• It's Here!

    Etf Pro

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

The quarter was very messy and riddled with charges as expected. However, it looks like clean EPS came in at $0.15, beating the street and company guidance as well as our $0.14 estimate.   Stronger leisure demand and solid cost controls contributed to the better than expected results.  Earlier this morning we put out a quick review.  Below are more details on the quarter.

RevPAR Details:

  • Full service room growth was lower than we expected, however, limited service growth more than made up for the difference. Limited service room growth actually accelerated in 3Q09 vs 1H09.
    • Total managed rooms were 1,200 light of our estimate while franchised rooms grew by 1.8% more than our estimated growth rate of 8.4%
  • ADR declines were a higher percentage of the RevPAR decline compared to our projections and chain scale results.
    • There was a notable sequential improvement in occupancy (declines), especially for the Ritz brand and the full-service brands
  • The FX drag on international RevPAR was 6.6%, highly correlating with the 6.2% y-o-y strengthening of the dollar vs Euro

Total Fee income:

  • Base management fees were exactly in line with our estimate but franchise fees were $5MM better, driven primarily by more room additions in the quarter
  • Incentive fees were also $7MM better than our estimate

Owned, leased and other:

  • Owned, leased and other revenues of  $226MM were $19MM above our estimate
    • $6MM of the beat was due to termination fees
    • $15MM was due to better F&B performance, which makes sense given that occupancy performed better than we expected for the full service hotels.   Food and beverage outperforms RevPAR over the next few quarters as occupancy flattens out
  • Assuming branding fees were in the same $19MM range as previous quarters, gross margins ex-termination fees and branding fees on “owned & leased” are about -$17MM.  Since there is a lot of other stuff in “Owned, leased & other”, we would caution investors on extrapolating too much from the margin changes of this bucket

Timeshare Details:

  • Contract sales declined 42%, coming in 6MM lower than our estimate.  Fractional sales were also weaker
  • Development revenues of $138MM declined 48%, missing our estimate of $172MM by $34MM, while finance revenues came in $3MM better
  • Timeshare results were 4MM below our estimate of $13MM due to lower JV equity earnings and lower timeshare sales & services, net results. Base fees were in line
  • As a reminder, in 2010 the adoption of FASB 166 & 167 will require MAR to consolidate its existing portfolio of non-recourse securitized loans.  This accounting change won’t change risk or cash flow from timeshare but will inflate liabilities & debt balance while benefitting pre-tax earnings by an estimated $30-40MM