Starwood 2009 Annual Report Download - page 4

once again be tailwinds in the future based on favorable
long-term demographics.
For the first time in decades, the U.S. consumer is not
leading the world out of this recession. Asia, Africa and
South America have weathered the recession better and
are already growing. This is another factor that plays to
Starwood’s strengths given our global footprint. Over half
of our hotel rooms are already outside of the U.S. And this
skew towards international will continue to grow given
more than 80% of our 85,000-room pipeline will be built
in international markets. Asia Pacific represents our largest
source of future growth with 50,000 rooms in the pipeline.
We are proud to be the world’s most global hotel company
and have been very careful to not let the economic downturn
derail our long-term growth strategy. In our view, the
crisis has revealed just how unstoppable the trends of
globalization, capital flows and wealth creation are around
the world, as three billion people enter the global economy
and more than 70% of the world’s growth over the coming
decade is expected to come from rapidly growing economies.
These trends represent a once-in-a-lifetime growth
opportunity for infrastructure development around the
world, not the least of which lies in the demand for more
high-end hotels. People are increasingly traveling outside
of their native countries where they are drawn to brands
they recognize and respect. We believe this represents an
exciting opportunity for Starwood as the potential for new
international travelers at our properties is truly astounding.
For example, it is expected that by 2015 there will be 400
million Chinese and Indians with sufficient incomes to travel
abroad. That’s seven times the number of international
travelers who visited the U.S. last year!
Creating value for shareholders in 2009 was all about
cost-cutting and ‘de-risking’ the company’s balance sheet
through debt reduction. In 2010 we are focused on driving
top-line growth. This includes driving RevPAR premiums
and growing our pipeline.
We are also focused on monetizing the value of our portfolio
of owned hotels. The transformation of our business mix is
ongoing and we have made significant progress in growing
our managed and franchised business and reducing the size
of our owned portfolio. Five years ago, 20% of our profits
came from fees and today we are at 60%. But there is more
to come given our goal of becoming over 80% fee-driven.
This transformation should generate substantial after-
tax proceeds that will allow us to pursue ongoing growth
opportunities, strengthen our balance sheet and return
cash to you, our shareholders. At the same time, we will
be left with one of the most attractive business models in
the capitalist world. With long-term contracts and minimal
capital requirements, the fee business generates predictable,
sustainable income streams.
While it is essential to focus on our financial performance,
we must also deliver on our responsibility to effect
environmental change and improve the communities in
which we operate around the globe. Now, more than ever,
the private sector needs to step forward and lead by example
in the area of environmental stewardship. Starwood has
established a Global Citizenship group to cultivate our
ongoing commitment to the earth and implement
economically viable standards across our hotels that will
help decrease our environmental footprint. We have made
an earnest commitment to integrate sustainable practices
into our core business strategies, and we are determined to
truly make a difference.
Travel is uniquely positioned to create new jobs, stimulate
community development and generate tax revenue. In
just the U.S. alone, the travel industry employs 7.7 million
people – more than twice the auto industry. In 2010, Starwood
expects to create 12,000 new jobs around the world in
addition to the 12,000 jobs that we created in 2009 at our
recently opened hotels.
As a final observation, it is becoming increasingly clear that
scale, financial flexibility and great brands are the foundations
of future success, and Starwood has all three. Companies
that can offer global scale to owners and customers will
have an advantage that is difficult to replicate. Companies
with financial flexibility will be able to take advantage of
opportunities that create value for shareholders. And great
brands take years to establish but can create significant
value through pricing power and growth.
So while we are cautiously optimistic about the near term,
we are working hard to own the upswing and are more
confident than ever in our long-term future. We are in an
enviable position to leverage our great brands, our unique
properties, our innovative edge and our global organization
to take advantage of favorable mega-trends and make the
most of the opportunities that lie ahead for Starwood in
2010 and beyond.
Thank you for your continued support.
Frits van Paasschen
Chief Executive Officer