HLT 4Q 2013 CONF CALL NOTES

02/27/14 11:40AM EST

Not your Father's Hilton - A really solid quarter operationally. Don't fret about guidance, Q1 should be another beat.

CONF CALL

  • HLT: Global leading RevPAR industry premium at 15%
  • #1 in pipeline, rooms under construction worldwide
  • Further migration to capital-light model; will consider divest RE in the future
  • Timeshare:  54% of interval (3rd-party); 78% of year-end inventory was capital-light
  • 2013 Systemwide RevPAR 5.2% with 3.3% in ADR and 1.3% occupancy gains
  • Transient growth outpaced group but group picked up in latter part of 2013
  • Group particularly strong in big-box hotels (+10%)
  • RevPAR industry premium grew 1% in 2013 
  • 60% pipeline outside of US
  • ME pipeline- largest in industry with 20k rooms
  • Rooms under construction: 25% higher than nearest competitor
  • Have not lost focus on growth in US
  • Net unit growth to accelerate in 2014/2015
  • DoubleTree:  fastest upscale brand in lodging; doubled in size since 2007
  • China:  +6.7% REVPAR in 2013
  • Asia/Pac: 55k rooms in pipeline
  • Waldorf-Astoria Beijing opened last week
  • Luxury: Conrad/Waldorf-Astoria:  doubled since 2007, 27 properties in pipeline
  • Hilton brand:  554 hotels opened; 150 projects in pipeline (95% non-US)
  • Home2Suites: opened 28 hotels and 100 in pipeline
  • Hilton Garden Inn: 214 in pipeline with 16 hotels in China 
  • Mobile:  8x increase in revenues; doubled in last few months
  • 2014:  
    • Rate up meaningfully; group business (8 big-box hotels) up 10%; medium-sized group business up 7%
    • Modest growth in US but better than 2013
    • Outlook for Japan is very strong 
    • China 5.5%-6.5% REVPAR in 2014, down from 7% from 2013
    • London will be stronger in 2014 due to stronger group revenue, trending +20% in 2014.
    • ME&A:  continue to be strong
    • Egypt remains highly volatile
  • Growth rate in Q4 slower than previous quarters due to decreasing govt business resulting from govt shutdown
  • San Fran/Hawaii:  +13%, +12% RevPAR
  • NYC:  +3.5% RevPAR;  owned hotels:  +4% RevPAR
  • EUROPE:  +3.9% RevPAR driven by occu (Germany, Austria, .....)
  • Asia-Japan:  +7% RevPAR
  • Hilton Waikiki new timeshare development: sales begin in 2014; construction will begin in 2016
  • Fixed/floating debt:  50%/50%
  • Term loan at end of 2013:  $6b
  • Weighted debt: 4.2%; 6.2 yrs maturity
  • UK-bad weather would impact fees in Q1
  • Share-based comp $25m benefit reversal from accrual

Q & A

  • $700-$900m 2014 cash balance for debt reduction
  • Debt repayment of $700-$900m result in coverage of 4.5x 
  • China:  GDP moderating; still generally pretty positive; higher-end hotel development has slowed, mid-scale development has picked up; the upcoming market will be more mid-scale (3.5-4 star space)
  • 2014 occupancy expectations:  73% in 2013, 0.5%-1.0% occupancy growth in 2014
  • Big group hotels still have more room for occupancy growth
  • Changing a big contract in Mecca which resulted in volatile incentive fees
  • 2014: IMF growth- 8-10% range; should ramp up to 20% in the future
  • Supply trends/growth: 
    • seeing little full-service, zero luxury, all limited service in suburbia 
    • Rooms supply growth 1.5% in 2014 vs 2%-2.5% long-term trend
  • New Brands: 
    • looking to develop as well as add brand extensions.. 
    • will do then announce and market
    • definitely developing boutique but will be different than peers
  • RevPAR 5-7% variables:
    • higher end: continued strength of transient at or better than 13
    • need group to show up
    • nothing big to go wrong in the World
  • Waldorf redevelopment: recently spent $125m but not yet rooms because considering all alternatives to maximize value to shareholders - including some sort of conversion.  Will layout plan for future of Waldorf Astoria later this year.  
© 2024 Hedgeye Risk Management, LLC. The information contained herein is the property of Hedgeye, which reserves all rights thereto. Redistribution of any part of this information is prohibited without the express written consent of Hedgeye. Hedgeye is not responsible for any errors in or omissions to this information, or for any consequences that may result from the use of this information.