The timing of Easter, the Fourth of July and Jewish holidays particularly are having a negative impact on U.S. hotel performance, executives said during calls with analysts to discuss second-quarter performance.
REPORT FROM THE U.S.—Shifts in the holiday calendar that helped to boost hotel companies’ performance during the first quarter of 2017 came back to bite in the second quarter, executives said during calls with analysts.
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And such shifts are expected to hit third-quarter performance even harder, while the fourth quarter should bring some needed relief.
Here’s what executives at some hotel companies said about the impact calendar shifts have had and will have on their company’s earnings results:
Kristian Gathright, EVP and COO, Apple Hospitality REIT
“… As we look to the third quarter … July did start off soft for us. The first week was very soft with the July 4th holiday moving to Tuesday. So we did see quite a bit of impact on business travel.
We expect August to be stronger … (but) we have a less visibility on September. We expect to have a little bit less of an impact from the Jewish holiday shifts than some of our peers that may be more exposed to convention and urban markets. We will have some impact. So for the third quarter, we would expect to be towards the lower end of our full-year range or about full-year range, but in the fourth quarter we would expect to be in the higher end of our full-year range.”
Jeremy Welter, EVP of asset management, Ashford Hospitality Trust
“If you look at our quarter, we had a positive (revenue per available room) in group for the quarter, but it was all through rate. And so actually our roomnights were down in the quarter. Most of that is because of the shift of (Easter) into the second quarter. And that has impacted group bookings for sure. That had an impact to the business transient as well, our transient segment.
“… April was the worst month. And so we would probably have been positive in terms of group roomnights had the Easter shift not occurred. Unfortunately, in a market where it is a little bit softer, you just can’t overcome it like we’ve been able to do in maybe previous quarters with the (calendar) shift.”
Dominic Dragisich, CFO, Choice Hotels International
“As discussed in our first-quarter earnings call, we (expected) the Easter holiday timing to have a negative impact on our 2017 second quarter RevPAR results since Easter fell in the second quarter of this year compared to the first quarter of 2016. The timing of the holiday reduced our RevPAR growth for the 2017 quarter by approximately 60 basis points. Even with this calendar shift, we experienced a 2% growth in our domestic RevPAR driven by a 30-basis-point increase in occupancy and a 1.5% increase in average daily rates. Excluding independent hotels, our 2% growth exceeded the results reported by branded hotels by 30 basis points, according to (STR).” (STR is the parent company of Hotel News Now.)
Chris Nassetta, president and CEO, Hilton
“Here’s how I would describe group (business) overall … it is weaker in the second half of the year than it was in the first half. That was fully expected from the beginning of when we started budgeting last year just for a whole bunch of reasons in terms of how the groups are cycling through. That is almost entirely driven by Q3 being weaker. There are … a few things going on there. The Fourth of July hurts a lot the beginning of the third quarter, just because basically it became a week of no business, no group travel. The shift in the Jewish holidays between September and October, it has a big impact on group in the third quarter. The pace in Q2 into Q3 was a bit weaker. Having said that, the fourth quarter is quite strong on the group side. Actually, the pace in Q2 for Q4 was up. So it really is … from everything we’re seeing, sort of a Q3 phenomenon that’s driving the second half of the year.
“… There is a lot of crazy stuff going on with calendar, day of week and holiday shifts this year—more than the average. And so if you look at the numbers … and you sort of cleanse the whole year of all these holiday shifts between Easter, Fourth of July, the Jewish holidays and some other things that are less impactful, but nonetheless are impacting the results … believe it or not second half is better in the U.S. than the first half …. And if you look at it quarter-by-quarter, the weakest quarters are the first quarter and the third quarter, and the strongest are the second quarter and the fourth quarter.
“So when you cleanse it for the holiday shift, Q2 was better than Q1. I mean … we had a 70-basis-point net impact (from) Fourth of July and Easter.”
Jim Risoleo, president and CEO, Host Hotels & Resorts
“The cadence of the year is playing out as we anticipated, and as we discussed on our first-quarter call. As expected, the strength we witnessed in the first quarter was somewhat offset in the second quarter, due to the Easter holiday shift. Looking forward, that same holiday-shift dynamic remains, with the Jewish holidays moving back from October to September. This will negatively impact the third quarter, but positively impact the fourth quarter, which we believe will be strong and second only to our first quarter in terms of RevPAR performance. This is consistent with our prior and current commentary, and is the basis for our forecast.”
Patrick Grismer, CFO, Hyatt Hotels Corporation
“Because the timing of the Easter holiday was favorable to Q1 and unfavorable to Q2, it’s helpful to look at year-to-date results. Year-to-date through the second quarter, we delivered comparable systemwide RevPAR growth of 3.8%, contributing to 9% adjusted (earnings before interest, taxes, depreciation and amortization) growth, both in constant dollars. Overall, we are very pleased with these results. In the U.S. specifically, comparable full-service hotels experienced RevPAR growth of 1.3%; adjusted for Easter timing that number was 3.1%. As anticipated due to holiday timing, our group rooms revenue in the U.S. declined about 2% in the quarter, driven by lower roomnights.
“Looking at year-to-date results, which helps to normalize for the holiday shift, group rooms revenue in the U.S. grew about 3%. … Transient rooms revenue in the U.S. benefited from the holiday-driven pullback in group business, increasing approximately 2% in Q2. …
“Adding that all up, we are confidently raising our full-year RevPAR growth outlook to a range of 1% to 3%. This includes an expected relatively soft quarter in Q3 and relatively strong quarter in Q4 due to a shift in the timing of the Jewish holidays. In fact, we expect that Q3 will be our weakest quarter of the year with respect to both comparable system wide RevPAR growth and absolute adjusted EBITDA. In Q3, we are challenged not only by the timing of the Jewish holidays, but also by a tough comparison at Grand Hyatt Rio due to last summer's summer Olympics.”
Arne Sorenson, president and CEO, Marriott International
“While these growth rates seem to vary considerably, they are less volatile than they appear. Excluding the impact of the Washington inauguration in January and the shifting Easter holidays, we estimate RevPAR in both the first and second quarter increased roughly 1% to 2%. And excluding the impact of the shifting Jewish holidays and the DNC and RNC conventions last year, we believe RevPAR in both the third and fourth quarter will also increase 1% to 2%. We would characterize this guidance as steady-as-she-goes. With this steady outlook for North America, we expect worldwide RevPAR will increase 1% to 2% in the third quarter and 1% to 3% for the fourth quarter and full-year 2017.”
Tom Baltimore, chairman, president and CEO, Park Hotels & Resorts
“As you look at Q3 … given the calendar shift … the Jewish holidays, plus … July 4th, we really thought we’d probably be flat … A month doesn’t make a quarter and certainly doesn’t make a year, but as you look at July, and just shows you how quickly things can turnaround, we expect it to essentially be slightly positive.”
Jon Bortz, chairman, president and CEO, Pebblebrook Hotel Trust
“As a result of these macro trends, our industry’s performance in the quarter was mostly as expected. Industry demand continues to outpace supply growth. Demand was up 2.3%, a deceleration compared to Q1’s 2.8%. The Q1 benefited from the holiday shift to the second quarter’s detriment. … The other notable observations from the quarter were that business demand, both group and transient, remains soft with the industrywide group demand actually negative in part due to the holiday shift that negatively impacted group in April. And leisure travel remains healthy in the quarter. Transient outperformed group overall for the industry in the second quarter and is outperforming for the whole year so far.”
Ross Bierkan, president and CEO, RLJ Lodging Trust
“With the Jewish holiday shifting from October to September, the third quarter will be negatively impacted, but the fourth quarter will benefit.”
Leslie Hale, COO and CFO, RLJ Lodging Trust
“As we look at the (second) quarter overall on the transient side, some of our leisure-oriented markets, such as South Florida, fared better in large part due to the holiday shift and overall healthy leisure demand.”