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Wealth Management Research 1 March 2011
US Equities Consumer Discretionary
Starwood Hotels & Resorts
This is an extract from US Equities Consumer Discretionary: Monthly
- is oil the canary in the coal mine?, 28 Fenruary 2011. For a copy,
please ask your Financial Advisor.
Our underlying investment thesis for Starwood Hotels & Resorts
remains intact. RevPAR and average daily rate (ADR) continue
their recovery, particularly for HOT's core strengths of international,
domestic gateway business, city exposure and upper upscale and
luxury segment focus. Despite the strong performance of the stock
over the past year we do not believe investors fully appreciate
the powerful impact the first dollar incentive fees from HOT's
large international portfolio will have on profitability and free cash
flow. HOT has a strong balance sheet having reduced debt by
over USD 1 billion in 2009, recently amended and extended its
revolving credit facility to a 2013 maturity and has minimal debt
maturities in 2011. In addition, management has been very focused
on capital management as it seeks to reduce its portfolio of owned
hotels, increase its percentage of managed hotels, particularly in
the lucrative international market and significantly reducing its
investment in the timeshare business. Combining this with HOT's
strict focus on expense control and the lodging industry's dearth
of new construction, particularly in the luxury and upper upscale
segments provide HOT with a very attractive risk/reward profile. Given
the strength, in industry RevPAR performance and HOT's favorable
industry positioning, we raised our price target from USD 59 to USD
67.One issue that bears watching is the turmoil in the Middle East.
We estimate HOT derives approximately 1% of its revenue from
the region. It is too early to determine any discernible impacts on
HOT's business in the region. However we will closely monitor the
developments.
Jonathan Woloshin, CFA, analyst, UBS FS
jonathan.woloshin@ubs.com, +1 212 713 3635
High Conviction Call
Starwood Hotels & Resorts (HOT) Outperform
Starwood Hotels & Resorts operates a real estate investment trust. It makes
investments in luxury and upscale full-service hotels and resorts. It serves the needs
of upscale business and leisure travelers worldwide. The company is headquartered
in White Plains, NY.
Price (USD)
WMR
Target
Upside /
(Downside)
52 Week
High
52 Week
Low
61.55 67.00 9% 65.51 37.10
Key Metrics
Dividend
Yield (%)
Enterprise
Value ($M)
Total
Assets ($M)
Market
Value ($M)
0.49 14,254.5 8,797.0 11,827.8
Consensus Forecasts (Fiscal Year End) 12/2010 12/2011E 12/2012E
Sales ($M) 5,071.0 5,452.0 5,882.6
Net Income ($M) 237.5 321.1 442.7
First Call GAAP EPS ($) 1.25 1.69 2.33
Book Value per share ($) 13.34 14.46 18.55
P/E (x) 49.2 36.4 26.4
ROE (%) 11.0 13.0 15.7
Consensus Rating Distribution Buy Hold Sell
16 11 0
Price Target Rationale
Our price target is based on a 13.5x multiple of HOT's consensus 2012 EBITDA
estimates. Risks include a further weakening of the economy, a negative mix shift
away from business travelers and a reversal of the RevPar gains realized this past
year.
Source: UBS WMR and FactSet, as of 25 February 2011
Stock price performance
75
65
55
45
35
25
Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11
STARWOOD HOTELS S&P 500 CONS DISCRET IDX (S5COND) rebased
Source: Bloomberg, as of 28 February 2011
This report has been prepared by UBS Financial Services Inc. (UBS FS). Analyst certification and required disclosures
begin on page 3. UBS does and seeks to do business with companies covered in its research reports. As a result,
investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.
Investors should consider this report as only a single factor in making their investment decision.

US Equities Consumer Discretionary
Investment Thesis Summary - Consumer Services
UBS WMR Consumer Discretionary: Consumer Services - Sector Outperform List
Company Ticker Investment Thesis Summary
McDonald's MCD
Starbucks SBUX
Starwood Hotels & Resorts HOT
We became more constructive on MCD, now, given our further understanding of the in-store initiatives in Europe, commitment to unit
growth in emerging markets, and the near-term catalyst for better-than-expected 2011 same-store sales growth in the US.
Our bullishthesis depends on the remodeling the US stores, adding beverage innovation, incremental advertising spend, the
launch of Via and the Seattle's Best Coffee quick-service partnerships. These sales/operation initiatives lead us to believe
that estimates are too low for the following years. We believe there has been a mentality shift among management
towards focusing on profitable growth versus expanding outlets aggressively.
We believe HOT's well diversified international portfolio combined with a good mix of managed and owned hotels will allow
the company to leverage the current RevPAR cycle. In addition,we envision substantial cash-generative asset sales over time
as the portfolio further evolves toward a managed model.
UBS WMR Consumer Discretionary: Consumer Services - Sector Underperform List
Company Ticker Investment Thesis Summary
Brinker International EAT
EAT is going through a multi-year transition as the company is searching for its voice in a sea of bar and grill sameness. The recent
move to sell some brands is a step in the right direction. However, we worry that the main concepts may be share givers in a modest
economic recovery as the competition has gotten stronger.
UBS WMR Consumer Discretionary: Consumer Services - Sector Marketperform List
Company Ticker Investment Thesis Summary
Carnival CCL
Cheesecake Factory CAKE
Choice Hotels International CHH
Darden Restaurants DRI
Hyatt Hotels H
Marriott Intl MAR
Yum! Brands YUM
With the recovery in swing, valuation, in our opinion, valuation reflects a balanced risk versus reward profile given some important
inflection points occurred and some risks loom in the future. The inflection points include: improving operating profit per ALBD and
upward revisions EPS to what we believe are more realistic levels. The risk we see on the horizon is the threat of operating cost
inflation: food and fuel particularly.
We admire the CAKE brand and management's nimbleness during the recession. CAKE's brand and uniqueness provides consumers a
reason to dine-out versus its peers. CAKE is developing new growth avenues through sales layers and smaller unit sizes, which may
help to expend CAKE's growth outlook. We look to learn more about the profitability of the new sales initiatives and the sustainability
of the consumer recovery.
We believe CHH is a more defensive and late cycle play in the lodging sector. We see the shares a fairly valued given the current RevPAR
cycle.
Darden has one of the strongest suit of brands and management teams in the casual dining space. DRI's brands and positioning
continues to enable the company to steal market share. Neither the consumer backdrop nor DRI's valuation leave us with a compelling
story at this time.
We recognize the quality of H's portfolio, balance sheet and operating leverage given its high level of hotel ownership (vs. contract
management). However these positive attributes are offset by several factors that concern us. We see the shares as fairly valued.
We believe MAR is a more of a late cycle play in the lodging sector given its heavy domestic exposure. We see the shares a fairly valued
given the current international RevPAR cycle.
We believe YUM is one of the best-run companies in our space. However, many of our near-term catalysts have been realized, leaving
less room for missteps given current valuation (17.8x 2011E EPS). We still believe in the long-term unit growth outlook for YUM given
its head start in China and emerging markets.
Source: UBS WMR, as of 25 February 2011
Note: Companies in BOLD represent High Conviction Calls. See Appendix for definition.
Wealth Management Research 1 March 2011 2

US Equities Consumer Discretionary
Appendix
Analyst certification
Each research analyst primarily responsible for the content of this research report, in whole or in part, certifies that with
respect to each security or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his
or her personal views about those securities or issuers; and (2) no part of his or her compensation was, is, or will be, directly
or indirectly, related to the specific recommendations or views expressed by that research analyst in the research report.
Required Disclosures
For a complete set of required disclosures relating to the companies that are the subject of this report, please mail a
request to UBS Wealth Management Research Business Management, 1285 Avenue of the Americas, 13th Floor, Avenue
of the Americas, New York, NY 10019.
Stock recommendation system:
Analysts provide a relative rating, which is based on the stock’s total return potential against the total estimated return
of the appropriate sector benchmark over the next 12 months.
Industry sector relative stock view system
Outperform (OUT) Expected to outperform the sector benchmark over the next 12 months.
Marketperform (MKT) Expected to perform in line with the sector benchmark over the next 12 months.
Underperform (UND) Expected to underperform the sector benchmark over the next 12 months.
Under review
Upon special events that require further analysis, the stock rating may be flagged as “Under review” by the analyst.
Suspended
An outperform or underperform rating may be suspended when the stock's performance materially diverges from the
performance of its respective benchmark.
Restricted
Issuing of research on a company by WMR can be restricted due to legal, regulatory, contractual or best business practice
obligations which are normally caused by UBS Investment Bank’s involvement in an investment banking transaction in
regard to the concerned company.
Sector Relative Stock View
Outperform Expected to outperform the sector benchmark over the next 12 months.Marketperform Expected to perform
in line with the sector benchmark over the next 12 months.Underperform Expected to underperform the sector benchmark
over the next 12 months.
Sector bellwethers, or stocks that are of high importance or relevance to the sector, that are not placed on either the
outperform or underperform list (i.e., are not expected to either outperform or underperform the sector benchmark) will
be classified as marketperform. Additionally, when stocks that are not deemed to be of high importance or relevance
to the sector are not expected to outperform or underperform the sector benchmark, they will simply be removed from
the lists and will not be assigned a WMR rating.
High Conviction Calls
Sector analysts are required to have at least one "high conviction" outperform or underperform call for each sector they
cover. Analysts have discretion over the selection of a recommendation as high conviction and the grounds for selection
(e.g., greatest upside/downside to price target, most/least compelling investment case, etc.). The basis for each high
conviction call is set forth in any research report identifying a recommendation as such.
Terms and Abbreviations
Term / Abbreviation Description / Definition Term / Abbreviation Description / Definition
A actual i.e. 2010A ADR American depositary receipt
E expected i.e. 2011E p.a. Per annum (per year)
Shares o/s Shares outstanding WMR UBS Wealth Management Research
Wealth Management Research 1 March 2011 3

US Equities Consumer Discretionary
Appendix
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contained herein is based on numerous assumptions. Different assumptions could result in materially different results. Other than disclosures
relating to UBS AG, its subsidiaries and affiliates, all information expressed in this document were obtained from sources believed to be reliable
and in good faith, but no representation or warranty, express or implied, is made as to its accuracy or completeness. All information and opinions
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