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In my 8/31/08 post “HOT: WHERE DO ESTIMATES GO W/O NYC AS THE SAVIOR” I predicted 2009 consensus EBITDA and EPS estimates needed to come down by 10-15% and 25%, respectively. Today, HOT provided guidance 13% and 23% below estimates, respectively, so pretty close. However, given the very difficult comparisons facing the company in the first half of 2009, and difficult 2 year comps for most of 2009, I’m beginning to think the guidance is not conservative enough. Management has not exactly been stellar in their predictions.

  • Here is the eye opening statistic that forces me to really question the 2009 guidance. Q4 REVPAR at Branded Same-Store Owned Hotels in North America is now expected to decline 9% to 11%. Yes that is against a tough comparison. However, it is such a sharp deterioration from +3% in Q2 and flat in Q3 that it brings into question why management settled on only a 5% decline next year.

  • From a company perspective, HOT is clearly underperforming MAR. This is understandable due in part to the lack of hotel ownership in MAR business model. However, HOT’s significant exposure to some of the previously “hot” markets of NYC, London, and Hawaii is now a liability. I’ve written posts on each one of these markets over the last two months highlighting HOT’s exposure. We focus a lot on deltas here at Research Edge and the delta in these markets is hugely negative.

  • I’ll have some more to say on HOT in the areas of timeshare and cash flow but for now, I still see downside risk.

Not exactly a stellar record on guidance
Comparisons remain tough throughout most of 2009 on a 1 and 2 yr basis