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This quarter should beat consensus and guidance but all eyes will be on guidance for 2010. We’re at $1,385MM of revs and $236MM of Adj EBITDA for Q4 vs. consensus of $1,341MM and $226MM, respectively.



Trends & Outlook

  • “For the first time in seven quarters we did not experience a significant decline in transient room nights as the number of room nights sold this quarter matched the prior-year total. Demand in our corporate and special corporate segments fell by just 10% which was the lowest decline in the last five quarters and increases in demand for the lower rate segments fully offset this reduction leading to flat transient occupancy.”
  • “On the group side, the fallout from the cancellations experienced at the end of last year and the beginning of this year continue to take a toll on group occupancy.  The short-term net group bookings in the quarter for the quarter exceeded the levels obtained in both 2007 and 2008 and on a relative basis the number of overall net room nights booked in the third quarter for 2009 and 2010 improved significantly when compared to our results in the first half of the year. While the booking pace for the fourth quarter continues to trend behind last year’s pace, the booking cycle continues to be very short which offers the potential for additional pick up in the quarter. “
  • “As we look into 2010 we are pleased to see that our transient demand is improving albeit at lower rates because we expect that the first sign of better results will ultimately be driven by that segment. Our group booking pace for 2010 is still behind last year’s pace although the decline has moderated from what we had experienced earlier in 2009 and the combination of easier comps and the improving economy suggests that this gap should begin to close.”
  • “We still expect the combination of low occupancy and customers now accustomed to seeking lower prices will mean that rev par will continue to decline during the early months of 2010”
  • “As of yet there is little on the market that we find tempting but we continue to monitor activity and we expect to see deal flow improve in 2010 as the combination of lending debt maturities and depressed operating results create more motivated sellers or inadvertent owners. In fact, looking forward through 2014 there is over $30 billion of hotel CMBS debt that is coming due and although difficult to precisely calculate we think there is over $100 billion of hotel, bank and [license] company debt coming due during that time period…We would expect we would see additional assets begin to enter the market over the course of next year and into 2011. We intend to be opportunistic as market conditions evolve and are optimistic about the future prospects in this arena.”
  • “We expect the New Orleans Marriott to have another good quarter while the San Antonio market will underperform the overall portfolio in the fourth quarter due to a year-over-year drop in city-wide activity…. We expect the D.C. metro region to continue to outperform on a relative basis in the fourth quarter….We expect the New England region to perform much better than the overall portfolio in the fourth quarter due to growth in city-wide room nights compared to last year….We expect the Hawaiian market to outperform the majority of the Pacific region due to easier comparisons... We expect the Philadelphia market to continue to outperform the portfolio due to continued strength in business transient.”
    • New Orleans, Boston, Oahu did outperform, with metro area RevPAR up 5.8%, -8%, -2.4%,  respectively in 4Q09. 
    • DC and Philadelphia look like they only modestly outperformed the market, with metro-area RevPAR down 10.2% and 9.9%, respectively
    • HST’s properties should have performed better than the RevPAR  data suggests for these markets since Upper Upscale is recovering ahead of limited service segments, whose data is included in metro-area RevPAR statistics
  • “We expect the Atlanta region to underperform the portfolio in the fourth quarter due to lower group and transient demand and a more significant decline in rate... We expect the San Francisco market to continue to struggle due to weak group and corporate demand and Seattle will also likely underperform due to lower group demand and weaker transient business... We expect New York City to continue to struggle in the fourth quarter although we have seen positive signs from short leads with bookings.”
    • Atlanta looks like it only modestly underperformed the market, with metro-area RevPAR down 11.7%
    • The San Fran/San Mateo area looks like it actually outperformed the with smith travel reporting RevPAR of -9.9% in 4Q09
    • Seattle was indeed weak, with metro-area RevPAR down 17.3%
    • While STR data indicates that NY did underperform in 4Q09 with RevPAR down 13.4%, it looks like one of the strongest markets QTD in 1Q2010
  • “In the fourth quarter we expect the Tampa region to continue to outperform; the Miami/Fort Lauderdale region to struggle due to renovations at the Harbor Beach Marriott and the Orlando market to rebound based on improvements in transient and improved demand.”
    • STR data shows that Tampa was down 10.2%, Miami was down 10.9%, and Orlando was down 13.5% in the quarter
  • “In the context of describing weak demand at least in the beginning of 2010 that is really more of a rate commentary than anything else… A lot of the consensus projections out there right now seem to be expecting that employment will not pick up until the second half of the year and really show investment at this stage in 2010 as being relatively flat to 2009. Those are some of the factors that lead us to conclude it will probably take until the second half of the year before you start to see some sort of a meaningful rebound in RevPAR.”



  • “We would anticipate that our comparable hotel rev par decline would range between 20-22% for the full year which is slightly better than what we had projected in July which reflects our improved operating results this summer.”
    • We have HST coming in at -19.5% for 2009 given stronger results in 4Q09
  • “Looking at the fourth quarter we think comparable hotel adjusted operating profit margins will decline more than we experienced in the rest of the year primarily due to the significant level of fourth quarter 2008 high profit cancellation revenues, the high level of cost contingency measures implemented in the fourth quarter of last year and decline in average rates in 2009. As a result, we expect comparable hotel adjusted profit margin to decrease in a range of 600-640 basis points for full-year 2009.”
    • Given the somewhat better RevPAR performance we expect that hotel adjusted operating profit margins will decline 810 bps, but still expect EBITDA to beat consensus of $226MM by approximately $10MM
  • 2010 Guidance: “One way we have thought about it is if you go back to the last downturn and you look at the third year of the last downturn that being 2003 our rev par in 2003 was down 4-4.5 points and our margins were down around 300. If you think about what that may mean in a context of 2010 obviously if the rev par number is better than the margin number would have been better. I think there is some sense of guidance one could take from that as an estimate.”

Other commentary

  • “We continue to expect our capital spending for the year will total about $340 million… . I think our sense is our spending in 2010 will probably be slightly less than what we are doing in 2009.”
  • “There certainly are over the next 2-3 years a number of additional non-core assets that we would look to sell. Our sense is that we probably would not be that active over the next 12 months. … By and large at least as we think about 2010 right now I would expect that our disposition pace would probably be a bit lower than what we saw this year.”