Starwood Hotels (HOT) The Top Stock Pick Says Susquehanna Financial Senior Analyst; Owner-operator Status Results In Strong Financial Leverage For Forecasted Lodging Up-cycle

67 WALL STREET, New York - December 6, 2011 - The Wall Street Transcript has just published its Gaming and Leisure Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Hotel Occupancy, Rates and RevPAR Trend Upward - Increased Corporate Ancillary Spending - Las Vegas Conventions and Casinos - U.S. Regional and Emerging Market Hospitality

Companies include: InnSuites Hospitality Trust (IHT); Orient's (OEH); Allegiant (ALGT); Ameristar (ASCA); Boyd (BYD); and many more.

In the following brief excerpt from the Gaming And Leisure Report, expert analysts discuss the outlook for the sector and for investors.

Rachael Rothman, CFA, joined Susquehanna Financial Group LLLP in 2010 as a Senior Analyst covering the restaurant, gaming, lodging and leisure industries. Her research leverages more than a decade of direct operational experience in the hospitality industry with 10 years of experience in equity research. She is a recognized expert in the field and has been selected to Institutional Investor's "All American Research Survey," The Wall Street Journal's "Best on the Street" and the Financial Times' "World's Best Analysts." She earned her master's degree in hotel and restaurant management from Cornell University, a graduate degree in economics from the University of Virginia and her bachelor's degree from Bates College.

TWST: Why don't we start with a brief overview of your coverage universe?

Ms. Rothman: We cover the hotel, the casino, the cruise line and the chain restaurant industries, so everything from McDonald's (MCD) to Marriott (MAR) to Carnival (CCL) to Starwood (HOT) to MGM (MGM) and Las Vegas Sands (LVS) - basically what we call hospitality.

TWST: What about the leisure travelers? Are they back?

Ms. Rothman: Especially at the high end. I guess we would be fairly strong believers in the bifurcation of the economy, and you can see that in the results of Wynn, for example, or even some of Orient's (OEH) European properties. With the stock market back, and the highest income or highest net worth individuals throughout the globe having their income pretty heavily tied to the stock market and not necessarily tied to home values, you can see that their spending patterns rebound fairly quickly. Whereas at the lower end, the bulk of individuals' net worth is comprised of their home values, which remain largely depressed at this point. So it's definitely a tale of two consumers.

TWST: How would you describe the overall health and outlook for the Las Vegas casino operators?

Ms. Rothman: In Vegas, our view on 2012 is pretty bullish. We're pretty optimistic. The basic underlying premise would be that a decent portion of the overall business for 2012 - which is the convention business, it's about 15% of the overall business - is booked at higher rates. Once you have that higher-rated business on the books, it gives the yield management systems and the general managers confidence to drive rate on both the leisure, which is the packaged customers, somebody that comes on Allegiant (ALGT) or through Orbitz (OWW) or Expedia (EXPE), and the individual traveler. So you should expect to see them holding rates longer and yielding rates higher sooner in the booking window than they had over the last two years, when demand was weaker.

TWST: How are gaming volumes faring? That's a big portion of revenues for these companies.

Ms. Rothman: Baccarat in Vegas has been extremely volatile, so gaming revenues are down, but they aren't necessarily down in the core mass players. They're down due to the volatility in baccarat. Our focus name is MGM, that's our top pick in the Vegas-based, larger-cap destination casinos, and that's really less about baccarat and more about a room rate recovery and a mass market recovery in Vegas.

TWST: What companies with an Asian presence do you like?

Ms. Rothman: Again, expectations are really high. With Macau, the set up is this - for 2012 - I would say consensus gross gaming revenue growth is probably 25%. Even if gross gaming revenues grew next year 10%, which is still a good number, it could be a massive disappointment. And you're not going to have any visibility into whether or not the number is 10 or 25 or 40. All you know is that the macro numbers with respect to credit extension and liquidity and GDP are going in the wrong direction. You just don't know how much they matter, when they matter, if they matter, and so you're making a bet that the results will be better than sentiment expects them to be, and that's just not a guarantee.

TWST: How about on the hotel owner and operator side? What are your favorite names there?

Ms. Rothman: Top pick is Starwood, and that is because it's an owner-operator, so it does have some of that operational and financial leverage that you want if you're a believer that the lodging up-cycle continues. It has a higher penetration of luxury assets than Marriott does, and again, luxury is outperforming. It has a stronger growth pipeline, both domestically and in Asia; it represents about 29% square footage. And it has a good balance sheet, and it's cheaper on a valuation basis than Marriott. If you believe that the world is getting better, you don't necessarily want the manager-franchisers; you want the owner-operator.

The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.

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