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:
- SLIGHTLY BETTER: HOT beat the quarter but left guidance substantially unchanged with minor revisions. Fears that RevPAR could worsen were diminished by mangament commentary on the call.
BAL HARBOUR
- BETTER: Mgmt raised Bal Harbour EBITDA expectations by $20MM to $110MM. At the end of 2Q, 22 condos were left to sell or close. HOT has been raising prices and recent square footage rates have exceeded $1,500.
- PREVIOUSLY: "As of the end of the quarter, we sold and closed about 86% of Bal Harbour residences. That means there's only about 40 units left, and we expect to complete the sellout this year."
CHINA
- WORSE: Growth in Q2 (0.9% constant-currency) was slower than expected. 3 headwinds at work: 1) govt's austerity policy, 2) natural events (e.g. bird flu, earthquakes) and 3) slowdown in GDP growth
- PREVIOUSLY: "As we look at China, our business is generally picking up...we expect the Q2 REVPAR trend in China to be in the middle of our worldwide outlook range of 5% to 7%. New deal signing and new hotel opening pace remain robust."
NA REVPAR
- SAME: NA revpar was 5.2%, constant-currency. HOT expects RevPAR growth in North America to step up in Q3 from June trends driven by transient demand. Leisure travel in both July and August is looking strong based on business on the books.
- PREVIOUSLY: "Helped by the holiday shift, we expect North American REVPAR growth to be sequentially higher at the high end of our Q2 outlook range of 5% to 7% for company-operated hotels. Rate increases should approach 5% as we hit peak occupancies."
GROUP BUSINESS
- WORSE: Group business has been tracking in the low single digits, while bookings for future years have been strong. Group paid for 2014 and 2015 is currently tracking in the mid single digits. HOT expects group softness to persist through the year.
- PREVIOUSLY: "Group business continues to pace in the mid-single digits."
SG&A
- BETTER: HOT lowered SG&A guidance to 2-3% for FY 2013, from 3-5% previously
- PREVIOUSLY: At the same time, we don't see the need to grow our SG&A faster than 3% to 5% a year. And most of our capital investments in making our system more attractive for owners is covered by our breakeven funds."
EUROPE
- SAME: Slow and sluggish. Mgmt expects similar performance in Q3.
- PREVIOUSLY: "As maybe expected, European companies are watching their costs, groups are smaller, staying closer to home and booking."
AFRICA/MIDDLE EAST
- SAME: REVPAR was up 7.5% in Q2. HOT expects growth rates in Q3 to tick down in this region for a couple of reasons. Egypt was impacted by the recent turmoil and Saudi restrictions are sharply reducing Ramadan-related travel.
- PREVIOUSLY: "With REVPAR up 7.1%, Africa and the Middle East was our fastest-growing region in Q1. Perhaps it has something to do with the fact that we were all there for the month of March. Jokes aside, the UAE is booming again with REVPAR growth of almost 14%. Saudi was up 8%. In North Africa, while the situation remains volatile, we are seeing some visitors return to the region. Egypt was up 30% in the quarter. We expect these trends to continue into Q2."
M&A
- SAME: HOT's actively in the process of selling our hotels. Overall hotel transaction market suggests that the first half of the year saw an uptick in volume in both the U.S. and Europe. Despite this, the market is still well below where it was pre-crisis when large portfolio deals were not unusual.
- PREVIOUSLY: "Our sense is that volume in this kind of environment should continue to pick up. In the U.S., it's the public REITs. There's the sovereign-wealth funds and high net worth outside the U.S. We are not yet seeing a market that is looking for what you might call large deals, truly multi-hotel deals, billion-dollar plus deals. It is still a market for one and two hotels at a time."
BUYBACKS
- SAME: Stock buybacks remain a priority
- PREVIOUSLY: "On buybacks, too, our goal is to be disciplined and be focused on buying back when we can, buy back at levels that are good relative to intrinsic value. You have seen us be very aggressive on buybacks in the past. So, again, this is something that we will review on a regular basis, and you should expect that our past behavior will tell you a lot about what we might do in the future."
