KEY POINTS
- TRACKER BETA TEST RESULTS: The good news is that the tracker caught the 1Q bookings acceleration to within 1% of actual bookings, exceeding management guidance by 200bps. The bad news is that our bookings tracker predicted bookings too far ahead of management guidance, which is the more important metric. As we noted yesterday, the Hedgeye PCLN bookings tracker predicted 2Q bookings growth in the mid-20% range. Today, management issued 2Q bookings guidance of 11%-18%, so approximately 10% below our model. More importantly, the tracker was directionally wrong as we expected acceleration in 2Q bookings guidance versus 1Q bookings.
- SO WHAT HAPPENED? Management clearly indicated that April bookings growth decelerated from 1Q, but also suggested that they’re assuming further deceleration through rest of the quarter. We suspect this could be an attempt by the new CEO to rebase expectations following particularly strong 1Q results (e.g. room nights growth at 2-yr high), especially since 2Q guidance showed considerable deceleration across all metrics. Our tracker also failed to pick up negative ADR expectations. Finally, the timing of the European football (soccer) tournament in France may have pulled forward bookings from 2Q into 1Q as hotel occupancies run full and reservations are made well in advance. Looking ahead, our tracker is not yet showing further deceleration throughout the quarter. If we’re right here and the guidance is overly conservative (sandbag?), actual 2Q bookings could ultimately exceed management guidance by the more than typical 2-3% and come in closer to our mid 20s% prediction.
- MOVING FORWARD: While we’re happy with the 1Q accuracy, we’re clearly disappointed that our tracker missed the more important 2Q bookings guidance. While there are some mitigating factors, the tracker clearly needs work in projecting the forward quarter bookings. Tracker adjustments for the calendar and event issues are easy. We think we understand the issues with the tracker as it relates to the early deceleration, but the related modification to the tracker requires more work on our part. However, we believe we’re on the right track theoretically, and that a modified tracker will do a better job going forward. Sometime this quarter, we will introduce our modified tracker as part of a deeper dive into the drivers of the PCLN story. Stay tuned.
Let us know if you have questions, or would like to discuss in more detail.