Starwood Hotels & Resorts Worldwide Inc

Vail Resorts (MTN) has a market cap of $4.6 billion. Its YTD (year-to-date) price movement has been rising quarter-over-quarter in calendar 2015.

Strong Momentum in HOT The below graph reflects the strong performance of Starwood Hotels and resorts, HOT, which was particularly strong until the 2008 crisis, and is once gain handsomely outperforming the Morningstar mid cap growth total return index. While just a bit below the S&P 400 index over the years, Starwood Hotels has been […]

Co-branding relationships are an important part of the American Express business model. The costs of renewing and extending these relationships is increasing.

In fiscal 2014, Marriott had forward EV-to-EBITDA multiple of 15.3. It was trading at 11.2 as of January 1, 2016, which was the highest among peers.

Since 2010, Wyndham’s stock has outperformed all its peers, growing by over 270%. In that time, Marriot grew by ~176%, Starwood by 102%, and Hyatt by 67%.

Marriott repurchased 7.7 million shares of common stock valued at $544 million in 4Q14 and 24 million shares for $1.5 billion in 2014.

Marriott has been expanding its presence in the international market. It added new brands in Europe, Asia Pacific, and the Middle East and African regions.

Highfields Capital Management LP is based in Boston. The fund was founded by Jonathon Jacobson in 1998. The fund’s US long portfolio declined slightly to $12.8 billion in the third quarter.

With the Starwood-Marriott merger, the companies expect to generate at least $200 million in annual cost savings beginning in the second year after the deal closes.

In 3Q15, Hyatt Hotels had a price movement of $7.1 billion. After its 3Q15 release, its stock fell by 1.31% to close at $49.76 per share on November 3.

Hotel companies, like Hilton, expand their operations based on the demand for accommodations by location. They also expand based on customer preference for the level of service offerings.

For 3Q16, analysts are estimating Expedia’s (EXPE) revenue to rise 31.3%. That’s slightly lower than the growth in the first and second quarters.

Since the merger received final approval on September 20, 2016, Marriott stock (MAR) fell 2.2%, while Starwood (HOT) stock rose 2.2%.

Wyndham has the highest return potential of 21% with a target price of $81. Marriott is next with a return potential of 18% and a target price of $79.15.

According to Marriott’s (MAR) CEO, Arne Sorensen, Starwood’s (HOT) guest loyalty program was a “central, strategic rationale for the transaction.”

On April 29, 2015, Starwood put itself up for sale. On August 29, 2015, Anbang offered to buy it at a 20% all-cash premium deal on its last closing price.

The Marriott-Starwood merger received final approval from the Chinese regulatory authority. Both chains completed the deal on September 23, 2016.

Microsoft paid a 50% premium to LinkedIn’s June 10 closing price. At 7.5x revenues and 75x EBITDA, Microsoft is paying a lot. LinkedIn is a unique property.

The last two years have been marked by turmoil for Starwood Hotels (HOT). Starwood’s properties include brands like the Sheraton, Westin, St. Regis, and W hotels.

The Marriott–Starwood deal holds immense significance for Marriott International because the combined entity of Marriott International and Starwood Hotels and Resorts Worldwide would create the world’s largest lodging company.

In this series, we will discuss why Starwood (HOT) decided to put itself up for sale, how a merger with Starwood would benefit either Marriott or Anbang, and who could probably win this takeover tussle.

The forward EV-to-EBITDA multiple for the hotel industry currently stands at 9. It has declined from 13.1, which was recorded at the beginning of 2015.

Marriott has one of the lowest asset bases among its industry peers, having reduced its PPE-to-total-assets ratio from 24% in 2012 to 21.2% in 2014.

Marriott’s operating margin increased from 5.9% in 2010 to 8.4% in 2014. Its operating income grew from $695 million in 2010 to $1,159 million in 2014.

The Conference Board Consumer Confidence Index as of November 2015 was 90.4 compared to 102.6 in September 2015.

Occupancy rates, which measure hotel capacity utilization, saw unprecedented growth in 2015. November 2015 occupancy rates saw a year-over-year growth rate of 3.2%.

ADR, or average daily rate, measures the average room price paid in the market. Hotels saw unprecedented occupancy levels in 2015 driven by strong demand.

Hotel investors can use the indicators discussed in this series to gauge the industry’s general trends. Leisure travelers make up ~60% of the total hotel room sales, and business travelers account for 40% of total sales.

Cost reimbursements make up a major component of Marriott’s revenues and mostly consist of salaries paid to employees working in Marriott-managed hotels.

Marriott now focuses on capital-light segments like franchised properties. Its fee incomes rose from $1.2 billion to $1.7 billion between 2006–2014.

Marriott International saw strong increases in RevPAR—from $87 to $110—between 2010 and 2014.

Marriott’s acquisition of Starwood will likely help Marriott double its international portfolio while diversifying its global presence.

Marriott has been able to expand its international business by both acquiring and creating brands that enable it to enter new markets and market segments.

In 2015, Marriott topped the ACSI survey with a score of 80. It also topped the survey in 2014 and 2013, with scores of 83 and 81, respectively.

At the end of 2014, Marriott had around 2,882 franchised hotel properties, with 388,670 rooms under the franchise model.

Marriott International is known for its wide range of budget and luxury hotels. Its acquisition of Starwood will make it the world’s largest hotel chain.

Hyatt’s EV/EBITDA has moved in line with the median valuation multiple of its peers. Hyatt, with rare exceptions, has always traded at a discount to the median valuation multiple of its peers.

As of December 31, 2014, Hyatt’s cash, cash equivalents, and marketable securities as a percentage of total assets is one of the highest among its peers, at 10%.

Hyatt had the lowest return on assets (or ROA) ratio among its peers at 4.6% for fiscal 2014 due to lower profits generated from its assets.

Operating margins for Hyatt Hotel (H) increased from 1.4% in 2010 to 6.3% in 2014. The growth in margins was largely driven by steady growth in revenue and declining expenses from the owned and leased hotels segment.

As of January 31, 2015, Hyatt had 36.8 million Class A shares entitled to one vote and 111.4 million Class B shares entitled to ten votes.

Hyatt (H) operates its hotels and other business segments under three models: franchise, management, and ownership models.

Hotels that offer accommodation with limited services and amenities are called select service hotels. Hyatt (H) operates about 37,500 rooms and two brands under this segment.

A global hospitality group, Hyatt (H) operates industry-leading brands such as Park Hyatt, Andaz, Hyatt, Grand Hyatt, and Hyatt Regency. As of December 31, 2014, the company operated 587 properties with more than 155,000 rooms.

Wyndham’s operating margins declined from 18.6% in 2010 to 17.6% in 2014 due to growing marketing and reservation expenses.

Vacation unit sales rely on disposable income available to customers. The stable US economy and growing household incomes have positive impacts on Wyndham.

Wyndham Worldwide’s Wyndham Exchange and Rental segment is its most geographically diversified business segment, with a presence in over 100 countries.

Wyndham’s ADR growth in 2010–2014 was driven by a lack of supply growth in the economy segment and by an increase in domestic travel.

Wyndham invests in technology to improve its e-commerce capabilities and marketing abilities and to help it differentiate itself from competitors.

We can measure Wyndham’s rental and exchange business by average number of members, revenue per member, rental transactions, and average net price.

Wyndham Hotel Group provides services under a franchise model but also offers professional oversight and operations support under a management model.

Wyndham had the lowest occupancy rate among peers in fiscal 2014. Its larger presence in the economy and midscale segments accounts for the difference.

Wyndham Worldwide is considered the world’s largest hotel franchiser. It owns the world’s largest vacation ownership and exchange network.

Starwood Hotels & Resorts traded at $74.81 on Tuesday, October 27. It was well above its respective 50-day and 20-day moving averages.

RevPAR (or Revenue Per Available Room) is a key performance metric used in the hotel industry that indicates the hotel’s performance and the demand scenario for the hotel’s rooms.

The US hotel industry was badly affected by the economic crisis. Sales plunged, commercial-property prices collapsed, rooms remained vacant, and a weaker dollar added to the industry’s woes.

Hilton (HLT) saw strong revenue growth in 2Q15, which was driven by strong occupancy rates and room rates.

In 2006, Starwood’s management embarked on an asset-light strategy. It decided to sell a significant portion of Starwood’s owned hotel portfolio.

On February 10, 2015, Starwood Hotels and Resorts announced plans to spin off its vacation ownership business into a separate publicly traded company.

The revenue from owned, leased, and consolidated joint ventures is primarily derived from hotel operations. This includes room rentals and food and beverage sales.

Marriott’s revenues totaled nearly $3.6 billion in the fourth quarter of 2014, compared to $3.2 billion in the fourth quarter of 2013.

Hilton’s 4Q14 revenue increased 7% YoY to $2,828 million. For 2014, its revenue increased by 10.5 billion, or 7.9%—compared to 2013.

In December 2014, Adobe announced that it had been recognized by Gartner as a leader in the 2014 “Magic Quadrant for Digital Marketing Hubs” research report.

Marriott (MAR) operated a total of 3,916 hotel properties in fiscal year 2013. Most of these properties were either managed, franchised, or licensed.

Marriott has a diverse portfolio of 18 brands. It describes the brands as “individually distinct and collectively powerful.”

Hilton Hotels Corporation was acquired by Blackstone in an all-cash transaction valued at $26 billion. The acquisition was an important milestone in Hilton’s (HLT) history.

Timesharing—also known as vacation ownership—is a method of getting the right to use a vacation property like a hotel or a resort. The buyer owns “timeshare interests” or intervals.

Timeshare revenue accounted for ~18% of total revenue from segments. The company generates revenue by marketing and selling timeshare interests and managing resort operations.

Hilton’s hotels, resorts, and timeshare properties are spread across 91 countries and territories. On December 31, 2013, Hilton’s portfolio consisted of 678,630 rooms.

Hilton’s growth plans are measured by the number of rooms under construction. Its growth plans rank first in the industry in all its markets—domestic and international.

IHG has been involved in asset disposals, and using the proceeds for dividends and buybacks—for the first half of 2014, IHG said it completed a $500 million share buyback program, and in July it paid out $750 million in special dividends.

The company said on its website that its “business model is focused on franchising and managing hotels, rather than owning them, enabling us to grow at an accelerated pace with limited capital investment—we call this ‘asset light.’

As of September 30, 2013, Iridian’s assets under management totaled $10.1 billion in U.S. mid-cap and small-cap equity strategies.