LodgeNet Interactive Corporation Conference

LodgeNet Interactive Corporation (LNET)


December 7, 2011, 9:00 a.m. ET


Scott Petersen - Chairman and CEO

Frank Elsenbast – Senior Vice President & CFO



Aright, I think we are ready to get started. Good morning everyone. This morning session is with LodgeNet Interactive Corporation. LodgeNet is the world leader in delivering entertaining content and interactive experiences to more than 1.9 million, interactive hotel rooms and serves 10,000 hotel properties, as well as many leading healthcare facilities.

With us today is Scott Petersen, Chairman and Chief Executive Officer of the company. Scott has been with the company since 1987, is that right? Joined as the 11th employee and has been President and CEO, since 1998, and the Chairman of the Board since October 2000. Also, with me up here is Frank Elsenbast, who is the Senior Vice President and Chief Financial Officer of the company, and joined us in April 2010. With that, I turn it over to Scott.

Scott Petersen

Thank you very much, before starting my presentation, I’d like to introduce Bob LodgeNet, please.


Good morning. We launched this video this fall to our hotel customers of course, as this is from the hotel’s point of view. It embodies our new Four Screen strategy, I’d like to discuss with you today, before getting to that, couple of framing concepts.

First of all, from investment perspective, we believe we represent a highly attractive market position, and from a growth opportunity standpoint we have proven and impactful strategies that we have implemented and are gaining financial benefits from, tracked a position to 85% market share within the VOD market within the hotel space, we present our products and services are very attractive consumer demographic. We have the best screen, within the hotel space, with the best content. In fact our premium VOD (inaudible) represents one of the top 5 channels, that’s watched in hotels, I will show you the data here, in a second. And from a pure financial standpoint, strong cash flows that we have been using over the past several years to deal over the balance sheet.

From a growth standpoint, proven impactful, the Four Screen strategy gives us an expanded mission, transition of high def is well under way, but we have a long ways to go, only 20% penetrated. We are launching a Mobile App here, within a couple of weeks. Our advertising program, I’ll give you an insight there, we are launching and taking that to a new level in 2012 for launching 2013 and Healthcare continues to be a very interesting opportunity for us.

From a size perspective, we are the larger provider, we will call interactive media and connectivity services to the hospitality market place. We own and operate within the Unites States, Canada and Mexico. Have licensing arrangements throughout the globe. About 1.7 million hotel rooms, we provide our services to, and I said that does give us about 85% share of that market.

We reach over a half a billion consumers annually, flowing through our rooms. A highly interactive, you’ll see about little pie charts below 98% of the guests who turn on the television. With a new platform now, 60% of the guests are going interactive, that’s 3 times higher than the prior platform that we have installed, for even a high def platform.

And as we move to Mobile now, of course on the smart phone, travelers over about 3 quarters of all travelers carry smart phones, of course that will be going up. Gives us an interesting opportunity, we believe to interact more with the traveler, especially from an ad and promotional basis. And the consumer than the room, highly affluent, highly educated, two times more likely to have household income over $100,000, that’s the demographic profile of the consumer within our room. And the 57% are more likely to have a college degree, so it’s a very interesting demographic that consumer companies are looking to gain access to.

Our room base today, from a hotel perspective 1.7 million, about 40% are in the upper market place luxury upper, up scale. That’s really I would say the heart and soul of the business, about 40% are in the mid markets, which is a larger parker place, but less penetrated from our perspective and then around 15 or 16% in independent and a very small amount in the economy change, which were at instance at this point of time, exiting from an interactive perspective, due to economics.

If you take that 1.7 million rooms, break it up by flag, about 20% of our rooms fall under one of the Hildner, the highest family brands. Starwood, Hyatt and then intercontinental represent the balance the companies, but 55% of our overall room count. At the brand level, they generally don’t have the power of the pen. So we create our programming and marketing packages for them, create the offers that they want us to offer their franchise owners, price points put together, general business terms, and then we take that to the, this 1500 owners and managers of the properties themselves, that do have the power of the pen. So our sales force goes out, secures contracts with them, and then you’ll see at the bottom right hand corner, we sign contracts with the actual hotel property. Mostly, there is different legal entities for every location, from a real estate standpoint, so it’s a very diverse space, even though it appears to be somewhat concentrating at the brand level, it is nicely diversified across, well over 1500 management companies and then 9000 locations.

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