Good morning, and welcome to Starwood Hotels & Resorts Fourth Quarter 2013 Earnings Conference Call. [Operator Instructions] I will now turn the call over to Mr. Stephen Pettibone, Vice President of Investor Relations. Sir, you may begin.

Thank you, Sylvia, and thanks to all of you for dialing in to Starwood's Fourth Quarter 2013 Earnings Call. Joining me today are Frits van Paasschen, our CEO and President; and Vasant Prabhu, our Vice Chairman and CFO. Before we begin, I'd like to remind you that our discussions during this conference call will include forward-looking statements. Actual results could differ materially from those indicated in the forward-looking statements, and forward-looking statements made today are effective only as of today. We undertake no obligation to publicly update or revise these statements. The factors that could cause actual results to differ are discussed in Starwood's annual report on Form 10-K and in our other SEC filings. You can find a reconciliation of the non-GAAP financial measures discussed in today's call on our website at www.starwoodhotels.com. With that, I'm pleased to turn the call over to Frits for his comments.

Thank you, Stephen, and welcome, everybody, to our fourth quarter call today. For my prepared remarks, I'm going to follow my usual format and cover 4 main topics: First, I'll spend several minutes on our 2013 performance and what it says about the state of our business; second, I'll share a few brief thoughts on returning capital to shareholders; and then I'll turn to our outlook for 2014; and then finally, I'll highlight some of the exciting ways that we're using digital technology to connect with our guests. So turning now to our performance in 2013. Let me start by reflecting on what we said on our Q4 call 1 year ago. We said then that despite the choppy global recovery, we were steadfastly focused on the long-term trend lines of rising wealth, massive urbanization and greater connectivity. Our caution about the short term explains our conservative stance on both cost and leverage, and our confidence about the long term explains our rapid global expansion and our investments in technology to meet guests' changing expectations. On our Q4 call last year, our baseline scenario called for 2013 REVPAR growth between 5% and 7%. As we described it, the low end of that range reflected a modest improvement on 2012; the high end envisioned 2013 that was a stronger version of 2012, with Europe averting a crisis, North America picking up steam and China rebounding. Looking back on the year, global GDP growth was actually slower than in 2012. In fact, GDP growth was slower than in the past 3 years. Our REVPAR was in line with this tepid environment, with worldwide growth of 4.9%, just below the low end of our baseline scenario. Here's how 2013 played out around the world: In Europe, full year REVPAR was up almost 2%,…

Thank you, Frits, and good morning to you all. At this time last year, we provided you our outlook for 2013. As with all forecasts, they're not particularly useful the day after you make them. This was true in 2013. The real world threw a few curve balls at us, but we were able to roll with the punches, as they say, and deliver on our commitments to you. Worldwide REVPAR growth in local currencies for 2013 came in at 4.9%, at the low end of our outlook range of 5% to 7%. Exchange rate proved to be a significant headwind versus what we had assumed in our outlook, dragging profits, as reported in dollars, down by as much as $17 million. We sold 6 hotels, which reduced our earnings in the year by another $8 million. And yet we delivered 2013 full year EBITDA x Bal Harbour of $1.144 billion, at the high end of our outlook range of $1.115 billion to $1.14 billion. The big positive surprise last year was the strength of the U.S. business, where our REVPAR grew 6.3%. The big negative surprise was market weakness in China. However, we were able to grow REVPAR by 2.2% in China by outperforming the market by as much as 600 basis points. Europe surprised by not falling apart, as many were predicting early last year. Growth accelerated through the year, approaching 4% in Q4. Asia had robust 7% REVPAR growth in local currencies. But a sharp and abrupt weakening mid-year in the yen, the Aussie dollar, rupee and the rupiah caused dollar REVPAR to actually decline 1%. In Latin America, Argentina went from bad to worse, Brazil slowed markedly, but Mexico recovered strongly, growing REVPAR over 8%. In Africa and the Middle East, Egypt was back in turmoil,…

Thank you, Vasant. We'd now like to open up the call to your questions. [Operator Instructions] Sylvia, can we have the first question, please?

Your first question comes from Felicia Hendrix from Barclays.

Vasant, just want to kind of -- my question is on the point that you just ended with, and that is deploying your capital. And I'd like to talk about buying back stock for a moment. I think you've been pretty clear in the past about the analysis that you all do internally regarding buybacks and you have your own intrinsic value formulas. You haven't -- you didn't -- well, you bought back stock in the quarter. But since you last reported, you didn't buy back a lot of stock. And given everything that you've laid out and given the growth that you've talked about and all the great things that are going on for the company, we would assume that your stock price would continue to rise. So can you just talk to us a bit about how you are valuing -- how you are evaluating that intrinsic value calculation and how we all should think about your appetite for buying back stock in the future?

Yes. This is -- as we've told you before, Felicia, this is a regular conversation we have among ourselves here, as well as with our board, and we will have it again next quarter. As you would expect, we go about assessing intrinsic value, which is as much art as science in the ways you might. We look at all angles, peer multiples, discounted cash flows, all the various approaches that you might take. It is a range. We discuss it regularly, and we make some judgments on what our intrinsic value is. And our approach has been that we are buyers of our stock, we feel that it is below intrinsic value. Just a few things I might point out because, I guess, you're asking the question on the basis that there were no buybacks in the last quarter. First of all, one quarter doesn't tell you much about what we might do. The second thing to note is we did pay a dividend in the last quarter of $1.35. As Frits said, that's $260 million that actually went back to shareholders in the last quarter. The third point, I think is we can understand some concern if our stock was underperforming and we were not deploying the capacity we have, perhaps, to buy back stock. That, as you know, has not been the case. We had total shareholder return of 41% last year, and we're well ahead of S&P and our peers for the last 10 years. We could also perhaps understand if there was some concern that we were overpaying for acquisitions. We never have and certainly do not plan to. The other thing I would point out is despite having the cash in the balance sheet that we have, we're actually reducing our capital spending on our own hotels as we finish our renovations. And in fact, you've seen us sell hotels. And now, we're terminating a lease early, where on accessible terms, we have owners who are willing to take on the renovation. So the point of all this is essentially to say that despite the cash we have, we remain disciplined allocators of capital and we have a track record of returning significant cash back to you. And buybacks, as you know, are not the only avenue. We have dividends, special dividends, and we've used all avenues. So we do, as Frits said, have plenty of dry powder, and we will use it as we've done in the past to really focus on driving shareholder value.

Your next question comes from Harry Curtis from Nomura.

Did your lawyers keep you from buying any stock back in the quarter? It just strikes me as strange that you acknowledge that your intrinsic value is above where the stock is today and you've got an extremely under-levered balance sheet. Over next couple of years, you're going to generate $5 billion of operating cash, plus just levering up to, say, 2x. What's keeping you from doing it?

Well, I mean, 2 things: One, we're talking about 1 quarter here. That doesn't tell you much about what we might do. And in the last quarter, as you know, we had bought back quite a bit of stock. And if you look at our track record, there's no evidence that we don't return cash back to shareholders. So I don't think one should overreact to what happens in one quarter, number one. Number two, I guess having once said we weren't able to buy stock in the quarter because we were constrained by other considerations, we have to forever answer that question. Having answered that once before, I guess, we should say, no, we were not constrained in terms of buying back stock. And I'm not sure you should read too much into what precisely our intrinsic value considerations are and so on. As we said earlier, I mean, we have multiple avenues to return stock -- cash back to you. In the fourth quarter, we did return $260 million back in the form of a dividend. We have done special dividends, we have done buybacks, so we look at all angles.

Your next question comes from Joe Greff from JPMorgan. Joseph Greff - JP Morgan Chase & Co, Research Division: I'll refrain from asking a capital allocation buyback question because I don't know if you're going to see anything incremental from this point forward. But it's on top of mind from everybody. And obviously, it's weighing on the stock price today, and you guys know that.

Yes. Joe, I just want to make it very clear that we -- Frits and I and our board fully understand that the pace of asset sales and the pace of cash return is a significant priority for our investors. We know that. So you should be quite sure that the message is clear and has been heard, and not just because you just delivered in the first 2 questions. We know that.

Right. So that was the non-answer to the non-question, Joe. What was your actual question? Joseph Greff - JP Morgan Chase & Co, Research Division: Yes. No, my question is this: within your 2014 owned hotel margin improvement guidance, what's -- if you were to break that out between U.S. and non-U.S., how would you explain that margin improvement between those 2 broad geographies?

Yes. Actually, we might get a little bit better performance in some of our European hotels and we will be held back by what's happening in Argentina. So Mexico should help, the U.S. will be okay and Europe should be better.

Your next question comes from Robin Farley from UBS.

I know you mentioned -- you reiterated the $3 billion in asset sales by 2016. And I think you first started talking about that dollar amount and time frame in early 2013, which would be a pace of something like $750 million a year of asset sales. So I wonder if you could just comment on whether -- have you always expected it to be more weighted towards 2015 and 2016? Or in other words, how do you feel about the pace of those asset sales versus that target?

Yes. Robin, this is Frits. And when we made the statement at our Investor Meeting in Dubai last year, we fully expected that you and others would look at the 4 years and the $3 billion and do exactly what you've done, which is try to decide whether we're on pace each year at $750 million per year. The reality is that we have said and will continue to say that first of all, our pace of sales is very much dependent on appetite and demand among the hotel ownership community and transaction volumes. And in that area, we've seen some pickup in demand. Our assessment when we made this statement looking out to 2016 is yes, that, in fact, the market would continue to improve over that time period; and therefore, it's more likely that there would be more sales as we got through to the 3 years than -- or the 4 years laying it out since last year than where we began. The second piece is, and I think that people need to appreciate this for its importance as well, we are, as a management team and as a business, committed to the fee part of our operations. And as such, it's very important for us, particularly when we sell iconic hotels that we want to have part of our system, that we sell them to partners that we want to work with over the long term. So the key for us is to have a robust slate of buyers we want to work with in a transaction environment that would enable us to sell. So we're continuing to focus on our goal of getting to 80% fee-driven, which, as you'll recall, was the basis under which we had made the projection or -- if that's the right word, the estimate for the $3 billion in sales. We're still very much committed to that track. This is, I think, a classic example of the motion you see is only the transactions that are completed. What you don't see are the active discussions that take place every day as we look at opportunities and alternatives. So long way of saying, recognize the pace question. It doesn't concern us, the direction and the strategy hasn't changed, and we are looking forward to the transaction environment making it more attractive as we look ahead.

Your next question comes from Thomas Allen from Morgan Stanley.

Two questions on asset sales, just following up. So the first question, can you talk about how receptive buyers are for purchasing assets in the various regions you have hotels? And then any comments around cap rates? And then the second question is, a lot of the large deals that have been done recently have been with sovereign wealth funds, what's the appetite from other typical buyers?

We actually think that the markets are becoming deeper, and there are more buyers now seeking to deploy larger amounts of money. Our sense, as we told you earlier, was it used to be the public REITs in the U.S. who came in for one hotel at a time, issued stock, et cetera. We now think that there are people who are willing to do portfolio sales. We think private equity is back, had not been in the market before. Certainly the sovereigns are back. So we're optimistic that -- as I think I said in my comments, that this is prime time for asset sales, and we intend to fully take advantage of it. You might recall that in 2006, we probably sold $6 billion worth of hotels. If this is something like that, then you should expect us to not wait until 2016 to get our $3 billion done but do it sooner; as always, contingent on market conditions, prices and all that. Cap rates-wise, it's purely a function of what hotel you're selling. I mean, we've seen sub-5% cap rates on some of our better hotels, and 6% to 7% on some of the more suburban and airport hotels. In terms of region, we feel pretty good about -- we feel very good about the U.S. We think there's interest in Mexico. We certainly think Brazil is -- this could be a good time, given the World Cup and the Olympics. Argentina is going to be hard. We think there's definitely a market for our hotel in Sydney. And then because of the nature of our hotels in Europe, because the hotels we have in Europe are largely trophies, that's a global market and it's not a Europe-specific market. So we feel pretty good about most of the regions.

Yes. Thomas, this is Frits. I would just add a couple of things to reinforce Vasant's point. The first is we do see the buyer market around the world getting deeper. And what that really means is that increasingly, we see regional buyers interested in hotels in the regions where they reside or where they tend to be more active. The second is that, and we've said this for quite some time now with respect to our North American business, the supply demand environment for hotels here and the fact we had 3 straight quarters of record occupancies, would tell you that the fundamentals of operating hotels have been pretty favorable and look to be set that way for a while. So I agree with Vasant. We certainly don't wait until the 11th hour. On the other hand, being patient in selling assets up until now, I think, has worked in the interest of shareholders, not the other way around.

Your next question comes from Josh Attie from Citigroup.

In the prepared remarks, you mentioned the possibility of special dividends. Can you elaborate on that? How seriously is that being considered? Why might you prefer or not prefer that versus the alternative? And are there any tax reasons why that might make sense?

We've done special dividends before. We did as much as, if I remember right, $3 billion in special dividends, which mean whole stock and a special dividend in '06. I don't think the logic we would give you would be any different than what you would see elsewhere. They make sense under certain circumstances. We are open to them. We've done them before. Certainly, when there are sources of cash that are event-like, it's an opportunity to do it. It's certainly an avenue to get cash back to shareholders in a more reliable way at times. So we consider it as much of an avenue to return cash, as we consider buybacks and our regular dividend.

Your next question comes from Steven Kent from Goldman Sachs.

Can you just tell me how many shares or how much shares you bought back quarter to date? And then also, REVPAR for Sheraton and Méridien were both weak this quarter, under 4% at least. I'm looking at them on the constant dollars. Is that turnaround starting to fade on those 2 brands?

Yes. Méridien and Sheraton, remember, when you look at brands, their performance is very much a function of their global footprint. So if you look at Méridien, it is very big in the Middle East. And because of what's happening in Egypt and Saudi -- in fact, Saudi is a huge piece of the business for Méridien. I think almost 10% of the brand's fees come from Saudi, and there's a visa restriction. So you have these peculiarities that don't tell you much about how the brand itself is doing. We feel very good about what's happened to the Méridien brand over the years. Similarly for Sheraton, as you know, Sheraton has a significant footprint in China, which is among the weaker markets last year. And then Sheraton also has a very big footprint in places like Europe. Sheraton, in fact, is 50-50 U.S.-non-U.S. So it is more dependent on what's going on in other parts of the world. So again, I don't think you can read too much into a global REVPAR performance of a brand.

Your next question is from Smedes Rose from Evercore.

I just wanted to ask you a little more about what you're seeing on the group side. You mentioned some incentive business coming back. And are you continuing to see some reluctance from kind of larger groups, but improvement in kind of what we might just call higher-end corporate group business? Or can you -- and maybe -- I'm not sure if you gave any pace numbers for the year, but if you could repeat them, if you have any.

Well, pace for 2014 is pace in the mid-single digits. I think that we are starting to see the return of incentive travel especially in locations in Europe. So that's a good sign of increasing corporate confidence. I think that the trends that we were seeing through most of last year are continuing in. I mean, the nature of group is a little bit different than it used to be. It's higher volumes of smaller meetings, and we don't see a lot of that changing. We had seen some pretty good production into the out years. So I think that the trends are all going in the right direction.

Your next question is from Ian Weissman from ISI Group.

Yes, most of my questions have been asked and answered. But just a quick question on China. Just given the crackdown on government business and luxury, has it caused you to shift your strategy going forward going a little bit more downscale?

Yes. Ian, this is Frits. So there hasn't been a crackdown on luxury as such. There's certainly been a focus by the government on austerity for conspicuous activity at hotels and other locations for government officials. The reality is that the luxury business in China overall and demand among business transient travelers into China and then leisure travelers continues to be very strong. So as Vasant pointed out in his remarks, if you look at the volume of guests coming into Macau, if you look at the flow of guests to Hainan island, which is a place where we have a significant luxury and resort presence, I think what you'd conclude is that while government demand for the high end in conspicuous consumption has certainly been curtailed, the organic growth in consumer and business demand, we believe, is well positioned to offset that. So no, our focus is still on the portfolio of the 9 brands that we have in China. We've seen growth and demand for each of those in different places and in different kinds of markets.

The next question is from Patrick Scholes from SunTrust.

Where do you stand with your hedging strategy and exposure right now? And what is the latest sensitivity for your earnings as it relates to fluctuations in interest rates? I know you used to, couple years ago, give that out.

You meant interest rates or exchange rates? I guess, exchange rates.

Exchange rates, yes.

Yes, look, we have a very diversified portfolio in terms of currency exposures. And we don't view sort of speculating on currencies as something we should do. Having said that, we have, as you know, for the past few years hedged about half our exposure to our -- half our euro exposure. And less to make a directional bet on the euro, but more to go to a fixed and variable kind of approach to the euro and reduce some of the volatility. And we've done it again. We've hedged about half our exposure of our profits to the euro at about 1.36, if I remember right. And other than that, there's not a hedging we're doing. And our -- so the plus or minus 1% move of the dollar uniformly against other currencies is still about $5 million.

1.36 is the hedge. That's right.

1.36 is the hedge, yes.

Your next question is from Bill Crow from Raymond James. William A. Crow - Raymond James & Associates, Inc., Research Division: Real quick. Point A is you've talked about the buyer group widening, broadening out. Is there more interest in portfolio deals than there has been previously? Number two, what do you think the value of owned assets will be post the $3 billion of sales? I think that you did not throw every asset into the mix at the time you announced that, maybe I'm wrong, maybe you go to 0, but if you could answer that. And then finally, what sort of proceeds do you expect from the lease transaction you talked about hurting EBITDA? And then the timeshare note sales, how much cash do you anticipate, have you built into the model from that?

All right. I'll start. And Bill, I probably won't get to every one of your questions. And therefore, I'm sure Vasant will come in behind me. In terms of your first question related to demand for portfolio sales, seeing as how we really haven't undertaken a portfolio sale of significance for some time. We've had a few multiple property sales, but largely focused around a single asset or a combination of assets. I think any future portfolio sale would, therefore, mark a significant uptick in that demand. And I think the best thing for us to say at this point is we're certainly testing the market for portfolio sales, but it would mark the first time in quite some time for us, if we were to undertake one of great significance. The second part of your question related to what the value of our owned assets would be as we look ahead. And remember, and I mentioned this a bit earlier in an answer to a question on this call, our focus has been to get to a business that is at least 80% driven in terms of its earnings by our fee business. And our logic for doing that is because we believe that the fee business, as we've outlined before, has extraordinary characteristics in terms of its potential for long-term growth and its ability to generate cash while it's doing that. The reason we haven't said 100%, Bill, is that we will have leased hotels, which technically don't fit in the category of fees. We have a vacation ownership business today. And we also believe that we don't want to completely preclude our ability, if necessary, on a relatively small scale, to undertake any transactions where we end up owning a hotel as a part of what we're…

Yes. I think the timeshare, we'll look to do a securitization later this year. And because we didn't do one last year, it could be roughly in the range of $250 million in cash from a timeshare securitization. And in terms of the lease itself, once the deal is done, we'll give you some more details. It's an important hotel. It allows us to lock in a key location for a very long time. We'll get some consideration in cash, but the rest will be avoidance of a capital spend that we were planning this year, anyway.

Your final question comes from Ian Rennardson from Jefferies.

Depreciation and amortization, you're guiding to about $310 million, which is $40-something million above where it was in 2013. What's the cause of that, please?

I don't think it was that much. It was less than that.

The D&A that we guided to includes the proportion of the JVs. So it's going to be higher than what you're seeing on our balance sheet, if that's what you're referring to. It is going to be a little bit higher because it's going to reflect the investments we've been making both on the renovations we've been doing and some of the technology. So...

I think if you normalize it, it's up probably 5% or 6%, if I remember right. But it is the investments that we made in our owned hotels that are now renovated and opened. So you start depreciating the new capital that went in, and it's the investments in our technology infrastructure. But it is not such a big increase once you normalize it and do apples-to-apples. Some of your questions, I'm sure Stephen can do that.

Yes. Ian, if you have any questions, feel free to reach out. So thanks, Frits and Vasant. I want to thank all of you for joining us today for our fourth quarter earnings call. We appreciate your interest in Starwood Hotels & Resorts. If you have any other questions, feel free to reach out to us. Thanks for joining us.

Ladies and gentlemen, this concludes today's Starwood Hotels & Resorts Fourth Quarter 2013 Earnings Conference Call. You may now disconnect.