• 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.

“With changes in the composition of our hotel portfolio both owned hotels and joint venture hotels, we will experience volatility in reported quarterly earnings” -- Mark Hoplamazian


Quarter Review

  • O&L RevPAR: over two-thirds due to higher ADR, Seoul & Bishkek continue to underperform. Improving F&B results and trends.
  • Margins outside the U.S. impacted by specific market issues.
  • Group rooms revenues >9% driven by rate also drove 6% greater banquet revenue and spend/group room night  SF, SA,
  • Transient +7%, rate 9.1%  
  • Group production +2%; in aggregate lapping Q3 2013 was 9%  
  • ADRs IQFQ +12%
  • Group pace 8% for 2015 at end of Q3, ended Q3 with 2/3rds booked for 2015.
  • Mgmt Fees: decline due to French hotels, higher system RevPAR and 23 more managed hotels    
  • IMFs:  increased 25%, about half due to two hotels
  • Franchise Fees: 80% due to higher RevPAR

Select Service Portfolio

  •  Hyatt Place: service model is most important and central feature to system.
    • RevPAR +10% CAGR past few years, more than 200 hotels, opened 10 in 2012, 20 in 2013 and 17 thru Q3 2014. Now in nine countries.
    • New contracts = 65% increase in room count base in 21 countries in urban markets. 
    • Average ADR today 25% greater than prior hotels due to urban locations.
  • Hyatt House: home like environment and space, causal interactions, contemporary but not edgy. 
    • RevPAR 8% CAGR over past two years. Updating space and programing design.
    • Executed contracts = 50% increase over current room base
  • Used corporate capital to develop, will continue to invest in urban locations


  • Mexico Hyatt Regency
    • $20 million renovation, new F&B offerings, earnings performed in line, expected $20 million of EBITDA
  • $325 million investment in Playa
    • Ziva and Zolara: converted 2 properties, will have 4 more by end of 2015.  Additional openings on time and on budget. 
    • Adj EBITDA $13-$15 million but will be at lower end of range - not include impact from hurricane in Los Cabos
  • Orlando Hyatt Regency acquired $717 million, expect to earn $55 million in adjusted EBITDA
  • Acquired Grand Hyatt San Antonio expect $27 million EBITDA in 2014, expansion of convention center in 2015, outlook is better.
  • Portfolio 4 France Hotels: under performing thus far, earnings 5 million Euros per year.  IMFs slower than expected.  Expect to pay 20 million in guaranteed performance payments in 2015.  Finalizing renovation plans so short-term negative impact. Guarantee payment in 2015 30-35 million Euros, upon completion better performance and lower guarantee fees.
  • Park Hyatt NY: early but performing in line; expect ADRs $1,000/night and currently in line with expectations.  Add'l rooms coming on line.
  • On track to meet/exceed but for French hotels.

Recap of Recent & Possible Activity

  • Sold Park Hyatt WDC $100 million, 15x LTM
  • 7 add'l full service listed for sale = $35-40m LTM EBITDA
  • 38 select service hotels sold for $590 million to Lone Star = $45 million adjusted EBITDA
  • Addl 6 select service = $5m LTM EBITDA
  • HRG $220 million including development stake
  • 3 JVs sold hotels = $36 million of equity proceeds and unconsolidated JV debt dropped by $34 million, blended multiple 11x LTM EBITDA
  • During Q3 2014, net impact on O&L EBITDA = -$7m offset by JV hotels, in aggregate = -$4m and lower EBITDA margin
  • Several pending sales not included in the $8 million impact on owned/leased variability: 
    • 38 SS (LoneStar):  $10m of EBITDA (generated in 4Q 2013)
    • 7 full service, 6 SS:  $7m EBITDA (generated in 4Q 2013)
  • Actively seeking acquisitions


Q: Expense growth at non-comp hotel base?

  • Variance: newly opened = ~$2m as well as mix off assets and seasonality sold hotels with mid-high 30% margin hotels vs. Orlando & San Antonio hotels had mid-20% margins (less than 15% of EBITDA for two assets in Q3)
  • Will see this dynamic over the next few quarters due to portfolio changes
  • Park Hyatt NY also negatively impacted due to opening mid-August

Q: Group Pace in 2015 up nicely, drivers/markets?

  • Consistent room demand from associations across many markets, so further out bookings, pace evolution due to higher association advanced bookings.  Corporate rates up IQFQ also healthy 2015 corporate rate growth.  ADR progress 7% to 8%.  Concentrated with Tech firms, tech consulting firms and health care increasing - leading growth.  Manufacturing, pharma very strong. 

Q: CFO search - hamper acquisitions/dispositions?

  • Function & Role more integrated across Hyatt, still looking

Q: Transient nights down, group up -- why mix shift, future?

  • Saw shorter term group IQFQ include more significant F&B, banquet requests so total revenue of group > transient, so trading into group, transient mix very high occupancy in 80%s -- not fundamental change in mix.  Mixing/revenue yield matching rate vs. total revenue.

Q: Limited/Select service - interest to add 3rd or 4th brand, consider buying a brand?

  • Need critical mass and coverage is important, need urban footprint to drive brand performance.
  • Have and would consider buying a brand and converting assets/properties.

Q: Margin expansion US vs. Int'l - how long lagging International margins?

  • Ex two hotels Int'l segment margins increased nearly in line with US margins. Impact of each of those will lap in Q1 2015, so more normal YoY comparisons.

Q: Orlando purchase to round out convention hotels - helping pace?

  • Hotel already operating at strong demand level and strong market position, improving via the rotational element of Orlando based conventions - will work to reprogram asset.

Q: French hotel impact - incremental 2015 costs?

  • Short term more difficult, market conditions challenging - two hotels in Paris and two in south of France. Less demand from high-end Europeans, Russians, as well as significantly slower Paris based groups.  Looking at expense controls. F&B largest negative variances, high fixed cost operations vs. high variability of banquets and F&B.
  • Anniversary of transaction is May - so timing of payments vs calendar years. Impacts in "Other Income/Loss" line so not included in Adjusted EBITDA reconciliation.
  • Increase in 2015 due to step-up of guarantee and renovation

Q: Margins - sale of select service and segment margin erosion?

  • Select service margins mid-30% range

Q: CFO search - internal vs. external?

  • search parameters very broad
  • specific hotel experience not required
  • timing is difficult due to calendar, may get pushed into 2015

Q: Expectations for ROIC on ramping assets?

  • Consider Orlando, San Antonio and Mexico City - building base and stronger foundation.  Mexico City >10%, Orlando ~7-8%, San Antonio ~10% on total acquisition value = $275 million.

Q: Group room nights & ADR vs. peak on portfolio basis?

  • Total group revenues tracking below peak, aggregate occupancy above peak in almost every market, demand strength increasing... serial and steady improvements, continued demand support and rate realization.

Q: Guidance - view on guidance vs. moving parts?

  • Offering more complete and exhaustive detail in transactions and history