LaSalle Hotel Properties (NYSE:LHO.PRI) Q3 2016 Earnings Conference Call - Final Transcript

Oct 20, 2016 • 11:00 am ET

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LaSalle Hotel Properties (NYSE:LHO.PRI) Q3 2016 Earnings Conference Call - Final Transcript

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Presentation
Operator
operator

Good day and welcome to the LHO Third Quarter 2016 Earnings Call. At this time, I would like to turn the conference over to Mr. Max Leinweber, Director of Finance. Please go ahead, sir.

Executive
Max Leinweber

Thank you, David. Good morning, everyone and welcome to the third quarter 2016 earnings call and webcast for LaSalle Hotel Properties. I'm here today with Mike Barnello, our President and CEO and Ken Fuller, our CFO. Mike will discuss our third quarter results and activities, then he will provide an overview of the industry. Ken will provide details on our portfolio performance and an update on our balance sheet. Then we will open the call for Q&A.

(Forward-Looking Cautionary Statements) With that, I will turn the call over to Mike Barnello. Mike?

Executive
Mike Barnello

Thanks, Max and thanks, everyone, for joining our third quarter call. We will start off this morning with a recap of Q3. Our portfolio performed well in a slow-growth operating environment. While we benefited from the recovery of last year's lost business at Park Central New York and WestHouse, our results, excluding these hotels, still reflected moderate RevPAR growth and solid expense management.

For the whole portfolio, our consistently best-in-class hotel EBITDA margin rose again to an outstanding 36.8% and expanded by 29 basis points. Certainly one of the contributors to this success was the recovery of lost business at Park Central New York and WestHouse. We also benefited from reduced real estate taxes, which resulted from lower-than-expected assessments at our two Chicago assets.

Another bright spot was energy, which has been the case several quarters in a row. Energy decreased 5% per occupied room in the third quarter resulting from a combination of reduced consumption and a strategic staggering of our utility contracts.

Food and beverage was a disappointment this quarter, driven entirely by a 5% revenue decline. Our banquet business this quarter was most negatively impacted in San Francisco, Chicago and Boston where citywide group rooms were up, but in-house banquets were down.

Our newest hotel, Mason & Rook, did buck this trend with food and beverage revenue increasing by $700,000 during the quarter, an early indicator of the strong incremental return we expect to realize by expanding the meeting space there and adding in a bar-centric restaurant that caters to the vibrant neighborhood around the hotel.

Our asset managers and our teams across the portfolio continue to relentlessly pursue opportunities to operate efficiently in each department, while delivering a great product and experience for the guests in our hotels. These efforts are reflected in our standout margins and our impressively low expense growth. Excluding Park Central New York and WestHouse, our expenses grew by only 1.5% in Q3.

Another highlight of the quarter is that we were active in the asset transaction market completing two non-core asset dispositions. The Indianapolis Marriott and the mezzanine loan on Casa and Shutters. Both of these were excellent investments for us. The transactions we facilitated leave our Company stronger and more flexible.

Turning to capital, we