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


  • “Despite the upheaval in the equity markets created by headlines about legislative gridlock and slow employment growth in the U.S. and sovereign debt risks in the EU, our outlook for the remainder of the year remains quite positive.  Our fourth quarter group booking pace is quite solid compared with last year with bookings up over 2% and revenues ahead by almost 5%. In addition, our transient bookings are up over 6% with very strong rate growth. While a realistic appraisal of the impact of weaker economic data suggests that we will not experience significant outperformance in the fourth quarter, we do expect that fourth quarter RevPAR growth will generally be in-line or slightly better than what we experienced in the last two quarters, leading to full-year RevPAR growth of between 6.25% and 6.75%.”
  • “Assuming that adjusted profit margins expand between 80 and 90 basis points, we would project that adjusted EBITDA will range between $1,015 million and $1,025 million which will reflect full-year growth of 23% over 2010. We project FFO per diluted share between $0.86 and $0.88 which has been reduced by $0.03 per share for acquisition, debt repayment, and impairment costs.”
  • “While we are not prepared to offer any specific guidance relative to RevPAR or revenue growth for 2012 and we fully appreciate the event risk that may threaten overall economic growth for next year, we would confirm the sentiments offered by others in the industry that the fundamentals for our business continue to be attractive. We would start by noting that supply growth in 2012 is projected to be roughly 0.5% which is a small fraction of the long-term industry average. This would suggest that occupancy rate should continue to grow even if economic growth is more modest than expected earlier in the year.”
  • “The group booking pace for next year is strong, with room nights up over 4% at higher rates, especially in the important second and fourth quarters where room nights are ahead by more than 9%.”
  • “The recently issued government per diem rates which increased an average of 5% across our major markets, plus expectations for successful special corporate negotiations, all point towards higher transient rates. Given the significant recovery in occupancy rates over the last two years, we should be starting the year in a position of strength, which suggests that we should benefit from both mix shift and absolute rate increases across most segments. In short, there is a clear opportunity for very solid RevPAR growth for next year.”
  • “On the disposition front, we are marketing a few selected properties for sale but would expect that these transactions would most likely not close until the first quarter of next year.”
  • “For the year, we expect to spend approximately $300 million to $320 million on maintenance capital expenditures.”
  • “Margins for the quarter benefited from better productivity as wages and benefits on a per occupied room basis were essentially flat. Rooms flow-through was good at roughly 75%.”
  • “F&B flow-through was approximately 26%, which was better than the first half of the year, but profits were still lower than expected. There were two primary reasons. The first is that we had a number of restaurants and some meeting space under renovation in the quarter where the negative impact on F&B profits was higher than anticipated. In addition, a few hotels had lower group spend only a portion of which was anticipated.”
  • “Looking forward to the fourth quarter, we expect margins to generally perform in-line with what we experienced in the first three quarters of the year. We should get some benefit from a RevPAR increase driven more by rate growth than occupancy and the potential for improvement in F&B flow through. We do; however, expect unallocated cost to increase more than inflation, particularly for awards and sales and marketing cost or higher revenues will increase cost and we expect property taxes to rise well in excess of inflation due to refunds received in the fourth quarter of 2010 that will not recur in the fourth quarter of this year.”
  • “With the extension of the closing until mid-December, our current guidance assumes that there would be minimal EBITDA from the acquisition in 2011. If we do not acquire the hotel, we would forfeit our $15 million deposit and reduce our 2011 adjusted EBITDA by $15 million.”
  • “If we do not close the acquisition, NAREIT FFO would be an additional $8 million or roughly $0.01 per share lower than our current guidance. This amount represents the loss of the deposit partially offset by the transfer taxes and interest expense that we would not have to pay.”
  • “Net-net the bookings for the fourth quarter are better than where they were earlier in the year. As we've worked our way through the year, we've seen continued improvement in the fourth quarter. Probably more importantly as we look at what has actually happened over the course of the last 60 to 90 days; our bookings for the fourth quarter were stronger than they had been in 2010. So we booked more room nights in the last 60 days for the fourth quarter than we did last year. And those bookings were also ahead of the pace that we had seen in 2007.”
  • “Overall, we continue to feel that the quarter is going to be good. Our property level forecasts are frankly stronger than the guidance that we're giving. I think the properties are a bit more optimistic than we are, but I think we felt like it made sense to dial back a little bit on that…We're not going to outperform in the fourth quarter, but we still expect to perform in-line in Q4.”
  • “To achieve 6.5% that means we need to achieve 7% growth in the fourth quarter. So, that's the 7% that you were just talking about. And obviously, if we hit 7% that would be the strongest quarter of the year.”
  • “Generally I think our philosophy on this is stock purchases are best funded from the proceeds of asset sales, where you are effectively selling a part of the company at a market level price and getting an opportunity to buy part of it back at a discount price.”
  • Group bookings for 2012: “room nights were up about 4% and then rate was up roughly 1%.”
    • “Right now, we're at about 55% of our – what we would, at this point, estimate would be our total room nights for 2012. And I don't think that that's too far off of where we would normally be. We would expect to get to the end of the year and be around 70% of our room nights for next year booked.”
  • “If we included all of the acquisitions, so in other words, our acquisitions were up over 14% in the third quarter. So if we looked at that on a pro forma basis compared to last year, that would have added an incremental 70 basis points to our third quarter RevPAR growth. So 6.4% would have gone to 7.1% and obviously if you add the hurricane disruption then you end up at 7.7% for the quarter.”
  • “On the group side, we're still 9% to 10% below where we were in '07; we are not that far below on rate, but we are way behind in terms of room nights. So, when I think about '12, I think that's the area where we have an opportunity for outperformance as group activity continues to improve.”
  • “I would expect that as you look at that opportunity next year it tends to be more on the rate side than on the room night side, simply because the demand piece of that has already been quite strong”


Chinese New Year becoming less of a factor?



As the following chart shows, there certainly was a traditional pattern of a pre-CNY slowdown followed by a jump in Gross Gaming Revenues during the celebration.  However, we still haven’t gotten the post-CNY slowdown.  It is unclear, how much hold played a role in the recent strength but the historical post-CNY slowdown skipped at least this year.


Importantly for Macau, YoY growth has been surprisingly strong, with the exception of the actual CNY weeks.  Growth during those two weeks was only 4% but 24-38% the other 4 weeks presented.  We acknowledge that the comparisons are not perfect but the data is good enough to support our conclusions.  We’d say the data leans bullish for Macau.



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European Banking Monitor: Is the ECB Making Up the Numbers?

Positions in Europe: Short EUR/USD (FXE)


The ECB's Security Market Program, or secondary sovereign bond purchasing program, bought a paltry €59 Million in the week ended 2/10 versus a mere €124 Million in the week ended 2/3, and €63 Million in the week ending 1/27 to take the total program to €219.5 Billion. These diminutive figures compare to €2.243 Billion purchased in the week ended 1/17 and many weeks of low to mid single digit buying in the BILLIONS in previous months.  Frankly, we’re surprised that sovereign bond auction demand has been so strong across peripheral countries in the last three weeks -- successfully issuing paper at lower yields (versus previous auctions of similar maturity) -- without the ECB playing a critical role to fill demand.


With record levels of money being parked at the ECB’s overnight facility, much of which is a result of the 1st 36 month extension of the LTRO, we wonder just who is filling this sovereign paper demand.  Is the ECB making up the numbers?   We welcome your feedback on the issue.


European Banking Monitor: Is the ECB Making Up the Numbers? - 1. SMP



Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".   If you'd like to receive the work of the Financials team or request a trial please email .


Euribor-OIS spread – The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone.  The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. The Euribor-OIS spread tightened by 4.7 bps to 70.9 bps over last Monday.


European Banking Monitor: Is the ECB Making Up the Numbers? - 1. euribor


ECB Liquidity Recourse to the Deposit Facility – The ECB Liquidity Recourse to the Deposit Facility measures banks’ overnight deposits with the ECB.  Taken in conjunction with excess reserves, the ECB deposit facility measures excess liquidity in the Euro banking system.  An increase in this metric shows that banks are borrowing from the ECB.  In other words, the deposit facility measures one element of the ECB response to the crisis.


European Banking Monitor: Is the ECB Making Up the Numbers? - 1. ECB


European Financials CDS Monitor – Bank swaps were wider in Europe last week for 26 of the 40 reference entities. The median widening was 10.1%.


European Banking Monitor: Is the ECB Making Up the Numbers? - 1. banks


Matthew Hedrick

Senior Analyst


We are increasing our February GGR projection to HK$20.5-21.5 billion, or 6-11% growth YoY, up from our previous forecast of 1-9% growth. 



Macau generated HK$751 million in table revenue per day in the second week of February versus HK$809 million in the first 5 days.  We would’ve expected a bigger slowdown.  At this point, it is unclear if hold played a role in the better than expected week in Macau.  Remember that February 2012 is a tough month due to the timing of Chinese New Year, partially offset by an easy hold comparison and an extra day this month due to leap year.




In terms of market share, percentages have moderated after a volatile first week.  SJM is still trending above but much lower than the 34.9% posted last week.  Wynn also moderated downward but is still above trend.  On the other side, MPEL and Galaxy are moving back toward normal share after a hold-induced tough first week.



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