HST 4Q 2013 CONF CALL NOTES

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

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