Why Did Starwood’s RevPAR Improve in 2014?



Starwood’s RevPAR

Starwood Hotels and Resorts (HOT) derives its revenue from hotel operations. Starwood’s hotel business is largely focused on the global operation of hotels and resorts—primarily in the luxury and upper upscale segments of the lodging industry.

RevPAR (revenue per available room) is the most important performance indicator for the hotel industry. It captures both the occupancy and the ADR (average daily room) rates. RevPAR is calculated by dividing hotel room revenue by the total available room nights. Starwood’s system-wide RevPAR increased by 4.4%. It was mainly driven by strong performance in the North America region. Investors should keep in mind that the fourth quarter marked the seventh straight quarter with record-high occupancy.

It should be noted that system-wide RevPAR increased by ~5% YoY (year-over-year) in 4Q14 for both Wyndham (WYN) and Hyatt (H). Hilton (HLT) and Marriott’s (MAR) system-wide RevPAR rose 6.6% and 6.2% YoY, respectively, in 4Q14.

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2014 RevPAR 

For 2014, Starwood’s RevPAR was up 5.8%. This was within the guidance range set out last year. Mainly, it was driven by strong performance in the North America region. RevPAR was up 7% in 2014.

As noted in Starwood’s 4Q14 earnings call, RevPAR in China increased over 8% in 2014. RevPAR in the Asia-Pacific markets outside of China grew almost 3%. RevPAR in the Middle East and Africa grew 2.4%. In Europe, hotel performance greatly improved in the second half of 2014.

RevPAR guidance for 2015

Starwood expects that the RevPAR increase at same-store, system-wide hotels worldwide will be 5%–7% in constant dollars for 2015. For 1Q15, the RevPAR increase at same-store, system-wide hotels worldwide will be 4%–6% in constant dollars.

Investors can buy Starwood’s share directly or through ETFs like the iShares U.S. Consumer Services ETF (IYC) and the Consumer Discretionary Select Sector SPDR Fund (XLY). It should be noted the RevPAR denoted in this article is adjusted for currency. The RevPAR are comparable.

In the next part of this series, we’ll discuss how Starwood funds its capital return to its shareholders.


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