• It's Here!

    Etf Pro

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

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

 

OVERALL

 

BETTER:  While guidance for the balance of the year was effectively unchanged, the quarter did come in a little better than expected on the back of strong performance in NA (relative to easy guidance) and strength in fees as well as some other one time items.  Results would have been even better if not for some one-time SG&A items

MAR 1Q13 REPORT CARD - mar444

 

2013 GROUP PACE

  • WORSE:  Group booking pace for the Marriott Hotels and Resorts Brand was up 4% for remainder of 2013, reflecting a more cautious short-term corporate demand environment
  • PREVIOUSLY:  "As of year-end, our Group pace was running about 6%, probably a little more rate than occupancy in that."

BOOKING WINDOW

  • BETTER:  While management did not specifically comment on the booking window on this call, the fact that short term bookings for group are suffering warrants "caution."  Longer-term bookings are showing strength with 2014 booking pace "improving dramatically" to being up 5% vs. being down 4% just a year ago.  This commentary was consistent with what we've heard from MAR's peers.
  • PREVIOUSLY:  "You're seeing the window lengthen a little bit. It's not lengthening a lot, but it's lengthening a little bit which means those groups are saying, I need to book it now... or I'm not going to get those dates I want out there because the occupancy has strengthened."

NEW EDITION HOTELS

  • SAME:  The hotel openings seem to be on schedule and Marriott still intends to market them for sale once they open
  • PREVIOUSLY:  "We'll invest probably in those three properties you mentioned about $900 million in total. About $250 million of that will be in 2013. They're in various stages of completion. London will be finished and opened probably by June of this year. Miami, which is on South Beach, probably first quarter of 2014. And then the Clock Tower in New York City will be probably early 2015, give you kind of timing.  We'll recycle those hotels, sell those hotels shortly after they open, anywhere from six months, three to six months maybe after that, and recycle that capital."

LEVERAGE

  • SAME:  Marriott reiterated their position of keeping leverage in the 3.00x-3.25x range
  • PREVIOUSLY:  "We're a BBB company, investment grade. That gets us into the commercial paper market. That's where we want to be. So we try to stay at a 3.00x-3.25x adjusted debt-to-adjusted EBITDA. So as EBITDA grows, that creates debt capacity for that."

INCENTIVE FEES

  • BETTER:  Incentive fee growth was impressive this quarter.  What was even better was that some of the larger US hotels started paying fees. Marriott did not comment on 2014 or getting back to peak on this call but the takeaway was more positive on the margins.
  • PREVIOUSLY:  "What you'll see as we have those growth in rooms outside the U.S. in Asia-Pacific, Middle East, you're going to see an acceleration of incentive fees for those hotels. We're projecting by 2014, we'll be back at that $370 million level. But it'll be more international, less domestic."

CHINA/ASIA

  • WORSE:  Despite the transition in China being complete, the austerity measures in place on government spending are having a negative impact on RevPAR.  Thailand and Indonesia were strong but not good enough to offset China weakness.  MAR now expects RevPAR for Asia Pacific to increase in the low single-digit range, with the back half being better given the easier comps for China.
  • PREVIOUSLY:  "With the leadership transition complete, we think China travel should regain its footing later in the year.  We expect Thailand and Indonesia to remain strong throughout the year. In Asia, we expect first quarter REVPAR to increase at a mid single-digit rate, strengthening a few points as the year progresses."

NORTH AMERICA

  • LITTLE BETTER:  Given the strength in 1Q,  MAR raised the low end of their NA guidance by 50bps for FY13- essentially just carrying out the benefit of a stronger 1Q
  • PREVIOUSLY:  "Across North America, we anticipate systemwide RevPAR in 2013 will increase 4% to 7% in the first quarter and full-year. The high-end of that range reflects today's strong demand and limited supply. The low-end reflects our view that the federal government's inability to reach a comprehensive fiscal agreement will continue, and the automatic sequestration will go into effect on March 1."

CARIBBEAN AND LATIN AMERICA

  • WORSE:  While RevPAR was up 7% in 1Q13, Marriott guided to low single-digit increases for the balance of the year
  • PREVIOUSLY:  "In the Caribbean and Latin America region, we expect first quarter REVPAR will increase at a mid single-digit rate, improving to a mid-to-high single-digit rate for the full year. Here, we're more bullish than in October. While economic growth has slowed a bit in Brazil, we've seen lodging demand strengthen in Mexico and the Caribbean."

EUROPEAN

  • LITTLE WORSE:  European RevPAR was down almost 3% in 1Q, largely due to weak results coming out of the UK due to difficult comps from London Olympics.  Marriott still expects flat RevPAR growth for the balance of the year.
  • PREVIOUSLY:  "In Europe, we expect some modest improvement in GDP in 2013, but given the tough comparison to the Olympics and other events, we are still expecting flattish REVPAR growth for the quarter and the full-year, similar to our outlook in October."

MIDDLE EAST AND AFRICA

  • LITTLE BETTER:  1Q RevPAR grew 11% and FY guidance was for high single-digit RevPAR increases
  • PREVIOUSLY:  "In the Middle East and Africa, we are modeling a mid single-digit increase in RevPAR, consistent with our October outlook, with double-digit REVPAR growth in the first quarter."

FINANCING ENVIRONMENT

  • SAME:  Marriott didn't spend as much time on financing availability on this call. They did say that availability is getting better for high-quality limited service projects
  • PREVIOUSLY:  "We have seen on a limited service side financing getting a little better, but it's still under terms that are requiring the developer to guarantee the debt, provide credit enhancements. And the leverage isn't what it was way back when, so to speak. But that money is becoming available, especially from regional and local banks as the CMBS market has strengthened providing capacity for those. As to the full-service hotels, especially whether a suburban or even urban full-service hotels, we haven't seen new construction type financing. Now financing is starting to show up for asset sales, but not for new construction."