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In preparation for HOT FQ3 2013 earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary.




  • So, why are rates lagging? Group demand has been slow, which means that the order books are filling later, leaving group-dependent properties either reluctant to push rates or turning to lower year – yield channels
  • We expect REVPAR growth in North America to step up in Q3 from June trends, followed by transient demand. Leisure travel, in both July and August, is looking strong based on business on the books
  • North American REVPAR has been growing at about 6% through the first half and we are projecting that this will continue with rate accounting for 80% of the increase.


  • In the year, for the year group bookings have been weak this year, tracking in the low single digits, while bookings for future years have been strong. Group pace for 2014 and 2015 is currently tracking in the mid-single digits. We expect group softness will persist through the year.


  • Transient demand, especially corporate travel has remained robust. Helped by record low supply, occupancies hit new peaks. Rates were up 4%, accounting for 80% of the REVPAR increase. Rate realization has been held back by weak group demand, which is increasing room supply available for transient customers.


  • We've seen unrest in Brazil and most recently Egypt. And while Argentine prospects remain uncertain, for now at least they're not getting worse. Meanwhile, Dubai and the other gulf states are booming.
  • Business transient travelers have been the first to come back [Mexico] and our teams expect to build on its momentum for group and leisure. Meanwhile, resource rich economies like Canada and Australia felt the slowdown in demand for commodities. Both currencies have weakened and pulled the REVPAR growth below our system wide average
  • Middle East: We expect growth rates in Q3 to tick down in this region for a couple of reasons. Egypt, which was recovering nicely, is impacted by the recent turmoil and Saudi Visa restrictions are sharply reducing Ramadan-related travel. Things are expected to recover as we enter Q4.
  • With the crisis in Argentina and now a slowdown in Brazil, Latin America has struggled this year. Brazil was down 6% in the quarter, but by the demonstrations, a slowing economy and the impact of major renovations at the Sheraton Rio, which remains in the same store set. Mexico is helping mitigate some of this as it grows from increasing business activity as well as the return of the American vacationer.
  • As we enter Q3, we lap 16% declines in Argentina last year, so we might actually see Latin American REVPAR grow 5% to 6%.


  • Turning to Europe, the economic picture is still anemic overall. But as before though, our business is holding up pretty well. We attribute this to tight supply and our ability to bring in global suppliers to Europe – global travelers to Europe with SPG, and our global sales team.
  • Europe is steady but sluggish, as it has been for the past couple of years. It may surprise you that our strongest markets invest in Europe in Q2, were France, Italy and Spain, reflecting the mix of our business which is global and pan-European in scope rather than local. 
  • We expect this 2% to 3% growth rate to continue into Q3 as leisure travel looks good for the summer and we may benefit from Ramadan ending earlier in August.
  • We're lapping the London Olympics, so that will be a drag. While Greece is recovering well, Turkey could be challenged if riots persist. Recent news on the economic front has been more positive and pro-growth policies are likely as austerity fatigue sets in. We're cautiously optimistic that the worst may be behind us in Europe. 


  • India remains a soft spot and will likely remain weak until elections are completed later this year. Our results as reported in dollars have unfortunately been hurt by the sharp declines in the Yen, the Rupee, the Aussie dollar and other Asian currencies.
  • Asia accounts for most of our exchange rate headwind this year. The good news is that demand trends remain stable in the rest of Asia and we forecast growth rates to remain at the high end of our current global REVPAR outlook range of 5% to 6%.


  • In China, REVPAR growth continues to track well below the expectations we had at the start of the year.
  • We are reorienting our efforts to generate new sources of revenue from the private sector and consumer-oriented companies, which should benefit from the shift to consumption that the government seeks to drive. This is easier in the South and the East which have more diversified economies and higher per capita incomes, less so in the North and the West.
  • As we enter the second half, we begin to lap the slowdown in China last year.  As such, we expect REVPAR growth will pick up a bit to the 2% to 4% range.


  • Our vacation ownership business continues to perform very well. As you know, our priority here is to invest selectively with a focus on ROI, rather than earnings growth. 
  • Tours were up, close rates remain stable and price realization improved
  • Our loan portfolio continues to get better, with defaults at post-crisis lows. We will most likely complete our annual securitization of receivables in the fall. 
  • We still have 2 to 3 years of inventory at the current sales pace; we're selectively adding in Orlando, Palm Springs, and converting our resort in St. John entirely to timeshare over the next few years. 
  • Cash generation remains a priority for this business. We expect to deliver $200 million this year.
  • We're raising our full year forecast for SVO profits.  You should know that fourth quarter reported profits will be lower than last year, negatively impacted by GAAP deferral dynamics as well as some renovation activities at the St. John resort.
  • At the end of the quarter, we only had 22 condos left to sell or close. We have been raising prices and recent square footage rates have exceeded $1,500. Unfortunately, this gift will stop giving by the end of the year since we will be sold out. We are raising Bal Harbour profit expectations by $20 million to $110 million, and cash flow to at least $175 million


  • We're on our way to getting to a level where 80% of our profits will come from our fee business. Since 2000, as a part of getting there, we've sold 124 hotels, generated about $8.3 billion from those sales. We set a target of getting to that 80% by 2016. We think we can do this and we'll be selling approximately $3 billion worth of hotel assets as part of that process.
  • Selling $3 billion is probably about 60% to 65% of the value of our owned real estate. Somewhere, in that range would be our guess.


  • We expect that through the growth of our fee business, as we continue to expand our footprint and expand share, the performance of our owned hotel portfolio and cash that we'll be able to generate from our vacation ownership business, we'll be able to generate approximately $2 billion in cash. Add to that additional balance sheet capacity as we grow our EBITDA, it could be in the area of $3 billion that we will use to either redeploy within the business to grow it further or return to shareholders. And that doesn't take into account some cash that we could generate from the asset sales.
  • We will also discuss moving to a quarterly dividend starting in 2014. Stock buybacks remain a priority. 
  • I think we've made it very clear, we have no aspirations to being anything other than a triple B. Clearly, our ratio, as you said, are well below those levels. There were reasons why we couldn't be buyers in the second quarter. And those reasons are not relevant anymore, there are no constraints on our ability to buy and clearly there are no constraints in terms of our leverage and our ability to buy.