Strategic Hotels and Resorts Inc
Strategic Hotels and Resorts — Investor Presentation (November 2014)
50 slides from Strategic Hotels and Resorts's investor presentation, Nov 5, 2014
Slide 1: Investor Presentation November 2014
Investor Presentation November 2014 Exhibit 99.1
Slide 2: Forward-looking statements
Except for historical information, the matters discussed in this presentation are forward-looking statements subject to certain risks and uncertainties. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends, and similar exp
Slide 3: Strategic Hotels: An Overview
I. Strategic Hotels: An Overview II. Financial Overview III. Strategic Plan IV. Industry Update & Operating Trends V. Appendix I. Case Studies II. Corporate Governance Strategic Hotels: An Overview 2
Slide 4: BEE's Strategy to Drive Shareholder Value
3 BEE’s Strategy to Drive Shareholder Value Disciplined capital allocation & external growth strategy Enhance and expand our high-end, unique, and irreplaceable hotel portfolio Proactive and conservative balance sheet management Industry leading asset management platform BEE’s strategy has delivered
Slide 5: BEE's Consistent Outperformance
4 BEE’s Consistent Outperformance Source: SNL Financial as of 10/31/14 (1) Includes DRH, LHO, PEB, SHO, and HST BEE has outperformed its peers in 1 year, 2 year and 3 year Total Shareholder Return 75 100 125 150 175 200 225 250 2011 2012 2013 2014 BEE Peers SNL Hotel REITs RMS 164.3% 108.5% BEE Peer
Slide 6: Financial Overview
I. Strategic Hotels: An Overview II. Financial Overview III. Strategic Plan IV. Industry Update & Operating Trends V. Appendix I. Case Studies II. Corporate Governance Financial Overview
Slide 7: 3rd Quarter Results
3rd Quarter Results (EBITDA in millions) 6 Strong third quarter results 3Q 2013 3Q 2014 Operations (Total United States Portfolio) ADR $297 6.0% $315 RevPAR $237 6.4% $252 Total RevPAR $407 7.0% $435 EBITDA Margins 26.4% 60 bps 27.0% Corporate Results Comparable EBITDA $60.1 25.1% $75.2 Comparable F
Slide 8: Year-To-Date Results
Year-To-Date Results (EBITDA in millions) 7 Strong YTD results Q1-Q3 2013 Q1-Q3 2014 Operations (Total United States Portfolio) ADR $284 5.4% $299 RevPAR $215 6.0% $228 Total RevPAR $392 7.7% $423 EBITDA Margins 23.9% 140 bps 25.3% Corporate Results Comparable EBITDA $154.8 19.6% $185.3 Comparable F
Slide 9: 2014 Guidance
(1) Excludes payments under the JW Marriott Essex House guarantee. 2014 Guidance (EBITDA in millions) 8 Strong results expected to continue (1) (1) 2013 Actual 2014 Guidance Operations (Total United States Portfolio) RevPAR $213 5.5%-7% $224-$228 Total RevPAR $392 6%-7% $416-$420 EBITDA Margins 23.5
Slide 10: Strategic Plan
I. Strategic Hotels: An Overview II. Financial Overview III. Strategic Plan IV. Industry Update & Operating Trends V. Appendix I. Case Studies II. Corporate Governance Strategic Plan
Slide 11: BEE's Strategy to Drive Shareholder Value
10 BEE’s Strategy to Drive Shareholder Value Disciplined capital allocation & external growth strategy Enhance and expand our high-end, unique, and irreplaceable hotel portfolio Proactive and conservative balance sheet management Industry leading asset management platform
Slide 12: High-End, Unique & Irreplaceable Portfolio
o Unique portfolio of luxury and upper upscale hotels in public markets o Locations in high-barrier-to-entry urban and resort markets with limited supply growth o Complex hotels with multiple revenue streams managed as mixed-use assets o World-class amenities managed by world-class operators High-En
Slide 13: Exceptional Portfolio of Urban and Resort Destinations
JW Marriott Essex House InterContinental Chicago Westin St. Francis Exceptional Portfolio of Urban and Resort Destinations 12 Ritz-Carlton Laguna Niguel Hotel del Coronado Four Seasons Washington, D.C.
Slide 14: Top-Tier Market Exposure
Top-Tier Market Exposure 13 Northern California Westin St. Francis Ritz-Carlton Half Moon Bay Four Seasons Silicon Valley Southern California Loews Santa Monica Ritz-Carlton Laguna Niguel Hyatt Regency La Jolla Hotel del Coronado Chicago InterContinental Chicago Fairmont Chicago Marriott Lincolnshir
Slide 15: Limited Competitive Supply Growth in BEE Markets
-6% -4% -2% 0% 2% 4% 6% 8% 10% 12% 198 9 199 1 199 3 199 5 199 7 199 9 200 1 200 3 200 5 200 7 200 9 201 1 201 3 o Approximately 2% competitive supply in current pipeline in BEE markets o High-end hotels trading at significant discounts to replacement costs further reducing supply risk o Limited cap
Slide 16: BEE's Strategy to Drive Shareholder Value
15 BEE’s Strategy to Drive Shareholder Value Disciplined capital allocation & external growth strategy Enhance and expand our high-end, unique, and irreplaceable hotel portfolio Proactive and conservative balance sheet management Industry leading asset management platform
Slide 17: Industry Leading Asset Management Platform
114.5x 112.8x 111.1x 114.4x 116.2x 116.0x 117.7x 116.9x 100x 104x 108x 112x 116x 120x 2007 2008 2009 2010 2011 2012 2013 TTM $92 $40 $60 $80 $100 BEE LHO PEB SHO HST DRH +44% Avg: $64 o Intense focus on operational excellence o Revenue management systems focused on driving ADR o Expense controls inc
Slide 18: BEE's Operating Metrics Lead the Sector
210 0 50 100 150 200 250 BEE HST PEB LHO DRH SHO Avg: 72 +138 $180 $40 $80 $120 $160 $200 BEE PEB HST LHO DRH SHO Avg: $72 +151% $213 $125 $150 $175 $200 $225 BEE PEB LHO HST SHO DRH Avg: $158 +35% $284 2 $180 $240 $300 BEE PEB LHO HST SHO DRH Avg: $202 +41% ADR RevPAR EBITDA Margin Expansion (bps)(
Slide 19: Significant Outperformance Throughout the Recovery
7.9% 4.0% 6.0% 8.0% BEE PEB HST DRH SHO LHO Avg: 5.6% +2.3 pts 8.6% 2.0% 4.0% 6.0% 8.0% 10.0% BEE PEB DRH HST SHO LHO Avg: 5.5% +3.1 pts 18 Significant Outperformance Throughout the Recovery Source: Company filings Note: Based on the average reported same-store RevPAR growth from each year, however
Slide 20: 2014 Group Booking Outlook
o Group pace remains the most reliable forward looking indicator Year-Over-Year Group Pace(1) Group room nights 8% below peak (1) Graph excludes the JW Marriott Essex House 2014 Group Booking Outlook 19 Room Nights on the books for 2014 +6.2%; ADR +3.6% 0 200,000 400,000 600,000 800,000 1,000,000 20
Slide 21: BEE Revenue Mix Compared to Peers
o Total RevPAR is key top-line performance metric o Focus on maximizing RevPAR, non-rooms revenue and EBITDA per room o Assets operated as complex, mixed-use properties with significant ancillary revenue BEE Total Revenue Mix Peers Total Revenue Mix Note: Metrics reflect full-year 2013 Peers include
Slide 22: BEE Luxury Assets Outperform Industry
BEE Luxury Assets Outperform Industry 21 (1) Includes 11 hotels: FC, FSP, FSDC, FSJH, FSSV, HdC, IC, IM, LSM, RCHMB, RCLN (2) Per Smith Travel Research 2013 HOST Report 250 basis point margin outperformance on same RevPAR 2013 BEE (1) Luxury Average (2) Variance Average Number of Rooms 461 301 160 O
Slide 23: Continually Elevating the Guest Experience
22 Continually Elevating the Guest Experience Luxury Rooms Meeting / Banquet Premium Dining Retail Outlets Fitness / Spas Bars / Lounges o Properties designed to be vibrant environments with multiple guest offerings and sources of revenue o Destination hotels/resorts with repeat customers o Diverse
Slide 24: World-Class Hotels Operated by World-Class Brands
World-Class Hotels Operated by World-Class Brands 23 11 hotels in Conde Nast Top 100 Hotels in the World 22 AAA Five Diamond Awards 31 hotels on Conde Nast Traveler Gold List 16 hotels in Robb Reports’ Top 100 35 hotels in U.S. News & World Report’s Best Hotel Rankings 28 AAA Five Diamond Properties
Slide 25: BEE's Strategy to Drive Shareholder Value
24 BEE’s Strategy to Drive Shareholder Value Disciplined capital allocation & external growth strategy Enhance and expand our high-end, unique, and irreplaceable hotel portfolio Proactive and conservative balance sheet management Industry leading asset management platform
Slide 26: Balance Sheet Today and Objectives
$163.0 Undrawn $137.0 Outstanding $94.8 $120.0 $120.0 $350.5 $117.0 $475.0 $143.5 115.0 $300.0 Undraw n $0.0 $200.0 $400.0 $600.0 $800.0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Bank Life Co. CMBS Corporate $445.3 $263.5 Objectives o Net Debt / EBITDA: 3x – 5x o Net Debt + Preferred /
Slide 27: BEE's Strategy to Drive Shareholder Value
26 BEE’s Strategy to Drive Shareholder Value Disciplined capital allocation & external growth strategy Enhance and expand our high-end, unique, and irreplaceable hotel portfolio Proactive and conservative balance sheet management Industry leading asset management platform
Slide 28: Disciplined Capital Allocation
o Recycled capital through well-timed asset sales at attractive valuations o Demonstrated track record of value creation through opportunistic acquisitions o Continued assessment and execution of ROI enhancing capital projects o Recent purchase of partners’ interest at the Fairmont Scottsdale Prince
Slide 29: External Growth Strategy
External Growth Strategy 28 Deliver return on investment that exceeds cost of capital Luxury and Upper- Upscale hotels Gateway cities and resort destinations Complex assets with multiple revenue streams Discount to replacement cost Operational upside o Ongoing evaluation of external growth opportuni
Slide 30: Industry Update & Operating Trends
I. Strategic Hotels: An Overview II. Financial Overview III. Strategic Plan IV. Industry Update & Operating Trends V. Appendix I. Case Studies II. Corporate Governance Industry Update & Operating Trends
Slide 31: Favorable Luxury Lodging Supply & Demand Dynamics
-15% -10% -5% % 5% 10% 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 o Supply growth remains historically low and lack of active development pipeline o Limited competitive supply growth in BEE markets o No meaningful supply additions for the foreseeable future o Lodging demand his
Slide 32: Luxury Hotels Outperform in a Recovery
-25% -20% -15% -10% -5% 0% 5% 10% 15% 198 8 199 0 199 2 199 4 199 6 199 8 200 0 200 2 200 4 200 6 200 8 201 0 201 2 201 4E Total U.S. Upper Upscale Luxury Source: Smith Travel Research and PWC Annual % Change in RevPAR o Luxury hotel RevPAR growth outperforms in a recovery o 1992 – 2000: 9 consecuti
Slide 33: BEE's Strategy to Drive Shareholder Value
32 BEE’s Strategy to Drive Shareholder Value Disciplined capital allocation & external growth strategy Enhance and expand our high-end, unique, and irreplaceable hotel portfolio Proactive and conservative balance sheet management Industry leading asset management platform BEE’s strategy has delivere
Slide 34: Case Studies
I. Strategic Hotels: An Overview II. Financial Overview III. Strategic Plan IV. Industry Update & Operating Trends V. Appendix I. Case Studies II. Corporate Governance Case Studies
Slide 35: Case Study: JW Marriott New York Essex House
Case Study: JW Marriott New York Essex House Objective o Partner with Marriott to reintroduce an iconic Central Park hotel o Restructure hotel operations to improve profitability Initiatives o Launch only JW Marriott in New York o Complete product improvement plan (“PIP”) o Reconfigure room sales st
Slide 36: Case Study: Four Seasons Jackson Hole & Silicon Valley
$70.8 $51.8 $54.7 $59.7 $67.2 $76.5 $80.2 $9.5 $3.3 $6.4 $8.5 $12.7 $16.6 $18.2 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $80.0 $90.0 2008 2009 2010 2011 2012 2013 2014 TTM Total Revenue EBITDA EBITDA Margin Case Study: Four Seasons Jackson Hole & Silicon Valle
Slide 37: Case Study: New Ballroom at the Fairmont Scottsdale
0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 2007 2008 2009 2010 2011 2012 2013 2014 Fcst Case Study: New Ballroom at the Fairmont Scottsdale 36 Objective o Address change in group demand patterns and increase in competitive set meeting space supply o Exceed previous peak group room night d
Slide 38: Case Study: InterContinental Miami
1.02x 1.04x 1.06x 1.08x 1.10x 1.12x 1.14x 1.16x 1.18x 1.20x 0.00 20.00 40.00 60.00 80.00 100.00 120.00 140.00 160.00 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 TTM 2014 IM RevPAR Comp Set RevPAR Penetration Case Study: InterContinental Miami 37 Objective o Gain market share through product repositioning o C
Slide 39: Case Study: Four Seasons Washington, D.C.
2006 Budget 2014 TTM Variance Occupancy 72% 72% 0% ADR $464.41 $572.98 23% RevPAR 335.39 412.50 23% Total Revenue $46,087 $69,300 50% Rooms Profit Margin 74% 76% 2% F&B Profit Margin 13% 25% 12% GOP $10,704 $21,268 99% GOP Margin 23% 32% 9% EBITDA $7,404 $16,049 117% EBITDA Margin 16% 24% 8% Case St
Slide 40: Corporate Governance
I. Strategic Hotels: An Overview II. Financial Overview III. Strategic Plan IV. Industry Update & Operating Trends V. Appendix I. Case Studies II. Corporate Governance Corporate Governance
Slide 41: Corporate Governance Initiatives
o The Company’s board and management team have significant depth and breadth of expertise in the hotel and REIT industries o Eight of the Company’s nine board members are independent o All directors elected annually, and committees only comprised of independent members o Recently enhanced board and
Slide 42: BEE's Strong Leadership Team
41 BEE’s Strong Leadership Team Prior Experience Management Years with BEE Former President of the Global Development Group for Starwood Hotels and Resorts Former Director, Chairman and CEO of Starwood Vacation Ownership and served as Chairman and Co-CEO of Vistana, a company he sold to Starwood
Slide 43: BEE's Highly Qualified & Independent Board of Directors
42 BEE’s Highly Qualified & Independent Board of Directors Experience Chairman and CEO of Strategic Hotels & Resorts Former President of the Global Development Group for Starwood Hotels and Resorts Former Director, Chairman and CEO of Starwood Vacation Ownership and served as Chairman and Co-C
Slide 44: Non-GAAP to GAAP Reconciliations: Net Debt / EBITDA
Non-GAAP to GAAP Reconciliations 43 Reconciliation of Net Debt / EBITDA ($ in 000s) 3Q 2014 Consolidated debt $1,667.9 Pro rata share of consolidated debt (132.6) Preferred stock redemption liability 0.0 Cash and cash equivalents (236.2) Net Debt $1,299 Comparable EBITDA $257.8 Net Debt / EBITDA 5.0
Slide 45: Non-GAAP to GAAP Reconciliations: Net Debt + Preferred / EBITDA
Non-GAAP to GAAP Reconciliations 44 Reconciliation of Net Debt + Preferred Equity / EBITDA ($ in 000s) 3Q 2014 Consolidated Debt $1,667.9 Pro rata share of consolidated debt (132.6) Preferred Equity 90.4 Preferred stock redemption liability 0.0 Cash and cash equivalents (236.2) Net Debt + Preferreds
Slide 46: Non-GAAP to GAAP Reconciliations: Net Debt / TEV
Non-GAAP to GAAP Reconciliations 45 Reconciliation of Net Debt / TEV & Net Debt + Preferred Equity / TEV ($ in 000s) 3Q 2014 Consolidated Debt $1,667.9 Pro rata share of consolidated debt (132.6) Preferred stock redemption liability 0.0 Cash and cash equivalents (a) (236.2) Net Debt $1,299.1 Preferr
Slide 47: Non-GAAP to GAAP Reconciliations
Non-GAAP to GAAP Reconciliations 46
Slide 48: Non-GAAP to GAAP Reconciliations
Non-GAAP to GAAP Reconciliations 47
Slide 49: Non-GAAP to GAAP Reconciliations
Non-GAAP to GAAP Reconciliations 48
Slide 50: Non-GAAP to GAAP Reconciliations
Non-GAAP to GAAP Reconciliations 49 Update when Guidance ranges available
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