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Takeaway: Delivers solid 2015 guidance (ex Fx) and outlook. Best in class stock (in our opinion) no longer cheap but should be a grinder.


  • Q4 2014
    • Led by Europe and US REVPAR  (6.9%, 6.8%, respectively)
    • Strong balanced growth in group and transient segment
    • Drive leisure demand in non-peak periods
    • Government grew 7% 
    • Transient grew 7%
  • Americas/owned group segment: up mid single digits for 2015
    • 50/50 (volume/rate) contribution
    • Pace has been very strong - up 57% YoY in 1Q.  
    • Middle quarters doing well
  • HLT as STR leader:  global rooms under construction, pipeline size and system rooms
  • HLT:  REVPAR index premium of 15%
  • HLT: Rooms under construction make up 19% of global share
  • Americas:  signed on average one deal/day
  • 400 Hamptons in the pipeline.  Will have hundreds of Hamptons in China
  • Doubletree:  doubled in size since 2007. REVPAR index increased over 700bps since 2007
  • 2 new brands in 2014:  Curio (5 hotels opened with 23 hotels in pipeline); Canopy (15 hotels in pipeline; expect to open 1st Canopy within the year)
  • Waldorf sale 1030 exchange:  screened for high-quality properties in urban/resort markets
  • 2015
    • >75% of Adjusted EBITDA comes from US.  Some disruption from weather....sees mid-to-high single digit REVPAR growth in US (strength in San Francisco, Florida, Boston, Washington, offset by ongoing challenges in NY)
    • Mid-single digit REVPAR growth in Europe; strong group business in Southern region.  Russia pressuring Eastern Europe. France underperforming.
    • Mid-to-high single digit REVPAR growth in Middle East
    • China:  6-8% REVPAR growth.  Overall Asia:  high single digit REVPAR growth in 2015
  • Effective franchise rates continue to increase: 4.65%
  • Timeshare: Lower SG&A, higher transient rentals, and lower club charges
    • Continue to transition to capital-light business
    • 60% of sales from new timeshare intervals (different from competitors)
  • Calendar shifts somewhat tempered growth in November
  • Some markets saw group revenue increase 15-25%
  • Hawaii Q4 REVPAR: 10%
  • Strong transient business in DC
  • Transient strength in Brazil and Argentina offset softness in Puerto Rico
  • Europe:  strong group business in UK and Rome 
  • China:  weakness in Mainland group business
  • Paid down $300m in term loans.  Leverage ratio currently at: 4.2x
  • Leverage target: 3-4x
  • Will start returning capital to shareholders via dividend when they reach leverage goals
  • Over 80% of adjusted EBITDA in US $
  • Expect $35-45m FX impact on 2015 EBITDA guidance
  • Remaining Waldorf money (~$100m): will purchase 1 or more US assets in next 6 months

Q & A

  • 2015 Europe:  continue to see strength in Western Europe/ some Southern Europe tempered by weakness in France and Eastern Europe
  • FX impact:  no impact on inbound business to US 
  • Will consider other options on returning capital to shareholders (i.e. stock buyback) but dividend likely first
  • Lodging cycle: Demand is growing with historical low level of supply. US getting better, will drive strong transient results. Group is coming back. 
  • REIT spin-off:  constantly looking at real estate to maximize value.  Don't see 'meaningful arbitrage opportunity' at this moment.
  • Timeshare:  80% is capital light.  Have active loyal customers. Like their timeshare business. 
  • Most of development in US is in limited service and franchising
  • China 2015 REVPAR: in Q4 2014, REVPAR was 3% due to hotel specific issues. For 2014, it was 6%. Expect similar growth in 2015.  Starting to see F&B ease up a little bit (govt austerity). Seeing ancillary spend recover a little bit. Signed more deals in 2014 than 2013 (much more limited service).
  • 2015 incentive fees (ex 1x items):  high teens growth rate
  • US incentive contribution rate:  High 50s (moved from low 50s). Expect in 2015 to move to low 60s
  • 2014:  Lower-end outperformed upper-end by 100bps due to transient growth
    • 2015:  roughly equal growth rates in lower-end and upper-end (UUP and higher)
  • New York EBITDA exposure:  going from 8% to a little less than 5% after Waldorf sale
  • Waldorf transaction/exchange:  REVPAR growth rates will be high single digits higher, EBITDA will be double digits higher
  • Finished at historic high in occupancy in 2014.  Do not think it will be another high in occupancy in 2015.
  • 6-7% HLT supply growth is even split between full service and limited service
  • Probably no more arbitrage opportunities in the portfolio similar to Waldorf, unfortunately
  • Would never say never on buying a brand but economics suggest organic growth the better option.
  • 60% of Fx hit is to the fee business
  • Corporate negotiations are becoming more of seller's market. Free WiFi not really related to that