May 10, 2018 • 08:00 am ET

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Presentation
Executive
Michael D. Barnello

in seven years and the seventh straight quarter of growth. For 2018, GDP is now estimated to grow by 2.7%, which will be the largest annual growth since 2015.

Additionally, unemployment remains low, falling below 4% for the first time since 2000 and continues to be a positive sign for our business. Consumer confidence still fits at an elevated level and is most positive of all the indicators we track.

In addition, tax reform has people excited about growth prospects in this country going forward. This may be why we have seen a rebound in other (ph) markets, bolstered by the strength of our corporate and international travelers.

In March and April, we saw a significant pickup from January and February and the positive trends for our business. And bolstered by the recent completion of several renovations, our portfolio of hotels is well positioned to capitalize on the strength.

As a result of our Q1 outperformance and outlook for Q2, we are increasing our outlook for the full year, which I'll talk about in more detail later on. At this point, we're not updating our outlook for Q3 and Q4. However, looking at the trends today, we view this outlook for the second half of the year to be rather conservative. We will revisit this during our second quarter earnings. We are confident in our current outlook.

Let's now walk through our results in more detail. As I mentioned, excluding Washington DC, Key West and renovation displacement, first quarter RevPAR was flat compared to last year and was above our outlook. Disruption in our nine hotels managed by Kimpton and two hotels managed by Marriott worsened during the first quarter relative to our expectations.

However, the hotels with unaffected market conditions did materially better than we thought. Thanks to the strongest execution by our team, our expenses declined 1% in the quarter. Focusing on our room mix, 75% of our demand was transient, 23% was group and 2% was contract. In our transient segment, March and April brought significant improvements that we believe will both boost performance in the second quarter and throughout the remainder of the year.

In the first quarter, corporate negotiated room rates and rates both increased, leading to a 3% rise in corporate revenue following a positive broader market macro economy. For our portfolio, this is our first corporate revenue increase since Q2 of '17.

Moving to our international business. We're pleased to see volume increase significantly during the quarter, which is the first increase in our portfolio since 2016. Overall, international travel trends across the country were positive. Additionally, despite rising supply, the New York market experienced its highest RevPAR growth of any quarter dating back to 2013, which is very encouraging for our assets located there. As we've always said, if demand ends up stronger than expected in our markets, it will offset the new supply and lift the markets in our portfolio at the same time. We're excited this has started to kick