Solid Q4 and guidance. Balance sheet in great shape.
CONF CALL
- Rate growth in group and transient segments
- Outperformed industry by 140bps in REVPAR in 4Q
- 2013 F&B increased 4% driven by strong catering activity (+4.8%)
- Room nights grew in transient/group in Q4 by 3.5%
- Group momentum picked up in Q4; Group REVPAR up 6.5% in Q4
- Corporate/association +7%, discount demand -5%; favorable mix grow results by ~+3%
- Sequester/shutdown impacted -1.5%
- Group will improve in 2014
- 70% booked
- +5.5% revenues
- Transient - higher retail/corp business was up +6.5%
- Rate up 4%, revenue growth 7%
- Higher-end demand up 9%, overall transient REVPAR 4%, revenues up 7.5%
- 2013 REVPAR - 2% below peak 2007; on an inflation-basis, 15% below 2007 peak
- 2013 occupancy exceeded 2007 peak
- 2013 F&B/group - 10% below peak 2007
- 2013 adjusted margins: 300bps below peak 2007
- 2013 comparable hotel adjusted operating profit: 15% below peak 2007
- Supply in industry will fall below long-term target in near term, excluding New York
- New Nashville hotel: fantastic start
- Powell Hotel
- Will be rebranded as UUP hotel
- Retail space cost $42MM
- $365,000 per key
- 6 Transactions in last four months: 5 NA, 1 Europe for ~$540MM
- Lodging recovery progressing well
- West Coast: +8.1% REVPAR (ADR: +5.6%), continued mix shift from contract to higher-end transient business
- San Fran: +14% REVPAR (+13.7% ADR)
- San Diego: +10% REVPAR (+4.6% occu); F&B: +11.6%
- Hawaii: +2.5% REVPAR, construction of timeshare impacted results;
- San Fran, Seattle, Hawaii will outperform in 2014
- San Diego, LA will perform in-line in 2014
- New Orleans: +22% REVPAR (+20.5% ADR) - benefited from 3 strong, high-rated medical city-wide events
- Houston: +14.3% REVPAR (+15.7% ADR)
- San Antonio: +12.5% REVPAR, strong group ADR; expect REVPAR to be negatively impacted by renovations in 2H 2014
- Philly: +16.9% REVPAR (+12.3% increase in demand)
- Boston: ~+11% REVPAR
- NY: +3.9% REVPAR; market REVPAR: -0.1%
- DC: +1.8% REVPAR; +8.8% REVPAR comparable hotels in downtown, -6.5% REVPAR decline in VA/MD surburbs
- Expect 2014 East portfolio to outperform due to Super Bowl
- Calgary: +13.8% REVPAR
- Latin America: +7.1% REVPAR
- Asia/Pacific: +7.0% REVPAR
- International: unfavorable FX impacted REVPAR
- JV: +5.1% REVPAR in constant euros
- Expect better performance in 2014
- Encouraging signs in Europe
- 54.2% flow-through in F&B
- Still room in occu growth particularly in Group but 2014 REVPAR will be driven mostly by rate
- 21% of FY EBITDA will be in 1Q 2014
- $310MM cash
- Debt - $4.1BN
- Weighted average debt maturity: 6 years
- Year-end leverage is lowest in the industry
Q & A
- A hair on the conservative side for 2014 guidance
- Other revenues (e.g. spa): 15-20% below 2007 peak; has been lagging
- F&B revenues: up slightly in occupied room nights
- Looking to outsource restaurants to 3rd party- profits will increase but revenues will be lower
- Leverage goal: 3x; at end of 2013, fairly close to 3x
- 2012 group rate: +2.7%-+2.8%; 2013 is similar
- Will be active in transaction market in 2014; want to be a net acquirer
- Particulary in Europe (i.e. Germany, Spain), but not in London
- Powell Hotel value of retail too high? Have already received unsolicited offers for higher than the $42MM they paid
- HST underperformed compared to C-corps
- Dividend yield: +3%; expect dividends to grow
- Disciplined in acquisitions
- NY: high level of supply but bullish on the market
- Will outperform portfolio due to Super Bowl, Citywide and strong Group activity on the books
- Renovations will help too
- 2014 dispositions: should be in-line with 2013
- Q1 REVPAR: stronger quarter relative to rest of quarters in 2014; will be at high end of 5-6% REVPAR range
- 4Q group room nights growth was great; revenue booked for 2014 in 4Q is up YoY
- Marriot Marquis DC will adversely impact results in 2H 2014 - but captured in the 2014 guidance
