Starwood 2007 Annual Report Download - page 3

As you all know, I joined Starwood as the CEO in September
of 2007 and I am excited to be a part of such a great organiza-
tion. So while I can’t take credit for the terrific results our team
delivered in 2007, I’m very proud of their hard work and feel
fortunate to have such a strong team of talented Associates
around the world that deliver industry-leading results year after
year. This pool of industry veterans will be the foundation for our
future as we transform Starwood into the leading hotel company
in the world.
First, let me list some of our top accomplishments in 2007:
• We delivered worldwide system-wide RevPAR growth of
10.3%, driven by our strong international presence where
RevPAR jumped 15.5%.
• We also delivered strong results at our worldwide owned
hotels, with RevPAR gains of 11.0% and margin expansion
of 120bps.
• We opened 67 hotels and signed 198 hotel contracts with
47,000 rooms.
• SVO generated operating income of $246 million on industry-
leading margins of roughly 26%.
• We returned approximately $2.0 billion to our shareholders,
including $1.8 billion through our buyback program and
almost $200 million in dividends.
But rather than just talking about yesterday’s results, I want to
take this opportunity to walk you through my vision for
Starwood’s future, our strengths and opportunities, and how we
will continue to create value for our shareholders over the long-
term. We have identified five pillars that will direct our actions to
deliver the growth, cost containment, and focused resource allo-
cation that our investors should expect from us. So let me take
you through each of these pillars, why they are important for
Starwood, and how we’ll measure our success.
The first pillar of our strategy is based on ‘World Class Brands’.
As you all know, Starwood has some of the best brands in the
industry, especially in the upper upscale and luxury segments.
Our goal is to have distinctive and compelling brands. Distinctive
brand positioning means targeting a specific guest with exactly
the experience they are seeking. Our brands become compelling
through delivering those experiences time after time. The role of
innovation is to keep our brands fresh, driving repeat business.
Successful delivery of the experience builds loyalty, which, in
the end, drives RevPAR growth ahead of the competition. So,
put simply, if we aren’t gaining share, we’re not doing our jobs.
To measure our success, we’ll focus on RevPAR index by brand.
And at the same time, we’ll keep a sharp eye on the underlying
economics for both ourselves and the development commu-
nity. This should translate into additional pipeline growth and
increasing returns on invested capital. Let me give you an example.
We would contend that the economics of W are better than any other
luxury brand, which explains the explosive growth from an existing
base of 20 hotels today to well over 50 in the coming years.
Now let’s take a quick look at our distinctive and compelling
portfolio of brands. To start with, our Luxury Brands Group
offers unique and differentiated products for consumers and
developers through St Regis, The Luxury Collection and W. In
the upper upscale category, Westin is one of the most sought-
after brands through its clear and consistent positioning around
personal renewal. Sheraton’s strong international presence
affords us a platform to aggressively re-invigorate and bring con-
sistency to the brands in the US. And Le Meridien complements
these upper upscale offerings with a chic European-flair that
can grow from its geographic base in Europe, Africa and the
Middle East. Meanwhile, aloft and Element bring excitement
and personality to the select-serve category. And at the same
time, we’ve transformed Four Points by Sheraton into a compelling
brand, with stellar growth in RevPAR, GSI scores and pipeline.
Our second pillar for Starwood is to be ‘Operationally-Driven’.
We must consistently deliver the right brand experience for our
guests. And we can measure our effectiveness at delivering on
that brand promise through tracking our Guest Satisfaction
Scores. But at the same time, we must also manage expenses
at our hotels to improve efficiencies. And because we own
hotels, we’re focused on growing not just the top-line, but also
margins. I also believe we have an opportunity to streamline our
processes and better allocate resources within the company to
their highest and best use. Prioritization is key to our success as
we enter a period of great growth in our managed and fran-
chised businesses. An example is innovation, which has been a
hallmark for Starwood. Our goal going forward will be to focus
on fewer, more significant innovations that will resonate with our
guests and are aligned with owner interests.
This leads me to our third pillar, ‘Growth’, as we believe that
Starwood is poised to gain market share over the coming years.
Our development team has led the charge in building a great
pipeline to increase our penetration in the US. More importantly,
these are exciting times for the upper upscale and luxury seg-
ments thanks to the extraordinary rise in global prosperity. This
is most dramatic in China, India and the Middle East, but it’s
also true in scores of other markets around the world. Our dis-
tinctive and compelling brands will have a global appeal as
guests reach income levels where they can afford to travel. Our
optimism about our growth is reflected in our industry-leading
pipeline. With 120,000 rooms in the pipeline, our room count
can grow by over 40% over the next four to five years. These
are high quality rooms, with almost 70% in the upper upscale
and luxury categories, and over half in international locations.
Dear Fellow Shareholders
Starwood Hotels & Resorts Worldwide, Inc.