WHITE PLAINS, N.Y., Apr 29, 2003 (BUSINESS WIRE)—Starwood Hotels & Resorts Worldwide, Inc. (NYSE: HOT) (“Starwood” or the “Company”) today reported results for the first quarter of 2003.
First Quarter 2003 Financial Highlights:
— EPS was a loss of $0.58, compared to income of $0.16 in 2002. EPS excluding special items, primarily related to a $104 million (after tax) impairment charge associated with the expected sale of an 18-hotel portfolio in North America, including several non-proprietary branded hotels (“18 Hotel Portfolio”), was a loss of $0.08 compared to income of $0.0 in 2002.
— Total revenues, including other revenues from managed and
franchised properties, were $1.073 billion, down slightly from
2002 levels. Total revenues, excluding other revenues from
managed and franchised properties, were $883 million, compared
to $884 million in 2002. REVPAR for Same-Store Owned Hotels
worldwide decreased 1.7% when compared to 2002, primarily due
to a decrease in ADR. REVPAR for owned and operated Same-Store
Hotels in North America decreased 1.3%, due to the weak travel
environment, especially in the Northeast. W Hotels owned and
Same-Store REVPAR in North America increased 9.2%,
while Westin owned and operated Same-Store REVPAR decreased
2.0% and Sheraton decreased 1.4%. Revenues from the vacation
ownership business increased 14.4% to $93 million.
— Total Company EBITDA was $186 million compared to $250 million
($224 million excluding special items) in 2002. EBITDA in 2002
included $24 million of foreign exchange gains related to the
Argentine Peso devaluation and $2 million of restructuring
credits. EBITDA at Same-Store Owned Hotels worldwide decreased
18.8% to $156 million. EBITDA from the vacation ownership
business increased 20.1% to $22 million from $18 million in
— Total Company EBITDA margin excluding special items decreased
approximately 420 basis points to 21.1% when compared to 25.3%
in 2002. EBITDA margins at Same-Store Owned Hotels in North
America decreased approximately 470 basis points to 22.0% when
compared to 26.7% in 2002.
— Total Company market share in North America increased for the
Company`s owned and managed hotels.
— The Company signed binding agreements to sell the Hotel
Principe di Savoia in Milan, Italy (“Principe”), and four
hotels and a 51% interest in its undeveloped land in Costa
Smeralda, Italy, (“Sardinia Assets”) for 565 million Euro
(approximately $617 million based on the March 31, 2003
exchange rate of $1.09 to the Euro). These sales are expected
to close in mid-2003. Subsequent to the end of the first
quarter, the Company approved a plan to sell the 18 Hotel
Portfolio and expects to enter into a definitive agreement in
the coming months and close these sales in the second half of
2003. Total proceeds from all three transactions are
to be approximately $1.1 billion.
EPS was a loss of $0.58 in 2003, compared to income of $0.16 in 2002. EPS excluding special items was a loss of $0.08 in 2003 and income of $0.09 in 2002, and excludes net charges of approximately $100 million (after-tax) in 2003 primarily related to the impairment charge associated with the expected sale of the 18 Hotel Portfolio and net benefits of approximately $15 million (after-tax) in 2002 primarily associated with the foreign exchange gain related to the devaluation of the Argentine Peso. Gains associated with the sales of the Principe and Sardinia Assets will be recognized when the sales are closed in accordance with U.S. GAAP. Total Revenues declined slightly to $883 million when compared to $884 million in the same period of 2002. Total revenues, including other revenues from managed and franchised properties, were down slightly to $1.073 billion. EPS including discontinued operations was also a loss of $0.58 in the first quarter of 2003 compared to income of $0.16 in the same period of 2002.
Comments from the CEO : “It is obvious that the travel environment in the first quarter of this year, traditionally our weakest quarter, was at maximum distress, in large part due to factors beyond our control,” said Barry S. Sternlicht, Chairman and CEO. “In addition to revenue challenges, small increases in expenses (in areas like snow removal and energy) on a low revenue base exacerbated margin pressures. Furthermore, we are exposed to markets most impacted by the global slowdown, notably New York City and the Boston corridor.”
“Nonetheless, there were some important bright notes in the quarter. The W, Westin and Sheraton brands posted industry leading full-service REVPAR results which helped the Company generate a nearly 1% gain in overall market share. In addition, our previously announced wage freeze will only begin to positively impact year over year comparisons as of April 1 and beyond. There are also signs that spiraling fixed costs may be moderating in areas like property insurance, terrorism insurance, energy and real estate taxes. Our brand development pipeline remains strong and growing, despite worldwide turmoil. I remain optimistic for the back half of this year, assuming the SARS crisis dissipates.”
Concluding, Mr. Sternlicht said, “Most significantly, in the quarter we placed over $600 million of assets under contract for sale and expect additional sales as well. Together, these sales will provide significant debt reduction, allow us to take advantage of external opportunities as they may arise, or fund accretive capital projects.”
Hotel Operating Results: At the Company`s Same-Store Owned Hotels worldwide, revenues for the first quarter of 2003 decreased approximately $7 million to $730 million from $737 million in 2002 and EBITDA for the period decreased 18.8% to $156 million from $193 million in 2002. EBITDA at the Company`s Same-Store Owned Hotels in North America decreased 19.6% to $124 million in the first quarter of 2003 when compared to the same period of 2002, primarily due to the impact of lower ADR, increased energy and insurance costs, reduced cancellation fees in 2003, and increased spending behind incremental sales hiring and marketing. EBITDA at the Company`s Same-Store Owned Hotels internationally decreased 15.6% to approximately $32 million in the first quarter of 2003 when compared to the same period of 2002. The positive effects of foreign exchange in Europe and Asia Pacific were partially offset by the weakening of currencies in South America. Excluding the net favorable effects of foreign exchange, EBITDA at the Company`s Same-Store Owned Hotels internationally decreased 19.8% in the first quarter of 2003 when compared to the same period in 2002.
REVPAR at Same-Store Owned Hotels worldwide decreased 1.7% in the first quarter of 2003 when compared to the same period of 2002 as a result of a decrease in occupancy rates of 40 basis points to 60.0% and a decrease in ADR of 1.1% from the prior year. REVPAR at Same-Store Owned Hotels in North America decreased 3.0% to $90.15 when compared to the same period of 2002 as a result of a decrease in ADR of 3.1% to $147.16, offset by a slight increase in occupancy rates to 61.3% from 61.2% in the prior year. REVPAR at system-wide operated hotels (Same-Store Owned and managed) in North America decreased 1.3% when compared to the same period of 2002 as a result of a decrease in ADR of 3.1%, offset by increases in occupancy rates to 62.6% from 61.4%. Internationally, Same-Store Owned Hotel REVPAR increased 3.1%, with Europe up 9.6% and Asia Pacific up 23.6%, offset by declines in Latin America of 14.0% when compared to 2002.
EBITDA margins at Same-Store Owned Hotels worldwide were 21.4% in the first quarter of 2003 when compared to 26.1% in the same period of 2002. In North America, EBITDA margins at Same-Store Owned Hotels were 22.0% when compared to 26.7% in the same period of 2002. Internationally, EBITDA margins at Same-Store Owned Hotels were 19.6% when compared to 24.1% in the same period of 2002. The decline in North America EBITDA margins was due to the decrease in ADR while occupancy increased as well as difficult year-over-year comparisons as a result of the lease of the Sheraton Manhattan and portions of the Sheraton New York Hotel and Towers to a major tenant for office use. Further, the Company`s margins were significantly impacted by higher energy costs due to the extreme cold and snow storms that hit the East Coast in the first quarter of 2003 as well as increased insurance costs and reduced cancellation fees in 2003. During the first quarter of 2003, the Company signed six hotel management and franchise contracts and opened seven new hotels and resorts including: The Sheraton Sanya Resort (Sanya, China, 511 rooms), the Sheraton and Westin at Our Lucaya Beach & Golf Resort (Lucaya, Bahamas, 1260 rooms), The Sheraton Krabi Resort (Krabi, Thailand, 246 rooms), and the Westin Leipzig Hotel (Leipzig, Germany, 447 rooms). Three new hotel openings scheduled for the second quarter of 2003 include: The Sheraton Saigon (Ho Chi Min, Vietnam, 383 rooms), and the Westin Charlotte, (Charlotte, North Carolina, 700 rooms). Including these properties, through the end of 2003, the Company expects to open 23 new full service hotels and resorts around the world. An additional 12 W Hotel projects are in the development pipeline as well as 20 Sheratons and 15 Westins, based on their flexible prototypes.