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Superb start to 2014: strong group bookings, higher ADRs and improved F&B spend + higher transient ADRs = expanding operating margins and a strong outlook for several quarters. 



  • 2014 is off to a strong start - hotel demand continues to grow, particularly in our group business, allowing for increased ADRs across all segments.
  • Solid group demand in Q1 drove exceptional growth in F&B
  • Adjusted EBITDA for the quarter was $308 million. +8.8% YoY
  • Strong results due to:
  • RevPAR +6.8%
  • Occupancy +1.5%
  • Group business revenues +11% as demand increased by more than 6% and average rate improved by nearly 4.5%. All segments of group benefited from rate increases, and our corporate demand was up by more than 10%.
  • While the calendar change of Easter to April clearly boosted group activity, we saw solid demand improvement throughout the quarter.
  • Transient room nights were flat to 2013, but ADR +3.5% driven by both rate increases and positive mix shift especially in our higher price segments.
  • Transient revenues +3.3%
  • F&B and AV was +13.5% due to strong group activity
  • Banquet - revenue per group room nights >5%
  • Total F&B revenues +9.5% as catering activity was exceptionally strong in New York (Super Bowl) and West Coast hotels.
  • Strong flow through resulted in adjusted operating profit margin expansion of the 120 basis points and comparable hotel adjusted operating profit growth of 12.5%
  • Investment activity in Q1 saw the purchase of Powell Hotel in San Francisco for $75 million.
  • Invested $6 million in ROI CapEx - completed the expansion of the Willow Stream Spa at Fairmont Kea Lani in Maui
  • Invested $5 million in a series of energy conservation projects and the repositioning of the Cast & Plow Restaurant at the Ritz-Carlton Marina del Rey.
  • Invested >$13 million in the Novotel, Ibis,
  • Projects represent a total investment to date of approximately $105 million. 
  • Have a few assets currently on the market for sale and continue to pursue acquisitions given the difficulty in predicting the timing of completing these transactions - guidance does not assume the benefit of any transactions other than the ones we have already closed.
  • The remainder of 2014: demand growth throughout the U.S. should continue to be strong; GDP growth and business investment trend positively for the full year, and international travel continues to demonstrate robust growth.
  • Overall, occupancy in the portfolio is ahead of 2007 peak
  • Expect group demand to remain strong throughout the remainder of the year
  • Second quarter group activity will be lower, primarily because of the year-over-year Easter Holiday shift. O
  • Booking pace for 2014 continues to be quite strong as revenues are up 5.5% compared to last year. 
  • ITQFTY:  room night booked for the remainder of the year exceeded last year’s pace by more than 4%, with bookings for the month after April up nearly 10%. Approx 85% of our full-year expected group bookings on the books
  • Comparable hotel RevPAR growth for the year will be between 5% and 6%.
  • Expect comparable food and beverage revenue to increase 4% to 5%, which is a full point above prior estimate of the 3% to 4% increase.
  • Margins - incremental profitability and strong flow through from ADR and group results in adjusted margin guidance to 70 basis points to 120 basis points for the full year.

Operating & Financial Performance

  • West Coast RevPAR +14%, occ 450 ADR 700, expect continued out peformance
  • SF RevPAR +25%, Group +15% while transient +8%, mix shift ADR +16%, expect hotels to continue to outperform for 2014
  • Central & South RevPAR +250 bps, weak convention calendar and weather hindered Chicago; Florida less vacation travelers due to Easter shift; expect RevPAR to increase vs. Q1 and in-line with portfolio
  • East Coast RevPAR +260 bps, Boston weak down 270 bps, WDC flat, NYC +420 bps.  Boston weakness due to room renovations.  WDC negatively impacted by YoY comp to 2013 inauguration - expect challenges to persist due to new competition.  NYC - pursued group strategy for SuperBowl with NFL and Media also aided F&B uplift.
  • International: constant $ RevPAR +10.3%.
  • Lat Am RevPAR +21%, expect continued strong performance across Lat Am
  • Asia/Pac RevPAR +8.2% strong group and transient, Oz transient rates +9% in Q1. 
  • European JV +2.8% in constant Euro; increased F&B at 11 of 18 assets.
  • Costs: ex higher utilities operating margins +120 bps, F&B flow through 58.5%.
  • RevPAR driven by ADR = strong flow through.
  • 28% of full year EBITDA earned in Q2, therefore Q2 lwoer than 2013 because 1) sold land adjacent to Newport Beach  2) lost ebitda for assets sold  3) Hyatt Maui timeshare sales ($5M)
  • Redeemed/repaid $675M of debt with available cash and ended Q1 with approx $392M of cash and $782M of capacity under the credit facility.


  • Recovery of Group - seeing deeper trends to resort locations from gateway markets -- seeing growth across all markets, Q1 centered in NYC and West Coast.  Seeing growth across price points.  Catering contribution F&B per Group night up each of last two quarters, but increasing aggressively. 
  • Supply growth - mid 7% range in NYC in 2014 but strong 5% Group growth in NYC, likely struggle to generate ADR growth in NYC.
  • Why transaction market so quiet - pricing working way higher, fundamental problem is view cycle has a long runway as such sellers have no interest to sell nor impetus to sell. Expect 2014 activity to be greater than 2013.  
  • International transactions - capital global moves to opportunities, Asia, Middle East, US, etc.  Run into different investors in different markets, but sovereign wealth funds see consistently.
  • Acquisition market - given capital availability by PE and leverage, looking at more non-core (International, non-branded, etc)?  Looking internationally, would love to do more Palm San Francisco, some add'l limited service in certain markets, no plans for the Caribbean and would look to avoid Caribbean.  
  • Have teams focused on opportunities within global regions - each office focused on specific region.
  • Development opportunities - when not make sense vs. cycle - market by market analysis.  Repositionings still look good in most markets, new development limited, but select service development appears okay for now.
  • F&B guidance - also include F&B revenue increase?  View remainder of year based on Q1 results, also feel Q1 success portends better results for remainder of 2014.
  • Given guidance of 21% EBITDA in Q1 and revised 2014 EBITDA guidance - how big was Q1 beat?   $17M but also $3M insurance gain (was expected but not in Q1), so more like $14M. 
  • Holiday calendar shift in Q1 vs. Q2 - have not run analysis, but expect Q2 to be less strong vs. Q1.
  • Balance of dividends vs. opportunity to purchase assets - what prevents higher dividend - expect as EBITDA increases, so should taxable increase and such dividend should also grow.  Then what to do with FCF of $300M/year - acquisitions (property) or reinvestment in current portfolio.  If unable to grow through investment, then return capital to shareholder.
  • Brands with better/stronger RevPAR trajectory - no comment on brands within portfolio, ask the lodging operators. 
  • Why 2014 RevPAR guidance not increased based on Q1 strength - more comfortable after mid-point of the year, patient, but more comfortable in the higher end of the range for now. 
  • How/why outperform in WDC - better group strength in March as well as transient.
  • Banquet/F&B per room vs. prior peak and trajectory - 
  • Seattle or Denver transactions - Seattle convention center 
  • Chicago trends - harsh winter in Q1 and remainder of 2014 not as strong of a convention year
  • Renovations pipeline and benefit - relatively consistent levels of maintenance capex, not significant disruption which provide uplift.
  • Gain on Sale - why so large and tax impact small is there a 1031 exchange plan.  Philadelphia asset, gain baked into 2014 forecast and dividend. 
  • Pace  ITQFTQ +19% vs. Q1 2013, ITYFTY +4% room nights for year but for May - Dec +10%
  • Later Easter because stretched out spring break travel in Florida.
  • What percentage of portfolio needs higher maintenance capex - very small deferred capex, consistent capex investment, accelerated capex in 2010 and 2011.  Maybe six assets have some level of deferred capex but usually assets thinking about selling.
  • $70-$80M of reinvestment in portfolio
  • Group by month in Q1: Jan weakest; Feb slightly above 6%; March double digit growth%; April likely weaker than 2013
  • Group vs. Transient mix: leave $ on the table but how weather impact?  Yes weather impacted transient, but also transient rate was stronger 3.5% but increased transient business in lower priced markets while group was stronger in higher priced markets.
  • Balance Sheet:  V and Z notes - pre-payable, yes callable in 2016.