HST 2Q 2013 CONFERENCE CALL NOTES

In line

 

CONF CALL NOTES

  • Feel good about the outlook for 2013
  • Strong F&B and audio/visual in 2Q but do not believe strong pace to continue
  • Strong increases in ADR
  • Group and transient demand increased 2.5% - rate increased 3.5%; outpaced industrywide pace
    • Transient rev 6.4%
    • Group revs +6.2%
  • All segments benefited from mix shift as highest price transient demand increased by nearly 9%;  higher price corporate demand increased by over 7% 
  • Govt contracts fell more than 10%
  • Gov business represented 6% of its business; govt group business was up 35% and transient declined 4%
  • Remainder of 2013:  group will be weak in 3Q as middle of quarter tends to be influenced by discount business
  • 2014 group room nights and rates are higher YoY
  • Have not included any additional acquisitions in guidance
  • Sold Ritz-Carlton San Fran at $479k
  • Completed room renovation at Philly Airport Marriott
  • 2H 2013:  Short-term group will be weaker than last year while transient demand will remain robust
  • Houston:  top performing market, REVPAR +16.1%; shifted out lower rated group business; expect 3Q to outperform
  • Seattle:  +14.5% REVPAR; both group and transient drove rate; expect 3Q to be solid
  • Atlanta:  +11.4% REVPAR; NCAA Final Four drove rate; strong citywide calendar will lead to a strong 3Q
  • San Francisco:  +11.2% REVPAR; room rates will lead to a strong 3Q
  • Chicago:  +10.9% REVPAR; boosted by city-wide demand in May/June; F&B +17.6%; expect 3Q to continue to outperform
  • Los Angeles:  +8.8% REVPAR; expect solid 3Q as strong transient demand persists
  • NY:  +5.7% REVPAR; large increase in supply have suppressed rates; expect 3Q to hold up relatively well compared with rest of competition
  • Boston:  +2.2% REVPAR; expect 3Q to improve but will underperform the rest of the portfolio
  • DC:  +0.30% REVPAR; expect 3Q to underperform 
  • Latin America:  -10% REVPAR;  expensive renovations at JW Marriott in Mexico City - renovations will be completed in 3Q and unrest in Brazil
  • Calgary Marriott:  +3.6% REVPAR, despite flooding in Alberta, CA; flooding has adversely impact Calgary's biggest event - Calgary Stampede; expect 3Q to underperform
  • Euro JV:  +3.9% REVPAR (constant euros);  
  • Successful refi on Euro mortgage loan:  37MM euros, all-in rate of 4.5%
  • F&B up due to positive mix and solid catering contribution
  • Corporate group business was healthy 
  • REVPAR will continue to be driven by rate
  • Utility rates will likely increase
  • Insurance costs will increase at inflation rate
  • 20-24% of 2013 EBITDA will be earned in 3Q

Q & A

  • Weak group business in 3Q but stronger group business in 4Q
  • Group in 2H 2013:  room nights about flat but revenues will be up 3-3.5%
  • Transient pricing should accelerate further
  • Non-room revenue:  April was stronger in general; new retail at Marquis helped results
  • Forecast issuing another 5 million shares for the rest of 2013 but it will depend on M&A outlook
  • Continue to drive transient business into higher-priced segments
  • 2H 2013:  lower growth in other income (rentals/retail)
  • Hyatt Place Waikiki Beach return expectations:  unlevered IRR 9.5-10%; cap rate: 6%
  • Ritz-Carlton:  cap rate: 3%
  • Europe:  more single asset transactions, few portfolio on market because of challenging financial circumstances
  • Australia:  1-2 portfolios on market; overall feel good about the market despite lower commodity demand
  • One-time severence charge (Larry's departure at CFO) was incorporated in corp expense
  • Group:  37% of business (in the past, it was 40-41%)
    • Typically, 70-75% booked at beginning of year
    • Have 95% of rooms booked for rest of 2013
    • 2014 pace is higher
  • Would like to sell more properties but hope to be a net buyer
  • DC outlook:  not seeing group bookings pick up in 2014
  • NY outlook:  lots of new supply hurting rate growth; will host Super Bowl in 2014
  • Strong correlation between employment growth and corporate demand
  • Slow recovery in group
  • Probably Grand Hyatt DC would sell at close to where HST bought it; believes in the DC market long term

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more

REPLAY: Review of $EXAS Earnings Call (A Hedgeye Best Idea Long)

Our Healthcare Team made a monster call to be long EXAS - hear their updated thoughts.

read more

Capital Brief: 5 Things to Watch Right Now In Washington

Here's a quick look at some key issues investors should keep an eye on from Hedgeye's JT Taylor and our team of Washington Policy analysts in D.C.

read more