In preparation for the HST Q2 earnings release tomorrow, we’ve put together the pertinent forward looking commentary from the company’s Q1 earnings release/call and subsequent conferences.
Trends & Forward Looking Commentary
- “Our top line results improved on a relative basis in each period of the quarter and turned positive in March. As you may remember, due to the timing of our reporting period, our first quarter does not include the operating results for a significant portion of our portfolio for the month of March.”
- “For the third straight quarter, we experienced year-over-year growth in our Transient business with an overall increase in Transient room nights of more than 12%. More importantly, this increase in demand was led by our Special Corporate business where room nights increased more than 28%, and our Premium and Corporate segments where room nights increased for the first time in nine quarters at a rate of nearly 9%.”
- “On the group side, frankly, we were pleasantly surprised by the pace of our short-term bookings during the quarter.”
- “RevPAR growth for period four exceeded 5%, continuing the recent trend of improving results. Group bookings continue to be strong as bookings in the first quarter for the second quarter have more than tripled when compared to last year and even slightly outpaced our 2007 level of activity. Transient bookings for the second quarter are also trending ahead of last year. Overall, improvement is still relying on the strength of the economy, but we are optimistic that businesses are beginning to loosen their travel budgets, spurring a recovery in lodging demand.”
- “Overall, wages and benefits decreased 1.3% or 8.2% on a per occupied room basis, and unallocated cost declined by 2.7% for the quarter as hotels reduced management headcount and lowered other controllable costs. Utility costs also decreased 8.4% through a combination of lower usage, lower rates and the impact of energy saving capital improvements. For the quarter, real estate taxes were flat.”
Guidance
- “We are increasing our estimates for RevPAR for the year to an increase of 1% to 4% with a comparable adjusted margin decline of 125 basis points to 50 basis points. Based on these assumptions, full year adjusted EBITDA would be approximately $750 million to $800 million and FFO per diluted share would be $0.58 to $0.65.”
- “We are increasing our expected capital expenditure estimate for the year to $300 million to $340 million, and we'll continue to evaluate other projects as we work through the year.”
- 2Q 2010 Guidance:
- “We expect the Philadelphia market to underperform the portfolio due to lower levels of both transient and group demand.”
- “As expected, the Miami Fort Lauderdale market performed very well with a RevPAR increase of 10.3% …We expect the Miami Fort Lauderdale market to have a weaker second quarter but still have positive RevPAR.”
- “We expect San Antonio to have a decent second quarter and a strong second half of the year.”
- “We expect our Boston hotels to have a great second quarter with double-digit RevPAR growth due to strong citywide activity and improvement in transient demand.”
- “We expect the Orange County market to continue to perform well in the second quarter.”
- “We expect New York City to have an outstanding second quarter due to high levels of business transient demand.”
- “We expect Chicago to perform much better in the second quarter and for the outperformance of the Swissotel to continue.”
- Hawaii: “We expect the hotels to perform much better in the second quarter but we need to see further increases in airline capacity versus stay in recovery.”
- “Our DC hotels had positive RevPAR in period three and we expect DC to have positive RevPAR in the second quarter.”
- “We expect the San Diego market to continue to struggle in the second quarter but improve in the second half of the year.”
- “Looking out through the rest of the year, we expect occupancy to increase further, which will likely lead to growth in wage and benefit cost at inflation after taking into consideration the benefit from productivity gains. We expect unallocated cost to increase at inflation except for utilities where rates will increase and occupancy improvements will drive higher utilization, and sales and marketing where higher revenues will increase cost. We will also incur cost for the implementation of new sales and marketing initiatives. We expect property insurance to increase at inflation and property taxes to rise in excess of inflation. As a result, we expect comparable hotel adjusted operating profit margins for the year to decrease 50 basis points at the high-end of the RevPAR range and decrease 125 basis points at the low end of the range."
- “For all of 2010, cancellation and attrition fees will be significantly lower than 2009. Adjusting 2009 to a typical year of cancellations would result in an improvement of the above margin guidance of 70 basis points.”
- 2009 attrition: “It's $40 million incremental, over a typical year.”
- “On the margin front, I think our estimate is that we are looking at a 50 basis point decline tied to a 4% overall full year RevPAR growth rate."
Miscellaneous
- “Earlier this month, we purchased the junior tranches of a mortgage loan secured by a 1,900-room portfolio of hotels in Europe. The par value of the tranches we purchased are approximately EUR 64 million and we purchased the notes at a meaningful discount. While we cannot get into more specifics regarding this investment, the return we expect to generate on the notes meets or exceeds our return target for a levered investment.”