On Tuesday, Host Hotels & Resorts Inc (NYSE:HST) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.
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Special Corporate Pricing Impact
Eli Hackel – Goldman Sachs: Just two questions. First can you just talk about to what extent rate growth or RevPAR growth was held back by lower price groups in pre-negotiated corporate that had last room availability? I don’t know if there is a way to quantify this, but any color there and maybe what you’re doing with your managers to help maybe expedite the process of getting rid of some of those groups where maybe you could get a higher priced on a rack rate, and then second, just on the guidance, can you just help us with the gives and takes how much is coming in and maybe some of the cap rate or multiple paid on the D.C. asset, then how much EBITDA you expect to go out the door, due to the sold assets that you talked about? That’s it. Thank you very much.
W. Edward Walter – President and CEO: Okay. So, let’s start with the issue about lower priced group and the special corporate. It is as you guessed, it is fairly difficult to get a precise handle on either the, especially the impact of the special corporate pricing, but here is what I would probably say if we look at our group business in ’12 I think we’ve previously estimated that maybe a quarter or so of that was booked during a period of time when pricing was weaker and when the business was softer. So, as we keep working our way through ’12 and into ’13, we will continue to find because of the nature of how we book group in our hotels and because the number of them are larger hotels that both business significantly advanced. We will continue to find that we have booked during slightly slower times simply because we’re now in the third year of the recovery. But, I would imagine that as we work our way through this year and into next, there will be very little of the business that we’ve booked stay back in the (indiscernible) time period, that’s left on our books. I don’t – it is to some degree inhibiting rate growth, but I guess I probably flip it around and go back to some comments I made in my prepared remarks which was that – while overall rate growth in the group area which I think were roughly around 1.5% to 2%, reality is that the bookings that we’re getting – that we got in the last quarter for the third and fourth quarter of this year were closer to up 7%, which I think sends a good signal for where our group bookings are going on a going forward basis. Now, on the special corporate side, what I think you’re referring to is the fact that a number of the transient sided, a number of our special corporate accounts have what’s called last room availability, which means that if there is a room available in a hotel of the type that they are entitled to that even though we may be able to sell that to another customer at a higher price, they are entitled to get that room for the contract that they’ve agreed to that we’ve agreed with them on if the room is available, and since special corporate pricing tends to be somewhat below our rack rate pricing, the reality is that did I think our sense is in the second quarter because of the high occupancy we ran at so many hotels especially during the midweek, that did hold pricing back a little bit. At the end of the day, we were very pleased to see the growth in occupancy. That ultimately does allow us to push rate, and we were doing that. You could see that at the overall rate growth that we saw on the transient side. There is not a lot that we can do in the near-term relative to the contracts that we’ve negotiated for 2012, but on the other hand, I think as you look to what that mean for 2013, I suspect that our strategy certainly at those hotels running high occupancies will begin to change. We will certainly be pushing for higher pricing next year to reflect the more competitive market conditions. I also think that it’s reasonable to assume that if trends hold the way they are now, we would probably do a little bit less in special corporate, than – we have fewer special corporate accounts next year or at least fewer special corporate accounts with last room availability, because we will be recognizing the fact that, number one, we’ve got more group business on the books, we have higher occupancy and we really ultimately would like to be able to push even more of our business into those more highly rated corporate and premium categories. With respect to the guidance I don’t think that I really want to break it down into the different segments. I guess, I would just say is at the end of the day, we made the decision to move forward with a comprehensive pool renovation, including adding a small water park as part of our Orlando hotel and that combined with some other activity regarding fa�ade improvements and other things. I mean, once we decided to step into the pool renovation area, we decided to accelerate a lot of other activity at the hotel including the renovation of two of our food and beverage outlets and the net effect of that plus the decision to add what I think is going to turn into a great bar restaurant at the Helmsley, which was not part of our original game plan but represents an opportunity to not only add a very profitable outlook but it also gives us the ability to take the existing restaurant and turn that into meeting space. Those changes I think are going to be really positive for both of those hotels, but they did result in some reduction in EBITDA in the current year. We obviously hope that it results in much stronger EBITDA going forward.
Eli Hackel – Goldman Sachs: Just on the cap rate for the Hyatt, I think you said that’s probably less than 14 times when you were going to buy it late last year, I don’t know if there’s an updated number?
W. Edward Walter – President and CEO: I would say that based on the last 12 months’ EBITDA, we’re right in the mid-13 range on our acquisition price.
New Group Contract Terms
Joe Greff – JPMorgan: Ed, I think you touched on it in your answer to the last question but can you just talk about how tight are the terms of these new group contracts relative to a few years ago with respect to either cancellation provisions or attrition or commitments and then I have a follow-up? Thanks.
W. Edward Walter – President and CEO: Joe, I think from a trend perspective what I would tell you is where as a couple of years ago, we were finding it almost impossible to get really good attrition clauses, what I’m hearing in general is that well that of course varies by hotel. We are starting to see an ability to negotiate better cancellation penalties, better attrition clauses and overall better contracts. That is, you can guess it depends a lot on the hotel. So, markets where occupancies have fully recovered and its becoming – really I’d say the balance of power shifted a bit back towards the hotel, you see better contracts and in other markets they might still be struggling to recover a little bit or have lead periods, you don’t see quite as much but I think what we’re seeing this year is ultimately a slight increase in attrition and cancellation fees on a year-to-date basis compared to what we had last year and I think that’s our sign of the fact that we’ve been able to negotiate slightly better clauses in recently compared to where we were a year or two ago. I also think a part of that too, is the fact that the business that was being booked in the end of ’10 and in the beginning of ‘11, was tended to be very short-term in nature. Although, I would still – meaning that people didn’t book unless they were absolutely certain they were going to have the event. Now, I think what you’re seeing is while there certainly is business being booked on a short-term basis. My sense is just looking at how the bookings are playing out. We are seeing more people, more companies booking a little bit further in advance and that’s one of the reasons why you are seeing our booking pace show sort of the positive year-over-year comparisons that we’ve been describing.
Joe Greff – JPMorgan: So how much of your anticipated full year 2012 group is on the books right now?
W. Edward Walter – President and CEO: I think if you – my guess is its slightly north of 90%, maybe 90%, 91%, something like that, and that obviously depends a little bit on what happens in fourth quarter bookings. But, I think one thing, people should expect is that given the strength we have at this point for the rest of the year, we would expect to see incremental business booked, that’s obviously or implicit in my comments that 90% of it’s on the books, but I suspected on a relative year-over-year basis, we may not book quite as many rooms as we did last year only because we were so far ahead of where we were last year. Just to be clear there, because sometimes these areas get confusing. We certainly expect that by the end of the year, our group business will be up significantly compared to last year.
Joe Greff – JPMorgan: Would you expect the RevPAR growth rate in the fourth quarter to exceed the year-over-year growth rate in RevPAR in the third quarter. I know you don’t provide quarterly guidance, but just directionally?
W. Edward Walter – President and CEO: I don’t know that we necessarily see a big difference in trends between the quarters right now.