STARWOOD BRANDS PERFORMANCE UPDATE

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1 FEBRUARY 14 PRICE $500 IN FOCUS: STARWOOD BRANDS PERFORMANCE UPDATE Rod Clough, MAI Senior Managing Director HVS Denver 413 S. Howes Street, Fort Collins, Colorado 521

2 ( ) eandrevpar AverageRat month Februa monthsto February12 PAR( ) eandrev eragerat Av 12months to 12 to months 1 February F Avea RevP Ocup 12m ebruary Fe ( ( R erate ancy % % % to onths % WESTIN HOTEL, RICHMOND, VA This article reviews the performance of Starwood s brands in 13. The company released data in its recent February stock filing, and this article focuses on the performance across the company s brands in North America. We note that brand-wide performance levels for the Element brand were not released. Source: HVS Highlights North America Hotel occupancy levels surpassed for all Starwood brands in 13, with Four Points by Sheraton moving above this threshold, from 69.6% in 12 to 71.0% occupancy last year. Sheraton was slightly lower at 70.6% occupancy in 13, but also held the largest share of the group with 5 hotels and 77,548 rooms (45% of the total). Le Méridien registered the highest average occupancy level, which in contrast, held the smallest share of rooms, with 14 hotels and 3,225 rooms (2% of the total). Average rate growth spanned 2.6% to 7.9% in 13, with St. Regis & The Luxury Collection taking the top spot for growth. At 7.9%, this brand category surpassed the $3 rate threshold, and RevPAR was just under $250. Le Méridien also experienced formidable rate growth, at 5.5%. Le Méridien and Aloft held the number two and three spots for RevPAR growth in 13, at 7.9% and 6.1%, respectively. Hotel Occupancy Aloft Continues To Gain Ground CHART 1: OCCUPANCY TREND ( 13) Le Méridien, with many of its 14 hotels well located in highoccupancy markets such as New York, San Francisco, and Philadelphia, was the only brand to surpass the % mark average that it has enjoyed over the last three years. The average size of a Le Méridien hotel was 230 rooms in 13. W and Westin followed, with each brand s average occupancy IN FOCUS: STARWOOD BRANDS PERFORMANCE UPDATE PAGE 2

3 ) AvReOc RevPAR( erateand Averag 12mto 12m 1 February 1 February 0% 90 % % 70 % 50 % % R( ) drevpa Ratean Source Average 1 1 Avera Ocupanc ( ate y % % % % level moving toward the % and 75% thresholds, respectively. Like Le Méridien, W still represents a relatively small group of hotels, at 27, with 8,588 rooms (averaging 318 rooms in size). By contrast, Westin spans 51,316 rooms and 122 hotels (averaging 421 in size). These metrics of the Westin brand underscore the impressive nature of the brand s 74.3% occupancy level in 13. CHART 2: OCCUPANCY LEVELS (12 & 13) Point Change Le Méridien.8% 82.6% 1.8 W 76.4% 77.8% 1.4 Westin 73.0% 74.3% 1.3 St. Regis & The Luxury Collection 70.4% 73.2% 2.8 Aloft 70.9% 72.3% 1.4 Four Points by Sheraton 69.6% 71.0% 1.4 The St. Regis & The Luxury Collection hotels Sheraton 70.0% 70.6% 0.6 showed a strong jump in 13, moving roughly three points higher to 73.2%, which is no easy task when maintaining a high St. Regis & Luxury Collection Registers Largest Point Gain average rate level and managing seasonality factors that affect many of their resort locations. This group of hotels experienced the company s strongest occupancy gain in 13, while the greatest gain over the four-year period has been in the Aloft category. Aloft has moved roughly 11 points higher during this time. Sheraton and Four Points, together representing 55% of the Starwood rooms in this North American group, were neck and neck in occupancy levels, at 70.6% and 71.0%, respectively, in 13. All Brands Surpass The Occupancy Mark All Starwood brands were able to obtain average occupancy levels above the mark in 13, a formidable feat given the depth and variety of hotels, markets, and price points that are held within the group. While maintaining these levels may be challenging in light of the planned new additions, these marks correctly point to opportunities for continued development given their popularity among individual travelers and meeting planners alike. In the company s February stock filing, Frits van Paasschen, CEO, remarked, Starwood had a strong year in 13. We exceeded our profit expectations, despite a tepid global business environment, exchange rate headwinds and the effect of having sold six hotels. Occupancies in North America reached record levels for the third straight quarter, and in a weak economic environment, occupancies in Europe remained high. In Latin America, Asia Pacific, Africa, and the Middle East, we delivered strong footprint and fee growth. CHART 3: AVERAGE RATE LEVELS ( 13) Average Rate & RevPAR The span of average rates achieved by Starwood s brands widened to just over $225 in 13, with St. Regis & The Luxury Collection hotels exceeding the $3 mark, versus the Four Points by Sheraton rate of roughly $114. Similar to the occupancy improvement ranking, St. Regis & The Luxury Collection also IN FOCUS: STARWOOD BRANDS PERFORMANCE UPDATE PAGE 3

4 experienced the largest average rate gain, at almost 8.0%, an improvement of roughly $35. The W and Le Méridien brands held the next position, targeting a rate position roughly $ lower. Both brands experienced significant rate growth in 13, with Le Méridien achieving the second highest rate of growth among the brands, at 5.5%. CHART 4: AVERAGE RATE LEVELS (12 & 13) % Change St. Regis & The Luxury Collection $ $ % W $ $ % Le Méridien $ $ % Westin $ $ % Sheraton $ $ % Aloft $1.92 $ % Four Points by Sheraton $ $ % Westin surpassed the $175 mark, while Sheraton s brand average rate moved higher by almost 4.0% and is now approaching $145. Starwood s Aloft and Four Points by Sheraton brands were similar in overall rate levels in 13, bracketing the $115 mark. The top three brand categories for 13 RevPAR growth were St. Regis & The Luxury Collection, Le Méridien, and Aloft. St. Regis & The Luxury Collection, Le Méridien, and W all surpassed the $0 RevPAR mark, while Aloft and Four Points by Sheraton fell within the $ to $85 range. Four Points by Sheraton registered the lowest RevPAR gain, with a still strong 4.6%. CHART 5: REVPAR LEVELS (12 & 13) % Change St. Regis & The Luxury Collection $ $ % Le Méridien $ $ % W $ $ % Westin $ $ % Sheraton $96.59 $1. 4.8% Aloft $78.64 $ % Four Points by Sheraton $77.67 $ % Distribution CHART 6: ROOM DISTRIBUTION BY BRAND Sheraton remained as Starwood s most significant brand in 13, representing 45% of the rooms in North America. Westin was the second most significant, with a 30% share. Together, these two brands comprise roughly 75% of Starwood s North America room stock, and 58% of the hotel count. The performance levels for Le Méridien may realize some normalization in the near term, as the brand positions itself for a strong expansion in North America over the course of the next year. New destinations are expected to IN FOCUS: STARWOOD BRANDS PERFORMANCE UPDATE PAGE 4

5 PAR( ) eandrev eragerat Av 12months to 12 to months 1 February F Avera RevPA Ocup 12m ruary Fe ( ( R erate ancy % % % to onths % PAR( ) eandrev eragerat Av 1 12m to s 12mo Februa to 1 Febru Avera RevPA Ocupanc ths 12m to ths ( ate Febru 1 2 % % % % CHART 7: NORTH AMERICA BRAND DISTRIBUTION (13) Brand Hotels % of Total Rooms % of Total Sheraton 5 36% 77,548 45% Westin % 51,316 30% Four Points by Sheraton 114 % 17,885 % W 27 5% 8,588 5% Aloft 57 % 8,483 5% St. Regis & The Luxury Collection 24 4% 6,325 4% Le Méridien 14 2% 3,225 2% Totals ,370 include Charlotte (April), Tampa (May), Chicago Oakbrook (July), and Indianapolis (November). Moreover, hotels are likely to open in the cities of Cleveland and Columbus in early 15. Announcements for additional destinations are sure to follow over the course of the next six to twelve months. Aloft and Element will also continue to be a focus of new development given the intensifying interest and available financing to construct new rooms in these popular product categories. Efforts are also underway to undertake more conversions to the Aloft brand, allowing for the transformation of existing hotels to Aloft s hip and urban lifestyle experience. New Aloft hotels in the coming months will open in Downtown Denver, Downtown Atlanta, and Detroit, among other destinations. Starwood will open many more new hotels in the near term, with a current listing shown on their website under New Hotels : New projects span 29 states, with the most new development activity noted for California, Florida, New York, and Texas. PROPOSED ALOFT ELEMENT S RELAXED ATMOSPHERE Source: HVS Source: Starwood IN FOCUS: STARWOOD BRANDS PERFORMANCE UPDATE PAGE 5

6 About HVS HVS is the world s leading consulting and services organization focused on the hotel, mixed-use, shared ownership, gaming, and leisure industries. Established in 19, the company performs 4,500+ assignments each year for hotel and real estate owners, operators, and developers worldwide. HVS principals are regarded as the leading experts in their respective regions of the globe. Through a network of more than 30 offices and 450 professionals, HVS provides an unparalleled range of complementary services for the hospitality industry. Superior Results through Unrivaled Hospitality Intelligence. Everywhere. HVS DENVER has been the leading provider of consulting and valuation services in the Rocky Mountain region since the mid 19 s. Rod Clough, MAI, oversees this office and a network of licensed hotel consulting experts nationwide. Rod s group handles a wide variety of projects, from complex portfolios and development projects to appraisals for limited-service hotels in tertiary markets. Rod s group has extensive experience with all Starwood brands and is continually working with developers on proposed Starwood projects nationwide when market studies or feasibility studies are needed, as well as appraisals for lenders on both existing and proposed Starwood hotels. About the Author ROD CLOUGH, MAI is the Senior Managing Director of the HVS Denver office; Rod is also a partner in the HVS Atlanta, Minneapolis Dallas, Houston, Mexico City, Philadelphia, and St. Louis offices. This group of offices represents over hotel industry professionals and executes over 2,000 assignments a year. Rod has been working in the hospitality industry for years and is a graduate of Cornell's School of Hotel Administration. He is a Designated Member of the Appraisal Institute (MAI) and a state-certified general appraiser. Contact Rod at (303) or rclough@hvs.com. Follow Rod on HVS Denver 413 S. Howes Street, Fort Collins, Colorado 521