HST
#Yes, I would agree with you that we certainly ---+ as we looked at our results and compared them to what we saw in the industry, we were very pleased to see the occupancy growth that we had.
Now, some chunk of that was due to the fact that there were rooms out of service, but I think largely we attribute it to the fact that we had very good leisure demand.
Perhaps not in Florida, but in pretty much all of our other markets.
And on a relative basis to the industry, I suspect our group demand was fairly strong, too.
So, as we look through the rest of the year, given the fact that we've got a very strong group base, we are expecting to see ---+ I don't know that we would necessarily expect to see occupancy growth at the same rate going forward as we have right now.
We probably would expect to see our RevPAR growth lean a little bit more towards rate growth going forward, just because these next couple quarters are months where we start off with a really strong occupancy base.
But we would still expect to see some gains in occupancy throughout the rest of the year.
We are always tempted.
But I guess what I would say is that we were pleased with the way the first quarter played out.
I think that we took what we thought was an appropriately conservative perspective on RevPAR at the beginning of the year.
Our properties are more optimistic right now than we are.
But on the other hand is what was demonstrated in first quarter GDP is the economy's maybe not quite as robust as we all would like to see.
So, I think for right now, sitting where we are and feeling very comfortable with where we are, it was the right answer for us.
Yes, so I think what ---+ I don't know that we necessarily were commenting on tough comps in Q1.
I think what I was saying in my prepared remarks, and I will elaborate a bit, is that we have exceptionally strong group bookings in Q2 and Q3.
And those are months where we run at higher occupancy levels.
And it is what we have been seeing of late, is in general, when we are running at higher occupancy levels that seems to be when we have the best opportunity to push rate.
So that is why we feel pretty good about Q2 and Q3.
And I would confirm what you said, which is that today our group bookings for Q3 are the strongest that we have throughout the entire year.
Q4 is impacted by a number of things.
I think what probably matters most is the shift in the Jewish holiday, which will now impact October.
And secondly, the fact that this year's election will probably be one that most people want to pay attention to.
The net of those two things is we would expect less group business in the fourth quarter.
And then finally, the other reason why we expect the fourth quarter to be a hair weaker is the fact that November and December tend ---+ the second half of November and December tend to be lower occupancy months.
So what we experienced last year was that it was more difficult to push rate in those months.
We are expecting that same sort of a scenario will apply again this year.
Well, I am not going to try and speak for what other owners might think, but I guess I would say from our perspective, we see both positives and benefits from this.
I think what probably matters in some ways in the near-term, assuming that they navigate and we expect that they will, the challenges that exist around the integration.
When we compare our cost structures leaving out management fees, between Starwood and Marriott, right now Marriott ---+ if our Starwood hotels sat within the Marriott system, we would be able to save costs and improve margins.
So we are hoping that they execute as we expect they will, and that we ultimately get the benefit from that.
I think that the challenge that the industry in general has identified with the combination is that there will be a number of brands that will all sit beneath one family, under one company, and it will be important to be thoughtful about how to continue to distinguish those brands.
We look forward to working with Marriott in order to make certain that happens in a cost-effective manner.
Steve, it's a little hard right now for us to get a clear indication on how some of the booking direct programs were impacting us.
We do know that, in an effort to drive more bookings directly to the website, there were some ---+ there are some rate reductions.
I would say I think that's probably contributed to less growth in our transient rate than what we might have normally seen in the past.
Maybe and from that standpoint, a slight negative.
The flipside is, of course, is that when you look at what gets through the bottom line, the cost of booking a reservation directly with an operator is significantly cheaper than if it were to happen through one of the OTAs.
So we are certainly supportive of the overall strategy and we look forward to working with them to fine tune that as they move forward.
As it relates to the asset sales, I think that market is clearly not as robust as it was last year.
We do ---+ as I indicated in my prepared remarks, in addition to the assets that are under contract at this point that we identified in the press release, we have another $0.5 billion of activity that we are working hard on and I would feel we are making good progress on.
At this point, we would expect to attempt to sell additional assets in the second half of the year, but a lot of that will depend upon how we see the market evolve over the course of the summer and what the outlook seems to be for the second half of the year for transaction activity.
So I feel relatively good about where we stand right now.
I think we certainly were one of the first in the industry to begin to look to sell assets.
We did not just come up with this idea in the last 6 to 8 months.
And I think we're made great progress overall on the sale program.
I am hopeful that we will be able to keep going.
But at this stage, I think we will have to take a little bit of a wait-and-see attitude for the second half of the year.
I would guess it's a little hard to judge that in a vacuum.
But I think we are probably about halfway through.
My guess is we have implemented more than half of those measures already.
And I would also tell you that we are not ---+ just because we are ---+ when I say we are halfway through, we are halfway through the first, call it, 20 to 25 hotels that we ran the program on.
We are operating on a scaled down basis; been executing the program on some of our mid-sized hotels.
The benefits there will not be as significant in a total dollar context as they were on the larger hotels, simply because the hotels are smaller.
But as we work our way through getting the benefits from this, part of the structure of this program is that there is a bit of a cost-sharing relationship with the company that is helping us with that.
And so, part of what we are ---+ the second year of the benefit we don't really pay for anything.
Consequently, there is an opportunity for further pickup there.
So, I would say we have certainly gotten meaningful benefits.
We would expect to continue to get more going forward.
<UNK>, it's probably a little early for us to try to have any informed comment on that.
We have talked with them about some of their preliminary thoughts.
And it certainly ---+ the issues that you are identifying and the concerns that you are identifying are concerns that we have.
But specifically how they are going to approach that, they have not given us any details on that yet.
So, I am sure we will learn more as they move forward with consummating the merger and then working towards the integration.
But they are not at the point now where they have given us significant detail on that.
Generally, the answer is that we have not seen corporations pulling back on the businesses that they already had on their books.
There were some markets where we saw some slight ---+ we saw some reduction in production compared to prior levels on smaller groups.
But the larger ---+ we are not seeing any ---+ certainly not seeing any trend of significant cancellations.
We are not seeing a trend of significant attrition compared to the levels that might have been under contract.
It was interesting on the food and beverage side, just because that is something that we are clearly watching in this area, we actually saw in the first quarter that our spend for our food and beverage spend per group room night actually was up somewhere between 2.5% and 3%, which we viewed as fairly favorable, especially given some of the overall economic headwinds.
That is always a little tricky to get information that we fully trust on that area.
Our sense was that we were still down in the first quarter on international travel.
Now, I would say we were fairly encouraged by some of the arrival data that we have been tracking, which goes through February, which showed that Europe was up mid-single digits, that China was up nearly 20%.
Japan, actually ---+ arrivals from Japan actually trended up, which was a nice change compared to what we saw last year.
The two major inbound markets that we saw were down from the standpoint of air arrivals were Canada and Brazil, which were both down about 5%.
So those were two markets where ---+ I think in Brazil it is probably an economic situation; in Canada I think that's really being hit by the dollar.
There was some discussion that ---+ actually at our recent GM's meeting, that there was a feeling that we may start to see international improve in the summer, both because of some better circumstances in some of those countries, and also the fact that ---+ if the US dollar does not continue to strengthen, then the year-over-year change in the dollar is not as dramatic as what we saw in 2015.
But that is on the come.
We don't know whether or not that is actually going to happen.
I think to answer the last part of your question first, I think that the group activity that we have is very strong.
And of course, as you know, it represents 37%, 38% of our overall business.
We have always been more significantly weighted to group than the industry.
I am comfortable that with that base, that to the extent that we saw a reacceleration in corporate transient, that we would ---+ that would not present a problem for us, because that would just be directly reflected in the form of higher rates that we would be able to charge transient customers.
And in fact, that is one of the reasons why we like to have a very solid group base.
I think if you look more broadly at why we are where we are and others may be where they are in terms of outlook, I think some of this is the fact that we do have a very diversified portfolio.
So, no market represents more than 11% of our EBITDA.
We have got some exposure to some lower supply markets, whether it's Phoenix, Atlanta, or maybe New Orleans, where we are looking at very strong growth this year out of those markets.
The fact that we have a significant chunk of our portfolio in some key resort assets I think also helps, because so far the trend we have been seeing this year is very strong leisure demand, and we hope that that continues.
Then lastly, back to the group point, the large number of big group hotels that we have, which contribute meaningfully to our profitability, they are all in good physical condition.
We've invested significantly in them, and this is the part of the cycle where they have an opportunity to truly perform, both at the top and the bottom.
So, as I stated in response to a question before, we continue to be conservative in our approach to guidance.
But we are ---+ we feel very comfortable with where we are right now based on the information that we can evaluate.
I guess what I would say is that we are certainly concerned, as anyone should be, that when two large companies that represent a significant chunk of your portfolio are merging, you hope that that merger happens and that integration happens as effectively and as quickly as it can.
We have no doubt, based on our conversations with the folks at Marriott, that they understand the importance of getting that right.
Not just for our own sake but obviously for their own success.
They are a talented group of people.
And the one thing that Marriott has always been very good at execution.
So, I don't want to underestimate the challenges that they face, but I certainly think that they are aware of what they are heading into and doing the best they can to manage that process.
At the property ---+ some of the ---+ there obviously is activity that happens above the property on the marketing side.
But I don't want to leave everybody with a sense that ---+ when you look at who is running the hotel on a day-to-day basis, those folks are on-site at the property.
As we just ---+ again, we had a meeting with all of our GMs a week ago, and it was clear that in talking to both the Starwood and the Marriott GMs, they are all very enthusiastic about this combination.
It dramatically improves their opportunity.
It will facilitate cooperation in an appropriate manner in various markets where we may have assets branded under both companies.
And I think in a lot of ways, at the property level, they are very fired up about what the future might bring.
So, we are very focused on making certain that they stay focused on what they are doing, but we are very much aligned with those property GMs in terms of their activities.
Again, we are certainly paying attention to this and we will be staying as close as we can to making certain that every effort is being made to complete the integration as quickly and completely as they can get it done.
But I suspect we will be okay.
No, I think in general, what you described is generally what we expect, which is to see some improvement in Q2 and Q3, especially in Q3.
And then I think Q4 is the part that is a little harder to judge at this point.
<UNK>, I am not sure 90 basis points of margin growth with 3.6% RevPAR growth was stronger than what we would have predicted, so maybe we will be pleasantly surprised as we move forward as well.
But sitting here today, as <UNK> said, we are expecting stronger RevPAR growth in both Q2 and especially in Q3.
So that certainly should be helpful in margins.
Obviously <UNK> also mentioned that we expect to continue to have occupancy increases, but it will be more ---+ the RevPAR increase will be more balanced between rate and occupancy, which also will be helpful for us.
But having said that, I don't know that we can sit here and count on utility costs always being down 11% or more.
So we will see.
Obviously, we tried to take into account the success that we had in the first quarter and then we tried to ---+ frankly, my view for the rest of the year is slightly stronger than what it was just a quarter ago.
So we tried to take into account both of those things to come up with our new guidance of 25 basis points to 65 basis points.
<UNK>, I always appreciate fuzzy math to come up with multiples.
But I think if you look at the eight assets that we talked about in our press release, the three that we have sold and the five under contract, and look at an aggregate EBITDA multiple, it is around 11 times.
And so it is pretty ---+ obviously pretty close to the multiple where our stock trades today.
It varies by asset.
So in some cases, there is a sizable PIP, and in other cases there is virtually no capital required.
There are three new ones and two that we had ---+ two assets that were identified on the fourth quarter call have just not yet closed.
New York City Hotel is not in the group of assets we've identified so far.
That continues to be a priority.
And I would hope that we would be able to announce further progress down the road on that, but we are not there yet.
Yes, I think that is certainly one of the issues that needs to be studied as part of this.
And it's a unique thing to each individual market, so we don't have anything there that we are necessarily prepared to disclose, but that is certainly something that we are looking at as part of evaluating the overall impact of the merger.
As tempting as it would be to discuss M&A activity, I just ---+ I've generally found that the best answer to those sorts of things is to just not try to comment on potential M&A transactions until they are announced.
Yes, I would say that we are ---+ I would probably would say we are somewhat ---+ we are in the 3% to 4% range, and then we're expecting to be at the upper end of that range right now.
I don't know that we have got a clear delineation on what it is between occupancy and rate, but I would imagine it is about a 50-50 break.
I think there has been a high volume of transactions on the market from New York, for more than just the last six months.
I would also say that there is a high degree of buyer interest in the transactions that are there.
As I mentioned on the last call, our sense is that the properties that have attracted the most interest are ones where there is potentially brand flexibility, or use of the building flexibility.
Because that broadens the pool of folks that would be interested in a particular asset.
So, I don't think there's any doubt that a lot of people are interested in looking at New York right now, but I would also agree with what you are implying, which is there's a lot of assets on the market.
Well, thank you, everybody, for joining us on the call today.
We appreciated the opportunity to discuss our first quarter results and our outlook for the rest of the year.
We look forward to providing you with more insight into how 2016 is playing out in our second-quarter call in July.
Have a great weekend, everybody.
