HOT YOUTUBE

In preparation for HOT's FQ2 2012 earnings release tomorrow morning, we’ve put together the recent pertinent forward looking company commentary.

Raymond James Institutional Investors Conference March 5

• "Our long-term target is to be at least 80% fee-driven, which means continuing to grow out our fee business around the globe, as well as continuing to sell assets, shrink that own portfolio and monetize some of the inventory we have at Vacation Ownership, which has been a meaningful cash contributor to the company."
• "We made some big changes to our SPG program that we think will allow us to lengthen our lead versus competing programs. You saw this with innovation such as allowing 24-hour check-in for our most elite members. What this means is when you fly over to Europe and land at 7:00 in the morning, you can check into that property that morning and have a 24-hour stay rather than having to pay for two nights for that true one-night stay." 
• "75% of our revenues are driven by the business traveler."
• [Fees] "Today... almost 60% non-U.S... and longer-term, we'd like to be at least 80% non-U.S. It shouldn't surprise you that when you look at our pipeline, 85% of our pipeline is going to be built in markets outside of the U.S."
• "So, supply growth is very low today and with very few signings for new hotels over the last four years and a three-year gestation period from when you sign a hotel until that hotel opens. We would anticipate that there will be a limited supply through at least 2014 and increasingly as we move through 2012, 2015 looks to be a benign environment as well."
• [REVPAR] "We expect mid to high single-digit growth in 2012. You would need 2013 to grow at a similar level just to get back to nominal RevPAR that you had in 2007, but you've had six years of inflation over that time period."
• "Without the new supply coming in, you would expect to see a potential scenario where demand is in excess of supply, and you can either grow occupancy with rate or trade up some of those occupancy gains to keep pushing rate until you got back to prior peak margins."
• "Occupancies at our owned hotels are actually back to prior peak levels. For the system, we're still running a few hundred basis points below where we were in 2007. But, these types of occupancies are high enough that you're able to drive compression in the hotels and be pretty aggressive about pushing rate, and we've been pushing rate hard. 
• "We're focused on growing SG&A roughly in-line with inflation, any additional SG&A growth will be driven by investments in select markets like Asia-Pacific where we need that growth to support our rapid unit growth."

Youtube from Q4 Conference Call

• "The impact of renovations and asset sales is most significant in Q1, a drag of almost $5 million. Also business conditions in Canada and Europe are sluggish right now. Our outlook assumes some improvement as the year progresses. As such, owned EBITDA is depressed in the first quarter. SG&A growth in Q1 will also be higher by $5 million than the full year run rate of 3% to 5% would suggest. This is due to some items in 2011 SG&A which were non-recurring."
• "We set a company record for new rooms added to our system, a record we aim to beat again in 2012." 
• [Vacation Ownership segment] "We have several years of inventory left to monetize and our team is looking at capital-friendly and high return ways to maintain our sales pace."
• "Our baseline scenario for 2012 targets REVPAR growth of 5% to 7%, which would translate into full year EBITDA of $1.06 billion to $1.09 billion, and that excludes $80 million from Bal Harbour. REVPAR will continue to be driven by growing demand. Quite frankly, I have yet to see a big customer who says they'll travel less this year than last year. Just like in 2011, our core customers – professional firms, tech, healthcare, and financial services, are profitable, have record cash on hand, and are scouring the world in search of growth." 
• "We have limited our cash exposure to the euro and Eurozone banks to the extent we can. As we have for the past several years, we have hedged approximately half our euro earnings exposure at $1.44 this year. We're holding the line on our hotel and above-hotel costs, and preparing contingency plans. Since most of our European regional overhead is also euro-denominated, our net earnings exposure to the euro is only 9%."
• "Our baseline scenario assumes that China and Asia will remain the engines of our owned growth in 2012, that trends we are currently seeing will be sustained through the year. A strong China helps commodity producers in Latin America, which was our fastest growing region in the fourth quarter. These trends are continuing." 
• "We are optimistic that U.S. travel will return to Mexican resorts in 2012. We are seeing significant renewed interest in Mexico from U.S. groups. We have also looked the possibility of a devaluation in Argentina and what our response would be. Our baseline scenario assumes another year of robust growth in Latin America."
• "We expect that 2012 will be a year of steady but unspectacular growth in the U.S....we expect a sequential slowdown from last year's 9% REVPAR growth rate."
• "With around 80% of bids accepted, corporate negotiated rates are up in the mid to high single digits. Lead volumes are up, as is average lead size."
• "Booking windows continue to lengthen. Group rates are rising. Group pace for 2012 is in the mid single digits. They're up even more in 2013 and 2014 [close to double-digit increases]. Transient momentum remains steady and strong. With occupancies approaching peak levels across the system, rate will remain the key variable to drive REVPAR in 2012."
• "The underlying rationale for our baseline scenario of company-operated global REVPAR growth of 5% to 7% in local currency. We expect Asia and Latin America to be at or above the high end of the range, North America to be in the middle of the range, and Europe, Africa, and the Middle East to be below the low end of the range... The dollar will be a headwind based on current exchange rates, pulling dollar REVPAR down by 200 basis points."
• "The Shanghai effect is behind us and Thailand has recovered, so current business momentum is in line with the high end of our outlook range. Also post March, we will benefit from comparisons in North Africa and Japan. In the latter part of the year, comparisons get easier in Europe. As such, the low end of our 2012 outlook range allows for a further slowdown in Europe and knock-on effects elsewhere."
• "On the owned hotel front, local currency REVPAR will be lower by 4% to 6%, and a further 200 basis points lower as reported in dollars.  34% of our owned EBITDA was derived from Canada and Europe in 2011. These markets will be a drag on same-store owned margin improvement and EBITDA growth."
• "We have some significant renovations underway in 2012 including the shutdown of The Gritti Palace, the Maria Cristina, and the Clarion at San Francisco Airport. Also under renovation in 2012 will be the Westin Peachtree, the Sheraton Rio, and The Westin Maui, among others. Our total owned EBITDA will be impacted approximately $10 million by 2012 renovations and the hotels we sold in 2011. Also across our hotel business, exchange rates shift negatively impact 2012 EBITDA by approximately $7 million, net of benefits from our euro hedge."
• "We continue to hold the line on SG&A costs, which will increase only 3% to 5%. More than 70% of the year-over-year increase comes from Asia and Latin America, where we continue to build infrastructure to support the realization of our large pipeline. In the developed world, our goal remains to hold costs as close to flat as possible."
• "In our Vacation Ownership business, trends remain stable. We will continue to focus on generating cash. We are targeting another $125 million in cash flow from this business in 2012, which includes the securitization late in the year. EBITDA will be roughly flat. To sustain the business, we are making selective investments in new inventory in tried and tested locations, generally where proven sales momentum warrants adding more warranty. Our baseline scenario is expected to deliver 2012 EBITDA of $1.06 million to $1.09 billion, not inclusive of income from Bal Harbour residential sales. Each point of REVPAR impacts EBITDA by approximately $15 million."
• [Bal Harbour]"Closings will be front loaded as we work through the contracts that have already been signed. Our sales team feels very good about current sales momentum. The buyer base remains largely non-U.S., particularly Latin American. Sales to date have averaged over $1,300 per square foot. We have been able to steadily raise prices after sales were relaunched. The project is coming in on time and under budget. Our baseline scenario assumes at least $80 million in EBITDA from Bal Harbour condo closings and at least $250 million in net cash." 
• "Including our Bal Harbour condo sales, baseline EBITDA ranges from $1.14 billion to $1.17 billion."
• "Baseline EPS for 2012 ranges from $2.22 to $2.33. Interest expense is expected to be $212 million. Reduction in interest expense from the paydown of debt is offset by interest that is no longer capitalized for the Bal Harbour project. This is why our reported interest expense does not decline as much as you might have expected. Our cash interest expense will in fact be almost $50 million lower."
• "Our estimated tax rate for 2012 is approximately 30%. This is higher than our normalized rate of 26% last year. The increase is largely attributable to the 38.6% GAAP tax rate on Bal Harbour income. It is important to note that there will be no cash taxes paid on Bal Harbour income since we have tax credits we are utilizing. Cash taxes in 2012 will be approximately $100 million."
• "We are stepping up capital spending in the hotel business on several major renovations as described previously. We are continuing investment to build our technology capabilities and drive our pipeline. Capital expenditure will be up $125 million to $575 million in 2012, $200 million in maintenance and IT capital, and $375 million in ROI projects. Despite the step-up in capital spending, we expect to generate at least $300 million in operating cash flow. 
• "As always, we are not including any asset sales on our outlook. We remain a seller of hotels where we can realize the values we want."
• "We feel good about the New York market. We don't know that it will necessarily lead REVPAR and rate growth in North America, but we don't think it's going to be soft either."
• "We're holding the line on costs with our Lean operations initiative and a variety of other programs. So you should assume that the cost growth is curtailed."
• "Tour flows, conversion rates, pricing all moving in the right direction. Delinquencies likewise going down, and so there's a return to a much more stable pattern."