Hedgeye - MAR YOUTUBE

In preparation for MAR’s Q4 earnings release this afternoon, we’ve put together the pertinent forward looking commentary from MAR’s Q3 earnings call and subsequent conferences.

Post Earnings Conference Commentary

[Autograph Collection] “We already have 12 hotels signed. We could have as many as 20 by the end of the year open, and we’re talking to 40 to 50 different developers and owners right now, owner-operators, about opportunities.”
[Cosmo] “Our newest edition to the Autograph Collection will be 2,000 rooms opening on December 15th, with another 1,000 rooms opening June, 2011; 150,000 square feet of meeting space right on the strip. We’re very excited about the hotel.”
“And the whole idea of buying hotels is to reposition those hotels, and then flip and sell those hotels, so at given time, we may own a dozen or a half dozen hotels. Right now out of our 3,400 hotels around the world that carry our brand we own six, so you could see it’s not a big investment from US.”
“We want to maintain about a 3 times debt to EBITDAR ratio as we continue to grow, so maintaining that rate keeps us at a solid BBB rating, which is important to us. And as a result of that, given the growth in our business, we will continue to borrow up about $1 billion to $2 billion worth of debt to maintain those ratios. We’re anticipating about $1 billion of that will be in the form of commercial paper. We’re a net borrower company.”
“So our adjusted earnings per share from continuing operations over that three year, well, depending on which growth assumption you make, 5, 7 or 9, our EPS could range between $1.90 and $2.75 or 20% to 36% compounded annual growth rate through the 2010 levels.”
“We’re right in the middle of doing all our budgets right now, but you would imagine based on, as you said, Europe is going to be a little lighter than the U.S., Asia, and the Middle East – Asia is going to be much higher. I mean, you can think about what’s going on around the world, and we think those trends will continue into ‘11”
[RevPar composition] “I think you’re going to see right now probably maybe 50-50 rate occupancy.”
“Current trends would tell you that ‘11 should be a better booking pace than ‘10 was, as you look at the booking pace as the economy continues to grow.”
“Cancellations are way down, slippage is way down and attrition is way down.”
“Limited service hotels are likely to recover more slowly than full service hotels. In 2010, only 5% of our more than 450 company operated limited service hotels are expected to pay incentive fees.”
“So all-in-all, we expect international incentive fees to grow by 18% to 27% compounded. Putting it all together, incentive fees could increase 18% to 36% compounded, with growth coming from improving net house profit, hotels achieving owner priority and unit growth.”

Q3 Conference Call:

“We are forecasting global REVPAR to increase 6% to 8% in both the fourth quarter and full year 2011. We expect to see considerable in the year, for the year group bookings in 2011 with better pricing. We also expect next year’s special corporate rates to increase at a high single digit rate, reflecting the impact of both higher prices and the impact of mix. Growth in catering revenue is expected to recover more slowly. Fee revenue is projected to total $1.29 billion to $1.33 billion as we are likely to open another 25 to 30,000 rooms in 2011. Owned, leased, corporate housing and other revenue net of the related direct expenses could increase 5 to 15%, due to improving REVPAR and margin. We assume Timeshare contract sales to be flattish to 2010 results and expect G&A expenses to increase 3 to 5%, reflecting increased spending for brand initiatives and compensation. All in all, both our 2011 cash flow and growing debt capacity provide substantial investment capacity next year. As we consider investments, our priority is to first, invest in our business and then return excess cash to our shareholders through dividends and share repurchases.
“The recovery is here and we’re doing things differently. First, we’re reducing discounting and improving our mix. And we’re raising room rates.”
[Corporate G&A] “There isn’t much more to cut but we continue to look for ways of doing things more efficiently.”
“We expect the Timeshare business to generate about $175 million in cash after all investing activities and to produce even more cash flow in 2011.”
[FY 2010] “Capex spending of about $500 million.”
[1% change in RevPar sensitivity] “I think you could use 15 million [for fees] for 2011. And then about 5 million for owned, leased and other.”
“I think, we don’t expect to see any deterioration in margins, in fact, we would expect that to expand as our margins expand, so our owned, leased properties would benefit from the REVPAR increase as well as the margin expansion.”
[2011 RevPar growth mix] "Mostly rate"
“I think healthcare costs will be up in the high single digits for us next year. Hopefully, that’s more in the 6 to 7% range than higher than that, we’re obviously not done with that. I think that rolling into cash compensation will make comp growth the largest driver of that 3 to 5% increased comp growth, meaning for our current group of associates around the world.”
[Nights on the books for 2011 compared to nights on the books for 2010 for same period] “Probably a little bit lower than where we were this time last year but one of the things we’re seeing is a lot of what you call in the year, for the year, in the quarter, for the quarter. And so when you look at ‘10, when we look the ‘10 compared to ‘09, we saw a real build-up as Arne mentioned in his comments where we started the year down like 5% and right now we’re up 1% for 2010 pace, a six point jump and you would expect ‘11 to be that way too with a lot of in the year for the year.”
“I think the revenue we’ve got on the books for next year for group business is all U.S. numbers, is down a little bit less than 2% from where it was at the same time last year for 2010.”
“We are seeing the lenders starting to get a little more active out there. Obviously, the leverage ratios are a lot lower than what they were, the time periods are probably a little shorter and you’re seeing a lot of personal guarantees by the developers, especially on our limited service side to enhance lines. We will continue to invest in our business in the form of mezz loans or guarantees or even outright purchases.”
“We also have some gains in the fourth quarter that we put in, so we moved our guidance up a couple pennies for the full year because of the gains that you see in the fourth quarter.”
“We will see that the government contribution in REVPAR is actually negative because their approach to rate and compounded with the effect on government volume which will tend to get yielded out a little bit will make government a negative number in terms of the total REVPAR contribution. But both volume and rate on special corporate should more than offset that. And so it varies a little bit segment to segment. The discounted stuff may also be negative next year. So that’s packaged stuff, it’s stuff sold through the opaque channels online, some of those sorts of things and that too will get offset by the stronger performance in both group and in business travel.”