Analyzing Capital Structures and Costs of Capital



Analyzing Capital Structures and Costs of Capital

Starwood Hotels & Resorts Worldwide Inc (HOT-NYSE)

Starwood Hotels and Resorts operate in upscale and luxury hotels all over the world. The company obtains portfolio of differentiated hotels and resorts with premium rates. It has significant brand loyalty and possesses the strongest pipeline of new hotels and its operations. The brand is positioned all over the world with large publically traded hotel operators, with average return on investment account for 18% of the capital investment. There are also risk factors involved as the company has a large amount of debt on its balance sheet. The stock performance chart of Starwood Hotels & resorts compared with the industry and S&P index is shown below:

Starwood Hotels, listed on NYSE is performing above the market performance compared to the S&P 500 index. It shows an increasing trend from 2008 till date except of the dip in 2008 due to world crises.

Sotherly Hotels Inc (SOHO- NASDAQ)

Sotherly Hotels Inc operates full hotel services and is self advised real estate investment trust (REITs). The company follows the strategy of purchasing obsolete hotels and then renovating and branding it, thus improving the functionality of the obsolete hotels. It was formerly known as MHI Hospitality located in Southern US with full service hotels in high growth markets. The company is traded on the NASDAQ under the symbol of SOHO. It has foundation of integrity, service and hospitality. The strategy of the company is to lead prudent investments with long term results. Sotherly Hotels have a well located portfolio through destination and primary markets throughout the southern US. The stock performance chart of Sotherly Hotels compared with the industry and S&P index is shown below:

Sotherly Hotels, listed on NASDAQ is performing below the market performance compared to the S&P 500 index. It shows a decreasing trend from 2009, it then gains some stability but with a very slow pace.

InterContinental Hotels Group PLC (IHG-London Stock Exchange)

InterContinental Hotels franchises and manage hotels for the contracts of 10- 30 years. It has attractively high return on invested capital, with 99% of the hotels being franchised. It is one of the largest hotel companies in approx 100 countries around the world. InterContinental operates in nine hotel names, Crowne Plaza, InterContinental, Hotel Indigo, Holiday Inn Express, holiday Inn, Candlewood Suites, Staybridge Suites, EVEN Hotels and HUALUXE Hotels. The switching costs along with the strong brand name and network provides economic moat as the company continued to sell owned properties. Due to high switching costs InterContinental is a very high uncertainty rating company; still it is being fairly valued.

InterContinental Hotels, listed on London Stock exchange is performing above the market performance compared to the S&P 500 index. It shows an increasing trend from 2008 till date except of the dip in 2008 due to world crises.

Capital Structure

Capital Structure shows the mix of companies' debt and equity. It shows how the company finances its operations and growth through different ...