Third Quarter Combined Financial Highlights:
* 75% increase to $1.40 in combined pro forma funds from operations (FFO)
per diluted paired share.
* 7% increase in same store REVPAR for owned hotels worldwide;
14% increase in Europe; 8% increase in Latin America; 6% increase in
* Total pro forma EBITDA of $427 million.
* 14% increase in same store EBITDA for owned hotels worldwide.
* Same store EBITDA margin for owned hotels worldwide increased from
29.4% to 31.5%.
* 47% increase in EBITDA at ongoing Gaming Group; Caesars Palace Las
Vegas EBITDA doubled.
Starwood Hotels & Resorts (the ``Trust``) and Starwood Hotels & Resorts Worldwide, Inc. (the ``Corporation``) (together ``Starwood`` or the ``Company``) (NYSE: HOT), the world`s largest hotel and gaming company which, through its subsidiaries, operates the Sheraton, Westin, St. Regis, Luxury Collection, Ciga, W and Caesars brands, today announced combined financial results for the third quarter ended September 30, 1998.
Pro Forma Results: For the third quarter of 1998, combined pro forma FFO was approximately $295 million or $1.40 per diluted paired share on combined pro forma revenues of approximately $2.3 billion compared to combined FFO of approximately $49 million or $0.80 per diluted paired share on combined revenues of approximately $237 million for the corresponding period in 1997 as reported on an actual basis by Starwood. The pro forma results for the third quarter of 1998 reflect the February 23, 1998 merger (the ``ITT Merger``) of the Company with ITT Corporation (``ITT``), including cost savings expected to be realized from the implementation of changes to benefit plans contemplated at the time of the ITT Merger, in each case as if the ITT Merger had occurred on January 1, 1998. Pro forma results also assume the disposition of a number of previously announced non-core businesses with total gross proceeds of approximately $3.4 billion, of which approximately $2.7 billion has been realized.
For the first nine months of 1998, combined pro forma FFO was approximately $700 million, or $3.30 per diluted paired share on combined pro forma revenues of approximately $6.6 billion, an increase of 45% over combined pro forma FFO of $2.27 per paired share for the first nine months of 1997 as actually reported by Starwood.
``Starwood`s unique hotel assets continue to provide the foundation for our success,`` said Barry S. Sternlicht, chairman and chief executive of Starwood Hotels & Resorts. ``We are pleased with our progress to date and our team`s extraordinary efforts to integrate our operations,`` Mr. Sternlicht said. ``We expect to continue to build corporate momentum and the benefits of our global scale in marketing, purchasing and technology will allow us to achieve REVPAR growth above industry averages while simultaneously reducing our cost of operations. Our REVPAR performance reflects, for the third quarter, the global diversification of our operations and the emphasis in our owned asset base on luxury and upscale full-service hotels. Results in Europe and Latin America remained strong while our North American operations which were negatively impacted in the last two weeks in September improved significantly in October and the month should be our best of the year,`` the chairman continued. ``We are focused on the opportunity to mine our existing asset base where several hotels are still materially underperforming and margins can be improved.
``The operating strategies we have put in place are beginning to take hold and bear fruit,`` said Richard D. Nanula, president and chief executive of the Corporation. ``The operating units turned in strong performances for the quarter in the face of some significant challenges,`` Mr. Nanula said. ``Our integration program is continuing at a very aggressive pace and we are beginning to achieve the kind of benefits we anticipated when Starwood merged with ITT. Call centers have been consolidated and our reservation centers integration is proceeding on target. The company will launch its new frequent guest program with shared benefits across all the brands in February.``
Hotel Group Results: On a same-store-sales basis, results for the third quarter of 1998 at the Company`s owned and leased hotels worldwide, reflect an increase in revenues of 7% to $718 million from $672 million in 1997, an increase in EBITDA margins to 31.5% from 29.4%, and an increase in EBITDA of 14% to $226 million from $198 million in 1997. For the quarter, REVPAR for these owned hotels increased 7% to $102. The increase in REVPAR was due to the increase in ADR of 7% to $140 with occupancy rates remaining virtually constant when compared to last year.
As of September 30, 1998 the Company`s portfolio of owned, managed and franchised hotels totaled approximately 650 hotels in 70 countries with over 213,000 rooms. During the quarter, the Company added 16 hotels (4,600 rooms) to its system, including two Westin branded hotels, nine Sheraton hotels, and five Four Points. During the first nine months of 1998, the Company added 68 hotels (18,000 rooms) to its system including 6 Westin branded hotels, 38 Sheraton hotels, and 24 Four Points.