- Labor Costs - up Commodity Costs - up Energy Costs - up Airfares - up Airline Capacity - down Leisure Travel - down Domestic Economic Growth - stagnant World Economic Growth - slowing With these unhealthy trends where is the Street math? Lodging Analysts' 2009 EBITDA projections - up Lodging Analysts' 2009 EBITDA margins - flat
- What are you, on dope? Whatever these analysts are smoking should be banned. Sorry for the Fast Times at Ridgemont High reference but it was a good movie. The analysis from my posting last week showed that peak to trough EBITDA margins fell 850 bps during the last cycle. Sure we don't have 9/11 this time but most of the factors above were in much better shape back in 2002. I'm not suggesting we'll see that kind of drop next year but even a 3% drop in margins would be devastating to EBITDA and earnings.
- Per Reuters, consensus EBITDA projections for HOT, MAR, HST, and OEH show 2009 EBITDA and EPS growing at an average of 9% and 17%, respectively. Despite the factors listed above, these analysts are essentially projecting flat EBITDA margins. In a more likely scenario of a 3% drop in EBITDA margin, EBITDA and EPS would decline an average of 10% and 30%, respectively. These are big deltas from consensus. Look for some new Street math in the coming months.
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