Strong secular tailwinds, but one major headwind...
Q1 2014 Results:
- Global economy "bouncing along" and slightly improving
- Worldwide presence makes HOT more susceptible to global gyrations
- Watching Thailand, Egypt, Russia, and Emerging Markets carefully...
- RevPAR >7%
- Occupancy at record highs
- Late cycle: RevPAR should be rate driven, but several years away from new supply in most markets - especially at the high end
- Momentum continuing into Q2, RevPAR expected in 6-7%
- RevPAR 2.5% but Q1 is slow season
- Outlook doesn't include a dramatic improvement
- 11 hotels pulled results lower
- Saudi Arabia stronger
- Mixed, emerging two-tier region
- Mexico & central: combined revpar +14%
- 2nd Tier: Venezuela, Brazil, Argentia - struggling, f(x) issues
- Expect Q2 slightly slower following strong Q1 results
- RevPAR +12% driven by Sheraton Macau with 90% occupancy
- ex Sheraton Macau (Mainland China) 6% RevPAR growth
- performance stronger than expected
- inbound travel to china dropped and Central Gov't austerity
- promoting the company across all segments, markets, and channels
- >70% occupancy PRC nationals
- Fewer large customers, few long lead time clients, booking window short/close in
- Results driven by increasing occupancy and not rates
- Bangkok: riots hurt results
- Thailand: much stronger
- Asia ex China continue growth trends
- only two condo remain unsold
Secular Growth in Cities:
- Top 100 Cities = 40% of global GDP
- Next 500 Cities = almost 40% of global GDP
- these 500 Cities = new development opportunity (Sheraton, Westin, St. Regis)
- 200 cities global that could support at least one Sheraton and not have a Sheraton today
Q&A - 5 of the 12 questions focused on share repurchase strategy or capital plans. The natives are getting restless...
- Share repurchase vs. special dividends:
- constantly recalibrating how to return to shareholders will use dividend, special dividend and share repurchase avenues
- special dividends: not adverse to one-time, like flexibility of quarterly
- Asset sales:
- now have more asset for sale since the global financial crisis
- North American portfolio, as well as assets in Europe and Asia
- Asset buyer profile
- Europe/Large one-offs: UHNW family or person, sovereign wealth
- US: portfolio sales to PE, funds, or private buyer
- Geographic: Middle East and ethic Chinese around the world
- Stock under performance due to lack of share repurchase vs. Emerging Market issues...
- NA system wide vs. owned RevPAR differential: less than 20 NA owned, skewed to NYC and Canada = Q1 under performance, purely geographic
- Corp Negotiated: mid single digits rates
- Corp Group: stronger and healthiest of all group
- Corp Group F&B: still focused on keeping costs down
- US: 1/3 group with long lead time vs. 2/3 non-group
- Non-US: 1/4 group with short lead time
- Airbnb: real phenomenon, disruptive, concern is similar to OTA onset 10 year ago.
- Termination Fees: anticipated for Q1 2014, 8%-10% growth for Q2 and FY 2014
- Underlevered Balance Sheet indicate interest in reinvesting through a brand acquisition?
- Europe: 70-75% business traveler world-wide, but destination hotels in Italy, France, Spain so summer mix is skewed to leisure - summer will tell if Europe bounces strongly higher.