FelCor Lodging Trust Inc. Q1 2010 Earnings Call Transcript - TheStreet

FelCor Lodging Trust Inc. Q1 2010 Earnings Call Transcript

FelCor Lodging Trust Inc. Q1 2010 Earnings Call Transcript
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FelCor Lodging Trust Inc. (FCH)

Q1 2010 Earnings Call

May 4, 2010 12:00 pm ET

Executives

Stephen Schafer – Vice President Investor Relations

Richard Smith – President, Chief Executive Officer

Andrew Welch – Executive Vice President, Chief Financial Officer

Analysts

[Andrew Whitman]

William Marks – JMP Securities

Susan Berlinger – J.P. Morgan

Presentation

Operator

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Previous Statements by FCH
» FelCor Lodging Trust Incorporated Q2 2009 Earnings Call Transcript
» FelCor Lodging Trust Inc. Q1 2009 Earnings Call Transcript
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I would like to welcome everyone to FalCor’s first quarter earnings conference call. (Operator Instructions) Mr. Steve Schafer, you may begin your conference.

Stephan Schafer

Good morning to everyone on the call. With me this morning are Rick Smith, President and CEO and Andy Welch, Executive Vice President and Chief Financial Officer. They will address the current operating environment, results for the quarter and our outlook. Following their remarks, we will take your questions.

Before I turn the call over to Rick, let me remind you that with the exception of historical information, the matters discussed on this conference call may include forward-looking statements within the meaning of the Federal Securities laws. Forward-looking statements are expressions of current expectations and are not guarantees of future performance. Numerous risks and uncertainties in the occurrence of future events could cause actual results to differ materially from those currently expected. These risks and uncertainties are described in FelCor’s filing with the Securities and Exchange Commission. Although we believe our current expectations to be based upon reasonable assumptions, we cannot assure you that our expectations will be attained or that actual results will not differ materially.

With that, I’ll turn it over to Rick.

Richard Smith

Thanks, Steve. Good morning. Thank you for joining us for our call this morning. Well things have certainly begun to move in a much more positive direction earlier in the year than we expected. In the first quarter, we vastly exceeded our internal expectations.

We also exceeded consensus analyst expectations. Based on the analyst original estimates, we were $5 million better on EBITDA and $0.08 better on FFO per share. In our last month, the analysts took their number up. Based on the most recent numbers, we still performed better, up approximately $2 million in EBITDA and $0.04 in FFO per share. Our revenue was also significantly better than expected, down only half a percent during the quarter.

We continue to gain market share with a slight increase during the quarter. Given the substantial increases over the past two years, we knew maintaining the premiums in our markets was going to be a challenge, so we are very pleased with this increase.

We also had extremely good positive flow through to budget. Based on the incremental revenue to budget, the flow through to EBITDA was 63%. Considering that the increase in revenues was primarily due to occupancy, and some in F&B, this is exceptional. Thus, we significantly exceeded every metric that we look at and continue to operate the hotels at a very high level.

While the occupancy trends have improved significantly, demand has not yet reached the point globally where we can achieve significant mix change and push rates further on key days of the week. There are pockets where we have started to affect some change, but it will be some time before this happens portfolio wide.

Until this happens, our margins will be impacted from lower average rate and higher occupancy. However, we expect that rates will begin to come positive sometime in the second half of the year.

All market segments started trending up to budget and prior year in February with major positive movement in March. Importantly, group room nights increased 8% and corporate transient room nights increased 12% to prior year during March.

Overall, for the quarter, group increased 1% and transient 10% with corporate transient up 7% all to prior year. While our highest rated corporate segment was still down to prior year, the decrease diminished as the quarter progressed, down 4% for the quarter, but only 1% in March, and was offset by the pickup in corporate negotiated demand.

These trends were evident in many of our top markets. For example, most of our hotels in San Francisco had RevPAR growth due to higher corporate transient demand across many industry types in San Francisco as that market was up 17%.

All of our hotels in Atlanta, which grew 9% grew RevPAR as a result of higher corporate transient pent up demand and was more city wide compared to last year.

Minneapolis at 6%, Boston at 4% and Philadelphia at 5% were also strong during the quarter, benefiting from higher transient demand. South Florida, up 3% had multiple positive impacts during the quarter such as Super Bowl and Pro Bowl, higher cruise and other leisure demand, and Haiti relief and Miami.

New Orleans, up 3% continues to recover. City wide’s grew from prior year. Mardi Gras was the strongest in years and the market was helped substantially by the Saints winning the Super Bowl.

Our worst performing markets were northern New Jersey, down 12%. That was impacted by lower group and transient demand and decompression from New York. This market began to recover a little later than others, but March was strong for group and transient, especially in the Pharmaceutical industry.

Orlando is down 6%, was also soft, and has been affected by new supply and lower conventions in the market. Myrtle Beach had a large group booking in 2009 that did not repeat in 2010 that caused that market to be down around 10%. However, group bookings for 2010 have now surpassed prior year.

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