Execs: The role of Trump, Easter shift in Q1 numbers
 
Execs: The role of Trump, Easter shift in Q1 numbers
18 MAY 2017 8:34 AM

Hotel executives pointed to a number of factors that strongly influenced first-quarter performance during earnings conference calls with analysts.

REPORT FROM THE U.S.—Many hoteliers entered 2017 with expectations that the start of the looming downturn would become clearer, but surprisingly robust first-quarter performance, in some cases, might have made cycle projections murkier.

According to industry analysts and executives, a number of factors contributed to the positive performance in Q1. The inauguration of U.S. President Donald Trump and the Women’s March set the pace in Washington, D.C., in January. Then, Super Bowl LI gave life to host city Houston’s floundering hotel market in early February. Finally, hotels around the U.S. benefited from the increased corporate bookings in the first quarter due to the shift of the Easter holiday.

Here’s how hotel company executives interpreted performance in the first quarter.

Jim Risoleo,
president and CEO,
Host Hotels & Resorts
  
Steve Joyce,
CEO, Choice Hotels International
  
Arne Sorenson,
president and CEO, Marriott International
  
Kevin Jacobs,
EVP and CFO,
Hilton

Jeremy Welter, EVP of asset management, Ashford Hospitality Trust
  
Patrick Grismer,
CFO, Hyatt
Hotels Corporation
  
Ross Bierkan,
president and CEO,
RLJ Lodging Trust

James Murren,
CEO, MGM Resorts International
  
Jonathan Halkyard,
CFO, Extended Stay America

Jim Risoleo, president and CEO, Host Hotels & Resorts

“While we are very pleased with our results in the first quarter, we are aware that overall performance was aided by events that skewed results higher. In fact, we believe that the first quarter will be our best of the year. Like quarter one, which benefited from the Easter shift, the fourth quarter will be favorably impacted by the Jewish holiday shift from October into September, and we expect it will be our second strongest quarter in 2017. That being said, the events that benefit the first and fourth quarters will negatively impact the second and third quarters, leaving our full-year outlook relatively unchanged.

“Despite this (first) quarter (having) better-than-expected results, there does not appear to be compelling evidence of acceleration in (revenue per available room) above where we initially guided. … (Although) a lot of forecasts for both business investment and corporate profits remain strong, we do not anticipate any material policy initiatives providing tailwinds to our business until 2018 at the earliest. … Group booking pace appears to be weakening for 2017, with February and March bookings for the year slightly softer than last year. This trend combined with continued economic uncertainty has tempered our outlook for the remainder of the year.”

Steve Joyce, CEO, Choice Hotels International
“We think it’s going to be a strong RevPAR year. Because of the way Easter worked, the numbers have jumped around a lot. And if you look at (STR’s) report on this, it explains all the details why. And so, what we are seeing for May early on is pretty strong, and we are expecting a strong summer.” (STR is parent company of Hotel News Now.)

Arne Sorenson, president and CEO, Marriott International
“In North America, systemwide RevPAR rose 3.1% in the quarter. Our hotels in the greater Washington, D.C., area benefited from January’s inauguration and Women’s March. Systemwide RevPAR in D.C. increased 15% in the quarter compared to the prior year and well ahead of our expectations. …
Across the North American region, group RevPAR rose 7.7% year-over-year, benefiting from the events in Washington and the shift in the Easter holiday to the second quarter. … Transient RevPAR in North America was up nearly 2% year-over-year in the quarter constrained by the timing of Easter and high occupancy rates. At the same time, transient demand exceeded our expectations, and we improved the mix of transient revenue, drawing more high-rated retail and corporate customers and reducing discounts.

“In the second quarter, we expect lower group business year-over-year due to the timing of Easter. As a result, we expect North American systemwide RevPAR will be flat to up 2% in the second quarter, and will increase 1% to 3% for the full year.”

Kevin Jacobs, EVP and CFO, Hilton
“For the quarter, systemwide RevPAR grew 3% versus the prior year on a currency neutral basis, which was at the high-end of our guidance due to good transient demand and strong group performance. We estimate the Easter calendar shift boosted RevPAR growth by 70 basis points in the quarter.”

Jeremy Welter, EVP of asset management, Ashford Hospitality Trust
“We own nine hotels in the District of Columbia and its suburbs, and in 2016 these hotels accounted for 8.9% of the rooms in our portfolio and 9.5% of hotel EBITDA—both metrics representing the highest concentration of any single market in our portfolio. Our D.C. portfolio grew comparable RevPAR 14.9% during the first quarter (of 2017), with 9% rate growth and 5.4% occupancy growth. ... Additionally, margins increased 252 basis points and hotel EBITDA for the portfolio increased $1.9 million or 22.1% for the quarter. These strong results were primarily driven by a strong January that was helped by Inauguration Week. We believe D.C., as a market, is also well-positioned to continue to outperform for the remainder of the year.”

Patrick Grismer, CFO, Hyatt Hotels Corporation
“Nearly three-quarters of the RevPAR increase was driven by rate with strong flow through. Approximately one-third of our RevPAR growth in the Americas was attributable to the timing of the Easter holiday and the presidential inauguration. When adjusting for the impact of these two items, Americas full-service RevPAR growth would have been a very solid 2.9% for the quarter. Due also to the fact that Easter shifted into Q2 versus 2017, we saw strength in group performance and relative softness in transient performance, compared with Q1 of 2016. In fact, group revenue at U.S. full-service hotels was up 10% in the quarter whereas transient revenue was down a bit more than 1%.”

Ross Bierkan, president and CEO, RLJ Lodging Trust
“Our top performer, Washington, D.C., achieved exceptional RevPAR growth of 14.3%. The presidential inauguration followed by the Women’s March created significant compression throughout the city and helped our hotels achieve RevPAR growth of over 170% during these events. … In Houston, we benefited significantly from the Super Bowl, achieving RevPAR growth of nearly 25% in the month of February. The continuing ramp-up of our newly converted hotel in downtown also made a positive contribution.

“Overall, we were very pleased with RevPAR growth of 2.4% for the quarter as well as an increase in market share of approximately 70 basis points. As we look further out, we do expect to see headwinds in Houston as the market continues to absorb new supply and given that the NCAA Final Four took place in April of 2016.”

James Murren, CEO, MGM Resorts International
“In the first quarter in Las Vegas, we achieved Strip revenue and EBITDA growth of 7% and 17%, respectively. … The quarter, of course, was aided by a strong convention business calendar and a favorable Easter calendar shift.

“Clearly, the quarter benefited from CON/AGG and that calendar shift. However, even excluding these benefits, we would have grown RevPAR by approximately 4% in the first quarter.”

Jonathan Halkyard, CFO, Extended Stay America
“For the second quarter of 2017, we are forecasting an acceleration of revenue growth compared to the first quarter and continued strong earnings growth. … This outlook for the second quarter reflects a negative impact of Easter shifting into April and the benefit from lower renovation disruption beginning in May that will continue into the first half of 2018. There should be minimal impact on operating results from asset dispositions in the second quarter.

“… Our revenue performance has been accelerating through the first quarter, and we’ve seen that continue into April. So, it’s a modest increase in the overall RevPAR growth guidance for the year (1.5% to 3.5%), but it really just reflects the trends we’ve seen over the last 60 days and what we’re seeing in the coming 60 days, plus of course our confidence around the conclusion of the renovation program and the performance of the newly renovated hotels.”

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