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In preparation for HOT's 1Q 2013 earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary.

INVESTOR DAY

  • 2013-2015 outlook: "Growth in RevPAR 5% to 7% and again important to recognize that this is much more rate driven than further occupancy driven. So, even though that number isn't maybe as high as it might have been earlier in the cycle, which is typical, it is I think a more profitable growth in RevPAR there. That leads to 10% to 12% growth in EBITDA and then 15% to 20% growth in EPS."
  • "If you look at where we are at the moment, we have 21 hotels in UAE. That is almost half of our portfolio in this region today. When you look at our pipeline, you see that our growth is actually more in the other countries in the Middle East. So 34% of our portfolio growth will be in the UAE and 66% is outside of the UAE, with this very strong focus on new markets like Tajikistan, Kazakhstan, Kurdistan. Until now, we grew 10 hotels per decade. From now on, we will grow 10 hotels each year. And by 2019, we project to operate 100 hotels in this region."
  • "If you look at the year 2000, this was still very much a U.S. company, 63% of our profits and fees came from the U.S. Today, it's well over a half coming from outside the U.S. Our goal here is also to be at 80/20 that's because that's where we feel the growth is being. In fact as you will see soon if you look at our pipeline, it's already 80/20, 80% of our pipeline is outside the U.S. and therefore, we're well on our way to achieving those goals as we open new hotels."
  • "It's important to note that we have a platform in all the key parts of the world now. So, we can grow without adding a lot of G&A. We've established sufficient scale by investing a lot in the last few years, and we will continue to invest where there's growth, like in the Middle East, like Africa, like Asia. But we have platforms everywhere now. There's no place in the world where we have not put a platform in to support the growth, which is why we've been able to only grow our SG&A 3% to 4% a year, while investing heavily in some parts of the world."
  • "In the last four years, we've generated almost $800 million in cash from the timeshare business, expect to do another $150 million to $200 million this year. So, we would have $1 billion in cash coming out of our timeshare business over the last five years. So we're running that business more for cash than earnings growth, and that has worked very well for us. 
  • "Bal Harbour, $460 million in cash last year, more cash this year. That's gone from being a place where we were putting money in to finish the project to significant amounts of cash coming out of it. That'll all be done this year in 2013, we hope to finish, sell out this year. It is not our intent to do projects like these, but in the meantime, it's been a major source of cash for us over the last couple of years."
  • "Our dividend today is the best among U.S. lodging companies. C-Corps, we have a 2% yield. We raised our dividend last year. We can sustain it. So, we are not only – incredibly strong balance sheet, we also pay a very healthy dividend in addition to having the capacity to do buybacks."
  • "Over the next three years, this supply situation is not going to change very much, which makes us optimistic that the recovery in the developed markets or the mature markets will continue for sure over this three-year timeframe and the situation in Europe is no different."
  • "Europe has demand challenges, but our most predictable business last year was Europe. It stayed very steady, growing in the 2% to 3% RevPAR range, it did not surprise. 2% to 3% is not spectacular growth, but it didn't go negative despite a recession. And a lot of that is because there's no supply."
  • "Our incentive fees are driven by significant amount of growth in the emerging markets."
  • [Timeshare]: "So assuming we spend $50 million to $60 million or $70 million in capital each year, we can continue to maintain the business at its current level of performance, while generating the $150 million to $200 million in cash that we have been generating."
  • "Incentive fee growth will be faster than base fee growth for all the reasons we've talked about. They're linked to profit, margins are expanding, profits generally grow faster than RevPAR at a typical hotel. That gets you to 9% to 12% franchise – management and franchise fee growth. Here again, coincidentally, one point of REVPAR, again cumulatively over three years; by 2015, would impact management and franchise fees by $20 million to $25 million."
  • "Our Vacation Ownership business, we're assuming that we will maintain a flat business"
  • "We have a stated strategy of selling hotels. We think the market is improving. If you look at the U.S., the public REITs have been very active and we've been very active in selling to them. The markets are good for public REITs to issue equity. There's no supply. So if you want to add hotels, it's better to buy them than build them."
  • "Our BBB rating.... 3.5x [leverage] is comfortable.  There is no question that we can have a higher debt load than we have today."
  • "There is no more debt to pay down."
  • "What does vary is the group transient mix. In the U.S., [transient] tends to be about a third of the business as group, whereas outside the U.S., it's probably more like 25% sometimes less. It's also a group that doesn't book as much in advance outside the U.S. as it does in the U.S. So, the group business is not as significant in many markets as it is in the U.S."
  • "F&B as you heard is far more important outside the U.S. than it is in the U.S., especially when you get to markets like these where the F&B mix can be 30%, 40% whereas in the U.S. it's probably more like 25%."
  • "If the debt markets really heat up and it sort of feels like they're heading in that direction, I could see some joint venture refinancing opportunities that might be another avenue to realize some value."
  • "We would assume that Europe would be at or below the low end of the (+5-7%) range. U.S. will probably be more in the middle of the range. Latin America is a mixed bag. We're still hopeful that China will reaccelerate once these big leadership transitions are complete. That will pull along a variety of other economies. So we're still hopeful that the growth market, whether it's the Middle East, Asia, China will be at the high end of the range."

YOUTUBE FROM 4Q CONFERENCE CALL

  • "Business activity continues to rise but with very few new build hotels coming on stream. So occupancies remain at near peak levels. If the U.S. economy continues on this trajectory, the basic laws of supply and demand suggest that we'll see strong growth in room rates for the next few years."
  • "Europe remained at a stalemate during 2012 and we're not expecting much different in 2013, even though southern European bond spreads suggest rising confidence."
  • [China] "With that behind us, we're seeing demand pick up as government activity starts to resume and business returns to normal....In January, Chinese REVPAR was up 6%. The transition is still ongoing with significant meetings coming up in March when the new leadership formally takes over at multiple levels and new policies are announced. As such we expect the rate of growth to pick up as the year progresses and year-over-year comparisons also become easier."
  • "Corporate and retail transient momentum is strong. Rooms sold in opaque channels are declining improving rate realization. Group pace is tracking in the mid-single digits for the year."
    • "Leads were up 27% in Q4, booking windows continue to lengthen. Group business in the cycle has come back slowly but steadily and companies remain careful about growing their cost base. We expect that negotiated corporate rates will be up in the mid-single digits in 2013."
  • "Business travel in Mexico is up, and American leisure travel is coming back. We expect Mexico to be the engine of Latin American growth for us in 2013. At the other end of the spectrum is Argentina, where we have two large owned hotels. Argentina REVPAR is declining while local inflation hits 25%, squeezing our margins. The inflation devaluation gap is hurting Argentina's competitiveness, and hitting exports and travel. This is only likely to get worse until the devaluation resets the equation. Brazil hit a soft spot as China slowed, but is now recovering."
  • "In Q4 and into Q1, we have been making additional adjustments, incurring some severance cost of approximately $9 million in Q4 and potentially another $10 million in Q1. These costs are included in our SG&A growth estimate of 3% to 5% for 2013."

HOT YOUTUBE - HOT