Analyzing Starwood and Its Performance in 2014



About Starwood

Starwood Hotels and Resorts (HOT) was founded in 1980. It’s based in Stamford, Connecticut. Starwood is one of the largest hotel and leisure companies in the world. It owns, manages, and franchises properties under the brands St. Regis, The Luxury Collection, W, Westin, Le Méridien, Sheraton, Four Points, Aloft, and Element.

Starwood operates in three regions worldwide:

  1. Americas
  2. EMEA (Europe, Middle East and Africa)
  3. Asia-Pacific

Starwood gets the majority of its revenue from the Americas. It’s followed by EMEA and Asia-Pacific.

As of December 31, 2014, Starwood’s hotel business included 1,207 owned, managed, or franchised hotels. It had ~346,600 rooms.

  • 36 hotels were owned or leased
  • 583 hotels were managed on behalf of third-party owners
  • 588 hotels generated franchise fees for Starwood
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Share price performance

The above chart shows that Starwood experienced a significant decline in its share price in October 2014. It released its 3Q14 results. Its adjusted net income declined by ~12% YoY (year-over-year). However, Starwood’s share price jumped by over 10% after it released its 4Q14 results in February 2015. Its adjusted net income grew over 21% YoY.

Investors should keep in mind that Starwood had a return of ~10% over the trailing 12 months, or TTM. It underperformed the SPDR S&P 500 ETF (SPY). SPY returned ~13% during the same period.

Series overview

In this series, we’ll discuss Starwood’s business model. We’ll also discuss why its 4Q14 earnings increased significantly even though its revenue decreased YoY in the same period. We’ll discuss how Starwood’s asset-light strategy and the spin-off of its vacation ownership segment drove its growth. We’ll also take a look at Starwood’s current valuation and its future outlook.

Starwood’s competitors 

Other companies in the industry include Hilton (HLT), Marriott (MAR), Hyatt (H), and Wyndham (WYN). ETFs like the PowerShares Dynamic Leisure and Entertainment Portfolio (PEJ), the Consumer Discretionary Select Sector SPDR Fund (XLY), and the iShares U.S. Consumer Services (IYC) help investors gain exposure in the hotel industry.

In the next part of this series, we’ll discuss how Starwood generates its revenue.


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