• 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.

Takeaway: HOT - we like it

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 - Despite selling 4 assets YTD and some FX headwinds, HOT slightly raised guidance on its core business.  Bal Harbour sales greatly exceeded expectations.  HOT maintains that it will return excess cash to shareholders and that debt levels will not be reduced further



  • BETTER:  Customers and developers are confident.  HOT remains upbeat on the US economy. Sequester has not had an impact given it's less 2% of its business.  HOT expects Q2 and 2013 US REVPAR to be in the high end of its 5-7% guidance range.
  • PREVIOUSLY: "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."


  • SAME:  Transient rates are up over 5%.  Group business continued to pace in the mid-single digits.  
  • PREVIOUSLY: "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.  Group business in the cycle has come back slowly but steadily and companies remain careful about growing their cost base." 


  • SAME:  1Q was similar to 4Q.  Mexico was strong (+10% REVPAR) but Argentina woes continue (-15% REVPAR).  Local inflation has significantly slowed travel into Argentina.  HOT expects Latin America to remain challenged in the near-term due to Argentina.
  • PREVIOUSLY:  "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."


  • WORSE:  REVPAR was up 5.4% (local currency), an acceleration from flat growth in Q4; Beijing was particularly soft, given its government exposure.  Southern China 1Q REVPAR was up 10%.  Q1 results in-line with its long-term outlook on China.  HOT expects China REVPAR to grow in the middle of the 5-7% guidance range for Q2 and FY 2013 from prior guidance of being at the high end of that range. 
  • PREVIOUSLY:  "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."


  • SAME:  Q1 REVPAR was soft (-1.3% in local currency), largely due to weakness in London, suggesting possible oversupply post Olympics.  Ex London, Europe was flat.  Southern Europe saw growth.  Groups are smaller and booking later.  1Q is not really a material quarter for Europe to its tough to extrapolate trends. HOT continues to expect Europe to exhibit modest (2-3%) REVPAR growth in Q2, but below its 5-7% worldwide guidance range.
  • PREVIOUSLY:  "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."


  • BETTER:  SG&A was 6% lower in 1Q.  They only spent $4MM of the $10MM severance costs guided for Q1. Higher costs are expected for the rest of the year.  HOT maintained its +3-5% SG&A guidance.
  • PREVIOUSLY: "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."


  • BETTER:  Vacation ownership is expected to generate ~$175MM in cash flow in FY2013 excluding Bal Harbour, up from prior guidance of $150MM for 2013. 
  • PREVIOUSLY: "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." 


  • BETTER:  HOT raised its Bal Harbour cash flow forecast from $100MM to $150MM for FY2013. 86% of the residences have been sold and only 40 units remain.  HOT expects to completely sell out by the end of the year.
  • PREVIOUSLY:  "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."


  • SAME:  Originated contract sales of vacation ownership intervals and the number of contracts signed were flat compared to 2012.
  • PREVIOUSLY: "Our Vacation Ownership business, we're assuming that we will maintain a flat business"