• 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.

OEH meets consensus expectations for the first time in while, which seems good enough... for now




Quarterly Review & Outlook

  • No big surprises in the 3rd quarter as trends set in the 2nd quarter continued
  • Grand Hotel Europe was down $3MM in EBITDA, $1.4MM was due to currency
  • Mexico was down $0.75MM (continued H1N1)
  • Occupancy grew 2% in Italy
  • Trains and cruises, cost basis in Euros impacted results by over a $1MM, despite some revenue recovery in certain products
  • Goal of reducing fixed cost base has been achieved and now they need to hold costs down
  • Goal of deleveraging:
    • First step is selling non-core assets, should have proceeds of "over" $100MM by year end
    • $55-65MM in cash proceeds expected from sale of villas in St Martin
    • Worked at Keswick hall to sell some plots for residential development
    • Net result should reduce debt by $140MM
  • Business outlook
    • Italy RevPAR grew 3%, Russia grew 9% in local currency in October
    • However, October still saw revenues drop 19%
    • Trends over the last 5 weeks have been consistent
    • Nov & Dec are trending 18% behind in bookings, but should end up better
    • 1Q2010 is running 50% in bookings from where they were a year ago
    • Bookings are very last minute still
  • Restricted cash was $18MM
  • 9.0x TTM debt/EBITDA
  • $116MM of loans drawn of R/C loans outstanding
  • $51MM of debt due in 2010 is related to Cupacoy which should be repaid from villa sales
  • Some of the capex this quarter was covered by insurance proceeds
  • Tax charge of $12-14MM for FY2009
  • Discussing debt maturities with their banks
    • One of the strategies is rebalancing debt maturities, for example Grand Hotel Europe, which they beleive is worth over $200MM only have $20ishMM of debt want to add some leverage there
  • Are seeing some interesting opportunities arise in the luxury space, will look at more management related opportunitites


  • Don't expect the booking window to further shorten but at the same time don't expect it to lengthen
  • Some of the group business they have is also booked within a month of the event
  • Any corporate bookings they have are last minute
  • 2010 should be like 2009 booking wise
  • "Last year all the bookings were last minute, now they are last second"
  • Domestic business around the world has increased to offset the considerable decrease in UK travelers, while US traveler has somewhat stabilized
  • Rate of expense growth next year?
    • Think they can really keep a very tight lid on costs for one more year
    • 50% target on variable costs (on flow through), the real challenge is for that not to grow when things recover
    • There are some properties that will likely see additional declines next year - like Mexico
    • Hope to keep fixed cost growth at or below local inflation levels
  • American guest (ex - domestic properties) is just above 30% (consistent across most of Italy, ex Ravello which is in mid 20's)
  • Debt refinancings?  Trying to achieve 85% on renewal (loan to value).
  • Balance of doing it now vs keeping the current low pricing?
    • They can do a forward start agreement to balance some of that out
    • Debt would be marked around mid 200's spread - would be happy there (sounds very low to me)
    • Would like to have something done by filing of 3Q2010 10Q, otherwise they have a current debt issue
  • Color on market pricing
    • Have traditionally bought assets around a 10x multiple (on what they think is a stabilized number).  Their special sauce is buying slightly run down assets.  Developing countries would have a slightly lower multiple though higher cost of debt
  • Performance in Asia is bouncing back nicely
  • Any change on dual class structure?
    • Hearing in Bermuda 6 weeks ago, and the court has ordered a further hearing on a pure question on law on whether having the dual structure is legal as well as OEH's desire to move to dismiss the charges.  No date set - sometime in 2010
  • El Canto
    • Dealing with some interested parties putting together JV
    • Would only do the project with a JV partner
    • Have $52MM sunk there
  • No more payments due on NY library until 2010, taking the total to $30MM
  • Brought recurring capex down from over $100MM to $35-40MM including the completion of Cataratas for 2010.
  • Any acquisition they would pursue in the intermediate term would likely pursue it through a JV that is asset lite from their end.  Hopefully see some opportunities come through in next 6-8 months