CONF CALL
- India economic growth in 2015 could exceed China
- On pace to grow global system by ~8% in 2015, including 10k Delta rooms. Net of deletions, system size should grow 7%
- Worldwide basis: MAR has 4.5% room count share
- 100 largest markets: has 6.4% room count share
- In largest most valuable markets, share of rooms under construction is ~16%
- Premium RevPAR yield premium fees
- Signed deals with nearly 17,000 rooms in 1Q. Expect these new managed
franchise rooms worldwide will deliver over $38 million of annual
fee revenue in their third year of operation. - Estimate existing contracts have an average of 17 years remaining. The length of MAR's newest contracts average 20 to 25 years.
- Across the U.S. financing availability continues to ease, particularly for their limited service products.
- 1Q EPS beat: 1 cent (owned/leased line largely due to strong results in Tokyo) 2 cents of outperformance came from favorable SG&A largely timing
related. Results partially offset by roughly $0.03 of impairment recorded on depreciation. - Better-than-expected incentive fees
- In North America systemwide transient RevPAR grew 7.0% with
room rates up 5%. Successfully reduced the volume of special
corporate business in favor of the greater volume of higher rated
retail business. - Group RevPAR at full-service hotels in North America rose more
than 5.0% including 4.0% from higher ADR. Demand from smaller
groups was particularly strong. - Systemwide RevPAR at limited service hotels in North America
increased more than 8.0%; strength in both transient and small
group demand - Expect continued strong group and transient for North America
- Full-service hotel group booking pace for the remainder of 2015
is up roughly 4.0%. (tough 3Q comp) - International systemwide REVPAR well ahead of expectations
- Caribbean/Latin America: expect RevPAR will increase at a
mid-single-digit rate with the tough comparison to last year's World
Cup in Brazil. - In Asia-Pacific region, REVPAR: +6.0% with particular strength in Japan and
India and easy comps in Thailand. - Systemwide RevPAR in greater China increased modestly reflecting strong results in Shanghai; lower RevPAR in Hong Kong. Believe these Asia-Pacific trends will continue yielding full-year RevPAR growth at a mid-single-digit rate.
- Europe well ahead of expectations due to strong attendance at group
events in Germany and higher leisure business in London and
Amsterdam. - Room nights from U.S. travel to our European hotels increased 9.0%
in the quarter - Despite the strong 1Q, expect mid-single-digit growth rate for the full-year.
- economies of France and Russia are week and central Europe comparisons get more difficult late in the year.
- MEA: expect mid-to high single digit constant dollar RevPAR growth. Outsized gains in 3Q.
- Incentive fees: +25% with better-than-expected results at
Ritz-Carlton and Marriott resorts in Florida and the Caribbean. In
addition, roughly $3 million of the higher incentive fees were
related to the timing of incentive fee recognition at one resort and
$2 million was related to a very strong performance and North
America limited service hotel. - Worldwide 48% of MAR's managed hotels paid incentive fees in the
quarter compared to 35% in the year ago quarter. In North America 35% of managed hotels paid incentive fees compared to 21% in
the year ago quarter. - Franchise fees: +25% due to higher royalty payments associated with unit growth
- REVPAR also helped by higher relicensing fees associated with hotel transactions. With a robust hotel resale market, MAR relicensed over 250 franchised hotels during the quarter. Typically the new agreements reflect higher royalty rates than previously and frequently include a commitment to make property improvements.
- Owned/lease: $5m from Protea, favorable $3m impact from expired leases
- G&A: declined due to favorable litigation resolutions partially offset by higher guarantee reserves.
- FX impact for 2015: expect reduction in pretax income $20-25m
- Repurchased 5.5 million shares during the quarter for approximately $431 million
- 2Q incentive fees likely flat YoY. Continue to expect strong incentive fees limited service hotels in the quarter there likely to be offset by the impact of full-service hotel renovations and a shift in timing of fee recognition at one resort which benefited 1Q
- FY 2015: Expect incentive fees will grow in the midteens rate
- Owned leased and other revenue net of direct expenses should
increase slightly year over year reflecting higher credit card branding fees offset by lower termination fees.
Q & A
- MAR's acquisitions: essentially flat in 1st year and accretive in future years.
- Won't talk about HOT's strategic review
- Profound differences in MAR's and HOT's recent deals
- Courtyard on a roll and drove the incentive fee beat
- NYC supply growth: ~5% in last 4-5 yrs
- Blended royalty rate: 5.8%
- More and more limited service hotels earnings incentive fees
- Peak on limited service incentive fees: $80m (trough: $5m). Last year, they did $20m. Could see $30-35m in 2015.
- Group bookings in 1Q 2015 for next 12 mth, rates up 6%. For the following 12 months, rates up 5.5% (room night growth of 3.5%)
- Inbound travel to US: +1% YoY, European visitors flattish, more business travel than leisure in Q1
- Including HK, China REVPAR up 1.5%. Exclude HK, up 4.5%
- 2015: Reiterate mid-single digit REVPAR growth for China. F&B ahead of that target. Will sign fewer deals in China this year. Remain pretty bullish.
- Will not see much full-service development in Europe
- Double-digit index gains for Autograph brand
- MOXY rate higher than Fairfield -smaller room, lifestyle brand
- Have been aggressive in calling out contract business from our full-service hotels e.g. airline crews. Contract business can often be at a significant discount to the average rate in the full-service hotel because of the way occupancy is moving. Could see that business gets replaced by rack business and will be pretty powerful in driving performance.
- FY Delta fees of $12m
- DC: Downtown modestly negative in Q1 . Suburban modestly positive. Q2 may be better by a couple of % points. 2016 group bookings doing well. Some growth in govt business but only 1.5% of group.
