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MAR should beat Q3 consensus next week. We remain concerned about the recent sequential slowdown in seasonally adjusted RevPAR, however.

Q3 may be the last quarter where earnings should be easily beatable for lodging companies.  We are projecting MAR to report $0.24 of EPS and $242MM of EBITDA, exceeding guidance and beating consensus numbers handily.  However, we do expect guidance to remain unchanged.  At $0.34, our Q4 estimate is $0.02 below the Street, which should be in-line with management’s unchanged 2010 guidance.

Our projections are based on recent absolute dollar RevPAR, adjusted for seasonality and GDP growth.  We’ve seen a seasonally adjusted sequential slowdown in RevPAR since the “pent up” period of May-July.  Based on this analysis, we think industry upper upscale RevPAR growth will be only in the 3-4% range in 2011.  Q1 2011 should be strong but Q2 and Q3 may be in the 0-2% range, owing to the difficult comparisons.  For MAR, our 2011 EPS estimate of $1.29 remains below the Street's $1.39.

3Q2010 Detail

  • WWW RevPAR of 8%, at the high end of company guidance (6-8%)
  • Total Owned, Leased, Corporate Housing and Other Revenue of $236MM and gross margin of $16MM – above guidance of $10MM
    • Includes $19MM of branding fees, and $2MM of termination fees
    • $95MM of owned & leased room revenues, up 9.4% YoY
    • 5% increase in food, beverage and other revenues
  • Total fee revenue of $263MM, compared to guidance of $245-255MM
    • Base management fees of $127MM, up 9% YoY
    • Incentive fees of $29MM, up 30% YoY
    • Franchise fees of $114MM, up 14% YoY
  • Timeshare segment results of $34MM, at the upper end of guidance ($30-34MM)
    • Contract sales of $184MM
    • $52MM gross margins on timeshare sales and services, net
  • Other stuff:
    • G&A: $150MM compared to guidance of $155MM (easy place to build in some cushion)
    • $5MM of gain and other income – in line with guidance
    • $39MM of net interest income, $1MM below guidance
    • A loss of $3MM for equity earnings