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Takeaway: HST's guidance was good and tone was positive. We like hotels right now and think MAR and HOT were too conservative with guidance.

Very upbeat conference call - certainly more positive than other lodgers - following solid quarter and guidance


  • Driven by solid group and transient demand they were able to significantly exceed the guidance they gave at this time last year
  • Calender quarter basis RevPAR increased by 6.8%. 
  • Sandy impacted RevPAR by at least 1% in 4Q
  • While occupancy exceeds 2007 levels by 50bps, they are still below their historic highs reached in the 90s
  • Key driver of their business was the more than 4% increase in their group room nights, which allowed them to price up other business
  • Group nights only increased 1.6% in 4Q but group revenues increased 4%. This was negatively impacted by Sandy.
  • Business generally shifted towards higher rated segments in the first 9M of the year but 4Q was discounted due to the storm
  • Transient increased 6% in 4Q
  • Average rates achieved in 2012 was 9% below their prior peak
  • Expect that supply in the UUP segment will continue to be constrained and demand will benefit from international visitation and group demand. Expect that RevPAR will be more driven by rate
  • Group booking pace is up 4% in room nights and 6.5% in revenues for 2013.  Expect a strong year for their group segments
  • Transient is also ahead of 2012 pace and expect a solid year
  • REVPAR:  March results are expected to slow due to the early Easter Holiday 
  • Remain focused on selling non-core assets and reducing their portfolio allocation to secondary markets. 
  • Transaction volumes in 2013 should be similar to 2012.  They expect to be a net acquirer in 2013, but their guidance doesn't assume any benefit from acquisitions. 
  • Should also benefit from over a 20% reduction in maintenance capex spending in 2013 and reduce ongoing business disruption.  Expect F&B and other to increase 2-4% in 2013.
  • Stock is currently trading at a 40% discount to their replacement cost and at their 10 year average multiple
  • Market color:
    • Seattle: 17.3% (9% increase occ./4% ADR). Top performer in 2013 due to transient & group demand
    • Hawaii: 12.3% (4% Occ/7% rate): Solid in 2013 due to good group bookings but may have 2H13 disruption from timeshare construction
    • Houston: 11.6% (6% occ/ 3% ADR): Good 2013 due to better demand allowing them to shift to better rated segments
    • San Fran:10.9%.   Expect a decent 2013, but impacted by renovation of Mar Marquis in 1H13
    • Boston: 10.3%; Expect another good year in 2013 due to group bookings
    • Chicago: 8.8%.  Continue to perform well in 2013 due to better business mix and more group business
    • NY: 1.7%: Sandy and renovations hurt their results.  Excluding downtown hotels, it would be 5.3% on a calender basis. Expect a very strong 2013.
    • DC: down 4.3%. Impacted by cancellations due to Sandy and renovation disruption. DC RevPAR was up 21% in January. Expect 2013 to be better than 2012 but weak due government budget cuts.
    • Orlando fell 3.9%
  • Expect Euro JV to have 2-3% RevPAR growth in 2013. 
  • Margin growth was impacted by Sandy and unfavorable holiday shift. F&B only increased only 1% and profit from F&B declined due to a difficult comp.
  • Property taxes increased 5% in the 4Q.  In 2013, expect RevPAR to be driven by ADR leading to good flowthrough
  • Unallocated costs to increase more than inflation in 2013.  Property insurance will also rise as will as property taxes (17bps).  Couple of initiatives from Brands will also pressure costs 10bps.
  • 2 items impacted comparability of FFO - 8MM gain on sale on land to JV in Maui. In 2013 the JV expects to start marketing the timeshare and their portion of expenses will be $4MM with no offsetting income.  Novotel Christ Church will reopen this year.  Combined, there are $19MM of FFO items in 2012 that will not be in 2013.
  • They recently moved to a calendar quarter year- they will provide comparable period comps when they report each quarter in 2013. 
  • Roughly 20% of FY EBITDA will be earned in 1Q; will provide quarterly guidance on their 1Q13 call


  • DC impacted January RevPAR by 1%.  They had 9% RevPAR growth in January.
  • Have 75% of their group room nights for 2013 on the books already
  • Total portfolio guidance for RevPAR:  Would be surprised if it would be dramatically different from SS RevPAR guidance. Will  be seeing a huge Helmsley increase, so it should be a tad higher.
  • F&B revenue has been more difficult to forecast than in the past.  In 4Q, excluding NY & DC they would have been up 4% - in-line with the rest of the year.  Given the uncertainty, they have chosen to go with a 2-4% growth rate which is hopefully conservative. 
  • F&B margins are 26-27% in general but flowthrough should be well above that - around 30-40% due to expected strong group business
  • They have not assumed that the sequester issues snowball into a bigger issue outside of the DC pain they should feel (and have seen some evidence of that already). Think that most of the impact will be felt in the Upscale segment vs. UUP.  Things could get worse but based on what they see today, things are solid.
  • In 2013, they would love to sell at least what they sold in 2012
  • Haven't really seen any significant impact from the sequester over the last 45 days. For the last 8-10 months they have been seeing reduced bookings from government sources.  However, assuming the sequester is coming they assume DC will be weaker. Think that government business is 6-8% of their bookings but this is a lower rated segment which they hope to continue to shift away from.
  • Would like to get to 3x leverage 
  • Given that they are in the process of selling / buying assets they don't want to give quarterly guidance right now 
    • Sounds like something material is underway - no? 
  • At this stage they still want to reduce leverage rather than buy back their stock
  • There are fewer opportunities in Europe (M&A) than the US. They are focused to acquire assets in Germany and London since they feel under represented there.
  • Think that less construction disruption will provide more than a 25-30bps RevPAR tailwind this year
  • The US gateway markets (Miami, California and Seattle) are the markets they are most interested in. They continue to be very bullish on the Brazilian market- preferably in existing assets and potentially in limited service new construction. Australia is interesting given demand trends and low supply.
  • They are looking to do some more development in the US.  Urban Limited service is what they are interested - but they will not make a big move to development.
  • The dividend they pay is to offset their taxable income. However, when they are at a point in the cycle where they don't want to be an acquirer of asset and will continue to sell assets, their dividend will increase.
  • Boston, NY, DC, S. Florida, San Fran, Seattle, etc is where they are focused on owning assets. Would like the bulk of their EBITDA to come from those markets. They already have 75% of their EBITDA coming from those markets already but would want to be even more concentrated. Think that they can reach their goal from just divestment but they are pre-disposed towards growth.
  • Think that they would get at least another 25bps of rate improvement if they were investment grade rated. Being investment grade also gets them better capital access. During difficult times, HY markets can shut down.
  • Most of the M&A activity has been in gateaway markets so far, but feels like people are starting to look outside of those markets now. 
  • While they have done a few large deals, they have built the company through smaller transactions 
  • Special Corporate rate increases are generally 5-6% 




  • The increase in total revenues for the fourth quarter and full year 2012 reflect the improved performance of the Company's owned hotels.... In addition, full year 2012 revenues benefited from the results of the ten hotels (nearly 4,000 rooms) that were acquired during 2011 and the acquisition of the Grand Hyatt Washington on July 16, 2012. These acquisitions increased revenues by an inremental $99 million for full year 2012.
  • Hotel RevPAR for the Company's joint venture in Europe increased 2.0%
  • 4Q Capex: 
    • Redevelopment and ROI ($22MM); Three properties with recently completed extensive redevelopment work, the Atlanta Marriott Perimeter Center, the Chicago Marriott O'Hare and the Sheraton Indianapolis, have performed exceptionally well, as RevPAR increased an average of 41% for full year 2012 compared to the pre-construction period in 2010
    • Acquisition ($39MM); HST completed the renovation of almost 750 guestrooms and opened the new concierge lounge in the Harbor Tower of the Manchester Grand Hyatt San Diego.... and began a $23 million renovation to all 888 rooms of the Grand Hyatt Washington. 
    • Renewal & Replacement ($121MM):  Major renewal and replacement projects completed during the fourth quarter included 459 rooms at the Washington Marriott at Metro Center, the 504-room North Tower of the Orlando World Center Marriott and 130,000 square feet of meeting space at The Westin Kierland Resort & Spa. 
  • Capex guidance for 2013:
    • Redevelopment and ROI: $90-100MM
    • Acquisition: $40-50MM
    • Renewal & Replacement: $270-290MM
  • On November 9, 2012 the Company entered into a joint venture with Hyatt Residential Group (the "Maui JV") to develop, sell and operate a 131-unit vacation ownership project in Maui, Hawaii adjacent to the Company's Hyatt Regency Maui Resort & Spa. The Company contributed a combination of land and cash to the Maui JV in exchange for a 67% membership interest and recognized a gain on the sale of land of $8 million. In addition to any profits from the sale of timeshare units, the Company also expects to benefit from synergies created with the existing hotel. Construction has begun and the project is expected to open in late 2014. 
  • On January 11, 2013, the Company sold the 1,663-room Atlanta Marriott Marquis...for ...$293 million and will recognize a gain on the sale of approximately $21 million in the first quarter 2013. 
  • On November 15, 2012, the Company sold its 94.8% interest in the 424-room Toronto Airport Marriott for proceeds of approximately CAD32 million ($32 million).
  • On November 30, 2012, the joint venture acquired a portfolio of five hotels consisting of 1,733 rooms in Paris and Amsterdam for approximately €440 million ($572 million) and the payment of an additional €10 million ($13 million) for the FF&E replacement fund. The acquisition was financed, in part, through the issuance of a €250 million ($325 million) mortgage loan by the joint venture. The Company's equity contribution of approximately €70 million ($90 million) to the joint venture in connection with this acquisition was funded with proceeds from the repayment by the seller of a €62 million ($80 million) note receivable that the Company had initially purchased at a discount of 38% in 2010, along with available cash.