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Correlation Risk: SP500 Levels, Refreshed



There’s obviously a big difference between calling for a correction and a crash – and the best risk management position we can take right now is calling for both!


A crash in the US Currency that is, and a May-June correction in US stocks of -2.3-4.1%.


The USD and the SP500 currently have an inverse correlation of -0.82, so anything that resembles a bid in the US Dollar Index is going to have a big impact on this market’s beta.


Chasing beta? Join the club. If you are performing YTD, you’re definitely long some form of The Inflation (long Oil, US Energy Stocks, Russia, Gold, Silver, etc) – so just know the exposure you own; it’s probably not unique. Thank God I sold Suncor yesterday – now I can buy it back (praying when long correlation risk can be effective). In terms of Energy Stock exposure, we’re long Petrobras and short BP.


Across our 3 core risk management durations (TRADE, TREND and TAIL), here’s what I am currently seeing: 

  1. Long-term TAIL resistance = 1 range (don’t forget that for the long-term, all we are debating here is: "where do we stop making lower-highs?")
  2. Intermediate-term TREND support = 1310 (we V-bottomed in/out of that level when we wrote “Short Covering Opportunity” in mid-March)
  3. Immediate-term TRADE = 1349 support seems to be holding here intraday; a close below it puts 1310 in play (a -4.1% drawdown risk from recent peak) 

What’s fascinating here isn’t The Price Volatility (VIX up +15.2% this week on an SP500 drop of 60 beeps), but the storytelling of the Fiat Fools about “price stability.” Like the “shock & awe” begging of The Bernank (begging for rate cuts to zero in 2008, remember that?), sometimes we should be careful what we beg for…


It’s called Correlation Risk.



Keith R. McCullough
Chief Executive Officer


Correlation Risk: SP500 Levels, Refreshed - 1


I find this hard to believe, but the word inflation did not even come up on the CPKI 1Q11 earnings call.  This alone is an indication that the company may be underestimating the impact of inflation on the P&L, at least publicly. 


More importantly, the most recent guidance from the company, of 2.5% inflation for the year, was not even in the ballpark of reality, putting CPKI at risk of having to guide down.  CPKI is scheduled to report earnings on May 5th, after the market close.


It also should be noted that the Board authorized management to consider a wide range of financial and strategic alternatives to enhance shareholder value.  I believe that the chance of anything happening in terms of an acquisition of the firm is very slim.


MANAGEMENT COGS GUIDANCE: With respect to the full year, I have some concluding comments that might be helpful. Starting with commodities, we expect to see an increase of approximately 2.5%, which will impact our cost of goods by 50 basis points compared to last year. We also expect labor expense to decline by 80 basis points, due to our menu optimization initiative which was rolled out nationwide across all stores on February 1.


QUESTION ON MENU PRICING: When we think about your 2011 outlook and the new menu, can you give us a sense if you plan to take any pricing?


ANSWER: But we think that with the type of changes that we're making, it's going to address the value proposition significantly, and we will be looking to defend margins. And so we do intend to take price at that time.  In Q3 and Q4, you'll see us build on this success by reenergizing the brand, and although we can't discuss everything for competitive reasons, we do plan to launch a new menu design that Rick mentioned and several other compelling new products. Our research confirms that these improvements will resonate with our guests, drive traffic, and importantly, drive value and lay the foundation for future price increases to help protect margins.


COMMENTS ON SALES TRENDS: Seasonally 1Q is our lowest quarter in terms of weekly sales average and therefore represents our weakest leverage point within the year.  Additionally, the month of January resulted in a significant number of store closure days, which equated to over $1 million in lost revenue, and this in turn significantly deleveraged our labor line for the month.


ON CHEESE PRICE GUIDANCE: Did you say that cheese is locked in for the year at $1.63? I'm sorry, did you say?

Answer:  No, no. That's our average estimate as we think about the basket of 2.5%. We haven't taken out any forward contracts.



Howard Penney

Managing Director


Cheap and now there is some visibility.



"We continued to see improvement in our business during the quarter. Our wholly-owned operations achieved quarterly EBITDA growth for the first time since the recession began, giving us confidence that we have reached a turning point for our Company. We expect to see further growth through the remainder of this year."



- Keith Smith, President and Chief Executive Officer of Boyd Gaming




  • Las Vegas Locals market: "Results reflect a particularly strong performance at The Orleans, which reported its best quarterly comparison in three years."
  • Downtown: "Regional results reflect higher spend among our Hawaiian customers and greater efficiencies in our operations, offset by significantly higher fuel costs at our Hawaiian charter service."
  • Midwest & South: "Year-over-year growth continued to accelerate due to strong performances at Treasure Chest and Delta Downs."
  • "Borgata's results were impacted by lower table game volume and hold percentage; however, the property reported growth in overall market share and slot win during the quarter."



  • Their 1Q results were encouraging. 8 of their properties posted YoY gains.  In March, 11 of their 13 properties reported YoY gains - including all of their Locals properties in LV.
  • Based on results from the first 4 months, they are encouraged that results will improve over the remainder of the year - especially in their Las Vegas locals business
  • Fly in business is really helping LV as those visitors spend more than drive-in customers
  • Cash room rates increased 7% in their LV locals business in 1Q
  • Haven't seen an impact from a spike in gas prices so far and do not believe that they will
  • Borgata - saw their most difficult YoY comps this quarter. They are encouraged by actions of the local government there.
  • Remain focused on strategies to strengthen their balance sheet - i.e. Dania sale - the property also had a $4MM drag on their operating income - should add 6 cents a year to their EPS (with assumed debt reduction)
  • Focused on improving their operating margins and looking to expand through new opportunities
  • Seeing the benefits of their more efficient operating structure as things begin to improve
  • Orleans had 20% EBITDA growth - increase in both gaming and non-gaming revenue.  New marketing initiatives are helping.
  • Locals business saw an increase in convention meeting business which was up over 20% in the first quarter which should continue throughout the year. While the promotional environment remains elevated, they are not being impacted by it. They expect to show growth in the LV locals regions for the balance of the year.
  • Downtown - for the second consecutive quarter, they saw improvement from their Hawaiian customers despite increased fuel costs of their charter business - expect this to continue
  • Treasure Chest performed well from a strengthening regional economy.  All 9 casinos in Tunica were forced to close on Tuesday and will have a modest impact on 2Q results. However, they do have flood and BI insurance which cover everything above a $1MM deduction.
  • Borgata: Table game volume was negatively impacted from PA competition. $4MM impact of low hold. Customers are reducing their length of play which can cause hold to decrease. Customers also played lucky in April - only 9% which cost them about $6MM. Do believe that table game hold will ultimately stabilize at 2010 levels of 13%.
  • $1.4BN was outstanding on their credit facility
  • Borgata debt: $892MM, of which $29 million was outstanding under their $150 million credit facility. 
  • Share-based compensation expense was ~$1MM higher due to one-time accounting adjustment; not a good run rate for remainder of year
  • Reduction in Boyd depreciation expense ($31.7MM) due to their reduced capital expenditure program
  • Tax rate was 33%
  • Tax loss of $60MM - will reduce cash taxes by $20MM and a gain of $40MM included in their covenant calculation


  • Las Vegas locals is seeing the strongest improvement in their top tier players
  • AC did have some elevated marketing expense - not necessarily indicative of future spend, but it was profitable for them. They still have one of the lowest levels of promotional spend in the market though.
  • Is the increase they saw in April in the LV locals business?  Frequency was up in the top tier and stable in their lower tiers.
  • Spend per visit is generally no worse than flat and starting to improve in some markets like LV locals
  • Quarter end cash balance: $25MM at Borgata and $150MM at BYD
  • Spend $4MM of Capex at Borgata ($40MM capex for the year- room remodel).  $25MM will be spent in 1Q12. At BYD - $50MM of capex for the year
  • Acquisitions: looking for new markets or ones that have stable regulatory and tax structures and that offer good returns.  Would they rule out a transformational transaction? No - they will look at anything to create shareholder value - size is not a deterrent.
  • Expect the summer to be challenging as it always is regardless of the year
  • Continue to keep Echelon as an option, and monitor when is the best time to commence construction there or sell some of the land.  Clearly, they aren't going to commence construction this year or next.
  • Will remain disciplined on the marketing front during the summer in LV
  • Utilities costs are down despite prices being up - are purchasing smarter and being more efficient in their consumption
  • Starting to see some improvements in midweek rates which were very challenged over the past few years for them
  • Not all the LV locals properties were up in April - but the group as a whole performed well.
  • Absent fuel cost, they were happy with their performance downtown. 
  • Hawaii - Japan accounts for 20% of the inbound tourism into Hawaii. On the flipside, there will be a lot of rebuilding in Japan.
  • Echelon - is $12MM per year and classified in pre-opening expense
  • Had some property taxes that were reversed in the first quarter - predominately at Blue Chip that benefited them by $3MM and offset the $3MM weather impact
  • Recovery in the locals region will be a slow and gradual one
  • Leverage ratio: 4.2x (secured) and 7.1x (total). Secured ratio will improve by 60bps and total will improve by 90bps post Dania transaction.
  • They can always use the extending R/C portion to repay the non-extending part. Don't currently have the need for a huge amount of R/C capacity given their lower capex run rate.

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SHLD’s Negative Preannouncement - Sales at stores open at least a year declined 3.6 percent in the quarter ended April 30, the Hoffman Estates, Illinois- based company said yesterday in a statement. The first-quarter loss will be $1.35 to $1.81, compared with the 3-cent profit predicted on average by analysts surveyed by Bloomberg. <Bloomberg>

Hedgeye Retail’s Take:  Interesting how weak appliance sales coincide with such a dramatic boost in North American shipments up +4% at Whirlpool in its 1Q11 release. Note that Wal-Mart is getting into the large appliance business, a key initiative this year at Best Buy (#4 player in the space) is to grow its appliance business, and Lowes ramped opportunistic appliance purchases after sighting the category as an outperformer on its year-end call.


Amazon to Launch Flash-Sale Site - Amazon.com, the $34 billion global Web giant, will today muscle its way into the flash-sale craze with the launch of a members-only Web site called Myhabit. The project has been a year in the making, sources said, starting with building a team in New York that pulled some key executives from the merchant and tech ranks at Amazon’s Seattle headquarters, then developing the site and moving into test mode. The New York team of 40 includes buyers, planners and editorial staff. The site will offer up to 60 percent off men’s, women’s, children’s, footwear, accessories, jewelry and outerwear, in what’s described as “a head to heel” offering. Doo.Ri, Badgley Mischka, Kenneth Jay Lane jewelry, I.Am.Clothing men’s wear and BedStu shoes are part of the opening day sales lineup. Four to six flash sales daily, and up to 40 events weekly across the different categories and genders are planned. They will start at noon Eastern Standard Time and typically last for 72 hours to create a sense of shopping urgency and limited availability. <WWD>

Hedgeye Retail’s Take: It's neither the first flash-sale site concept nor unique as several others offer head-to-toe product selection and over a 72-hour period, but unlike many of its competitors in the space, Amazon already has most (if not all) of the inventory it plans to sell – this is what differentiates it from others. Not only could this improve the quality of product it ultimately sells through the site, but it could also prove to be a valuable channel in which to clear excess inventory.


Also, Add AT&T to the latest list of competitors to join the fray of daily deal/flash-sale sites. In an effort to penetrate what has quickly become a crowded sub-segment in retail, AT&T is offering consumers a $10 credit towards their first purchase for signing up before May 22nd, which also likely tips the company’s hand as to when the site will go live.


PPR Acquires Volcom for $607.5M - With the announcement that PPR has made a friendly $607.5 million takeover bid for Californian action sports brand Volcom Inc., luxury mogul François-Henri Pinault kicked off the long-awaited acquisitions process aimed at building a mass-market division around Puma that could eventually eclipse its luxury holdings like Gucci.  The French retail-to-luxury group will make a cash tender offer for 100 percent of Costa Mesa-based Volcom of $24.50 a share, which represents a premium of 37 percent over Volcom’s three-month average share price.  In New York City for Monday night’s Costume Institute gala, of which he was an honorary chair alongside his actress wife Salma Hayek, Pinault said he had picked Volcom for its expertise in three key action sports areas: surf, skate and snow. “I’m in New York for two days for the Met ball. I might be on a beach in Hawaii or in Biarritz for the next surf competition, why not? I’m not always wearing suits, I have boardshorts,” the PPR chairman and chief executive officer laughed in a telephone interview with WWD. <WWD>

Hedgeye Retail’s Take: Adding to its stable of Lifestyle brands, which had only consisted of Puma prior to this deal, we can’t help but question both the timing and price that PPR is paying at north of 13x projected 2011 EBITDA. In hindsight, it’s $2.5Bn purchase of a 63% stake in Puma back in ’07 at 12x EBITDA when the enterprise value was more than 2x where it is today was not particularly well timed (or priced) either.


Pierre Cardin Looks to Sell - After more than six decades in fashion, designer Pierre Cardin is hanging the "for sale" sign in his shop window. At 88 years old, Mr. Cardin says he wants to sell his business to ensure it outlives him. "I want to sell it now," Mr. Cardin said in an interview in his corner office overlooking the French presidential palace. "I know I won't be here in a few years and the business needs to continue." French fashion designer Pierre Cardin, September 2010. At 88 years old, Mr. Cardin says he wants to sell his business to ensure it outlives him. His timing is fortuitous. Ever since luxury-goods giant LVMH Moet Hennessy Louis Vuitton paid richly for Italian jeweler Bulgari SpA in March, valuations of fashion houses have been on the rise. The industry is entering an acquisitive phase for the first time in a decade. Now, other smaller houses such as Jean-Paul Gaultier are also shopping around for investors. The price Mr. Cardin wants — €1 billion, or $1.46 billion— is a stretch, industry watchers say. <WallstreetJournal>

Hedgeye Retail’s Take: This brand is a little more complex than most with a reported 600+ licenses worldwide. Not only does this make the brand’s aggregate sales difficult to decipher and ultimately Cardin’s valuation easily justifiable, but it also means any potential buyer will have less direct control of brand marketing and distribution than most are likely willing to sacrifice. That said, cleaning up a messy license network is how Ralph Lauren created the most value over the past decade. This will be interesting to watch.


Prada forges Joint Venture to tap into Middle East - Italy luxury fashion group Prada has inked a joint venture agreement with the UAE-based Al Tayer Insignia LLC to distribute its Prada and Miu Miu brands in five middle-east countries, sources reported. Based in Dubai, the joint venture will build a network of retail shops to distribute Prada products in the UAE, Saudi Arabia, Oman, Bahrain and Kuwait.  In March, Prada applied to carry out a listing in the Hong Kong exchange, thereby valuing the company at around €8 billion or US $11 billion. <FashionNetAsia>

Hedgeye Retail’s Take: Broadening distribution ahead of its forthcoming sale or IPO only adds to Prada’s enterprise value. Net/net, this makes perfect sense.


Textile Task Force Targets Import Fraud - U.S. Customs & Border Protection, Mexican Customs and the National Council of Textile Organizations are collaborating in a textile task force to crack down on import fraud, a growing problem that threatens the domestic textile industry’s nascent recovery. Industry executives said the fraud is carried out primarily when foreign manufactures use phony affidavits — often copies of certificates — from legitimate U.S. textile companies to falsify that their yarn or denim fabric was made in the U.S. when it was actually produced in China or other countries. That allows them to take advantage of duty free benefits under U.S. trade pacts such as the Central American Free Trade Agreement and the North American Free Trade Agreement. <WWD>

Hedgeye Retail’s Take: With a considerably more focused effort on combating counterfeit retail goods over the past year and meaningful improvements as a result, the next logical step is to work down the supply chain to include textiles. Given the lack of clear branding, or other identifiable indications of fraud, tracing the origin of textiles is likely to be a considerably more challenging task. It could very well include implementing a system not unlike currencies or personal I.D. such as licenses to confirm a documents authenticity, which would eventually be a target of its own counterfeiting. Ralph Lauren has been doing this for years. It is not very costly, and it works.


Sites That Send Shoppers What They Might Like - When Emily McNish shopped for jewelry online, she was overwhelmed by the options while searching for “gold necklace” on e-commerce sites or Google. Then she found a Web site called JewelMint that she lets shop for her.  JewelMint determined that Ms. McNish, 24, a university admissions counselor in Los Angeles, has “boho” style and likes big chunky jewelry. So on the first day of each month it offers her pieces that match her style. She has five days to choose a necklace, bracelet or ring. She pays $29.95 a month for that service. “It’s sort of like being part of a secret club,” Ms. McNish said.  JewelMint is one of a new breed of e-commerce sites — which also include Send the Trend, Shoe Dazzle, Just Fabulous, Sole Society and the upcoming StyleMint — combining old-fashioned and new-fangled methods for luring customers. <NewYorkTimes>

Hedgeye Retail’s Take: Better for conversion, but the trend is unsettling as its becoming more Big Brother by the day.



The Canadian Majority

Conclusion:  The Conservatives won a majority in Canada’s election, which is supportive of pro-business tax policies and fiscal conservatism. 


Position:  No position, but we remain bullish on the Loonie for the intermediate term.


Yesterday, we wrote an intraday note analyzing the Canadian federal election.   Our view was that based on the results of recent polls that a Conservative majority was unlikely.  In fact, the Conservatives won a very decisive majority.


Based on preliminary results, the Conservatives gained 39.6% of the popular vote and 167 seats, which give them a solid majority in Canada’s 308 seat parliament.  Interestingly, and this was as predicted by polls, the NDP received 30.6% of the popular vote and 102 seats in parliament.  The most noteworthy loss was that of the Liberal party, who for the first time in Canadian history will not be the governing party or the official majority.  The Liberals are expected to finish a distant third with 18.9% of the popular vote, and 34 seats.


This election also marks, at least for now, the demise of the Bloc Quebecois, who received only 6.0% of the popular vote and only 4 seats.   The Bloc is a Canadian political party that runs only in Quebec and whose mandate is to protect the interests of Quebec in the House of Commons.  Aside from the Liberals finishing third, this was really the watershed moment of the election.   In the prior six elections, the Bloc had won between 38 and 54 seats.  In this election, the province overwhelmingly shifted towards the NDP, who are expected to win 58 seats in Quebec, which is supports a unified Canada.


The Conservatives clearly have a mandate to govern with the results of this election.   While there is some risk that the Conservatives shift too far to the right (at least by some critics), from an economic perspective we have been impressed by the results of the Canadian economy over the last couple years, which has been driven, in part at least, by Conservative policy.  As such, we view the results of this election as positive for Canada’s economic future.


In the table below form cbc.ca, we’ve highlighted the results from the election.


Daryl G. Jones

Managing Director


The Canadian Majority - 1


Another lackluster lodging release.



"Transient demand was very strong in the first quarter with both occupancy and rate improvements across many markets. We are very pleased with the performance of our hotels, particularly the strong continuing increases in RevPAR in our Hyatt Place and Hyatt Summerfield Suites properties."


- Mark S. Hoplamazian, president and chief executive officer of Hyatt Hotels Corporation




  • Hyatt reported $109MM of Adjusted EBITDA  - 4% below street estimates
  • "Comparable owned and leased hotels RevPAR increased 2.0% (1.4% excluding the effect of currency)"
    • "RevPAR for comparable owned and leased hotels is estimated to have been negatively impacted by approximately 400 basis points."
    • "Operating margins decreased 120 basis points"
    • "Adjusted EBITDA is estimated to have been negatively impacted by approximately $10 million due to renovations during the first quarter of 2011."
    • "Excluding expenses related to benefit programs funded through Rabbi Trusts and non-comparable hotel expenses, expenses increased 2.4% in the first quarter of 2011"
  • Comparable North American select-service RevPAR: +11.6%
  • Comparable International RevPAR: +11.0% (6.9% excluding the effect of currency)
    • "Adjusted EBITDA increased by 42.9% ...as a result of increased fee revenue from new hotels and non-recurring items."
  • "Our international hotels continued to perform well and we saw particularly strong performance in China and Brazil. There was some increased volatility in the results in the first quarter due to the devastating earthquake and tsunami and aftermath in Japan, as well as specific events in the Middle East and North Africa, but demand throughout Asia Pacific and Latin America was strong."
  • "Management and franchise fees ...increased approximately 23%, partially as a result of new managed or franchised hotels opened over the last few years in addition to RevPAR growth at existing hotels"
  • "Looking ahead, year-over-year North America group booking activity for future dates continues to be strong. This is encouraging as the booking window remains short and we are keeping a close eye on changes period-over-period. Recent activity gives us confidence in the recovery for the remainder of 2011 and beyond."
  • "As of March 31, 2011, this effort was underscored by executed management or franchise contracts for approximately 145 hotels (or more than 33,000 rooms) across all brands."
    • ~70% outside NA
  • 1Q11 Capex: $46MM ($9MM maintenance, $34MM enhancements to existing properties, $3MM investment in new facilities"
  • During 1Q11, Hyatt contributed the Hyatt Regency Minneapolis " to a newly-formed joint venture... in exchange for an ownership interest in the joint venture.... assigned a $25 million loan to the joint venture."
  • 1Q11 balance sheet items:
    • Debt: $770MM
    • Cash & equivalents: $1.1BN
    • Short term investments: $525MM
    • Undrawn R/C capacity: $1.1BN
  • 2011 guidance:
    • Capex: $380-400MM (includes renovation of 5 properties and expects negative impact on owned & leased segment through 3Q11)
    • D&A: $275-285MM
    • Interest expense: ~$50MM
    • 15 new hotel openings in 2011



  • Group bookings in the Q for the Q were up 15%
  • RevPAR was up 7% in constant dollars in their international hotels
  • Are making progress with 3rd party developers in urban US markets where they don't have a presence currently, despite the difficult development environment
  • Have 12 hotels under contract for development in India
  • Have Hyatt Places opening in Costa Rica, Hawaii and Amsterdam over the next 2 years
  • In NY, they accelerated their renovations and should finish a few weeks ahead of schedule.
  • Expect renovated hotels to have higher revenues vs. the comp set. These hotels are also in markets with limited supply and therefore should outperform over the next few years
  • Last year in 1Q2010 they benefited from an $8MM settlement of a dispute in their timeshare segment
  • Adjusted for the renovation impact, margins at owned hotels would have grown 60bps
  • NA management and franchising - full service
    • Timing of Easter negatively impacted them by 150bps on RevPAR
    • Group revenue was stronger as a result of stronger in the quarter for the quarter bookings.  There was also a 10% increase in in the quarter for the year bookings mainly due to rate increases
    • Shift of business mix continue to benefit rates
  • NA select service management and franchised:
    • Fees increased by 13%
  • International mgmt & franchise business
    • Asia Pacific continued to be strong
    • China RevPAR + 20%
    • 2010 benefited from the World Expo in Shanghai so comps are tough
    • Latin America comps were strong as well
    • Europe, ME & Africa was weaker
    • 1/3 of their increase in international fees (incentive fee line) was due to a $2MM termination fee received in the quarter
    • Expect fees to decline about 30% in 2011 for Japan and ME for the balance of the year
  • Adjusted SG&A would have increased 9% if not for the easy comps of last quarter which included some bad debt charges.  The increase was mainly due to higher compensation.
  • Expect renovations to impact EBITDA by $10-15MM (500bps of RevPAR impact) in 2Q and in 3Q the impact should be less than $5MM (100bps of RevPAR impact). Total impact of renovations will be 400bps to RevPAR and a little over $25MM EBITDA impact in the first 3 Q's of the year


  • The 15 hotel openings in the year is a gross number - they had 3 properties leave the system in this Q
  • Hyatt Minneapolis impact: $3MM EBITDA on an annualized basis
  • Focused on moderating their energy costs in India and also in the Middle East by making alternative and solar energy investments
  • Expect to also manage cost creep through food offerings and productivity gains
  • Have been focused on how they can apply their capital to get more development projects underway in the US. They are seeing a lot more opportunities now then they did a few quarters ago. They have done preferred equity, key money, equity, and loans to get the right opportunities in the US.  The construction lending marketing hasn't really improved.
  • Part of the benefit that they will see once renovations are complete is just a market weight factor - since the markets their hotels are in are performing well. The second part is due to getting higher RevPAR once the renovations are complete.
  • Group business grew 11% in the quarter.  A little over 80% of their business is booked for 2011, and rates being booked on 2012 are higher than rates on business booked for 2011.  They had 70% biz on the books at the end of last quarter. 
  • Expect that rate will be a major contributor to RevPAR growth in the future
  • Weather was a big factor in NY in the quarter, and therefore, RevPAR was weaker than most expected - including Hyatt.  They have had renovation disruption at their property. Their 2 Andaz properties are still ramping up too - so they don't have good comps.
  • Roughly 1/4 of the hotels in their pipeline have some sort of Hyatt capital behind it
  • Filed a shelf registration for 19.4MM shares on behalf of some Pritzer family shares - it's really their decision on what to do with those shares.
  • The reason that impact from renovations increased is because they are taking roughly 20% more rooms out in Q2, which is a seasonally strong quarter for them
  • Next phase of renovations? They do have some other renovations planned for the year - they will begin later this year but they don't expect them to have material disruption. It's about 4-5 properties - they are typical renovations - not as extensive as the 5 they outlined
  • They continue to pursue conversion opportunities but those opportunities are opportunistic - (Tulsa, Hawaii, Maldives)

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