Company officials carefully examine 2020 outlook
 
Company officials carefully examine 2020 outlook
10 MARCH 2020 9:02 AM

Executives at public hotel companies and REITs gave color on full-year 2020 guidance during Q4 2019 earnings calls, with some excluding the impact of coronavirus (COVID-19). Recently, some companies have updated or withdrawn previously issued guidance.

REPORT FROM THE U.S.—With uncertainty surrounding the business impact of coronavirus (COVID-19) and the inability to accurately quantify full-year financial performance, some public hotel companies and real estate investment trusts either reported guidance excluding virus impact or withdrew statements made during fourth-quarter 2019 and full-year earnings calls.

Arne Sorenson, president and CEO, Marriott International
“Given the uncertainty surrounding the length and severity of the coronavirus situation, we cannot fully estimate the financial impact to our business at this time. So, in our press release and our remarks (on 27 February), we are providing a base case first-quarter and full-year 2020 outlook that do not reflect any impact from the outbreak.

“This base case reflects the 2020 outlook our teams had prepared, as part of the company’s budget process, based on the pre-coronavirus environment, including hotel-by-hotel forecasts, group booking trends, and expected supply growth. …

“Now let’s start with our base-case RevPAR outlook for 2020, not impacted by coronavirus. On a global constant currency basis, we estimate global system-wide (revenue per available room) in 2020 will increase 1% to 2% in the first quarter, and will be flat to up 2% for the full year.

“In North America, recent estimates for U.S. GDP growth point to a modestly slower pace of economic growth in 2020 with lodging demand forecasted to increase around 2%. Industry supply growth is expected to also remain around 2%, with upscale supply expected to grow 4%.

“We expect leisure demand will continue to outpace business-transient demand, as there has yet to be a step-up in business investment levels. Overall, this implies a continuation of low RevPAR growth in the U.S.

“Our group sales organization in North America had a great fourth quarter in 2019, with bookings for all future periods up 5.5%. With this strength, our group revenue on the books in North America for 2020 is up at a mid-single-digit rate.”

Leeny Oberg, EVP and CFO, Marriott
“Our base-case outlook for 2020 … does not include any impact from coronavirus merger-related costs and charges, cost, reimbursed revenue or reimbursed expenses and it assumes no additional asset sales. For full-year 2020, given our assumptions for global RevPAR, our base case outlook shows gross fee revenue could increase 4% to 6% to reach $3.96 billion to $4.04 billion.”

Mark Hoplamazian, president and CEO, Hyatt Hotels Corporation (from release updated on 2 March)
“The 2020 outlook we provided with our fourth-quarter earnings announcement was clearly stated as our base case excluding the impact of COVID-19. Since then, we have continued to monitor the situation and, while we remain unable at this time to quantify the full-year impact on our financial results, we believe it is appropriate to withdraw our previously announced 2020 outlook and earnings sensitivity based on Greater China RevPAR. Over the past week, we have seen the outbreak spread beyond Greater China as well as temporary travel restrictions imposed by many companies, resulting in a decrease in near-term transient bookings and an increase in near-term group cancellations in North America and Europe that will impact our full-year outlook and earnings sensitivity.”

Kevin Jacobs, EVP and CFO, Hilton
“For full-year 2020 on an unaffected basis, we expect RevPAR growth of 0% to 1% and adjusted (earnings before interest, taxes, depreciation and amortization) of $2.42 billion to $2.47 billion. We forecast diluted EPS adjusted for special items of $4.08 to $4.21. For the first quarter on an unaffected basis, we expect system-wide RevPAR growth to be roughly flat. We expect adjusted EBITDA of $520 million to $540 million and diluted EPS adjusted for special items of $0.85 to $0.91.

“Our preliminary view of the potential impact of the coronavirus in the first quarter, again assuming our closed hotels are ultimately non-comp, is that there could be a roughly 100-basis-point to 150-basis-point drag on system-wide RevPAR growth and a $10-million to $20-million impact to adjusted EBITDA in the quarter.”

Michele Allen, CFO, Wyndham Hotels & Resorts
“This outlook does not reflect any impact from the coronavirus … For 2020, we expect net room growth of 2% to 4% which includes a 70-basis-point headwind from the expected loss of rooms that were previously covered by unprofitable hotel management guarantees. RevPAR is expected to be flat to down 2% in the constant currency which also includes a 70-basis-point headwind from the expected loss of rooms previously covered by the hotel management guarantees.

“We are projecting revenues of $1.89 billion to $1.93 billion reflecting approximately $190 million of lower cost reimbursement revenues which have no impact on adjusted EBITDA. Excluding costs reimbursable this represents a year-over-year increase of 2% to 4%. We are projecting adjusted EBITDA in the range of $635 million to $645 million a year-over-year increase of 4% to 5% and adjusted diluted EPS is expected to be in the range of $3.48 to $3.58, a year-over-year increase of 6% to 9%. …
“We are projecting 3% to 4% organic growth and adjusted EBITDA driven largely by rooms growth and cost containment efforts to mitigate the softer RevPAR environment.”

Geoff Ballotti, president and CEO, Wyndham Hotels & Resorts
“The first quarter is going to be another tough comp for us, but the comps will get easier as we move throughout the year.”

John Murray, president and CEO, Service Properties Trust
“Portfolio 2020 group pace is down nearly 1%, mostly influenced by the shift of the Super Bowl from Atlanta, with 14 SVC hotels, to Miami, with only five SVC hotels. While the potential headwinds of the coronavirus outbreak on the SVC portfolio are not yet readily quantified, several hotels have reported group cancellations as well as concerns about softening demand related to inbound travelers from impacted regions. Citywide projections are soft in San Francisco, Seattle, Philadelphia and San Antonio with many of these markets projecting reductions year-over-year in Q1 2020.

“Finally, supply growth is expected to continue to impact RevPAR growth in many major markets including Nashville, Dallas and San Jose, among others. As a result, our rate growth expectations have muted. Hotels are increasingly taking longer to fill, allowing less opportunity to push higher short-term rates. SVC’s managers project for 2020 we will experience RevPAR growth from occupancy gains driven by post-renovation improvement but with little change in rate such that full-year comparable RevPAR is likely to be flat to up 1%. We expect full-year 2020 GOP margin to decline by 50 to 150 basis points, given flat revenue and continued upward pressure on wages and benefits.”

Jon Bortz, chairman, president and CEO, Pebblebrook Hotel Trust (from 9 March news release)
“We have seen a considerable rise in corporate group- and convention-related cancellations due to concerns surrounding COVID-19, and therefore, we are unlikely to achieve our first-quarter and full-year 2020 outlook. These cancellations, which have dramatically escalated in just the last 10 days, are largely for business previously on the books for March, April and May of 2020. We’ve also experienced significant cancellations and material declines in business-transient demand, while leisure bookings have also been impacted, but to a lesser extent. This remains a rapidly evolving situation. As a result of the shift in demand, we are thoughtfully modifying our operations and implementing cost reduction plans to mitigate the impact on revenue that we are anticipating and experiencing today. In conjunction with our property operating teams, we are utilizing our unique set of best practices, just as we have successfully done during previous downturns and similar unexpected events. The impact of COVID-19 continues to quickly develop, and, thus, we do not expect to issue new guidance until we have more clarity on travel demand and more predictable overall operating fundamentals and trends.”

Host Hotels & Resorts’ (from updated 3 March news release)
“Host Hotels & Resorts, Inc., the nation’s largest lodging real estate investment trust, today announced that, to date, coronavirus (COVID-19) has negatively impacted its total revenues by approximately $14 million, net income by approximately $7 million and adjusted EBITDA by approximately $7 million, which amounts to a decrease of 0.5% at the mid-point of the company’s 2020 adjusted EBITDA guidance range of $1,360 million to $1,405 million.

“This current impact does not materially affect the company’s previously announced 2020 guidance, which remains unchanged as of the date of this release. The current decline in operations has primarily been group business cancellations, particularly in California, and the company is working closely with the operators of its properties as the COVID-19 situation continues to evolve.

“Due to the uncertainty regarding the duration and extent of the COVID-19 outbreak, the company cannot provide further assurances regarding future cancellations or their effect on the company’s results, and the company does not intend to provide further updates unless deemed appropriate.”

Mark Brugger, president, CEO and director, DiamondRock Hospitality Company
“Based on current trends, we expect the U.S. lodging industry will experience 2020 RevPAR change of negative 50 basis points to plus 1% growth. Importantly, we have not adjusted our industry outlook or company guidance for the impact of coronavirus. Against this backdrop, we think our strong group pace, up 14.1%, and favorable resort footprint will allow the portfolio’s total RevPAR to substantially exceed the industry average. …

“We’re at about 14.1% group pace as we entered the year. Always, as you progress through the year, the numbers kind of come in as you book and realize some of that business and the tougher periods are harder to book. So, we would imagine ending the year in the mid-to-high-single digits in total group pace. We also expect that our destination resorts will be above the national average. … Every top 25 market is a little bit different. That’s where we see more of the risk.”

Tom Baltimore, Jr., president and CEO, Park Hotels & Resorts (from updated 9 March release)
“Since our earnings call on (27 February 27), the situation related to COVID-19 has evolved rapidly, creating a notable economic impact to our business. In addition to the anticipated impact to inbound international travel, during the past week we have seen an increase in group and business transient cancellations as corporate customers pause and assess the highly fluid and uncertain environment. Consequently, we expect to see a material impact in the first half of this year. However, given the short-term nature of the cancellations and the uncertainty of how long the COVID-19 outbreak will last, we cannot provide a view on our 2020 outlook at this time. While we currently expect to recoup some of the lost revenue in the form of cancellation fees as well as rebooked events, we are primarily focused on implementing cost-containment strategies across our portfolio as well as ensuring the health and safety of all employees and guests in our hotels. I am confident our teams will thoughtfully adapt to this changing environment and employ best practices from our pool of highly experienced leaders both on property and among our corporate team.”

Sean Mahoney, EVP and CFO, RLJ Lodging Trust
“While we remain cautious on the overall macro environment, we expect our portfolio to perform in line with urban in top 25 MSAs, which will be impacted by continuing soft business-transient demand. We anticipate that the strength in markets with strong 2020 citywides will be offset by markets with weak citywides. Additionally, our 2020 guidance does not assume that we refinance the $475 million senior bonds or repurchase any incremental shares, as both will be influenced by market forces at the time of execution.

“I would also like to provide additional color on our 2020 cost assumptions. We expect total 2020 hotel costs to increase between 3% and 3.5%, which is higher than our 2019 growth rate of 2.2%. The combination of the economy being at full employment and ongoing economic growth continues to pressure labor costs, and our 2020 guidance assumes wages and benefits to increase between 3.5% and 4.5%. Also, our guidance incorporates insurance premium and property tax increases with a combined impact of approximately 65 basis points of the implied 155 basis points decline in hotel EBITDA margins at midpoint.

“As it relates to the Wyndham guarantee, our guidance assumes that we record the same level of guarantee during 2020 as we recognized in 2019. For 2020, we expect RevPAR growth to range between -1.5% and +0.5%; hotel EBITDA margins in the range of 29.4% to 31%, representing a decrease of approximately 155 basis points at the midpoint from 2019; consolidated hotel EBITDA to be between $413 million to $443 million; adjusted EBITDA to be between $378 million and $408 million; and adjusted FFO per diluted share to be between $1.62 and $1.77.

“Our 2020 outlook also assumes no additional acquisitions or dispositions. Finally, we are continuing to monitor the potential impact of the coronavirus. However, at this time, our guidance does not include any impact, given the difficulty in quantifying the impact at this time. To assist in modeling our seasonality, please note that in the first quarter, we expect hotel EBITDA to be between $89 million and $94 million and corporate adjusted EBITDA to be between $83 million and $88 million.”

Dominic Dragisich, CFO, Choice Hotels International
“For both the first-quarter and full-year 2020, we expect system-wide domestic RevPAR to be between flat and a decline of 2%, which is in line with industry expectations for our competitive set. We are optimistic that our strong pipeline in higher RevPAR markets and geographies, as well as strategic investments we are making to fuel growth will be a catalyst for long-term RevPAR expansion. …

“Looking ahead for full-year 2020, we expect adjusted EBITDA to range between $378 million and $385 million and adjusted diluted earnings per share to range between $4.22 and $4.33 per share. For the first quarter of 2020, we expect adjusted diluted earnings per share to range between $0.80 and $0.84 per share. Choice continues to strengthen its position in the industry, and we remain optimistic that we will continue to drive outsized returns for years to come.”

Bruce Haase, president and CEO, Extended Stay America
“Our market share gain, at least in recent months has been pretty phenomenal. At least relative to our own comp set, we’ve had weeks where we’ve been pushing 500 basis points in terms of outperformance. We don’t have that expectation set for ourselves for the remainder of the year. Our expectation is actually significantly more modest. As you know, the outlook for the economy segment and the midscale segments are not particularly bright this year. But we do expect to outperform—some of that a function of the extended stay model, some of that a function of some of the investment and the focus that we’re bringing to bear with our new head of revenue and our new head of operations.”

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