• It's Here!

    Etf Pro

    Get the big financial market moves right, bullish or bearish with Hedgeye’s ETF Pro.

  • It's Here


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

Takeaway: Nothing wrong with this story and execution - except the valuation

Proving consistency wins the race



  • Better results due to stronger RevPAR growth
  • RevPAR: Transient >8% while Group >10%  IQFQ very strong
  • Leisure demand extraordinary:  RevPAR 10% for Marriott, 9% for Courtyard
  • Catering +6% in Q3, increasing F&B minimums and catering prices as well
  • Washington DC:  strong special corp group business IQFQ
  • Europe:  Paris, Vienna, Munich & Istanbul strong
  • Profit Margins:  Domestic +240 bps while Worldwide +200 bps
  • IMF: driven by strength across North America
  • OL&O Revs: strong RevPAR 
  • G&A: did not assume $4m Venezuela currency nor $6m bonus compensation
  • Group Rev: improvement steady but flat YoY; less occupancy compression; 
  • Strong Transient demand = 5-7% RevPAR in 2015, largely coming from rate
  • Indonesia weak
  • Caribbean & Lat AM bookings +15%, Mexico very strong (Cancun) but Central America weak
  • Africa: Protea on track and expect $12m EBITDA for 9 mos 2014 - but Ebola risk.  Occupancy at 11 Nigerian hotels declined. 
  • Middle East: Egypt recovering, mid-high teens in MEA region

ceo- ARne Sorenson


  • Room Rates - compression driving room rates, rooms booked in Q3 for future periods rates +7%
  • Supply - don't believe supply >2% until 2016 or 2017   
  • Transactions - result in renovations and relicensing fees
  • Brands - Q3 Ritz RevPAR index increased >200 bps vs comp set = add'l incentive fees
  • Signed 60k rooms YTD, expect 80k-90k rooms by year end

Next Generation of Travelers:

  • Opened first Moxy, 40 Moxy by 2017
  • AC Hotels, 37 hotels in NA pipeline, 30 more in talks
  • Mobile: mobile booking & mobile check in

Outlook 2015

  • Global uncertainties = No EPS guidance yet
  • NA occupancy rates strong;  Group booking +4% for MAR brand, NA room rate expansion, transient demand, improvement Rate driven
  • Europe: supply growth but stable; weakening Germany; soft France; strong Group from Rugby and World Cup
  • Asia: middle single digits constant $ similar to 2014, China remain good/strong, not reigning in expectations on RevPAR
  • Caribbean & Latin Am: mid-single digit RevPAR growth
  • MEA: mid-single digit/high-single-digit easy Egypt comps
  • Remain bullish: strong/great demand, price aggressively.


Q: Transient demand, Group demand - how balance?

  • Business transient very close-in, virtually no business transient on the books for 2015.  At record occupancy levels today.  Upside to group, building demand trends. See nothing to moderate demand trends.

Q: International outlook - what gives confidence vs. macro backdrop?

  • RevPAR outside U.S. modestly lower, more difficult to predict global RevPAR. Europe muddle along. Russia weakest market (17 hotels, -20% RevPAR in Q3) not assuming Russia changes for better. Egypt: expect RevPAR better, during Q3 Egypt +100% RevPAR). Mexico very strong.  Central Am & Brazil less well.  Solid performance in China & India.

Q: China/India differential opinion?

  • Impact of supply growth - nothing new, supply increasing with middle class and global tourism. Supply trends stable to contracting.
  • Impact residential real estate/new intakes - watching, concerned, but not escalating to watch list. Domestic travel and outbound travel growing strongly.

Q: Lifestyle Brands - activity/desire for MAR lifestyle brands?

  • In stage where competitor launches new brand and sign conditions. Not seeing impact to AC, Edition, Autograph or Moxy - still strong appetite. Autograph growing in U.S. and Europe.

Q: Group business vs prior comps?

  • Group pace built over last three quarters, building today, plenty of runway, up 4% YoY

Q: Transient demand, leisure demand strong - ability to push down against OTAs?

  • OTAs more relevant to leisure than business/group. Leisure demand recovering but sell rooms the way customers want to purchase.

Q: Key money/incentive concerns?

  • Highly competitive, trends not new, longer term focus and more disciplined in value/ROI calculation.  Branded co's are managed with long-term view.

Q: Timing of fees Q3 vs. Q4?

  • Some movement between quarters but expectations about the same.  But on a full-year basis, quarter ago looking at full 2% RevPAR range, now narrower RevPAR range results in lower fee range.

Q: Int'l RevPAR higher than competitor's view?

  • Different distribution systems/network and different asset footprint

Q: Unit growth for 2015, how much is US/Int'l?

  • US 50-60% and Int'l 40%-50%, actual 54% and 46% outside at the moment.

Q: China, if slip, change to RevPAR outlook?

  • 8% of total fees Asia and ~50% from China, so 2014 could see more than 4% from China, not likely to move the outlook if China RevPAR changes

Q: Group commentary 2015 for Marriott brand - % booked in 2013 vs. 2014?

  • For 2015: 35-40% on books before 2013; 60% booked in 2014, and in the year for the year.

Q: Group bookings in 2014 for 2015:  higher rate, F&B, etc?

  • Every month group ADR for 2015 improved.  Up 2% in rate alone at current time.  Group bookings in Q3 14 for all future periods, all rates up 7%.
  • F&B influenced by volume and current conditions than pricing at time booking
  • Booking pace one year ago 4% at flat ADR, today similar pace but up ADR

Q: CapEx for Miami EDITION and Marriott Residences?

  • $230m for EDITION Hotel and $100m for Marriott Residences (65% of units sold today).  Hotel scheduled to open next week.  Total on Residences will be $150-$170m.

Q: IMFs - in 2007 included $70m Courtyard fees, how close to receiving IMFs from Courtyard?

  • Currently receiving $1.6m from 120 Courtyard Hotels in Q3 2014, large portion not likely to pay in Q4 due to timing.  During Q3 about 50% of hotels paying IMFs

Q: O&L renovations, how many of leased hotels under renovation and impact in 2015 as they come out of renovation?

  • Entire leased portfolio is 35 to 40, have about 6-10 hotels under renovation - no significant disruption or addition to revenues

Q: 2015: is there an inflection for higher IMFs across portfolio?

  • Look back to analyst day slide deck for trajectory

Q: Group - what's happening in market, cancellations?

  • Always a bit of arbitrary, seasonality, perfect Q3 holiday timing in calendar. It would be wrong to think that a weaker Q4 is a precursor to future trends.  Early 2015 looks strong and better.  Sept 2015 not as good a calendar as Sept 2014 for group.

Q: Fee guidance and deferral items?

  • Deferred base fees from sale of an asset are rare and will call out. Not include in assumptions, projections

Q: US supply growth acceleration - what percent capturing?

  • MAR opening more into limited service, approvals increasing.  Believe 25% of all hotel construction is headed to MAR affiliated brands.

Q: China pipeline to fruition? 

  • 65% of pipeline is under construction, matter of timing of delivery. Not seeing any fallout trend. 
  • Added 3700 rooms to development pipeline in Q3. MOUs might be slower but warnings not proving out. But at the moment, developers likely to take longer to get to opening. So could be some risk to delayed/extended opening dates.

Q: Deferred base fees in prior guidance?

  • $6 million in guidance, $9 million subordinated not in guidance

Q: Deferred fees - how much of base portfolio is subject to performance minimums?

  • Related to one or two limited service portfolios, relates to how portfolios perform over time, could be choppy. 

Q: Int'l inbound travel up 8% in H1 2014 - seeing any change in the velocity of in bound travel?

  • Not seeing any slowdown in inbound U.S. Int'l travel either on the East nor West Coasts.

Q: Ebola impact?

  • Impact: couple of million dollars of hotel revenue which is a rounding error in overall schematic. Not seeing impact to travel trends nor bookings.

Q: Special corporate rate negotiations - expectations from buyers?

  • Special corporate rates were up less than their hotel as whole special corporate volumes would've been flattish maybe down a little bit and rack rated business would have been up substantially both in terms of room nights and in terms of rates
  • Thinks that will continue into 2015 

Q: Where were group room nights rate compared against last peak in 2007/2008?

  • Group volume still as mix of total hotel business still 100 bps lower than prior peak not by a lot but rate unsure. 

Q: Group pace for 2015?

  • Revenue pace up 5% for 2015

Q: China exposure - less exposed to mixed use projects?

  • Current distribution at the top end with Ritz, JW Marriott and much less in upscale area and limited service sectors.  More heavily concentrated in Shanghai and Beijing followed by Shenzhen and Guangzhou.

Q: Mobile penetration?

  • Booking more, more widely adopted, expect greater usage especially higher if Marriott reward member.

Q: Market to market on fee differential on hotels that have changed hands/traded?

  • Franchise fees up 50 bps over past couple of years and apply only to new development or new owners.