• It's Coming...

    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

In preparation for MAR's FQ1 2012 earnings release tonight, we’ve put together the recent pertinent forward looking company commentary.

  • “As of year-end 2011, our group revenue pace for 2012 is up 9% and room rates continue to improve. For group revenue booked in 2011 for the following 12 months, room rates are up 3%. And for the transient business, approximately 80% of our special corporate rates are now negotiated with room rates running up at a mid single-digit pace.”
  • "Group revenue booked during the fourth quarter of 2011 for the next 12 months increased 16% year-over-year with 3% coming from rate while total group revenue on the books for 2012 is up 9%."
  • "As the bookings made in recession years in our large convention and resort hotels continue to burn off, we expect our group business will continue to strengthen."
    • “Our hotels in Japan have seen a remarkable recovery since the March 2011 tsunami. In December 2011, the Ritz-Carlton Hotel in Tokyo reported an 89% occupancy rate compared to just 28% last April. Demand from domestic Japanese travelers has led the recovery, but we expect growing numbers of international guests and easier comparisons in 2012. “
    • “The economy is Europe is concerning; government related travel has been weak in the UK provinces for some time largely due to government austerity programs. We estimate government related business represents 10% of lodging industry demand in continental Europe, so a broader adoption of such programs could have a negative impact on the industry.  Although the European economy is soft, 30% of our European lodging demand comes from outside Europe with about 20 points from North America and 7 points from Asia. We also benefit from a heavy concentration of hotels in international gateway markets. The Olympics in London this summer should also be a shot in the arm. Combined with a strong U.S. dollar, we hope for a strong tourist season this summer in Europe.”
  • "In the Middle East, local economies should be benefiting from higher oil prices but political unrest and the weak European economy continues to discourage travel, particularly to Egypt. While we can't predict future political unrest in the region, impact from the Arab Spring began in February 2011 so most of 2012 should at least benefit from easier comparisons. "
  • "San Francisco, Los Angeles, and Chicago were strong while some markets in the Eastern U.S. lagged a bit.  West Coast markets had both strong transient business and last minute group booking. New York RevPAR growth was moderated by new supply and competitor discounting. In Washington, our RevPAR increased modestly in the quarter but continued to be constrained by weak government business. Philadelphia had a very strong quarter following the completion of a public space renovation at the 1400 room Philadelphia Downtown Marriott."
  • "At year end, our pipeline increased to over 110,000 rooms worldwide with nearly half of the rooms in international markets.  Today, roughly 40% of our worldwide pipeline rooms are under construction and another 10% are pending conversion."
  • Guidance:
    • For 2012, we expect worldwide system wide RevPAR to increase 5% to 7%, reflecting strengthening group business. With roughly 30,000 group room additions – gross room additions, we expect adjusted fee revenue to increase 8% to 11% and incentive fees decline roughly 20%.
    • In 2012, we expect diluted earnings per share to increase 16% to 25% year-over-year to $1.52 to $1.64
    • For the first quarter, we expect diluted earnings per share to total $0.26 to $0.30 assuming a 5% to 6% worldwide system wide RevPAR increase. We expect fee revenue to increase 6% to 9% over 2011 first quarter adjusted levels.
    • We expect investment spending 2012 to total $550 million to $750 million including about $50 million to $100 million in maintenance spending.
    • We expect the [timeshare] transaction will generate approximately $400 million to $450 million of cash tax benefits over time, a bit better than our earlier expectations. We recognized about $80 million of these cash tax benefits in 2011 and expect to recognize about $115 million to $125 million in 2012.
    • Assuming incremental investment opportunities do not appear, we expect to return roughly $1 billion to shareholders through share repurchases and dividends in 2012.
  • "We're encouraged by our first period results. For January, system wide RevPAR at our North America hotels was up roughly 8%. For international hotels, RevPAR was up roughly 4% on a constant dollar basis in January, reflecting an earlier Chinese New Year in 2012. Given our 13 period fiscal year, our first quarter international RevPAR statistics will include only January and February so we won't see the easing comparisons in the Middle East and Japan until the second quarter."
  • Q: “So you generally expect the group rates to improve throughout the year as we look forward”
    • A: "That's absolutely right. Now it obviously varies significantly by hotel, but the group business on the books for 2012 at the beginning of the year is probably about 70% of the total group business that will actually stay and pay in 2012. So we'll get building rates on the business booked in the year for the year compared to the average, but they won't dramatically shift the total rate performance of the total group segment."
  • "There's a little bit of recycling in 2012, not around these EDITION hotels, but around some loans that will be paid off that we would anticipate happening. Total order of magnitude, $100 million."
  • Q: “Are you anticipating that debt will increase in 2012?”
    • A: “Sure, because we're anticipating the increase in EBITDA, or adjusted EBITDA from the rating agency standpoint. So based on that we have debt capacity and we'll use it.”
  • "We're sort of assuming that we have modestly positive RevPAR in Europe, plus two points or three points in comparable hotels. I think if you look at the risks in the model, probably the biggest single risk would be that we could do worse than that in Europe. Now, remember, we talked about 9% of our total fees are coming out of Europe, so you can do the math. If we lost 10%, really, of our RevPAR and therefore of our fees in Europe, that's only 1% of the total so it's not enormously crucial to us. But we don't have tremendous confidence that we have clear insight into the way Europe will perform in 2012."