NEW YORK Lehman Brothers Equity Research is reiterating its Strong Buy rating for Starwood following an analysts meeting held in Stamford, CT yesterday.
Lehman Brothers noted that at the meeting Starwood affirmed 2001 targets for 6% North American RevPAR growth, $1.7 billion EBITDA and $2.26 of EPS. Because Starwood provided initial 2002 guidance for $1.850 EBITDA and $2.60 of EPS, Lehman Brothers said it was increasing its 2002 estimated EPS for Starwood to $2.60 from $2.55.
In commenting on Starwood s presentation of information at the meeting, Lehman Brothers noted that the hotel company s executive lineup comprised of Chairman/CEO Barry Sternlicht, COO Bob Cotter, CFO Ron Brown, and President of North American Operations Ted Darnall confidently laid out the company s road map to achieving the financial goals presented on the recent 4Q conference call and also described in more detail several of their initiatives and growth engines.
Lehman Brothers also commented that we were impressed by the degree to which the management team was confident and cohesive as never before.
The initiatives and growth engines discussed at the meeting, according to Lehman Brothers, include the Starwood Preferred Guest (SPG) program, which, though only over a year old, now accounts for 34% of system revenue, up from 17%, according to Starwood.
Six Sigma was another initiative discussed, said Lehman Brothers, which Starwood described as a process improvement program that will ensure that underperforming properties are fixed and best practices are transferred across properties and brands. In discussing Six Sigma, Lehman Brothers said it was an important initiative for Starwood, comparing it to Marriott s dedication to operational excellence.
STARS (Starwood Technology and Revenue Systems) was the third initiative discussed. The program, according to Lehman Brothers, brings together under one umbrella Starwood s Internet marketing, group sales, revenue management programs, loyalty programs and its customer relationship management (CRM) efforts.
Starwood, according to Lehman Brothers, also plans to announce a partnership with Cisco which it believes may provide in-room Internet access and other technology to Starwood properties.
Another positive the equity research firm cited for Starwood was the fact that the hotel company forecast supply growth of less than 2% in six of its eight top markets over the next 24 months.
Separately, Starwood said at the meeting that it plans to grow its Starwood Vacation Ownership program at double-digit rates for the next several years. (3/1/01)