On a third-quarter earnings call, Host Hotels & Resorts CEO Ed Walter said he hopes to save on operating costs at Host’s Starwood Hotels & Resorts Worldwide properties now that Marriott International’s acquisition of Starwood has closed.
BETHESDA, Maryland—With Marriott International’s acquisition of Starwood Hotels & Resorts Worldwide now complete, Host Hotels & Resorts CEO Ed Walter is hoping for a smooth integration process at Marriott that results in cost savings at Starwood properties.
During Host’s third-quarter 2016 earnings call, Walter said the biggest issue for hotel owners surrounding Marriott’s acquisition of Starwood, which was completed on 23 September, is “how smoothly and successfully the integration goes.”
Since the acquisition was announced, he said, talks within the company have centered on opportunities to reduce expenses at its Starwood hotels.
“We know that as they work their way through the integration process we will start to see the benefits of those cost savings,” he said, “but it’s a little hard right now for us to predict how quickly that will happen.”
Gains in leisure, group demand
Host’s domestic hotels saw a comparable revenue-per-available-room increase of 2.8% due to a 6% increase in group revenue for the quarter, according to an earnings release.
“Corporate demand was uneven in the quarter, but the shift in the timing of the Jewish holidays from September of last year to October of this year led to a significant increase in corporate group during September,” Walter said.
He added that the strength of group demand in the quarter was partially offset by declines in transient demand.
Asked by analysts about the strength of leisure demand going forward, Walter said it “could probably hold up fairly well” as long as employment stays strong.
“If you go back to the 2001-2003 downturn,” which he said, from an economic perspective, was not that severe in that unemployment did not increase significantly, “we generally found that … our resort hotels outperformed during that time period and … that leisure travel was fairly strong.”
Going forward, Walter said international travel will affect leisure travel.
“In the last 18 months, it’s (international leisure travel) been a bit weak, primarily because of currency,” he said. “But assuming that the currency stabilizes, I think there’s an opportunity for some pickup there.”
- Click here for 2016 third-quarter earnings recaps from other major hotel companies.
Q3 2016 performance
Comparable RevPAR increased 3.8% for the quarter on a constant-dollar basis, according to the earnings release. RevPAR was up because of a 2.2% increase in average room rate and a 1.2% increase in occupancy.
Properties in Canada and Brazil had RevPAR increases of 14.8% and 105%, respectively. The Olympic and Paralympic Games drove performance increases in Rio de Janeiro, Brazil, according to the release. RevPAR increased 29% in the third quarter and 14.3% year-to-date at comparable international properties.
As of press time, Host’s stocks were down 0.5% year to date. The Baird/STR Hotel Stock Index was down 3.4% over the same period.