HST
#I'm sorry, I didn't hear ---+ what type of portfolio.
Oh, select service.
I would say that we ---+ to your first point we certainly recognize that on larger transactions, because of our scale and because of our access to capital, that we have an ability to buy those and maybe in an environment where it is a little less competition than what we might see in other properties.
That doesn't mean that we are just going to focus on those opportunities, but it is something we certainly recognize as we look at different acquisitions.
In terms of adding a select service portfolio, I think I would say we would be comfortable in adding select service assets.
There is no reason why you couldn't do or purchase a portfolio of those assets, but that would really be driven far more by where those assets were located and what the growth prospects were for those assets as opposed to making a strategic move into adding select service per se.
Yes, I think the simple way to do this really is that if you look in terms of the midpoint where we talked about a $17.5 million decline, look, just a hair over $5 million of that is attributable to the delta between the EBITDA generated by The Phoenician and the EBITDA that is lost by the asset sales that we consummated already this year.
As you look at the other three sources that we identified for the reasons why the EBITDA declined, it is pretty much an even allocation across those three items.
Yes, I would say that you are right in your assessment that the property is probably at best breaks even during the course of the summer.
And it probably generates about two-thirds ---+ actually probably generates about 75% of its profit during the first five months of the year and about 25% of its profit over the remaining seven months of the year.
We don't have a lot of hotels in those secondary markets necessarily.
So it would be ---+ it would probably be a little bit ---+ we probably don't have a great way to quantify that.
But I think one of the reasons why you have seen the secondary markets in some of the lower price points begin to perform better is because they have ---+ they run at lower occupancies and then they have had ---+ so they have more room to take on groups and things like that.
So I think that is why when you look at what ---+ as broadly across the industry the secondary markets have for about the last 12 months had bigger occupancy gains.
And I think it is in part because of what you identified.
It's certainly helping out Atlanta, for instance, that's right.
I would say that of the markets across the country, New York is one of those ones where you have the least pricing power right now.
I think that is, frankly, part of the problem that we have all been grappling with.
Now, you have got to remember when you look at New York is that the first quarter, you had a very difficult comp that related back to the Super Bowl.
And the first quarter of New York always tends to be the quarter where New York runs at lower occupancy levels compared to its overall stabilized level of occupancy for the year.
So in an environment where you have some increase in new supply, slightly less demand than what we had experienced in the prior year, leaving out the Super Bowl equation, you ended up with a fairly competitive environment even despite the fact that the market runs at a very high overall occupancy level.
We do think that as you work your way into the fourth quarter, that scenario starts to look a little bit more attractive because the market runs at even higher occupancy levels in the fourth quarter than it does the rest of the year.
Having said that, I think we are still finding that it is not easy to push rates, especially for transient business.
Yes.
Robyn, at this point it looks like our group bookings for 2016 are trending up close to 6% from a revenue perspective.
Remember, <UNK>, that number refers to the disruption that we were expecting to see in our non-comparable hotels as opposed to the comparable ones.
So that number is capturing the delta that we are experiencing year over year in say the Ritz Carlson in Phoenix or the Four Seasons in Philadelphia, the Axiom in San Francisco.
Those hotels where they are being closed for part of the year, or in the case of the San Diego Marquis where we eliminated a major chunk of our meeting space in order to build the new ballroom.
I would say that number has trended up just ---+ and that is really part of what we were referring to in our comment about (inaudible) some increased loss in effect because of the severance and weaker operations at the Ritz Carlton and the Four Seasons in the spring.
But the bottom line is Host Hotels was simply that as the hotels were focusing ---+ essentially as the management teams and the employees were focusing more on the closing and what they were going to do next, we overestimated the profits that we thought we would generated during that period.
We have been conservative but it just turned out to be weaker.
The good news is that problem has no impact on what happens at the hotel next year.
Correct.
Obviously increased severance cost this year obviously will not impact next year (inaudible).
<UNK>, I don't have those handy.
The bottom line though is the same trend that we had otherwise been seeing was that we were ---+ our situation in 2016 and in 2017 improved during the course of the second quarter.
<UNK>, I think that is a hard question to answer in the abstract.
And I wouldn't want to leave people with the sense that we think we need to sell a large number of our assets.
We think we have a very strong portfolio at this point and we are very happy with how the bulk of it is performing.
So I think it really comes down to we are going to continue ---+ as you describe, we are going to continue to sell the weaker assets within the portfolio.
And as we continue to do this over the course of really the last number of years, that the quality of what we are selling continues to improve.
But I wouldn't want to start to speculate on what a larger transaction might look like, because I wouldn't want to raise the expectations that something like that was likely.
I think ---+ I mean we ---+ the airline data that we are seeing nationwide is suggesting that travel from Europe is off a bit.
Specific data that we have gotten for our individual hotels in the market has suggested that we have seen weaker travel from Europe over the course of the first half of this year.
Now as you then look at ---+ I would point out that on Europe, a lot of the analysis on Europe says that EU currency countries are down in terms of travel.
The UK where the currency has been stronger and travel from Switzerland, which I think is a much smaller piece of it, has actually been up a bit.
But we have also seen ---+ I think in some of our assets we have seen that the travel from Asia has offset this decline in the EU and in other hotels we have not seen that.
I think that in a lot of cases this has to do with foreign travel bookings that the individual hotels have gone after, it has to do with their group patterns.
So it is tricky to draw broad conclusions.
We have done the best we could to interpret sort of a variety of different data points to give you a sense.
[But] when we look at it overall we feel as if international travel has been off slightly to New York this year.
Yes.
I mean (multiple speakers).
When we look at the first few weeks of July I would say we are roughly in line with what we saw in June.
I wouldn't say we have seen an acceleration but I think we are still comfortably positive.
So hopefully that will continue for this week and through the rest of the summer.
I imagine that the cap rates will stay low, <UNK>, just because there is an inherent attraction to the market.
But I would say that I would ---+ that is one of the things that I think we are going to find out over the course of the fall.
Our intention to move forward in marketing and asset is to get a sense of exactly how strong the market would be.
A lot of the activity that you have seen so far as to more attractive prices has been international buyers.
I think they are going to continue to be attracted to the market because they have perhaps a longer perspective in terms of what is going ---+ about the attractiveness of the New York market and they may have different motivations in terms of the returns that they are trying to achieve with their capital.
So, overall I would expect that ---+ at least when looked at in the context of cap rates ---+ that New York will continue to be one of the more attractively priced markets.
Part of the issue will be what the NOI is that that cap rate is going to be applied to.
I think we are ---+ I would say that we are ---+ we are not looking at one of our two largest assets in terms of a [marking], we are looking at one of our more midsized assets that we think has a more unique story that could be successful ---+ successfully executed in today's market there.
Yes, I wouldn't say that it is a high cap rate on the non-core sales just to make a general point there.
We have been selling ---+ the assets that we've sold when you take into account the asset and any (inaudible) that might be associated with it, which is only I think only significant in the case of one of the sales.
We have been getting very attractive cap rates in the sixes for those deals.
It is what you first surmised which is the bottom line if it is in the desert you make your money in the first part of the year and you don't make as much in the last seven months of the year.
The assets that we sold, if you start to ---+ you think about Boston and some of those other markets, even Chicago tend to be stronger in the summer than the fall, tend to be relatively weak in the winter and in the very early spring.
So we just ended up in a scenario when you look at it for 2015 we ended up buying an asset that's strongest performance is in the period of time before we acquired it.
And in the assets that we are selling, not to the same degree, but to some degree have a stronger second half of the year that the first half, which is why the net delta is negative this year, but on a pro forma basis would be positive.
And certainly we would be expecting when we look out in the context of 2016 we are confident we have added to EBITDA in 2016 by virtue of our actions.
I think it is a little bit of both, <UNK>.
And as I mentioned, we also had some other issues in the quarter whether it was disruption or the flooding that I talked about.
I think when we look out into the second half of the year, certainly Houston looks better than the RevPAR decline that we announced this morning for the second quarter.
But having said that, I think when we look at our second half forecast today for Houston, it is slightly lower than what we were predicting a quarter ago for Houston.
We try to take into account all those factors, the negative factors that you just mentioned.
The group booking pace actually in the third quarter is actually quite weak.
The flipside is that the group booking pace in the fourth quarter in Houston is extremely strong.
And so, we are trying to take into account all of those things including the fact that some of our disruption will behind us in (technical difficulty).
I think the other important thing to keep in mind, <UNK>, is that Houston is really about 2.5% to 3% of our (technical difficulty).
so it is pretty ---+ obviously a pretty light market for us.
I think we are ---+ I would say that we have a disproportionate number of international hotels on the market right now.
And some of that ---+ I would say that part of that's strategic and part of that is also tactical from a standpoint that as we look across the portfolio it applies to different metrics than we use in terms of deciding what assets to sell.
These were assets that sort of moved up on the list as prime candidates for sale.
I would say that in terms of what is happening in Rio and what is happening in Calgary and the fact that they drove the international RevPAR down significantly.
Calgary has just been a challenging room renovation, but long-term it has been a good market for us, short-term it is suffering both from the renovation and some of the same issues that exist in Houston because that is also ---+ that is probably Canada's equivalent of the Houston market.
But certainly as a general asset I wouldn't view that as a distraction.
In the case of the Rio asset, we continue to understand what is happening in that market from capital flows and things like that.
We know we have got a strong year coming next year with the Olympics.
I think if we saw the right opportunity to execute a sale we would be open to that.
But we also want to be thoughtful about capturing good prices there too.
I would say we expect to be a net seller in Europe this year.
We are still ---+ that is a market that we are still interested in acquiring.
So that is we are certainly looking aggressively there.
But I would say looking at our overall level of activity and handicapping that, I would say that we have already sold one asset there, we got very good pricing on that.
And I think we are more likely to be ---+ we will be a net seller in Europe this year more likely than a net buyer.
<UNK>, as it relates ---+ as we talk about those non-comp hotels which is where the bulk of the problem exists this year, the ones that have been closed.
I certainly would be ---+ were certainly based on the initial results we are seeing.
We feel good about how those properties will perform next year.
But having said that would also say that we are in the midst of construction, our management company has been just taken over.
All of those hotels tend to be a little bit more transient than group dominated, I am thinking more specifically of the one in San Francisco as well as both the Phoenix and the Philly assets.
So I don't know that we have a lot of good indicators right now other than our overall underwriting of how those assets should perform in those markets.
We should have better insight into that as we get into the third-quarter call and certainly as we get into next year's first call only from the standpoint that at that point the operators will have been in place, the products will start to be more visible in the market and we will have a better sense of the bookings.
But we are expecting across the board in those hotels to not only recapture the lost EBITDA from this year, but also to be adding meaningfully to EBITDA over the course of 2016 and 2017.
So I am certainly confident that we will recapture most of the ---+ all of the lost EBITDA next year and then the question is how much of that expected growth can we catch in 2016 versus 2017.
Great, well, thank you all for joining us on the call today.
We appreciate the opportunity to discuss our second-quarter results and outlook with you.
We look forward to providing you with more insight in the remainder of 2015 on our third-quarter call in the fall.
Have a great day.
Enjoy the rest of the summer.
Thanks.
