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MAR was the first chink in the lodging armor but HST might be the biggest. We remain worried about Q2 RevPAR.

HST’s Q1 results may disappoint the sell side bulls, some of whom have EBITDA estimates in excess of $180MM.  The company will report the quarter on April 28th.  We’re projecting $147MM of Adjusted EBITDA, 14% below consensus of $171MM and FFO of $0.11 cents, 1 cent below the Street.

Looking forward, we’re also 9% below the Street’s 2011 EBITDA estimate, which happens to be above the high end of company’s guidance of $1.035BN.  Expectations, both formal and informal, may have gotten too aggressive.  Q2 and Q3 remain our chief concerns.  We don’t believe the Street is reflecting the truly difficult comps from the May through July period of 2010.  As we’ve written about, absolute dollar RevPAR may have been boosted by pent up demand and it appears statistically that dollar RevPAR has slowed sequentially since then on a seasonally adjusted basis.  We’re about 12% below the Street for Q2 and Q3 EBITDA.

1Q2011 Detail:

We estimate that HST will report 1Q2011 revenue of $929MM and $168MM of Property level EBITDAR (margin expansion of 150bps YoY)

  • Property level revenue of $867MM
    • Total RevPAR growth of 9.2% to $119
    • Room revenue of $535MM, +10.5% YoY
    • F&B revenue of $272MM, +8% YoY
    • Other revenue of $60MM, +5% YoY
  • $664MM of property level expenses
    • CostPAR increase of 3%, producing estimated room expenses of $149MM
    • F&B expenses of $199MM
    • An 8% increase in hotel departmental expenses to $240MM
    • Other property level expenses of $75MM, a 3% YoY increase or a CostPAR decrease of 1.5%

Other items:

  • Corporate expense of $26MM
  • D&A of $139MM
  • Net interest expense of $86MM