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Why Did Starwood’s Revenue Decrease in 2014?

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Apr. 1 2015, Updated 4:06 p.m. ET

4Q14 revenue

In the last part of this series, we discussed how Starwood (HOT) generates its revenue. In this part, we’ll discuss why Starwood’s revenue decreased in 4Q14.

Starwood’s revenue decreased ~1% to $1,493 million in 4Q14. Starwood missed its consensus estimates by 2.1%. This is mainly due to the decrease in Starwood’s revenue at owned, leased, and consolidated joint venture hotels. The revenue decreased by 11.1% YoY (year-over-year) to $370 million. It was primarily driven by Starwood’s aggressive asset sale program. It was also impacted by foreign exchange.

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For companies like Marriott (MAR), Hilton (HLT), and Wyndham (WYN), revenue increased by 11%, 7%, and 3%, respectively, in 4Q14 on a YoY basis. ETFs like the Consumer Discretionary Select Sector SPDR Fund (XLY) and the iShares U.S. Consumer Services (IYC) help investors gain access to the hotel companies.

However, Starwood’s revenue at same-store owned hotels increased 3.6% YoY in 4Q14. Starwood’s same-store hotels contribute roughly 20% to the overall revenue. In North American, the revenue at same-store owned hotels increased 2.7% YoY. Internationally, the revenue at same-store owned hotels increased 4.8% YoY

In addition, Starwood’s vacation ownership revenue also increased 15.2% YoY to $167 million in 4Q14. The increase was primarily due to the timing and recognition of deferred revenue.

Fiscal year 2014 revenue

On a yearly basis, Starwood’s revenue decreased by 2.2% to $5,983 million. Fiscal year 2014 revenue was negatively impacted by a 4.4% decrease in revenue from the owned, leased, and consolidated joint venture hotels segment. It was also impacted by the 27.1% decrease in revenue from the vacation ownership and residential segment.

The revenue from owned, leased, and consolidated joint venture hotels decreased primarily due to lost revenue from 15 owned hotels that were sold or closed. Two leased hotels converted to managed or franchised hotels in 2014 and 2013.

The vacation ownership and residential segment’s revenue decreased mainly due to fewer residential closings during 2014—compared to 2013.

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