This roundup of talk from officials on second-quarter earnings calls focuses on New York City and San Francisco as rebound markets, as well as a few other markets.
REPORT FROM THE U.S.—New York City and San Francisco have faced market challenges with supply issues and the closing of the Moscone Convention Center, but things are looking up for some companies in those markets while others are still seeing supply headwinds in New York.
Hotel News Now compiled chatter from public hotel company executives on second-quarter earnings calls in relation to the two big markets on the rebound: New York City and San Francisco.
Here’s a look at what they had to say.
Leslie Hale, COO, RLJ Lodging Trust
“In New York, our hotels achieved solid (revenue per available room) growth of 3.4%. Our hotels benefited from a strong group pace in strengthening corporate demand. As we look ahead, we are encouraged by the fact that stronger demand is now driving (average daily rate) growth after multiple years of softness in this market. While we are encouraged by the recent positive trends in New York, we expect the third quarter to be constrained due to the Jewish holidays following on peak travel days.
“Our largest market of Northern California achieved RevPAR growth of 2.8% despite significant renovations at three properties. Excluding these hotels, our RevPAR would have increased by a robust 7.4%. During the quarter, we saw a strong corporate demand and benefited from compression, created by improved citywide activity, although renovations will continue to constrain our performance during the second half of the year. We are positioning our Northern California hotels to benefit from the significant growth in citywides in 2019.”
Jon Bortz, president and CEO, Pebblebrook Hotel Trust
“San Francisco led our better performing markets with our seven properties totaling a 15.5% RevPAR increase in the second quarter. Our Union Square properties outperformed our Fisherman’s Wharf properties as well as the market. I think the second quarter’s performance is a great representation of what happens in San Francisco when there is a strong convention calendar, particularly on a year-over-year basis. This bodes extremely well for 2019 with the city's convention business on the books growing dramatically over 2018, very similar to the second quarter of this year.”
James Risoleo, president and CEO, Host Hotels & Resorts
“We would agree that New York generally as a market is always going to be a good hotel market. Clearly, it's the highest RevPAR market in the country. I would tell you that we look asset-by-asset, as we always have, and we look at how we think our hotel is going to perform over the near to medium term and build out whole value scenarios and we look at alternative usage for every property in the portfolio, including our New York hotels.
“And as we mentioned in our release, we closed on the W Lex and we have the W Union Square under contract. And as we looked at the right strategy for each of those assets, we took all those factors into consideration.
“I think for the near term, New York is going to continue to have supply headwinds. We're obviously very in line with what's happening, with leveling the playing field from an Airbnb perspective, but New York is still going to have a lot of supply for the next two or three years, in our opinion, and it's a high-cost market in which to operate. And as I said in my prepared remarks, we're taking steps to reduce our exposure to profitability-challenged hotels, and those are hotels with high expense ratios, high expense flows and expense inflation and hotels that are in the need of CapEx.”
Arne Sorenson, president and CEO, Marriott International
“Group pace for comp and non-comp hotels for 2018 is up at a mid-single digit rate. For comp hotels alone pace is up at a low single digit rate. Given today's very high occupancy rates, we expect transient RevPAR will grow faster than group in the near-term. At the same time year-to-date, our group revenue bookings for all future periods is up over 17%. RevPAR growth exceeded 5% in the quarter in New Orleans, Orlando, South Florida, San Francisco and Houston and increased at a double-digit rate in Toronto and Vancouver. RevPAR in New York rose nearly 4% with higher retail and special corporate demand, particularly from tech companies and higher international arrivals.”
Jay Johnson, EVP and CFO, DiamondRock Hospitality
“Our New York City hotels performed well again this quarter with 5.2% RevPAR growth, 100 basis points better in the broader market and 200 basis points of margin expansion. Year-to-date, our New York hotels have grown RevPAR by 4.4% with 287 basis points of margin expansion.
“We are encouraged by our strong performance in New York this year and the signs of positive momentum in the market overall. With supply normalizing after this year and both international and domestic demand steadily increasing, there are many positive tailwinds for our New York portfolio. The recent advancement of a new law against illegal short-term rentals should be another positive for the market.”
Tom Baltimore, president and CEO, Park Hotels & Resorts
“… Our two San Francisco assets with nearly 3,000 rooms and a 160,000 square feet of meeting space led the way, reporting a combined RevPAR increase of 13.7% and significantly outperforming their respective comp sets during the quarter. Group revenues were up 55% over the second quarter of 2017, which was the quarter most impacted by the Moscone Center closure last year. Group production at both hotels was well ahead of expectations, benefiting from room block increases for groups on the books and also short-term group pick-up. Our two San Francisco hotels improved margins by over 500 points for the quarter on a combined basis.
“Looking forward, we expect group to remain strong for the second half of the year. And our San Francisco complex should see group revenue increase in the low-to-mid-teens for 2018. We are very excited by the outlook for 2019 for these two assets with the group pace up over 17% or 23,000 room nights.
“Continuing the strong grouping, we also saw favorable results at the Hilton Chicago and the New York Hilton Midtown. Hilton Chicago posted a RevPAR increase of 10.5% in the second quarter, which vastly outperform the comp set by 740 basis points and the overall Chicago market by 650 basis points. The hotel did a phenomenal job driving group business throughout the quarter, while also controlling expenses as group revenues increased over 22% and margins improved 250 basis points.
“Turning to New York, a 33% increase in group revenues led to a record setting food and beverage revenue quarter of nearly $33 million and total group catering contribution reached over $450 per group guest in May, due in part to the hotel hosting a large group in May, which produced over $5 million in catering alone. The hotel’s second quarter RevPAR of 5% outperformed this comp set by 350 basis points and the overall New York market by 80 basis points. Both hotels have a favorable outlook for the balance of the year.”