Executives of brands and REITs on their second-quarter earnings calls said the closing of the Moscone Center for renovations negatively affected performance for the quarter, but they expect better performance with the reopening of the center.
REPORT FROM THE U.S.—The closing of the Moscone Center in San Francisco led to weaker second-quarter results for some companies, but with the reopening of the convention center in 2018, headwinds are expected to turn into tailwinds.
Executives of brands and real estate investment trusts detailed the performance of their San Francisco assets in their second-quarter earnings calls. Here’s a roundup of what they had to say.
Ross Bierkan, president and CEO, RLJ Lodging Trust
“In Northern California, ongoing renovations at the Moscone Center continue to reduce compression in the market. Our (revenue per available room) decline to 5.5% compared favorably to the San Francisco market RevPAR to kind of 8.2% and again highlights the benefits of our portfolio diversification in the region. Additionally, our RevPAR this quarter reflects disruption at two hotels that were undergoing renovations. Adjusting for renovation disruption, our RevPAR would have improved by 220 basis points. With our hotel renovations now complete and the opportunity to lap the renovations at Moscone approaching late in the third quarter, our toughest comps are now behind us, which should lead to improved performance for the second half of the year and into next year.”
Patrick Grismer, CFO, Hyatt Hotels Corporation
“Compared to our system-wide average, Easter timing had a more pronounced effect on our owned and leased hotels because we have a higher exposure to group business in our owned portfolio. Excluding the Easter timing impact, our owned and leased hotels grew RevPAR by 0.5% in the second quarter. This was generally in line with our expectations as we entered the quarter given a challenging lap at Park Hyatt Zurich, as well as general market softness in San Francisco, where we own the Grand Hyatt and lease a Hyatt Regency. Adjusting for the Easter timing impact and excluding these three hotels, our owned and leased segment grew RevPAR a respectable 1.9% in the quarter.”
Jon Bortz, chairman, president and CEO, Pebblebrook Hotel Trust
“Year-to-date same-property RevPAR decreased 2.6%, same property total revenues have declined 2.1% and we estimate disruptions from renovation negatively impacted our RevPAR year-to-date growth by 245 basis points and one-time market specific issues such as the Moscone Center expansion, the Porter Ranch gas leak and the Super Bowl in San Francisco negatively impacted portfolio-wide RevPAR growth by an additional 315 basis points for a total of 560 basis points.
“Our RevPAR decline of 2.4% was in (the) middle of our outlook range. If you look at the portfolio excluding San Francisco, which is being severely impacted as expected by the Moscone closures that began following the first quarter, RevPAR grew 2%. On top of the challenges due to Moscone, as Ray (Martz, EVP and CFO) described in detail earlier, the renovation in Hotel Zoe in San Francisco also impacted Q2's RevPAR results shaving 155 basis points off our performance.
“The good news about the impact from Moscone this year, as well as our renovations particularly at Hotel Zoe, is that they make for much easier comparisons next year and in 2019. In other words, these headwinds turn into tailwinds for us.”
James Risoleo, CEO, Host Hotels & Resorts
“In San Francisco, RevPAR declined 2.8% in the second quarter, largely due to the anticipated, and well-documented, closure of the Moscone Convention Center. However, our hotels outperformed the STR upper-upscale market results by 280 basis points. Going forward, we anticipate hotels in San Francisco will continue to struggle as the Moscone Convention Center is scheduled to be completely closed in the third quarter, negatively impacting all hotels in the Bay area. However, keep in mind, that once the expansion project at the convention center is completed in 2018, we expect citywides to return to San Francisco, and business to positively follow through in a meaningful way in 2019.”
Tom Baltimore, Park Hotels & Resorts
“We emphasize that we remain bullish on San Francisco in the long run and believe we hold a competitive advantage with nearly 3,000 hotel rooms and over 160,000 square feet of meeting space in the Union Square Market that will allow us to reap outsized benefits from the Moscone Center expansion.
“Looking forward, 2018 citywide pace is up in the low to mid-double digits, and 2019 is projected to be a record year with the opening of the Moscone Center expansion, which is projected to generate approximately 1.2 million citywide room nights or a 65% increase over the 2018 pace.”
Paul Edgecliffe-Johnson, CFO, InterContinental Hotels Group
“First, the Americas, where RevPAR growth was predominantly rate driven, up 1.1% in the half. In the U.S., RevPAR declined by 0.4% in the second quarter. As we highlighted at the first quarter, this is adversely impacted by the shift in the timing of Easter, which we estimate was equivalent to 120 basis points. It's worth noting that third-quarter RevPAR in the U.S. will also be adversely impacted by calendar shift. Looking at the performance of individual brands, InterContinental (Hotels & Resorts) and Crowne Plaza, RevPAR declined 3.7% and 2.7%, respectively, in the second quarter, impacted by their distribution in higher supply growth markets, such as Dallas, and a challenging San Francisco market due to the refurbishment of the Moscone Convention Center.”