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