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FINC 5310: Financial Statement Analysis - Hotel Industry

Presention of Marriott, Starwood, & InterContinental Hotels Financials (2009-2013); Lamar University, Beaumont, TX

Johnny Simpson Jr.

on 16 February 2016

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Transcript of FINC 5310: Financial Statement Analysis - Hotel Industry

Financial Analysis
Nancy Alvarez
Joshua Hollis
Markesha Melancon
Johnny Simpson

Founded - Washington, DC, 1927
IPO - 1995 ($9.00)
4,087 properties in 80 countries
199,929 Employees
Bill Marriott (Executive Chairman)
Arne Sorenson (President/CEO)
Marriott International, Inc.
Starwood Hotels and Resorts Worldwide, Inc.
InterContinental Hotels Group, PLC
Marriott Overview
Founded - Chicago, IL, 1991
IPO - 1994 ($11.02)
1,162 properties
181,400 Employees
Bruce W Duncan (Director)
Frits Van Paasschen (President/CEO)
Starwood Overview
Headquarters - Bethesda, MD
Headquarters - Stamford, CT
Founded - London, UK, 2003
IPO - 2003 ($8.49 / £543.10)
4,600 hotels in 100 countries
120,000 Employees
Patrick Cescau (Chairman)
Richard Solomons (President/CEO)
InterContinental Overview
Headquarters - Denham, Buckinghamshire, UK
Ratio Analysis
DuPont Analysis
"Revenue Per Available Room"
Room Revenue/Room Nights Available
RevPAR = Occ% x ADR
Balance Sheet Analysis
Orlando World Center Marriott
(Largest Marriott)
Ratio Analysis
Income Statement
Sheraton Macao Hotel
(Largest Starwood)
IC Chengdu Global Center
(Largest Intercontinental)
Ratio Analysis
J.W. Marriott Lima Hotel
RevPAR (2009-2011)
BETA 1.26
MAR Beta
Beta = 1.26
Higher Volatility than the market
26% more Volatile
Hospitality Industry
Hotels have the highest betas in property, or Real Estate sector.
They rely on daily room rentals for profit (RevPAR)
They suffer first in economic downturns
Recover quickly as market rebounds
1,000 Shares at Peak vs Low
- $11,626
- $ 9,520
-$ 6,470
Financial Statements suggest MAR or HOT due to ratios & higher RevPAR
Beta suggests IHG because it's less volitale
II. Risks
Risk Analysis
Marriott (MAR)
Starwood (HOT)
InterContinental (IHG)
Intercontiental Hotel, Boston
Beta Overview
Beta 1.63
HOT is 63% more volatile than industry
Highest volatility in our study
Beta (β) measures a stock's risk against the market.
β = 1
β > 1 Market has greater affect on a stock
β < 1 Market has lesser impact on a stock
S&P 500
Marriott Stanton South Beach
Miami, FL
Boscolo Exedra Roma
Rome, Italy
W Hotel
New Orleans, LA
HOT Beta
Sheraton Dubai Creek
Dubai, UAE
Crown Plaza Market Center
Dallas, TX
IHG Beta
Hotel Indigo Gas Lamp Quarter
San Diego, CA
Beta of 1.18
18% more volatile than the market
Lowest of the 3 companies due to international business base.
Market & Industry During Great Recession (2007-2009)
Oct 2007
Apr 2007
Jul 2007*
Jun 2007
Oct 2008
Nov 2008
Mar 2009*
Mar 2009

Rivercenter Marriott
San Antonio, TX
Who Has Least Risk?
Hypothetical Scenerio
In Feb 2015, Starwood's CEO resigned amid shareholder dissatification in growth.
IHG wants to explore buying the company to expand its influence in the industry
To keep simple, we base value off its
Market Capitalization
(Market Cap) - $14.52B
We also focus on Revenue + Operating Costs as main factors
We use Sensitivity Analysis, NPV, & Internal Rate of Return (IRR) to determine profitablity of this investment
Works Cited
"HOT Starwood Hotels & Resorts Worldwide Inc XNYS:HOT Stock Quote Price News." Morningstar – Independent Investment Research. N.p., n.d. Web. 6 Apr. 2015.

"HOT: Summary for Starwood Hotels & Resorts World." Yahoo! Finance. N.p., n.d. Web. 6 Apr. 2015.

"HOT." Value Line." N.p., Web. 6 Apr. 2015.
Sensitivity Analysis
NPV Analysis
Frits Van Paasschen, former CEO
Starwood Hotels & Resorts Worldwide, Inc.
Scenario Overview
Scenario A: Best Case
III. Projects
Scenario B: Least Profitable
Cash Flow Statement 2014-2019 (in billions)
Cash Flow Statement 2014-2019 (in billions)
Cash Flow Statement 2014-2019 (in billions)
IRR 5.47%
IRR 22.64%
IRR -29.70%
Westin Excelsisor Hotel
Rome, Italy
W Hotel
Taipai, Taiwan
Sheraton New York Tower
New York City, NY
Le Mérdien Hôtel
Oran, Algeria
St. Regis Doha
Doha, UAE
Based on the data IHG should not buy HOT
Buy Starwood at $13B
Positive return at Y4
IRR 22%

Best Case Scenario Overview
Current Ratio
Accounts Receivable Turnover
Managerial Finance,
Lamar University
Spring 2015

Purpose of Presentation
I. Ratios
Statement data from 2009-2013
Revenue Per Available Room (RevPAR)

II. Risks
Overview of Hospitality Industry
Beta Performance from 2002-2012

III. Projects
Hypothetical Merger using Sensitivity Model
NPV, IRR, Projected Cash Flows for 2014-2019
Compare Financial Details of Three Successful Hotels
Full transcript