Executives at publicly traded hotel companies provide some insight into why they changed or maintained their fourth-quarter and full-year 2017 RevPAR guidance.
REPORT FROM THE U.S.—The third quarter of 2017 brought with it substantial challenges to the U.S. hotel industry, but several publicly traded companies have maintained or even raised their Q4 and full-year revenue per available room guidance despite the events of the past quarter.
Tougher year-over-year comps created by holiday shifts and natural disasters that caused evacuations and shut down many hotels were two of the most cited causes for performance interruptions during the third quarter. However, executives at some companies explained during their third-quarter earnings calls that their companies still performed well enough to raise their projections for the full year.
Arne Sorenson, president and CEO, Marriott International
“For the fourth quarter we expect RevPAR will increase 2% to 3% in North America as we benefit from the holiday shift and continued hurricane-related demand in Texas and Florida. North America group pace is up 5% for the quarter. For international markets, we expect RevPAR will grow 3% to 5% and worldwide we expect RevPAR will increase 2% to 3% in the fourth quarter. With the benefit of the third quarter's actual RevPAR and expected fourth-quarter performance, we now expect full-year 2017 worldwide systemwide RevPAR to grow 2% to 3%, up from 1% to 3% a quarter ago.
“We are only partway through our budget process for the upcoming year, but the early indications are that 2018 RevPAR growth will be similar to growth expected for full-year 2017. In North America, we expect special corporate rates currently in negotiation will increase at a low single-digit rate, and in the absence of accelerated economic growth, special corporate volume for comparable customers is likely to be flat.”
Kevin Jacobs, EVP and CFO, Hilton
“Comparable RevPAR in the U.S. was roughly flat with calendar-driven group under performance particularly in convention business offset by continued strength in leisure. We estimate that the two major calendar shifts negatively weighed on U.S. RevPAR by approximately 70 basis points in the quarter partially offset by a lift in business from the aftermath of the hurricanes. We estimate that our hurricane-related benefit was less than the overall U.S. industry due to our meaningful occupancy share premiums in those markets.
“For full year 2017, we continue to forecast the U.S. RevPAR growth toward the lower half of our 1% to 3% systemwide range. In the Americas outside the U.S. third quarter RevPAR grew 3.4% versus the prior year due to strength in Mexico, which was driven by strong transient demand. Leisure transient in particular saw high single-digit room night growth for the quarter. For full 2017, we expect RevPAR growth in the region at the higher end of our guidance range.
“We are raising our adjusted EBITDA outlook by $30 million at the midpoint to $1.93 billion, an increase of more than 9% year-over-year. We’re also raising diluted EPS adjusted for special items to $1.87 to $1.91.”
Mark Hoplamazian, president and CEO, Hyatt Hotels Corporation
“We're pleased with our 2017 results thus far and have confidence that we'll close out the year ahead of the guidance we provided in August. We continue to outperform the competition around the globe, and the strength of our brands combined with steps that we've taken this year to invest in new areas of growth, will all serve to enhance engagement with our guests and solidify our relationship with high-end travelers.”
Pat Grismer, CFO, Hyatt Hotels Corporation
“As Mark and I have mentioned throughout the call, we are very pleased with our results for the quarter following a strong first half of 2017. And while we continue to monitor group trends, our strong operating results through the first nine months, combined with increased visibility to Q4, gives us confidence to improve our full-year outlook. With respect to our full-year RevPAR growth outlook, we are adjusting the range up to 2.5% to 3%. Despite the challenges of Q3, we delivered solid RevPAR results and are looking forward to a stronger Q4.”
David Wyshner, EVP and CFO, Wyndham Worldwide
“Our associates and our management teams have been working to mitigate the financial effects of the storms on our business. Nonetheless, as we disclosed in our earnings release, we estimate that the hurricanes will negatively impact our fourth quarter revenues by $20 million to $30 million, our adjusted EBITDA by $15 million to $23 million, and EPS by $0.09 to $0.14. Therefore as a result of the storms, we're reducing our full-year 2017 projections. We now expect revenues of $5.8 billion to $5.85 billion, adjusted EBITDA of $1.38 billion to $1.395 billion, and adjusted net income of $618 million to $628 million.
“For the fourth quarter, we expect adjusted diluted earnings per share of $1.27 to $1.37 on a share count of 102.4 million excluding the effects of any fourth-quarter share repurchases. Other than the effects of the storms, our businesses are continuing to perform well and in line with our earlier projections. We are increasing our forecast of 2017 global RevPAR growth to up 1% to 2%, and we expect full-year room growth of 4% to 5%, including the AmericInn acquisition.”
Jim Forson, EVP and CFO, La Quinta Holdings
“Turning to guidance, as we contemplated our guidance update for this quarter, we considered several factors including our performance through the first three quarters of the year, the RevPAR outperformance against expectations at our franchise hotels, as well as the ongoing displacement of our owned hotels undergoing significant renovation. All of these things considered, we now expect RevPAR for the year to grow in the range of 2% to 3% with that growth being driven by the continued outperformance of our franchise hotels.
“In addition, we are lowering the top end of our range for total adjusted EBITDA to reflect the expected negative impact of owned rooms out of service as a result of damage caused by Hurricane Irma, leading us to reduce our Q4 adjusted EBITDA forecast by approximately $5 million. We now expect total adjusted EBITDA to be in a range of $320 million to $335 million.”
Dominic Dragisich, CFO, Choice Hotels International
“Based on our third-quarter performance and our outlook for the remainder of the year, we are raising both the top and bottom ends of our guidance for both adjusted diluted earnings per share and EBITDA. Our third quarter financial performance was highlighted by revenue growth of 10% over the prior year period and adjusted EBITDA for the quarter of $92.5 million, a 13% increase over the same period of the prior year.”
James Risoleo, president and CEO, Host Hotels & Resorts
“As we have maintained all year, we believe the fourth quarter should rebound. As the holiday shift positively impacts October, Brazil and the 2016 Olympics are in the rearview mirror, and the impact of natural disasters abates. This is reflected in our revised guidance of full-year comparable hotel RevPAR growth of 1.15% to 1.35%. Please note that the full year impact of Hurricane Harvey and Irma on RevPAR is 15 basis points, which accounts entirely for the revision of the midpoint of our guidance to 1.25% from 1.375% last quarter.
“I would also point out that continued strong margin results allowed us to increase our full year comparable hotel EBITDA margin guidance by 5 basis points at the midpoint to flat to up 10 basis points. This implies that we can now achieve breakeven margins for this year at 1.15% RevPAR growth, an improvement versus our prior guidance of breakeven margins at 1.375% RevPAR growth.”
Sean Dell’Orto, CFO, Park Hotels & Resorts
“Turning to an update on our annual RevPAR and earnings guidance. Despite the challenges facing Key West, for our comparable portfolio, we are maintaining our full RevPAR guidance of flat to up 1%, while tightening our margin guidance by 10 basis points at the midpoint to a new range of down 20 basis points to down 80 basis points.
“As (President and CEO) Tom (Baltimore) noted earlier, given the uncertainty of when our Caribe Hilton hotel will be opened to guests, we are taking the property out of our comparable portfolio for the balance of 2017.
“Overall, we expect Caribe and the ramp-up in Key West to account for an approximate $5 million hit to adjusted EBITDA for the balance of this year, resulting in a $0.02 drag on FFO per share.
“Consequently, we are lowering our full year 2017 earnings guidance only by this disruption, which translates into a new adjusted EBITDA range of $735 million to $760 million, while adjusted FFO per share decreases to $2.68 to $2.78.”
Leslie Hale, COO and CFO, RLJ Lodging Trust
“With respect to our outlook, in light of our merger, we're providing fourth-quarter guidance in addition to our updated full year guidance … With respect to our fourth-quarter guidance, first, given a positive lift expected from the FelCor portfolio, RevPAR growth for the combined portfolio is expected to be between 0.5% to 2%. Second, we expect hotel EBITDA to be between $136 million to $140 million. And finally, we expect corporate G&A to be between $10 million to $12 million.
“For the full-year, our guidance is being adjusted as follows. First, we are tightening our range of RevPAR growth to negative 1.25% to negative 0.75% to reflect the lift from the FelCor portfolio. Second, we’re adjusting our hotel EBITDA to $606 million to $610 million. Third, we’re adjusting our margins to 32% to 32.5%. And finally, we’re adjusting our corporate G&A to $30 million to $32 million.”
John Murray, president and CEO, Hospitality Properties Trust
“Looking ahead, we and our hotel operators remain cautiously optimistic. Our managers are projecting that for the rest of 2017, we will experience increased rate growth and occupancy growth versus earlier in 2017 as demand improves and recently renovated portfolios continue to ramp up. For the year, our managers are for the most part maintaining their forecast for hotel occupancy rate, such the comparable RevPAR growth for 2017 maybe 0.5% to 1% with GOP margins in the flat to down 50 basis points range.
“… We don’t expect to see that weak RevPAR and declining margins to continue. We do believe that the trend will start changing in the fourth quarter, and we are expecting that negative RevPAR will become a thing of the past after we get through this quarter.”