In recent years hotels have modified rate options within the booking process while also modifying cancellation policies, we think with a goal to reduce churn and cancellation activity. In years past, hotels offered a standard rate option – book now and pay at check-in. Now, hotels offer multiple options, including an option to pre-pay now at a lower but non-refundable rate. Hotels have also tightened cancellation policies for the standard rate (i.e. pay at check-in rate), with cancellation policies extending from 0-24 hours prior to check-in to in some cases now 72 hours before check-in. These policies have resulted in less cancellations, and on the last earnings call HLT cited cancellations are down 10% over the past several years.
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Each year around this time we dig through annual proxy statements to learn about changes in corporate governance and shareholder alignment, and we publish the results. Specifically, we study three broad categories: 1) CEO compensation, including how much and how it’s derived, 2) CEO equity ownership, and 3) board composition. We gave each company a qualitative score for each category and aggregated the results in Exhibit 1. Every company has areas of improvement, in our view, but HLT and WYND scored best based on our qualitative aggregation, followed by VAC, NCLH, and WH. All five are companies we think to be commercially aggressive and shareholder focused
In this week’s piece we discuss five ideas with five charts, including probably way-too-early hurricane forecasts for the upcoming Atlantic hurricane season as it relates to cruise lines; NCLH’s recent consistent beat and raise execution, and what that hasn’t meant for the equity multiple; why VAC’s planned analyst day later this Fall seems positive; RevPAR index gains for brands, who seemingly took RevPAR share from independents in 1Q, which we believe is positive for the long-term model; and softer Chinese credit data in April, and what that might mean for Macau GGR. Please click the link above for the full report.
This morning (5/10/19) MAR reported adjusted EBITDA of $821M, versus our $829M, consensus of $836M, and the prior guide of $820M-$845M. EBITDA came in at the low end of the range due to cost items, while EPS was better partly because of a lower tax rate. MAR reiterated FY RevPAR guidance (+1%-3%), prior FY EBITDA guidance ($3,615M-$3,715M), and prior capital returns guidance (at least $3B), but the stock closed down 3% we think because of a headline miss and softer 2Q guidance implying a bigger back half ramp.
CHH reported 1Q earnings this morning (5/9/19). The quarter beat estimates slightly on fee revenue and tax timing, but RevPAR was disappointing. CHH lowered FY RevPAR guidance, but it just doesn’t move the needle much on the P&L given the business model, and ultimately EBITDA guidance was unchanged. The stock closed down 2% on the news we think because the result wasn’t great, numbers aren’t going up, and the stock has already had a decent run YTD to an all-time high.
VAC reported earnings this morning, with adjusted EBITDA of $166M coming in below consensus of $173M and our $177M estimate driven by revenue reportability (i.e. revenue timing). VAC doesn’t provide quarterly guidance because of quarter to quarter volatility, particularly on the reportability line, which swung $30M against them in the quarter due to timing. Importantly, VAC reiterated FY EBITDA guidance, and note VAC usually doesn’t raise EBITDA guidance or contract sales guidance this early in the year (Exhibit 8). The stock is trading down 5% in a tough tape we think partly due to a “headline miss,” but overall business trends seem positive.
Last week was a busy week filled with cruise, gaming, and lodging earnings reports. In this week’s piece we highlight ten key themes with several charts. Please click the link above for the full report.
H reported 1Q yesterday PM (5/1/19) and hosted their call this AM. H reported adjusted EBITDA of $187M, in line with consensus and our estimate. H also reiterated prior FY guidance on RevPAR, net rooms, and adjusted EBITDA, which we think is positive in the midst of what was universally believed to be a soft March for the industry. Overall H sounded constructive on demand, like what we’ve observed from peers thus far.
HST reported 1Q earnings yesterday afternoon (5/1/19) and hosted their call this morning. Adjusted EBITDAre was $406M, versus our $379M, consensus of $385M, and the implied guide of $379M-$411M. HST beat us on better total revenue and margins, despite missing on RevPAR. Following the beat, HST raised FY EBITDAre guidance by $27M after accounting for new disposition activity to $1,535M-$1,600M as comparable margins are now expected to increase 5bp at the midpoint versus a prior expectation for a decline of 20bp at the midpoint.
HGV reported 1Q earnings yesterday PM and hosted their call this AM (5/2/19). EBITDA was $102M, which was in line us and consensus. However, contract sales declined 2% y/y, which was below HGV’s expectation for moderate growth. March VPG was much softer than expected, due to inventory challenges after selling out of high-quality inventory. As a result, HGV lowered FY contract sales guidance from 9%-11% y/y to 5%-8% y/y, but only lowered FY EBITDA guidance by $5M to $445M-$465M because of variable costs, cost containment, and better other revenue.
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