CONF CALL
- 15 hotels had significant construction/renovations
- 1Q portfolio grew market share
- Transient: +4.5%, strong rate growth
- Group: +1% (+8.5%-association business, corporate business was flat despite tough Super Bowl comps)
- 9% of EBITDA come from international
- Continue to have positive view on lodging cycle
- Do not expect 2017 suppy to accelerate meaningfully
- Lending continues to improve. Pricing has continued to improve
- Expect mid-teens return on investment opportunities
- Expect to complete more acquisitions in 2015 than 2014
- Stock repurchase program effective once they file 10Q this week
- View stock as attractively priced
- Replacement costs for portfolio avg $425k/key (well above current trading level of $328k/key)
- Expect group demand to be solid for remainder of 2015. Bookings in the 1Q 2015 for 2015 was +10% (rate: +8%). Demand for 3% in 2Q in 2015, (rate: +3.5%) resulting in rev growth of +7%.
- 2Q Construction impact will be not as severe as in 1Q
- Expect FX impact to be $25m for FY 2015 ($8m worse than previous prediction in February)
- Cost-saving initiatives will raise margins higher than what was forecasted in February
- REVPAR declines: NYC/DC/Houston/Canada
- Boston: +6% in occu, +9.5% in ADR, +19% in F&B
- San Francisco: Driven by strong group (+15%) and transient demand (+12.1% REVPAR). Will continue to be a top market.
- Phoenix: +15.8% REVPAR; group demand up 27% driven by Super Bowl, baseball spring training. Expect Phoenix to be one of the strongest in the year.
- Asia: +11% REVPAR (rate: +9.2%); Australia/New Zealand benefited from Cricket World Cup
- Outperformers: Los Angeles, San Diego, Florida. Expect continued outperformance in 2Q
- Embassy Suites Chicago renovation will be completed in May
- NYC: Expect positive REVPAR growth in remaining quarters
- Strong dollar: No impact on US visitation
- DC: Citywide strong for 2016/2017
- Canada: -21% REVPAR. Room renovations expected to be completed in June. Meeting space to be done by August.
- Euro JV: strong transient offset softer group business. Outlet revs up 2.8% offset by banquet revs decline of ~3%.
- Eurozone sentiment improved in April
- Spain/Germany macro forecast raised
- Utilities: -7.7% YoY
- Property insuarance: -10.3 YoY
Q & A
- Positive view on lodging cycle
- Why Stock repurchase $500m?: $500m is a good round number
- Near-term opportunities: look at Calgary contract which they had renegotiate
- They're also looking at international assets, single assets, and smaller deals
- Potential asset sales: likely be spread out.
- Risks on demand side, not supply side
- Capital allocation: Could also put out $600m in form of dividend
- Few large projects that will start later in 2015 that will have renovations in 2016. Feel 2016 renovation by $ amount will be lower than 2015 (more than 10% decrease)
- REIT consolidation? hard to predict in near-term
- $25m incremental revenues will flow through in 2016 and 2017 as a result of the renovation projects
- DC hotel renovations may be completed in May 2015
- Looking at meaningful energy ROI project which will reduce their utility costs
- Try to issue stock if stock price above NAV
- Have benefited from cap rate compression
- Trajectory of REVPAR growth by quarter in 2015: Q4 is strongest. Expect things to improve as they work through the year.
- Q4 will be strongest in margin growth perspective
- US travel into Europe up 6-8% YoY in 1Q
- Tourists tend to book a little longer out (longer than 60-90 days).
- Asian travelers to US (excluding Japanese) are growing
