WHITE PLAINS, N.Y., Aug. 5, 1999 - Starwood Hotels Resorts Worldwide,
Inc. (NYSE: HOT), one of the worlds largest hotel and leisure companies
which through its subsidiaries operates the Sheraton, Westin, St.
Regis/Luxury Collection, Four Points, W and Caesars brands, today announced
record financial results for the second quarter ended June 30, 1999.
Pro Forma Comparable Results
Second Quarter Ended June 30, 1999
For the second quarter of 1999, pro forma comparable income from continuing
operations was $85 million or $0.43 per diluted share on revenues of $968
million compared to $64 million or $0.29 per diluted share on revenues
of $945 million in the corresponding period in 1998.
Six Months Ended June 30, 1999
For the six months ended June 30, 1999, pro forma comparable income
from continuing operations was approximately $125 million or $0.64 per
diluted share on revenues of approximately $1.82 billion compared to pro
forma comparable income from continuing operations of $88 million or $0.38
per diluted share on pro forma comparable revenues of approximately $1.77
billion for the corresponding period in 1998.
Hotel Group Results
Revenues for the second quarter of 1999 at the Companys 171 owned and
leased hotels increased 4% to $831 million from $799 million in 1998 and
EBITDA increased 2% to $277 million from $271 million in 1998. Excluding
19 hotels under significant renovation, or for which comparable results
are not available (Comparable Owned Hotels), EBITDA at 152 owned and
leased hotels worldwide increased 6% in the second quarter of 1999 to $259
million when compared to the same period in 1998 and EBITDA margins increased
to 34.8% from 34.2%. EBITDA at 105 Comparable Owned Hotels in North
America increased 5% to $182 million in the second quarter of 1999 when
compared to the same period in 1998. EBITDA at 29 Comparable Owned
Hotels in Europe increased 13% to $41 million in the second quarter of
1999 when compared to the same period of 1998 despite the unfavorable effect
of foreign exchange rates resulting primarily from the lower value of the
For the second quarter of 1999, Comparable Owned Hotels REVPAR increased
2.7% to $108.90 from $106.04 in the corresponding period of 1998. The increase
in REVPAR primarily resulted from an increase in ADR of 2.5% to $148.35
from $144.72, and an increase in occupancy to 73.4% from 73.3% in the corresponding
period in 1998. These results exclude the W Hotel New York, which
fully opened in the second quarter of 1999 after a significant renovation.
During the second quarter, the Company signed management and franchise
agreements for 15 hotels with 5,300 rooms, bringing the year-to-date total
to 45 hotels with 10,500 rooms. During the quarter, 31 managed or franchised
hotels with 5,400 rooms opened.
Though we experienced a slowing in RevPar growth and in our margin
expansion in the quarter, we believe that the results are not indicative
of the underlying growth and potential for Starwood, said Barry S. Sternlicht,
chairman and chief executive of Starwood. The results were impacted by
unfavorable foreign exchange rates, our aggressive renovation program and
our investments in the future. First, though our extraordinary collection
of European assets continued strong RevPar growth in local currency terms,
with RevPar increasing 10%, European RevPar, when translated into dollars,
increased just 6%. Since the end of the quarter, the Euro has strengthened
against the dollar.
Second, our assets under renovation are not included in our Comparable
Owned Hotel RevPar. Few companies have so many assets that are or will
undergo substantial renovations and repositioning. These represent unique
potential for growth. The W New York, for example, which is excluded from
RevPar statistics, has experienced a 260% increase in RevPar in the quarter
and we expect a more than tripling in EBITDA this year compared to the
period as the Doral Inn. We have more than a dozen W hotels planned for
our owned independent hotels, 6 of which will be completed by the end of
the first quarter 2000.
During the second quarter, results in the New England market were particularly
impacted by renovations. Such renovations make quarterly numbers difficult
and impact overall, not same store, EBITDA margins, Mr. Sternlicht continued.
Third, we are investing for our future. Since the launch of our Starwood
Preferred Guest (SPG) frequency program in February, we have enrolled
more than 1.4 million members worldwide. This has created a short-term
expense to our owned hotels but we remain confident this investment will
translate into longer-term increases in occupancy and enhance Starwood
brand loyalty, Mr. Sternlicht said.
Going forward, we have a number of exciting innovations and initiatives
in the works which we believe will contribute to our results. Based on
the completion of extensive market research, we have now clearly delineated
our two most important brands, Westin and Sheraton. Each will, in the very
near future, launch new advertising campaigns, important product innovations
and public relations initiatives coordinated with their renovation programs.
Our E-Commerce initiatives are exciting and our purchasing initiatives
are also underway, and both should begin to have an impact later this year.
Our pipeline of management contracts continues to build momentum on a global
basis. All of our brands are performing well and even our newest brand,
W Hotels has received tremendous PR support but most importantly performance,
is exceeding our expectations. We expect to sign our first three W Hotel
management agreements and await the opening of the W Seattle in September,
our last wholly owned new build on our balance sheet.
In the quarter, we positioned the company for growth. With the pending
sale of Caesars and the Desert Inn, as well as the sale of the Westin Central
Park South, we will pay down our debt by approximately $3.3 billion. This
will dramatically improve our balance sheet and create capacity to expand
our core business. We have targeted and expect to complete additional asset
sales. Proceeds from additional asset sales will be used to finance growth,
reduce debt and to opportunistically repurchase our stock under our current
board authorization as our stock continues to trade at levels which we
do not feel represent the value of the assets of our company. To further
accelerate growth, in the quarter we also announced the acquisition of
Vistana, Inc., one of the premier interval ownership companies in the world,
completing a very important missing link in our companys capabilities.
Potential timeshare additions at our owned properties include the Phoenician,
the Sheraton Key West, the Westin Mission Hills, the St. Regis Aspen, the
Sheraton Harbour Island, the Westin Maui, the Sheraton Bal Harbour and
the Desert Inn. We are very excited to be partnered with Vistana, Mr.
Renovations and New Construction
During the second quarter, the Company invested approximately $115 million
in new construction and capital improvements on hotel assets.
In the second quarter, approximately 137,000 available room nights,
or nearly 3.5% of the total available room nights at North America owned
properties, were lost due to renovations. Of this number, approximately
100,000 were in owned properties in the New England region. These included
the Sheraton Ferncroft Resort in Danvers, MA; the Sheraton Newton, MA;
Sheraton Needham, MA; Sheraton Tara in Braintree, MA; Sheraton Framingham,
MA; Sheraton Nashua, NH; Sheraton Stamford, CT; Sheraton Boston Hotel Towers;
Park Plaza Hotel in Boston.
Major renovations continued in the quarter at the Grand Hotel in Rome
(which will be closed for most of 1999), the 1,068 room Westin Peachtree
Plaza in Atlanta and six other Westin properties, as well as the 232 room
Houston St. Regis. The Company completed on time and on budget, its $67
million lobby renovation and meeting space expansion at the 1,180 room
Sheraton Boston, the largest hotel in New England, which completely reopened
on July 1, 1999.
In May, the Company opened the 423-room W San Francisco which was completed
on time and on budget. In June, its first full month of operation, this
property achieved 71% occupancy with an average rate of $203.
On June 30, 1999, the Company had pro forma total debt of approximately
$5.2 billion (assuming the sales of Caesars and the Desert Inn) and cash
of approximately $169 million versus $180 million at the end of the prior
quarter. Starwood has no significant debt maturing until November
2000, and the weighted average maturity of the Companys debt portfolio
exceeds five years.
The Company expects to significantly improve its balance sheet by retiring
the increasing rate notes with the proceeds from the sales of Caesars and
the Desert Inn. At the end of the second quarter, the Companys debt was
approximately 50% fixed and 50% floating. Adjusting for the sale of the
Companys gaming operations, the debt portfolio is expected to shift to
approximately 70% fixed and 30% floating. During the second quarter,
the Company declared a dividend of $0.15 per share. The payment reflects
Starwoods new dividend policy of $0.60 per share per year, established
as part of the reorganization of the Company to a C-Corporation in January
1999. At the end of the quarter, Starwood had approximately 195 million
shares outstanding (including partnership units and exchangeable preferred
shares). Starwood is one of the worlds largest hotel companies which,
through its subsidiaries, operates the Sheraton, Westin, St. Regis/Luxury
Collection and W brands. Starwoods portfolio of owned, managed and franchised
hotels include approximately 700 hotels in 72 countries with approximately
215,000 rooms. Additional information, including more detailed financial
information, is available at the Companys website at http://www.starwoodhotels.com.
(Note: 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. Forward-looking statements are no guarantees of future
performance and involve risks and uncertainties that could cause actual
results to differ materially from historical results or those anticipated
at the time the forward-looking statements are made, including, without
limitation, risks and uncertainties associated with the following: the
continued ability of Starwood Hotels and Resorts (the Trust) to qualify
for taxation as a REIT; Starwoods integration of the assets and operations
of ITT and Westin; completion, terms and timing of future acquisitions
and dispositions, including the pending sale of gaming operations and the
pending acquisition of Vistana, Inc.; the availability of capital for acquisitions
and for renovations; execution of hotel and casino renovation and expansion
programs; the ability to maintain existing management, franchise or representation
agreements and to obtain new agreements on favorable terms; competition
within the lodging industry and the gaming industry, the cyclicality of
the real estate business, the hotel business and the gaming business; foreign
exchange fluctuations; general real estate and national and international
economic conditions; political, financial and economic conditions and uncertainties
in countries in which Starwood owns property or operates; the ability of
Starwood, owners of properties it manages or franchises and others with
which it does business to address the Year 2000 issue, and the costs associated
therewith; the adoption by several European countries of the euro as their
national currency; and the other risks and uncertainties set forth in the
annual, quarterly and current reports and proxy statements of the Trust
and Starwood. Starwood undertakes no obligation to publicly update or revise
any forward-looking statement, whether as a result of new information,
future events or otherwise.)