expenditures
into growth and maintenance expenditures. The Company considers the
growth expenditures as discretionary. In general, growth capital
has been allocated for sliver equity investments, ongoing major conversions
of independent properties to one of the Company�s proprietary brands (e.g.
W Hotels)or new projects yielding, on average, a projected better than
15% after-tax internal rate of return on invested capital. In addition,
the Company will continue to invest to expand its interval ownership business
which it believes enhances customer and brand loyalty. Interval ownership
projects, on average, are expected to achieve better than 20% after-tax
internal rate of return on invested capital. Despite the increased
depreciation from capital expenditures the Company is optimistic that given
its significant cash flow, it can continue to grow and achieve its 15%
per year EPS growth goal. Should market conditions warrant, the discretionary
growth expenditures discussed above may be used from time to time to repurchase
the Company�s stock.
CIGA Subsidiary
In addition to owned interests in assets in European cities including
London, Paris, Rome and Brussels the Company owns interests in an extraordinary
collection of properties in Europe commonly referred to as the CIGA portfolio.
These 25 hotels include such world renowned assets as the Gritti Palace
and Danieli in Venice, the St. Regis Grand and Westin Excelsior in Rome,
the Grand and Excelsior in Florence, the Principe di Savoia in Milan, the
Westin Palace in Madrid, the Imperia in Vienna, and four hotels in Sardinia�s
Costa Smeralda including the world famous Cala di Volpe and Pitrizza assets.
Included in the Sardinia assets is more than 6,000 acres of land including
several miles of beachfront property. This land is currently in various
stages of the entitlement process that has been proceeding for several
years. The EBITDA of CIGA is expected to exceed $120 million with
no value for the land. In general, the CIGA assets face little new
build competition as they typically are located in prime locations in dense
urban markets.
The Company would expect a sale of CIGA to be significantly accretive
to earnings per share as management would expect a double digit EBITDA
multiple sale price. However, the current position of the Euro and
the significant increase in value expected from entitling the Sardinia
land may make the timing of an immediate sale not optimal. Nonetheless,
the Company expects to market the portfolio for sale, encumbered by our
management agreements, in whole or in part in 2001. There can be
no assurance such a sale can be consummated on terms the Company deems
acceptable.
This release contains certain statements that may be deemed �forward-looking
statements� within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934.
STARWOOD HOTELS & RESORTS
WORLDWIDE, INC.
Hotel Results - Same Store (a)
For the Three Months Ended September 30, 2000
WORLDWIDE
NORTH AMERICA
2000 1999 Var.
2000 1999 Var.
OWNED HOTELS
155 Hotels
111 Hotels
REVPAR ($)
118.37 107.14 10.5% 115.66 101.26
14.2%
ADR ($)
157.21 147.06 6.9% 148.83
136.12 9.3%
OCCUPANCY (%)
75.3% 72.9% 2.4
77.7% 74.4% 3.3
SHERA
REVPAR ($) 104.73
96.53 8.5% 111.05 98.54
12.7%
ADR ($)
141.33 133.51 5.9% 142.03
131.79 7.8%
OCCUPANCY (%)
74.1% 72.3% 1.8
78.2% 74.8% 3.4
WESTIN
35
23
REVPAR ($)
117.23 107.68 8.9% 108.77
96.70 12.5%
ADR ($)
152.40 147.57 3.3% 139.11
131.43 5.8%
OCCUPANCY (%)
76.9% 73.0% 3.9
78.2% 73.6% 4.6
LUXURY COLLECTION
13
4
REVPAR ($)
258.37 236.61 9.2% 259.68
217.95 19.1%
ADR ($)
376.21 372.44 1.0% 377.56
369.00 2.3%
OCCUPANCY (%)
68.7% 63.5% 5.2
68.8% 59.1% 9.7
W
8
8
REVPAR ($)
173.35 125.85 37.7% 173.35 125.85
37.7%
ADR ($)
224.82 171.82 30.8% 224.82 171.82
30.8%
OCCUPANCY (%)
77.1% 73.2% 3.9
77.1% 73.2% 3.9
OTHER
36
36
REVPAR ($)
99.95 91.64 9.1%
99.95 91.64 9.1%
ADR ($)
129.05 119.40 8.1% 129.05
119.40 8.1%
OCCUPANCY (%)
77.5% 76.8% 0.7
77.5% 76.8% 0.7
INTERNATIONAL (b)
2000 1999 Var.
44 Hotels
OWNED HOTELS
REVPAR ($)
127.03 126.00 0.8%
ADR ($)
187.95 185.54 1.3%
OCCUPANCY (%)
67.6% 67.9% -0.3
SHERA
REVPAR ($)
91.94 92.47 -0.6%
ADR ($)
139.64 137.38 1.6%
OCCUPANCY (%)
65.8% 67.3% -1.5
WESTIN
12
REVPAR ($)
150.51 151.23 -0.5%
ADR ($)
209.15 214.30 -2.4%
OCCUPANCY (%)
72.0% 70.6% 1.4
LUXURY COLLECTION
9
REVPAR ($)
257.56 248.24 3.8%
ADR ($)
375.38 374.35 0.3%
OCCUPANCY (%)
68.6% 66.3% 2.3
(a) Hotel Results exclude 6 hotels under significant
renovation or without comparable results, 3 hotels without prior year results
and hotels sold during 1999 and 2000.
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
Hotel Results - Same Store (a)
For the Three Months Ended September 30, 2000
EUROPE
LATIN AMERICA
2000 1999 Var.
2000 1999 Var.
OWNED HOTELS
29 Hotels
14 Hotels
REVPAR ($)
172.06 168.05 2.4% 70.23
74.50 -5.7%
ADR ($)
231.22 231.69 -0.2% 120.89 122.51
-1.3%
OCCUPANCY (%)
74.4% 72.5% 1.9
58.1% 60.8% -2.7
SHERA
REVPAR ($) 113.47
111.39 1.9% 69.82
73.91 -5.5%
ADR ($)
152.75 151.81 0.6% 120.96
121.74 -0.6%
OCCUPANCY (%)
74.3% 73.4% 0.9
57.7% 60.7% -3.0
WESTIN
9
3
REVPAR ($)
191.02 189.47 0.8% 61.74
68.68 -10.1%
ADR ($)
249.71 257.88 -3.2% 99.53
106.79 -6.8%
OCCUPANCY (%)
76.5% 73.5% 3.0
62.0% 64.3% -2.3
LUXURY COLLECTION
8
1
REVPAR ($)
284.08 274.03 3.7% 107.25
105.17 2.0%
ADR ($)
395.39 395.87 -0.1% 213.28 209.65
1.7%
OCCUPANCY (%)
71.8% 69.2% 2.6
50.3% 50.2% 0.1
ASIA PACIFIC
2000 1999 Var.
OWNED HOTELS
1 Hotel
REVPAR ($)
128.33 118.65 8.2%
ADR ($)
168.79 147.40 14.5%
OCCUPANCY (%)
76.0% 80.5% -4.5
SHERA
REVPAR ($) 128.33
118.65 8.2%
ADR ($)
168.79 147.40 14.5%
OCCUPANCY (%)
76.0% 80.5% -4.5
(a) Hotel Results exclude 6
hotels under significant renovation or without
comparable
results, 3 hotels without prior year results and hotels
sold
during 1999 and 2000. |
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