Starwood 2010 Annual Report Download - page 3

As any athlete knows, recovery is critical in the pursuit of
peak performance. With that in mind, the Starwood team
has worked tirelessly during the challenging economic
conditions of the last few years to position the Company
to ‘Own the Upswing’ in 2010. Our 2010 results prove
the success of that approach, and we believe we are in
the early stages of what looks to be a multi-year, global
recovery for lodging.
The lodging recovery firmly took hold in 2010. Business
travel, which drives 75% of our total revenue, rebounded
sharply as companies began to scour the globe for growth
opportunities. As expected, the recovery was driven by
strong, late breaking business among transient and group
travelers. For the full year, worldwide RevPAR grew by 9%,
driven almost entirely by occupancy gains. Rates steadily
improved throughout the year thanks mostly to a better mix
of business at our hotels.
With occupancies in many markets now back to prior peak
levels, and with little new supply anticipated in developed
markets through at least 2013, we expect rates to post
strong increases in the coming years. Our group business
improved sequentially throughout 2010 and we expect to
enjoy healthy rate increases and higher volumes in 2011.
We also expect 2011 corporate negotiated rates to rise high
single digits after their 20% decline from peak levels. Most
importantly, the momentum we experienced in 2010 has
continued thus far into 2011. Our customers are telling us
they plan to travel more in 2011.
We’re very pleased with our performance in 2010. Starwood
gained share, grew faster than our competition, and
converted higher revenue into higher profits. We added
72 hotels over the course of 2010, translating into 5% net
unit growth. And roughly two-thirds of our portfolio of
hotels is new or freshly renovated, so we believe we are well
positioned to delight our guests as the recovery continues.
Our ‘Path to Peak’ program is well underway with a goal
of our hotels reaching — and then surpassing — prior peak
profitability through a combination of driving top-line
growth while containing costs. Focus areas include revenue
management, procurement, sales effectiveness, food and
beverage initiatives and lean hotel operations. Our efforts
are clearly paying off. In 2010, we grew our worldwide
RevPAR index by approximately one percent, with our newly
revitalized Sheraton brand leading the charge. This is a
significant move for a system of more than 1,000 hotels. In
North America, Sheraton’s RevPAR index jumped two percent,
a monumental move in the first year of a brand relaunch.
And despite hotels that are increasingly full, our Guest and
Meeting Planner Satisfaction Scores hit record highs for the
fourth year in a row. Worldwide owned margins increased
by 1.6%, but we have a long runway ahead and are working
hard to drive our hotels back towards peak profitability.
GLOBAL LEGACY AND REACH
Starwood has evolved to become the most global hotel
company, operating in more than 100 countries. Today we
have more hotels outside of the U.S. than inside, and we
generate almost 60% of our lodging fees from non-U.S.
markets. Our transformation will continue and, like many
global brands, we expect to derive 80% of our profits from
outside of the U.S. in the coming years.
Capitalizing on our global advantage is a key priority for
Starwood. Approximately 70% of the world’s GDP growth
over the next decade is expected to come from emerging
markets. And with almost 80% of Starwood’s pipeline
outside of the developed world, we are growing where the
world is growing.
We have an important first-mover advantage in several key
markets — we entered the Middle East in the 1960s, Africa,
Latin America and India in the 1970s, and China in the 1980s.
Since that time, we have built long-standing relationships
with owners and developers in their respective markets
and cultivated “local-smart” teams that have decades of
experience getting things done in different parts of the world.
Starwood’s success in China offers a powerful example of
how we are leveraging growth opportunities in emerging
markets. China recently became Starwood’s largest hotel
market outside of the U.S., and we expect that in 2011,
one in every three new Starwood hotels will open in China.
Today we have nearly 70 hotels in China and another 85
hotels in the pipeline. Importantly, demand continues to
outpace supply and we still have significant opportunities
for additional growth. There are nearly 200 cities in China
with populations of more than one million, many of which
do not yet have a major, international hotel.
Globalization, and all that comes with it, including billions
of new travelers and generations connected by social
networks, translates into a truly global consumer base with
an unprecedented appetite for our brands. This highlights
the importance of building hotel brands that will capture
the loyalty of increasingly brand-savvy global travelers.
Gen Y will be the biggest consumer group in history, with
a new and distinct take on design, technology, service
and sustainability. We intend to lead the way in what
hotel branding will mean to travelers. Our philosophy and
approach to branding, innovation and design are what make
Starwood special in the eyes of our associates, our guests
and our owners.
dear fellow
stockholders