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In preparation for HOT's 3Q earnings release Thursday, we’ve put together the recent pertinent forward looking company commentary.






  • China:  “We have seen a deceleration, but nothing precipitous. It appears to us that the slower growth has to do with upcoming government transition and excess supply in a few cities.”
  • “You should also note that none of our 100 hotel projects has been put on hold”
  • “On track to hit net rooms growth in excess of 4%”
  • “Asia accounts for 65% of our pipeline, with China representing three-fourths of that.”
  • “We've seen an increase in active members outside the U.S. of over 50%. As of today, non- U.S. members account for 44% of the SPG active base and around the world SPG drives over 50% of our occupancy. SPG provides benefits to our guests, but also to our business. SPG Members spend more, give us business in tough times and they're our best brand advocates.”
  • “Bal Harbour …. sales momentum and pricing remain good. We now expect the complete sales of all Bal Harbour condos by the first quarter of 2014, if not earlier."
  • “Our hotels in North China continue to grow in the double digits. Eastern and Central China are growing in the mid-single digits. The South has been hurt by the slowdown in exports. Selected cities like Tianjin, Guangzhou, Hunan, which have seen a lot of new capacity, have short-term supply/demand imbalances. Tier two and tier three cities, where we have the largest footprint among the major high-end hotel companies, are experiencing double digit growth with very strong F&B momentum... through the first half of the year, our total revenue in China is up over 25% in local currency.”
  • “Our opening pace for new hotels is not slowing down. By the end of July, we expect to have opened 15 hotels and the rest of our openings this year remain on track. Year-to-date, we have signed 30 hotels versus 27 at the same time last year.”
  • “As we look ahead to Q3, momentum remains good in Asian and Middle Eastern markets, as well as Sub-Saharan Africa. North Africa has tougher comparisons. We anticipate a slowdown in Latin America, driven by the worsening situation in Argentina, where we also benefited from a big soccer event last year.”
  • “High occupancies are helping us remix our transient business, raise group rates and we anticipate an even better outcome from 2013 corporate rate negotiations than the rate increases realized this year.”
  • “At this point, we have no indications global companies are either restricting or cutting travel and meeting plans. As such, our best estimate is that recent trend lines will continue through the rest of the year." 
  • "Given the issues in Canada and Argentina, we're lowering our owned-hotel REVPAR growth range at the high-end from 4% to 6% to 4% to 5% in local currencies and only 1% to 2% in dollars. Europe, Canada and Argentina account for over 33% of owned rooms and almost 40% of owned EBITDA.”
  • “We remain committed to our asset sale program… We have several conversations underway, some at advanced stages. It is our practice to announce sales only when we close and when we have received the cash. We expect to close on several transactions before the end of the year. Our goal is to sell most of our owned assets over time and we have quite a few transactions in discussion at this point.”
  • “What did help us in the second quarter, which won't help us as much in the third quarter, is the comparison in Japan. Japan was up quite a bit because it was lapping the earthquake/tsunami last year at this time that added, probably 100 basis points to REVPAR in Q2. It won't help as much in Q3. We're assuming the situation in China remains roughly where it is. You saw that some other parts of Asia were doing pretty well. So we would say that Asia still is a region that will be at the high-end, if not somewhat higher than our overall 6% to 8% range and that's our best view, at this point.”
  • “On group pace, we've continued... our run of strong mid-single digit numbers for the pace in the rest of the year. It's been something that's actually allowed us to remix the corporate transient, or the transient side of the business, where we've seen revenue increases of sort of nearing 10% and, at the same time, we've reduced our opaque and lower-rated discounted business”
  • “At this point, we have not put any hedges in for next year."


In an effort to evaluate performance and as a follow up to our YouTube, we compare how the quarter measured up to previous management commentary and guidance






  • LITTLE WORSE:  Numbers were in line, but there was some weakness in the lodging and vacation exchange and rental drivers.  2013 guidance looks solid


  • WORSE:  RevPAR growth was up 2% or 3% on a constant currency basis.  WYN said that RevPAR growth appears to be slowing partly due more construction and that things have already recovered.  The company expects to be at the lower end of their guidance range for RevPAR.
  • PREVIOUSLY:  Systemwide growth of 5-8%


  • LITTLE WORSE:  Even with the addition of the 3,000 HPT rooms, room growth was only up 1% YoY.  It looks like WYN is going to end the year at the low end of their guidance range.
  • PREVIOUSLY:  Growth of 1-3%


  • LITTLE WORSE:  # of exchange members is tracking just below the low end of guidance.  In the release, # of rentals was +3% (our math says +5%) so they either missed the guidance range or came in at the low end.  Pricing on rentals was down 9% YoY or -2% on a constant currency basis, the lower end of company guidance. 
  • PREVIOUSLY:  # exchange members: -2% to flat; # of rentals: +4-7%; rental price per transaction: -3% to flat


  • BETTER:  Tours came in at +5% above the guidance range as did VPG which also came in at +5% - at the very high end of guidance
  • PREVIOUSLY:  Tours: +1-4%; VPG:+2-5%


  • SAME:  Room nights resulting from Brand.com initiative are up 17% YoY (both YTD and quarterly basis).  WYN has completely revamped 13 brand websites, significantly enhancing features, functionality, and content for over 7,000 properties. 
  • PREVIOUSLY:  “We've made significant progress over the past two years with one of our key Apollo initiatives, brand.com. Revenue in room nights across the brand portfolio are up approximately 20% from this channel year-to date in part due to improved content and Web functionality.”


  • SAME:  Because of improvements to RCI.com, WYN is on track to reduce call volume by over 30% from the inception of the project through year-end 2012, and expect a total reduction of almost 40% by 2015.  Their online web share increased from 13% to currently over 40% and it's still rising.  
  • PREVIOUSLY:  “We completed another successful release of rci.com, which included an upgrade to an innovative click-to-chat functionality with multiple language support. From when we started the project in the first quarter of 2008, through the end of 2012, we expect our migration to online transactions to improve our exchange in rentals margin by over 225 basis points.”


  • SAME:  Continue to target annual EBITDA growth of 6% to 8%, high single to low double-digit growth in their Hotel Group and mid single-digit growth in the Exchange and Rentals Group and Wyndham Vacation Ownership. 
  • PREVIOUSLY:  “We are committed to EBITDA growth of 6% to 8% with high single to low double-digit growth in the Hotel Group and mid single-digit growth in the Exchange & Rentals Group and Wyndham Vacation Ownership."


  • BETTER:  Lodging EBITDA growth exceeded expectations by 28% and 20%, excluding inter-segment fees 
  • WORSE:  Vacation rental and exchange EBITDA fell 9% and was flat ex FX impact
  • PREVIOUSLY:  “We expect Vacation Ownership and Lodging revenues and adjusted EBITDA to be at the high end of their respective ranges. We expect exchange in rentals revenues to be at the low end of its range and adjusted EBITDA to be at the midpoint of its range.


  • BETTER:  Adjusted 3Q EPS came in at $1.13. Using the 2Q period share count EPS would have come in at the high end of company guidance of $1.10
  • PREVIOUSLY:  “For the third quarter, we expect earnings per share to be $1.07 to $1.10. This is below the consensus, reflecting differences in both share repurchase assumptions and seasonality between the third and fourth quarters, however our guidance for the second half of the year is consistent with street expectations”


  • SAME:  same commentary as previous guidance
  • PREVIOUSLY:  “We expect sustainable annual free cash flow of $600 million to $700 million. We remain committed to an investment grade profile, which will enable us to increase debt by $300 million for every $100 million that we add in EBITDA. The result is $1 billion of available cash to deploy each year to increase shareholder value.”


  • SAME:  may do a couple of deals in the future
  • PREVIOUSLY:  “We've probably seen a little more activity recently, more deals seem to be coming to market, but it's not a dramatic change in the volume of our activity, and really kind of what has to change is the expectation of the other side because we're very disciplined. We're not going chase anything, so if deals don't make sense, they're not going to fit into our plan… I would probably characterize it as the pipeline is a little bit stronger than it was last year at this time.”


Takeaway: Across the board beat

In an effort to evaluate performance and as a follow up to our YouTube, we compare how the quarter measured up to previous management commentary and guidance.




  •  BETTER:  PNK provides very little forward commentary so we're not able to determine whether the company exceeded management's expections.  However, margins were so strong and the EBITDA beat was sizeable so we will chalk this one up to a Better.   


  • SAME:  The gaming decree is currently undergoing a review process with different ministries in Vietnam. PNK continues to expect phase 1 to open by 1Q 2013.
  • PREVIOUSLY: “"Vietnam is expected to follow a gaming tax model that is similar to that of Singapore. The gaming tax rate is 30% in Vietnam on a mass market play; however, it is our expectation that junket commissions will be deductible for gaming tax purposes. Therefore, the VIP effective tax rate will be materially lower."


  • SAME:  The 1,600 space parking structure is expected to open by the Thanksgiving holiday weekend.  Construction of the second phase of this expansion, a 200-room hotel and multi-purpose event center, has commenced with an expected completion date in the second half of 2013. 
  • PREVIOUSLY: “[River City] "We expect to have the first phase of development open and to the public in 2013. We're looking forward to having access to the garage later on this year, the multipurpose room will come online next before the end of next summer, and the hotel will be opened in the second half of 2013.


  • WORSE:  We expect the transaction to close in the first quarter of 2013. 
  • PREVIOUSLY: "We expect that transaction to close by the end of this year." 


  • SAME:  Excluding severance costs, corporate expenses came in at $4.9MM, in-line with guidance
  • PREVIOUSLY:  [Corp expense of ~$5MM sustainable?] "Yes, we can maintain that level."

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.51%
  • SHORT SIGNALS 78.32%

HMA: Admissions Growth

Health Management Associates (HMA) recently reported third quarter earnings that were in-line with consensus estimates. Same Store Admissions and Adjusted Admissions both deteriorated sequentially on a one-year basis but improved on a two-year basis. Everything from weather to a decline in uninsured admissions played a role in lagging volume growth.


The company lowered its guidance for SS admissions to between -3.0% & -5.0% but affirmed its expectation for FY2012 SS adjusted admission growth between -1.0% & +1.0%


HMA: Admissions Growth    - HMAstock

JCP: Is This How America Dresses?

Takeaway: The new Izod shop opens a discussion for JCP’s customer acquisition cost rising faster than revenue and competitive pricing pressure.


We like much or what JCP is doing to its merchandise right now.Note, that is by no means a change in tone for us. Our call has never been about product. It has been about the cost associated with changing around a retailing strategy by such a startling degree, and the extent to which JCP will wake several sleeping giants (KSS, Macys, Gap) with its aggressive pricing strategy which will ultimately come back and haunt them.


With that mouthful said, check out  the images below from JCP’s latest Izod store. Authors’ note: I’d wear some of that stuff. But that’s not the question to ask. Johnson’s goal is to transform JCP into ‘America’s Store’. Ask yourself if an autoworker in Detroit will wear this? How about a police officer in Columbus? No and No. We realize that we’re being very narrow in our definition of customers, but the reality is that the cost of customer acquisition is going up very dramatically. It’s hard for this product to have such broad appeal to the people that they already count as customers.


So the punchline for JCP is that the revenue delta will improve - but it won’t outstrip the painfully eroding cost delta. That’s bad for JCP. For others like Macy’s, Kohl’s, and Gap, it means that JC Penney is – come hell or high water – bringing more product into the US to sell at what it thinks will be very sharp everyday low prices. The thing that people miss is that 100% of this product WILL SELL. It’s just a question as to what price it sells. 

If there’s significant discounting needed, then it is bad news for these other retailers that need to compete with JCP by offering similar product at what is today elevated prices. When that course corrects, it will be painful competitively for each of these retailers, but will also create a vicious cycle that will come back to haunt JCP as well.

In order of shorts, we like M, GPS, KSS, CRI, JCP, SPLS, and UA.


JCP: Is This How America Dresses? - JCP IZod



Bearish TREND: SP500 Levels, Refreshed

Takeaway: In other words, the market is now bearish TREND.

The stock market is not the economy. Growth and #EarningsSlowing has not changed; the markets re-rating of those economic risks have.


Across our core risk management durations, here are the lines that matter to me most:


  1. Immediate-term TRADE resistance = 1426
  2. Intermediate-term TREND resistance = 1419
  3. Immediate-term TRADE support = 1404


In other words, the market is now bearish TREND. What was support is now resistance. If TREND resistance remains, long-term TAIL support of 1354 is in play.


Risk moves fast,



Keith R. McCullough
Chief Executive Officer


Bearish TREND: SP500 Levels, Refreshed - SPX



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