HST YOUTUBE

In preparation for HST's Q1 earnings release tomorrow, we’ve put together the pertinent forward looking commentary from HST’s Q4 earnings call.

4Q YOUTUBE

• “Our transient revenue growth of 6.3% was driven by a nearly 5% increase in transient rate as transient room nights, which now exceed 2007 levels, increased slightly more than 1%. The improvement in ADR was driven by the premium and corporate segments where rate increased by almost 7%. When combined with the demand increase of 6%, these segments saw a revenue increase of more than 13%.”
• “While our full year transient demand matches 2007 levels, ADR is still more than 16% below the prior peak, indicating a meaningful opportunity for additional rate growth in 2011 and beyond.”
• “Our Group room nights were up more than 6% as increases in our corporate and other segments more than offset a slight decline in association business. Average rate was slightly better than the fourth quarter of last year resulting in an overall Group revenue increase of 6.2%.”
  • “Demand increase of over 11% in our higher rated corporate group business and a rates increase of more than 3%.”
  • “Recovery in the Luxury segment continues to gain momentum as our Luxury Group room nights were up more than 15%.”
  • ‘Compared to 2007, our Group revenues are still down by 19%, and our corporate room nights are down by one-third.”
• “Looking at 2011, we would expect that revenue growth will be driven by a combination of both occupancy and rate increases. It is worth noting that despite the nearly four point increase in occupancy we experienced this year, we are still four points below our prior stabilized occupancy level of 74%, so we expect to see increases in occupancy in both our Group and Transient segments.”
• “Our booking activity in the fourth quarter was exceptionally strong, and we started the year in a far better position than 2010, as group bookings for the first three quarters of the year are up by more than 3.5% versus a decline of roughly 6% last year. More importantly, our average rate for existing group bookings exceeds 2010 in every quarter. We expect we will see booking pace improve as the year progresses and activity in the higher rated categories will increase.”
• “We’re going to continue to look to fund a significant portion of our acquisitions through the issuance of equity.”
• New acquisition EBITDA contribution: “Helmsley, you talked about $35 million of EBITDA, once it becomes a Westin. This year, it’s more like $5 million, and we have $5 million in our guidance. Hyatt, we’re talking about a number that’s around $30 million and then there’s some EBITDA from New Zealand… That’s roughly $18 million.”
• 2011 Guidance:
  • “Comparable hotel RevPAR to increase 6% to 8%
    • “We expect the RevPAR increase to be driven more by rate growth than occupancy.”
  • “Adjusted margins increasing 100 to 140 basis points.”
    • The additional rate growth should lead to strong rooms flowthrough, even with growth in wage and benefit cost above inflation. We expect some increase in group demand as well as higher quality groups, which should help to drive growth in banquet and audio-visual revenues and solid F&B flowthrough. We expect unallocated costs to increase more than inflation, particularly for utilities which we expect higher growth due to an increase in rates and volume and, as well, in sales and marketing costs. We also expect property taxes to rise in excess of inflation.”
  • “Adjusted EBITDA of $1 billion to $1.035 billion”
  • “FFO per share of $0.87 to $0.92”
  • “In 2011, we expect to spend approximately $290 million to $310 million on ROI and repositioning investments."
  • “In terms of maintenance capital expenditures, we spent $195 million in 2010 and expect to spend $260 million to $280 million in 2011. 2011 plan includes room renovations at the New York Marriott Marquis, the Philadelphia Marriott and the JW Desert Springs Marriott, as well as meeting space renovations at the Hyatt Washington, Sheraton Boston, New York Marquis and New Orleans Marriott.”
    
  • “While we are actively reviewing our portfolio for likely sale candidates, we expect the volume of our asset sales to be light in 2011.”
  • Dividends: “First-quarter common dividend to be $0.02 per share. As our operations continue to improve, we expect to modestly increase the common dividend through the year, with the expectation of a full-year common dividend of $0.10 to $0.15 per share.”
  • “Due to the significance of the downturn, our taxable REIT subsidiary incurred a substantial book loss, primarily due to negative lease leakage, which resulted in our recording a $32 million tax benefit in 2010. The anticipated significant improvement in operating results should lead to a substantial improvement in lease leakage, and as a result, we are projecting a tax provision for 2011. This translates into roughly a $0.04 per share reduction in FFO for 2011.”
  • “Finally, starting in 2011, we are modifying our definition of adjusted EBITDA to no longer deduct. For 2010, we incurred $10 million of successful acquisition costs that decreased our adjusted EBITDA to arrive at the $824 million.”
  • Regional RevPAR guidance:
    • Atlanta: “Underperform our portfolio in 2011 even with an overall improvement in group business and special corporate pricing as well as a positive mix shift.”
    • San Diego: “Outperform the portfolio due to overall improvements in transient and group demand and ADR growth.”
    • Chicago: “Outperform the portfolio in 2011 due to strong Group and Transient demand as well as a further positive shift in mix which will increase ADR.”
    • San Fran: “Perform in line with our portfolio in 2011 through improvements in citywide and corporate group demand and ADR gains due to the related compression.”
    • San Antonio: “Outperform the portfolio in 2011 because of improvements in overall demand.”
    • Hawaii: “One of our top-performing markets in 2011 due to improvements in both group and transient demand, which should also drive some pricing power.”
    • Boston: “Underperform the portfolio in 2011 due to less citywide demand.”
    • Phoenix: “Turn the corner in 2011 and outperform our portfolio. Both group and transient demand are expected to increase significantly.”
    • Philadelphia: “Citywide demand for 2011 is strong and improvement in ADR is expected, but the renovation will limit available capacity and, as a result, that hotel will underperform the portfolio.”
    • Orlando World Center Marriott: “The hotel is expected to slightly underperform the portfolio in 2011.”
      
    • “We expect the European joint venture portfolio will have RevPAR growth of 5% to 7% for 2011.”