• It's Here!

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

  • It's Here


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

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

HOT 3Q 2012 REPORT CARD - hottt


  • WORSE:  Underlying fundamentals softened in 3Q with weakness primarily driven by Canada, Argentina and China.  4Q guidance is also softer.  While HOT is optimistic that the slowdown is just a pause, things are definitely a bit more uncertain today than where we stood last quarter. 


  • WORSE:  The slowdown was much sharper in China than HOT expected.  The slowdown was countrywide, with modest growth in the North and East and modest declines in the South and West.  Including the new openings, HOT’s business in China was still up 25% YoY.
  • PREVIOUSLY: “We have seen a deceleration, but nothing precipitous. 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. 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.


  • SAME:  While Starwood did not specifically address this point on the call, net room growth was 5.7% in 3Q and there was no indication that openings should decelerate. So we believe that the prior guidance is still intact.
  • PREVIOUSLY: “On track to hit net rooms growth in excess of 4%”


  • BETTER:  Bal Harbour closing are proceeding better than prior guidance with an expected contribution of $135MM to EBITDA in 2012 vs. prior guidance of $120MM.  HOT did not comment on sell out timing but reiterated that they are on track to meet their sellout goal of $1BN in condo sales.
  • PREVIOUSLY:  “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.


  • WORSE: Asia Pacific RevPAR slowed to 4.3%, driven by business in China held back by a weaker exports and the new government and tighter monetary policy. Latin American RevPAR fell to just 3%, driven by a 16% decrease in Argentinian RevPAR.  Africa & ME was better though with RevPAR growth of 7% due to strong results in Saudi Arabia and Dubai.
  • PREVIOUSLY:  “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.”


  • LITTLE WORSE: There was no comment on the transient business mix.  Group (particularly large group) was sighted as an area of weakness that’s expected to get better in 2013.  Corporate rate negotiations are on hold until post election but high-single digit increases are still expected for 2013 given peak occupancy levels.
  • PREVIOUSLY:  "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.”


  • WORSE:  HOT lowered their FY forecast to 5-6%
    • “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. This underpins our unchanged outlook for 2012 REVPAR growth at company-operated hotels of 6% to 8% in local currencies. Based on results to-date, we're likely to finish somewhere in the middle of this range.
    • 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.”


  • BETTER: Starwood completed the sale of the Sheraton Manhattan, W-Chicago Lakeshore and W-LA in 3Q for a net proceeds of ~+$500MM
  • PREVIOUSLY: “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.”


  • SAME: Group is still pacing in the mid-single digit range for 2013.
  • PREVIOUSLY: “On group pace, we've continued sort of our run of strong mid-single digit numbers for the pace in the rest of the year. It's been something that's actually, as we talked about before, 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.”