Vail FY 4Q17 Earnings Call Notes

Rob Katz – Chief Executive Officer

Absolutely seeing continued momentum in the upper end of the economy

“I think we are absolutely seeing that continued momentum, particularly in the upper end of the economy, which is where most of our resorts are focused and certainly the real estate projects are focused.”

Marriott 2Q16 Earnings Call Notes

Marriott’s (MAR) CEO Arne Sorenson Q2 2016 Results

Received regulatory clearance for starwood from everyone except China so far

“The big news this year for Marriott is the Starwood Acquisition. As you know we have received all of the necessary regulatory clearances throughout the world with the exception of China. We are in the second phase of China review and we have been working cooperatively with the regulatory authorities”

US economic growth has been slower than we anticipated

“you will not be surprised that U.S. economic growth has been slower than we anticipated when the year began. In fact over the last three quarters, room sales of our nearly 300 largest corporate customers have gradually weakened from 4% growth year-over-year in the fourth quarter to 2% in the first quarter and less than 1% in the second quarter.”

Strong dollar is impacting international guests

” with the stronger dollar we are seeing fewer international guests coming to our U.S. hotels. With the impact most pronounced in a few key gateway markets. We estimate the number of room nights occupied by international guests at comparable hotels in New York and Miami declined by 10% to 15% in the second quarter.”

Strength of the economy is the biggest question mark

“Obviously the strength of the economy is the biggest question I think in terms of forecasting how we are likely to perform in the coming quarters. And to some extent is the place maybe you can see this up a little bit over the second quarter. I think as we guided a quarter ago we have an overly rosy view about the strength of GDP in the United States particularly and as a consequence we continue to stick with our 3% to 5% REVPAR for the full year that we have provided at the beginning of the year.”

But it is still positive GDP growth

“But it is still positive GDP growth, I think to some extent the question you and we could ask of ourselves is we what more solid, more confident in the kind of guidance we are giving today than what we gave a quarter ago. And I think the best answer to that is that we now are making forecast based on essentially the current face of GDP growth in the United States which is weak not on a more rosy scenario.”

The economy should continue to grow but maybe somewhat anemically

“Is it possible the U.S. economy performs worse than that, of course it is. But when you look at the range of economic data that comes out including recent employment reports and consumer confidence reports and corporate profits and some of those sorts of things, it looks to us like it’s a reasonable good bet that the economy will continue to grow, albeit grow maybe somewhat anemically.”

Seeing construction projects take a little longer to complete

“And I think in some respects that in a somewhat weaker market, somewhat more anxious market that allowing the construction to take a little longer is a rational thing that some of our partners are doing. And as a consequence we see that the construction pace has expanding just a little bit. We are not seeing cancellations of projects however and I think generally what we’re talking about is projects that formally we would have expected to open probably in the fourth quarter of the year opening some time in 2017.”

Projects in China continue to move forward but slowed in Hong Kong

“We have been pleased with China on the development side year-to-date we obviously read the same newspaper that you do and there is some anxiety there as there is in many other markets around the world but it seems that people are continuing to move forward with projects that have strength. And then, on the negative side Hong Kong has been sort of tougher market mostly because Chinese visitation has, Mainland Chinese visitation has declined. Some of that is currency driven given that Hong Kong’s dollar is essentially pegged to the US dollar and so as a consequence has become more expensive as the US dollar has continued to appreciate around the world. We wouldn’t expect that Hong Kong is going to change for the better anytime real soon”

Marriott Starwood Acquisition Update Call

Arne Sorenson

We think we can accelerate unit growth

“On Unit Growth Opportunity, we think there are a number of places where we can accelerate growth in the Starwood portfolio, first we should commend the Starwood team for the growth that they have already accelerated over the course of the last year or so, it’s great to see that and great to see the momentum that’s already underway. But again we think that with the relationships we have with owners and franchisees around the world, with the development team that we have all around the world and with a proven track record we have for growth, we can bring that growth to St. Regis and The Luxury space, we look at what’s happened with The Luxury Collection and compare that on launch of the Autograph Collection just about five years ago, ”

Debt to EBITDAR will be 3.5x after the deal

“cash is obviously the cheaper currency for us to use, it does drive a bit higher debt level at closing we think roughly will be between 3.5 times and 3.6 times adjusted debt to adjusted EBITDAR at debt close, but given the power of the cash generation machine that these companies represent, we believe we’ll be well within our 3.0 to 3.25 target by year end 2016.”

There are opportunities for synergies

“With respect to the Hotel top-line and margin performance, this was an area that I carry in my briefcase actually about a dozen of very specific ideas for each one of those things which we’re optimistic we’ll be able to achieve, but because we are still competing with each other until this deal is closed, we will continue to compete. We have not had a chance to go through Starwood’s hotel level P&L for example and sit down and compare them side-by-side as if this was already our business. But we do know that there are areas like procurement, there are a number of system areas where we can combine two systems into one and share it across a broader platform and therefore deliver efficiencies to the hotels. And we also know that there are opportunities through the loyalty programs and through the salesforce to drive incremental share for those hotels.””

Leeny Oberg

Managed full service hotels have performed particularly well ytd

“Thanks, Arne. In a separate release today, Marriott announced that we have reiterated guidance for comparable system-wide RevPAR growth of 2% to 4% for the first quarter and 3% to 5% for full year. Year-to-date through February, we saw a constant dollar RevPAR at our comparable system-wide hotels increase 3.4% in North America, 3.9% outside North America and 3.5% worldwide. Couple of comments overall is that, the managed full service hotels performed particularly well year-to-date, rebounding from some renovations and with some great Group outperformance. Outside the U.S. we’ve seen very nice performance in Asia-Pacific and although Europe is still perhaps lower growth than we’d all like to see, is still a bit stronger than expected. Not surprisingly in the Middle East we’ve continued to see struggles there.”

Smith travel projects that demand growth will be higher than supply in 16 and 17

“And just kind of from a perspective from the whole industry in the U.S., we continue to see that Smith Travel projecting that on demand side that growth would be higher than supply for ’16 and ’17. And with supply still under its long-term average of 2 to a little bit over 2.”

Marriott 2Q15 Earnings Call Notes

Now offering Netflix in room

“Speaking of entertainment, as of the second quarter, we were the first hotel company to offer Netflix programming in our guest rooms. Our collaboration with Netflix reflects changing consumer preferences in how guests want to access and watch content while they travel. ”

Don’t see RevPAR growth slowing any time soon

“there’s been a lot of discussion about the strength of demand and the pace of RevPAR growth. Undoubtedly a slower pace of RevPAR growth is likely to occur at some point in North America as economic growth matures. Trees don’t grow to the sky. In fact, you may recall, at our Analyst Meeting last year that we started our four year RevPAR growth rate scenarios with a 4% handle. While this slower pace is likely at some point, we think it is premature to call it today. Based on our data, we believe North American industry RevPAR growth will be solid for the foreseeable future”

Group bookings are very strong

“Recent group bookings are very strong. North American Full-Service Group business booked in the second quarter for all future periods rose over 8% year-over-year. In fact, meeting planners are worried about securing availability more than negotiating hard on rate.”

There’s been limited supply growth

“Supply is another common question about our industry. In the U.S., the modest pace of economic growth combined with lender caution has constrained lodging supply growth for the past five years. While construction starts are picking up, STR doesn’t expect U.S. supply will reach even the historical average growth rate until 2017”

I think we see apprehension because people are wondering how long can this upswing last, but we don’t see anything that says it shouldn’t keep going

“I think we’ve got some apprehension as a marketplace, in part maybe driven by the fact that we’re in the sixth year of a strong lodging recovery. I think all of us kind of wonder how long can it last and we’re constantly looking for clues that maybe we’re reaching a point where we can somehow say that we’re transitioning to a different phase, and I understand that. In many respects we look at the same questions and we ask the same questions here. We don’t see evidence that would suggest that we’re entering a different phase of the cycle. We see supply growth continuing to be low. We see demand growth continuing to be high. When you look at group business, when you look at pricing power, all of those things look good.”

We have a lot of respect for trip advisor and have been in a mating dance for some time

“We’ve got a lot of respect for TripAdvisor. They have built a platform for customer reviews that has tremendous strength and obviously a broad application for hotels around the world. And we have been in a bit of a mating dance with them for some period of time, sort of feeling each other out and trying to figure out how the partnership would work between us”

Overwhelmingly for airbnb you’re talking about leisure travel at lower rates than you would pay for a hotel

“Overwhelmingly in this space you’re talking about leisure travel, overwhelmingly you’re talking about travel which is at relatively lower rates than would be available in a traditional hotel. And so while there are some business travelers, probably particularly younger business travelers who use these kinds of platforms for their business travel, they are still the exception rather than the rule.”

Corporate customers area little more concerned about risk involved in staying at an airbnb

“When we listen to our special corporate and significant corporate customers, I think usually what we hear is that they would like to make sure that their people when they’re traveling are taken care of and that the risk profile is acceptable to them, and there are attractive features of hotels when it comes to those kinds of considerations”

Starwood 4Q14 Earnings Call Notes

Each week I read dozens of transcripts from earnings calls and presentations as part of my investment process. Below are some of the most important quotes about the economy and industry trends from the transcripts that I read this week. Full notes can be found here.

North America recovery should continue for a long time

“Group business continue to strengthen and the year saw an uptick in the volumes of near term smaller meetings building on the trend that we’ve seen for a while. The supply picture remains relatively benign, that is, not enough new supply to bring occupancies down. We’re seeing more construction activity in the Select Serve segment but almost no industry supply growth in the upper upscale and luxury segment. Against the backdrop of low oil prices and low interest rates, we see potential for the North America recovery cycle to continue to for some time.”

China’s economy is twice as large as it was in 2007

“Looking back, China’s economy is more than two times as big in 2014 as when I joined in 2007 and by 2018 its economy is projected to be another 40% larger, which is why we maintained a view that despite any near term challenges, there is more risk in staying on the sidelines in China than in pursuing that to grow.”

Room growth has slowed

“our net rooms growth during the year was only 2% which is below our target of 4% to 5%.

As we mentioned on recent calls, this was driven by three factors. Longer development times and important growth markets like China, fewer in the year for the year conversions and a higher proportion of Select Serve hotels with lower average room count.”

Spinning off time share business

“Thank you, Tom. I am Grateful to be here today to talk to you about the new company I have the opportunity to join as CEO following completion of the spin off and for the chance to be partnering with Steve Williams and the talented SVO team on what will be an exciting next chapter for our guests, associates and investors.”

A company built on acquisition

“we’ve been a company that’s been built on acquisitions, and we really haven’t done an acquisition since the Le Méridien deal back in 2005, 2006 other than the design hotels acquisition couple of years ago. And I think you’ll see us being a bit more intentional here adding that as a lever to drive net rooms growth, so inorganic lever to drive that.’

Carnival Cruise Lines 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

We’ve turned a corner

“This is an exciting time for our corporation. Last quarter we indicated that we felt like we were turning the corner and our third quarter confirmed that we have. The 15% earnings improvement achieved in the third quarter and the increased guidance expected an even stronger improvement in full year earnings is truly a credit to our global team.’

Technology initiatives to reduce fuel consumption

“we have a series of technology initiatives in progress related to energy efficiency in areas like propulsion, lighting and air conditioning to name a few that we will continue to roll out during the resulting accelerated dry dock schedule. These initiatives have a quick payback period as we continue to steadily reduce few consumption in the years to come.

It is gratifying to say we have reduced our fuel consumption by another 5% this year and 25% since 2007, meeting our stated goal of delivering a 20% reduction in carbon emissions ahead of schedule while saving more than 1 billion gallons of fuel and $2.5 billion of fuel cost during that period.”

The Chinese government is promoting the cruise industry

“The Costa brand, as I mentioned, in the introduction here was the first brand to do so in China. And things take time to develop and we have been successful in developing our business there and others have come in now as well. What’s changed in addition to that, first was it just takes time to develop a market. But what’s changing in addition to that is that the government has it as a priority now.

The Chinese government has a plan for development of a cruise industry in China and that means, you are getting tremendous support and opportunity to participate led by the various governments whether it’s the Central Government or the provincial or the municipal governments like in Shanghai and Tianjin. And so all of that bodes well, we are beginning to gain momentum. Distribution system is learning how to market a product such as a cruise product. You are beginning to see players in China look at building the domestic brand, which we think will be real powerful at to developing that market.’

The brand has recovered very quickly, but of course we’d like it to recover faster

“Well, real quickly, in terms of the overall feeling about the brand. I would say that the recovery is probably the little faster than we had a right to believe it would be, but at the same time, it’s not nearly fast enough for all of us’

Optimistic about both North America and Europe going into 2015

“I would just say that we have seen the lengthening in the booking curve and higher prices in the first half of the year so far in North America. And while we’ve seen somewhat latent of the booking curve for the first half of next year in Europe, the prices are comparable pricing, so that’s probably what you are reacting to.

Having said that, I wouldn’t describe that broadly as North America being stronger than Europe or vice versa. Some of it has to do with the comparisons year-to-year and just a mix. So we’ll see how it goes. We are optimistic about both markets going into 2015.”

Continue to pursue fuel savings

“But, obviously, we will continue to aggressively pursue not only through the Department of Technologies but also managing deployments and managing the ships on itineraries from a fuel consumption standpoint, as well as all the practices onboard.

And so we will continue pursue fuel savings as we have in the past.”

We’re expecting quite a bit of growth in Asia and China

“Just one additional comment on the — on Arnold was answering, keep in mind that we’re expecting quite a bit of growth in the emerging markets particularly, Asia and China. So that should be able to profitably absorb a lot of that capacity and the other more established markets will see it more measured capacity increase.”

Starwood at Bank of America Lodging Conference Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Cyclicality of business is less pronounced in fee based business

“And then finally, one of the things that history has also taught us is something I alluded to earlier and that is the difference in the volatility of our earnings in the face of a downturn fee business versus owned-real estate. And the simple number is there, and again nothing new to those if you’ve been listening to us talk, a 50% drop in owned EBITDA or in hotel EBITDA and a mid-teens drop in the fee-based part of the business.

So the cyclicality of our business, I think, is much less of a downside risk as we become increasingly fee-based in our business, which is why for some time we’ve talked about getting in excess of being 80% fee-driven in terms of our business”

Select serve is growth potential but we don’t need it

“I look at the U.S. select-serve businesses as a growth vehicle for our company. But on the question of do we need it, I would say we don’t need it from the standpoint of building the base and relationships that we have with guests and customers at the higher end”

” our focus on building a platform that we can deliver value to hotels by having the best reservation technology, by having the strongest app, by being able to understand and give people individually what they want, is the most critical factor we think in developing our business. I don’t believe that we need the select-serve business in North America as a pipeline to grow demand for our higher-end brands around the world. But we do see it as a growth vehicle for our fee business and a way to expand the platform that we already have”

Analyst comment: not talking about China anymore

Analyst comment: “Two years ago I probably would have led off this whole discussion with China. And now, I made it 30 minutes without bringing it up.”

China will continue to urbanize

“China, today, is probably halfway through the process of urbanization that begun 30 years ago. There’s no reason to think that that fundamentally will stop. And so – now the other thing that I think we’ve been very clear about when it comes to China is in an economy as large as China is, changing as quickly as it does and as opaque as it can be, there will be fits and starts, as there have been. And whether it was two years ago or now, I mean, China has been around for 5,000 years. I think it’ll be around for another 30 years. And the reality is that there is a pace of urbanization and growth, and a commitment now to expansion in Tier 2, Tier 3, and Tier 4 cities.”

Starwood 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Record occupancy in North America

“REVPAR grew over 6% and occupancies were at a record 78%. That’s up over 170 basis points from last year and you might recall that last year in the second quarter we also reported record occupancy.”

We’re at capacity but the rest of the economy isn’t overheating, which is great

“the lodging sector is hitting record occupancy but the U.S. economy overall is showing no signs of overheating. This is very good news for us. It means that in this cycle we could enjoy full hotels and rising rates for some time before the rest of the economy catches up with lodging”

Latin America struggling outside of the World Cup

“World cup aside in Brazil as well as Argentina and Chile demand still struggles. Excluding Brazil for example we saw REVPAR decline across South America and in total across Latin America, REVPAR ex-Brazil was up 1%”

Sentiment continues to improve in Europe

“In Europe, overall sentiment continues to improve. Leading indicators suggest that the modest recovery will continue. This is good news on top of occupancies in Europe that remains strong, up 130 basis points to 73%”

Chinese demand is growing

“even without Macau China REVPAR was up 6%. Across China, demand is not just holding up but growing as the occupancy at our hotels excluding Macau increased year-on-year by over 5.5 percentage points and it now stands at 60%”

We could do this faster but we’d rather do it right

“t we are finding and we believe is that it will get better prices with owners that we want to work renovations and so forth by pursuing individual sales and so while we might be able to get to markets more quickly if we did a single portfolio sale, we would rather do this right and take a little bit more time and sell hotels individually in the way that we think is best fit for our long term fee business and for our brands.’

An opportunity in select serve

“where we are the smaller player in our industry is in what the North America called Select Serve or the other three or four star segment around the world, depending on where you are. And we think particularly a lot has – many of the characteristics against that segment that we saw in W a decade or decade and half ago, which brings – which in another words means we bring a fresh way of experiencing our hotel design language, color schemes the way that our associates deal with our guest, a focus on easy use of technology and a casual way of assembling in the living room or the lobby of the hotel. So all that I think is by way of saying that we think we have a brand and a [loft] that could make real inroads into a segment where we are small players.”

Carnival Cruise Lines 1Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings.

Turned a corner

“So, first of all, it feels like we’ve turned a bit of a corner. We achieved not only better than expected results for the second quarter, but we also achieved year-over-year earnings growth.”

favorable pricing trends in Europe and NA

“We were pleased to see our European brands revenue yields turn positive in the second quarter and particularly encouraged by the favorable pricing trends emerging not only in Europe, but in North America, as well”

Carnival trying to hold price at the expense of occupancy

” for the better part of the last year, Carnival Cruise Lines has been following a new revenue management tactic, holding price and giving up a few percentage points of occupancy.”

Efficiency improvement can come from leveraging scale, coordinating between brands

“I wanted to know we have a focus on it and where it emanates from is just coordination and communication and then single sourcing in some instances are limited sourcing, multi sourcing, you know, across the brands and just leveraging the scale that we have.

The brands individually have done good jobs at managing their costs. Some of the brands have done outstanding jobs. And we want to mine those best practices, deploy them across the fleet and across the brands.”

78 million passenger cruise days

” we fill 78 million plus passenger cruise days a year and $1 more per day is worth $78 million to us. So, the details matter and the discipline and the fine tuning matters.”

Booking patterns improved in Europe, expect to see something similar in the US

‘if you look at Europe in particular, the booking patterns have improved. So, people are booking further ahead than they did the prior year. Occupancy is up, yields are up, so that’s all very positive stuff. We expect to see similar trends, in due course, on a consistent basis in North America, as well.”

Starwood 1Q14 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Mature markets continue to show steady improvement

“This year’s begun pretty much along the same trend line that we’ve been seeing since the end of the economic crisis. Across mature markets, namely North America, Japan and Europe, growth and demand showed a steady improvement on last year and from what we can see, conditions are set to stay along that same trajectory.”

Occupancy rates peak, late cycle dynamics at play, REVPAR growth through price increases

“Across North America, occupancies once again were pushed to record highs. At this point, you’d expect late-cycle market dynamics in North America with REVPAR growth predominantly coming through higher rates, which is generally what we’re seeing. Yet despite this, we’re still several years away from seeing any real increase in supply in most markets.”

High end supply especially tight

“At the upper end, new supply is especially scarce, so as long as the U.S. continues its even modest economic growth, it seems likely that high occupancy and rising rates are here to stay for a while.”

China stronger than expected

” in China. For this first time in over a year, performance was stronger than we expected…Our result was especially good in light of government austerity, not to mention a slight drop in inbound travel to China. We’ve also improved our profit margins despite rising costs.”

China will have challenges though

“We’ve maintained for some time that an economy as large and rapidly changing as China’s will see some fits and starts. And while we agree with our owner partners that the Chinese economy has many years left to grow, we also recognize that China will need to make significant structural changes along the way.

In the near term, we don’t have much visibility into where the business is headed as transient booking windows are short, and we also have fewer large customers from whom to get a general read on business, let alone a commitment to meetings and conventions with long lead times.

What we can see in China remains — that it remains a relatively low occupancy market. So it’s likely that our growth will be driven more by occupancy than rising rates. Wages have also been rising faster for some time now, so we’re adapting our staffing levels to maintain our margins.”

Tighter liquidity has tempered the pace of real estate development in China

“On the development front, our view is the tighter liquidity has tempered the pace of real estate development. Many of our new hotels are slated for Tier 2 and Tier 3 markets and are part of mixed-use developments. As a result, the time it takes between signing and opening new hotels has become longer.”

Make your customers happy

“our business model is to make global guests happy so we can deliver great returns to our owners.”

Sheraton going to some obscure cities

“Looking at Sheraton’s pipeline, nearly 1/3 of the hotel’s — of the brand’s new hotels will be in markets where we don’t yet have — that don’t yet have a high-end hotel. These are cities like Aktobe in Kazakhstan, Nouakchott in Mauritania, Erbil in Kurdistan. Around the world, we estimate, in fact, that there are about 200 cities that could support one or more Sheratons that don’t yet have one, and there’s, of course, great potential for the rest of our brands as well.”

Trying to sell hotels as fast as they can

“Moving on to asset sales. We continue to believe the market for hotel sales is becoming deeper with a larger pool of buyers and more buyers looking for portfolio deals. We have a significant number of assets on the market in North America, Europe and Asia. Our intention is to get transactions completed on acceptable terms as fast as we can.”

The growth in Airbnb is a real thing

“Yes. Look, I think that the growth in Airbnb is a real phenomenon. I think the perspective that anything that reflects on more healthy demand for travel and encouraging people to get out, just like discount airlines as well, is generally a good thing for travel, not the other way around.”

Private equity driving demand for hotels

“in the U.S. the buyer base is institutional. And what we’re seeing in the U.S., as we said on our last call is for the past several years, we were only able to sell hotels in ones and twos because the primary buyer was public REITs who would buy a hotel, issue some stock and then come back for another hotel. What we’re seeing now, of course, is much more private equity money and, therefore, a greater interest in portfolio sales.”