LaSalle Hotel Properties (NYSE:LHO.PRI) Q4 2016 Earnings Conference Call - Final Transcript

Feb 23, 2017 • 02:00 pm ET


LaSalle Hotel Properties (NYSE:LHO.PRI) Q4 2016 Earnings Conference Call - Final Transcript


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Good day and welcome to the LHO fourth-quarter 2016 earnings call. At this time I would like to turn the conference over to Max Leinweber, Vice President of Finance and Asset Management. Please go ahead, sir.

Max Leinweber

Thank you, Matt. Good afternoon, everyone, and welcome to the fourth-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 fourth-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?

Mike Barnello

Thanks, Max. And thanks everyone for joining our fourth-quarter call on what we know is a very busy earnings day. Let's begin this afternoon with a short recap of last year. In 2016 we sold two non-core assets, debuted the newly redeveloped Mason & Rook Hotel in DC, expanded our hotel EBITDA margins to a new high, opportunistically issued preferred shares at a record low coupon for a lodging REIT and repaid three mortgages which significantly lowered our average interest rate.

Thus far in 2017 we have sold another non-core asset, the Hotel Deca in Seattle, and we refinanced our credit facility. Overall the hotels continue to perform well despite a slow growth operating environment.We have also enhanced our already well-positioned balance sheet. We are very proud of these accomplishments.

With that let's zoom in on our Q4 which had 2.5% RevPAR growth, 1% expense growth and 42 basis points of hotel EBITDA margin expansion. While we benefited again 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 fantastic expense management.

We also benefited from great food and beverage margin improvement due to our ongoing initiatives in that department. Despite a revenue decline of approximately 4% F&B expenses were down over 6%, leading to food and beverage margin expansion of nearly 200 basis points.

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 to the guests at 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 less than 1% in Q4.

Turning to capital, we invested $27 million in our portfolio during the quarter partially for the rooms renovation we just completed at L'Auberge Del Mar and Embassy Suites Philadelphia. For all of 2016 we invested $102 million of CapEx. For 2017 we expect to invest between $130 million and $170 million of CapEx in our properties which is heavily weighted towards renovations beginning in the fourth quarter.

Several of these renovations are hotels in San Francisco. Given the known headwinds in