• It's Coming...

    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

Conservative Guidance, Bullish Commentary - stronger corporate group pace plus strengthening rate = upside leverage to the cycle

CONF CALL

  • Protea:  will close April 1 2014; paid 10x EBITDA
  • Transactions to date:  completed London Edition (netted $240MM), Renaissance Barcelona sales (netted $60MM, closed in Jan 2014)
  • US supply grew <1% in 2013
  • STR US 2014 supply forecast:  +1.2%
  • AC brand:  1st opening in early 2015
  • MOXY - have 12 in pipeline and 15 in discussion; expect 150 MOXY hotels in Europe in a decade
  • China:  economic growth has moderated; aggressively pursing domestic leisure market  
  • Worldwide STR REVPAR for MAR brand:  increased 1% full point in 2013
  • In last 7 wks, did $880MM in transactions
  • Expect $1.25-1.5BN in share repurchases in 2014
  • All Marriot branded hotels (500) will be available for mobile check-in in 2014
  • Unit growth is sustainable in developed and developing world, including US
  • Q4 Fee revs strong -  better REVPAR in international markets and strengthening group business in NA
  • Better branding fees and profit from leased hotels added $0.02
  • G&A:  $0.06 unfavorable from certain items
  • Tax line helped 4Q by 3 cents due to several discrete items
  • NA
    • Strong REVPAR in San Fran, Houston and Miami
    • NY had tough comps due to Hurricane Sandy
  • Bookings pace for MAR brand was up 4% for 2014 - similar to what they reported in 3Q.  Corporate group pace at 10%.  Since corp demand is quite short-term, the trend is very encouraging for 2014 
  • Group performance outperformed competitiors in 2013
  • 4Q Europe REVPAR:  +3% 
    • UK: +6%; Germany: +9%, Caribbean/Latin America:  +4% (constant currency), ME&A: -9%, Asia-Pacific:  +5%, Greater China: +3%
  • NA incentive fees: +34%; outside NA incentive fees:  -2%
  • FY 2013 worldwide incentive fees: 39% (32-33% in 2012)
  • 2014 REVPAR outlook:  Mid-single digit in Asia/ME; low single digit in Europe; high single digit in Caribbean/Latin America
  • 2014 incentive fees growth:  Low double digit rate
  • Outlook reflects lower termination fees, slightly higher preopening expenses, stronger profits from owned/leased and affinity credit cards
  • 1% REVPAR 2014 outlook sensitivtiy:  $20MM in fees, $5MM owned/leased line pre-tax
  • Plan to renovate several owned hotels; build the Fairfield Inn in  Brazil to launch that brand and to complete Protea acquisition
  • Sept 8 Analyst Day Washington DC Marquis hotel

Q & A

  • 2014 looking a lot like 2013
  • About 3,000 hotels in US;  expect DC to continue to be weak
  • MAR Marquis DC:  not likely to be terribly impactful
  • D&A changes - more transparency and better comparability
    • Contract amortization line broken out in CF statement
  • 4Q G&A unusual items:  Through 3Q, 33,000 signed rooms. By end of year, had 67k rooms; the record quarter signings drove more legal costs ($8MM), transaction costs related to Protea ($10MM), writeoff/impairments ($6MM)
    • Ex items, about $3-5MM of G&A above previous 4Q guidance
  • 2014 Group trends (does not include new DC hotel):  first 3Qs (+6%), 4Q weaker
  • Great December period for 2014 bookings
  • 2014 Non-room revenues will grow a few tenths of a % faster than REVPAR
  • Full-service/select-service:   full service doing better than select service - partly due to distribution and strong group business.  Residence Inn may be at lower end of REVPAR guidance.
  • Brand growth:  top-end brands + Courtyard
  • EDITION sales:  long list of bids for London
  • NY EDITION:  will open 1Q 2015 (about $350MM)
  • Miami EBITION will close for $200-230MM in late 2014.
  • European REVPAR guidance conservative?  Well, last year, Euro REVPAR was only up 1.5% YoY.  3%ish guidance is about right. 
  • Possibly more Courtyard sales in Europe:  $20-30MM each
  • 2014 REVPAR will be driven by rate
  • Group business always lags
  • There is more growth opportunities in US