Starwood 2009 Annual Report Download - page 3

What a difference a year makes. As we entered 2009, the
U.S. economy was on the verge of collapse and a severe
global economic contraction had cost nearly 30 million jobs
around the world. By every measure, 2009 was a challenging
year and the lodging industry was severely affected. But it
was also a year of great progress for Starwood. While the
global economy struggled, our team remained focused and
continued to execute.
Today, macroeconomic conditions remain tenuous but
Starwood is in excellent shape. Our cost discipline allowed
us to exceed earnings expectations throughout 2009 and,
beginning in the fourth quarter, we were able to achieve
better than expected top-line results. Our brands are
performing well, emerging markets are outperforming the
developed ones and guests are beginning to return to luxury.
This benefits us as we are the global leader in the four- and
five-star categories.
While our recovery is partly driven by stabilization in
the overall economy, it is also thanks to several critical
decisions we made to manage through the most challenging
environment during our lifetimes. These initiatives included:
STRENGTHENING OUR FINANCIAL POSITION
During the year, we continued to cut costs, sell non-strategic
assets – such as Bliss and the St. Regis retail space, along
with the W San Francisco – and generate positive operating
cash flow. This allowed us to reduce our total debt by roughly
$1.1 billion from peak levels. In fact, we beat our target and
ended the year with less than $3 billion in debt. At the same
time, we extended our maturities and now have no debt
coming due until 2012.
FOCUSING ON INNOVATION
AND INVESTING IN OUR BRANDS
Innovation is core to who we are and gives us our competitive
edge. We continued to push our innovation agenda in the
face of a poor economy, delivering excellent results and an
outstanding response from our guests. At Sheraton, we
reinvented the hotel lobby by introducing the Link@SheratonSM
experienced with Microsoft® in 95% of our hotels around
the world. We opened 40 Aloft Hotels since the summer of
2008 – the fastest launch in the history of select serve.
We also introduced Element, the world’s first major hotel
brand to mandate that all of its properties pursue the U.S.
Green Building Council’s (USGBC) Leadership in Energy and
Environmental Design (LEED) certification. To support these
new brands, and Four Points by Sheraton, we created a
dedicated select serve organization focusing on the future
growth we expect from this segment. Together with our
owner/partners, we also completed a $6 billion revitalization
of Sheraton, and are continuing to grow W internationally
with plans to double its footprint between 2008 and 2011.
Today more than 60% of our hotels are either new or freshly
renovated. At the same time, we pulled our flags from
properties that were not up to our brand standards, improving
the consistency of the product throughout the system.
TAKING A HARD LOOK AT EFFICIENCY
WHILE DRIVING REVENUE
In 2009 we completed our Activity Value Analysis, a rigorous
process to address costs and lay the foundation for future
growth, which resulted in run-rate SG&A savings of over $100
million. We also rolled out our revenue management tools to
80 new properties, allowing us to improve forecasting so we
can better manage our mix and optimize rates. We initiated
efforts to further enhance our global sales force, and through
rationalizing brand standards and improving procurement,
we continued to reduce costs for our owner/partners.
Finally, our lean operations team not only beat their margin
goals in 2009, but they did so while achieving record guest
satisfaction scores across our brands.
THROUGH IT ALL, WE KEPT GROWING
The bottom of a cycle is actually a great time to open new
hotels so the newest product can enjoy the full upswing
as conditions improve. We opened 83 best-in-class hotels
and signed 77 new deals in 2009. We also reached several
milestones, including opening our 500th hotel in North
America and our 150th hotel in Asia. And with plans to open
over 80 additional hotels in 2010, our third straight year of
8% gross unit additions, we are on the cusp of opening our
1000th hotel in our 100th country.
We would never have been able to achieve all of this
without the hard work of our talented team. Thanks to
their commitment to excellence and their confidence in
Starwood’s long-term success, we ended the year in a better
place than we anticipated.
The big story for 2010 is that the business traveler is
coming back. After a year of hunkering down and cutting
costs, companies are sending people back onto the road to
do business. We are seeing occupancies begin to improve
from a deep drop-off as business and consumer confidence
rebounds. Leisure travel came back this summer, corporate
transient began to return in the fourth quarter, and by the
end of 2009 we saw early signs of life on the group side. The
return of business travel and meetings, which account for
75% of our business, is excellent news for our recovery and a
driver of our optimism about the future.
While we expect 2010 to be another challenging year given
the lags inherent in the lodging industry, we have emerged
a battle-tested, more mature organization and believe
the headwinds we faced in 2009 – our upper upscale and
luxury portfolio, our global footprint and owned hotels – will
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