Starwood 2011 Annual Report Download - page 5

pipeline. Domestic travel volume there is already
roughly equal to the US and likely to double in the
next five years. China could one day be our largest
market, eclipsing the 480 hotels we have today in
the United States.
Two-thirds of the 112 hotel deals we signed in
2011 were in emerging markets. This means we
are positioned to lengthen our lead and strengthen
our brands with great new hotels. Globalization
is adding to the ranks of elite travelers like never
before, and our brands have captured more than
our fair share of that demand. Our luxury room
count doubled during the last five years, which
underscores the value of our investments in brands
and in loyalty.
A BETTER WAY TO EXPERIENCE THE WORLD
As we sell real estate, we are making a shift from
owning hotels to owning guest relationships.
Compelling brands, great service and best-in-class
properties are three key ingredients to fostering these
relationships. Starwood Preferred Guest® (SPG) is
what binds our brands and properties together.
To great fanfare, we recently announced changes to
our SPG program that will deepen our connection
to global mega-travelers. Here is how these
changes came to life, what it does for our guests
and how it creates value for our hotel owners.
In any branded business, the best marketing
investments are geared to recruiting and retaining
new brand-loyal customers and getting even more
business from existing ones. The more targeted
and the more focused on their needs, the better.
Over the last five years, we’ve doubled our number
of elite members, and spending per elite member is
up 60%. Today, the top 2% of our guests account for
30% of hotel profits. Our Platinum SPG members
give us nearly 50 times the business of our average
guest. Our first-mover advantage has enabled us
to benefit from the rising wealth around the world.
Today, 40% of our elite members live outside the
US, and these mega-travelers are more diverse,
more informed and more sophisticated than ever.
We engaged in a dialog with these travelers, and
what we learned made a lot of sense. High-end
travelers want more than just a good deal. They
want that personal touch, and to be treated in a
special way. Their comments helped us to recast
SPG. They told us that not all trips are equal and not
all benefits matter. They asked for more milestones,
more reasons to stay after they reached a certain
level and more choices. All of these are part of our
program. They also wanted to know whether their
loyalty with us over time counted for something, so
we introduced lifetime status. Our guests asked for
a more flexible definition of a stay. So we tested
our ability to meet that need, and today we are
offering 24-hour check-in for our most elite guests.
Even in this digital age, they appreciated a one-
on-one contact, which we have made a part of our
program for our most loyal guests.
We believe that the changes to SPG will not only
set the program apart, but will take loyalty to a
whole new level. A great benefit for guests means
more business at our hotels. For every dollar, euro
or yuan that we spend on the transformation, our
experience tells us that we should expect to see
over four times that amount in top-line growth. In
other words, happy guests mean better returns for
our owners, and stronger brands.
DELIVER MARKET-LEADING RETURNS
We are focused on delivering market-leading
returns for all of our stakeholders, and we have four
financial levers at our disposal. It starts with driving
REVPAR premiums, growing our footprint, holding
down costs and unlocking the value of our balance
sheet. As we have noted, 2011 was a strong year
along each of these measures. We made progress
in getting cash from the sale of our real estate
assets. We sold two hotels and a joint venture
in 2011 for net proceeds of $281 million. Other
sources of cash include over $200 million from time-
share and $74 million from residential units at The
St. Regis Bal Harbour Resort.
We expect 2012 to build on our momentum. We
will generate cash as we work toward our target of
being at least 80% fee-driven. From Bal Harbour
and from our timeshare business, we expect to
generate $375 million in cash. When it comes to
selling our owned hotels, we will continue to be
patient and disciplined sellers, searching for the
right prices, partners and management contracts.
We also expect to continue to gain share. Our
margins will grow, as REVPAR is driven by rising
rates. Our corporate customers expect to keep
hitting the road in 2012. Corporate negotiated
rates are set to be up mid- to high-single digits,
and our group meetings are being booked at higher
rates as well.
At Starwood, we are sticking to a cautiously
confident worldview. Our caution is reflected in
our conservative balance sheet and cost base.
After all, the world remains an uncertain place.
Our confidence is rooted in the long-term growth
prospects for high-end travel and for our portfolio
of brands. To lengthen our lead in 2012, we will
stay on offense, targeting additional REVPAR index
gains, opening more rooms than ever, signing the
most hotel deals since the beginning of the crisis
and further deepening our ties to elite guests.
Thank you for your interest in Starwood. And, of
course, we look forward to welcoming you as a
Starwood guest in 2012.
FRITS VAN PAASSCHEN
Chief Executive Officer