Starwood 2004 Annual Report Download - page 3

I am a few months into my new job as your Chief Executive Officer
and I welcome this opportunity to communicate directly with you.
I am extremely excited to be at the helm of this very special company,
and even more thrilled that we have such positive news to report.
They say timing is everything, and the timing of my arrival at
Starwood Hotels & Resorts proved impeccable. With the recovery
of the U.S. economy and associated robust recovery in travel, 2004 saw significant
growth in revenue and profitability. In fact, we surpassed our early year expectations
by a wide margin. Even more gratifying, Starwood continues to outperform our key
competitors with nine consecutive quarters of market share improvement and
operating margins that are growing faster. Likewise, our share price was up more
than 62% in 2004, also an industry leading performance.
On the development front, our global pipeline today is the most robust in our history
with 160 hotels on the docket (primarily management and franchise agreements) as
we’re winning the lion’s share of the best hotel projects in the world. W and St. Regis
have won five out of eight of the luxury new builds currently under development, and
in the upscale and upper upscale segments Sheraton and Westin won 21 of the 43
new builds announced in 2004. In fact, Westin is the fastest growing upper upscale
brand in the world.
Today, our balance sheet is the strongest it’s ever been, providing us the resources
needed to make exciting, opportunistic investments like last year’s acquisition of
Bliss. Further, that strength can be used to fuel growth like in our Starwood Vacation
Ownership business, which appears to offer significant and recession resilient
opportunity given our unique owned hotel portfolio.
The company is in stellar financial shape. Since I arrived relatively recently, I must
bow to my colleagues. Barry Sternlicht, Starwood’s founder and now our Executive
Chairman, and his team did a masterful job of guiding the company through the
hellish storms of 9/11, SARS, global recession, war and other travails, and positioned
Starwood to capture more than its fair share of upside in the recovery.
Clearly the fact that we are long owned assets in New York, Washington DC, Boston,
Los Angeles and San Francisco was important to our success in 2004, but our success
goes beyond simply well located assets. Our emphasis on productivity initiatives,
powered by our Six Sigma learnings, have had a major impact and delivered healthy
margin improvements, which we expect can be continued into 2005. We’ve also
worked hard to decrease distribution costs by migrating guests to our websites, and
in 2004 gross dollar bookings from our proprietary branded websites grew 38%,
for the first time surpassing toll-free phone bookings. Plus, our brands are resonating
with travelers like never before. From driving design, creating the W brand,
developing the Westin Heavenly Bed, meticulously growing our St. Regis brand and
rejuvenating our Sheraton and Four Points by Sheraton brands, Starwood has set
our hotels apart from the pack.