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Data from HotStats: November Hotel P&L Metrics

HotStats data shows that despite a slight improvement in F&B revs in Nov, total revs declined similarly to prior months and Gross Operating Profit (GOP) margins softened m/m.

We recently began receiving monthly data from HotStats, a global profit and loss data benchmarking company. HotStats collects property-level P&L data to create reports with >500 KPIs of revenue and expense down to the Gross Operating Profit (GOP) level. The data is published on the 21st of each month for the prior month. In the US data set we receive, there are a total of 1,435 hotels or 453,646 rooms, covering 23 operators and 105 brands. The data reflects both open and closed hotels. Recent trends are as follows:

Revenue metrics. Total operating revenue growth fell 78%/79%/79%/79% y/y in Aug/Sept/Oct/Nov. F&B revenue growth declined 56%/67%/65%/60% y/y in Aug- Nov, improving from an April trough of 89%. While Aug likely benefitted from leisure pickup in the summer, Sept/Oct/Nov experienced a setback though they improved sequentially. Nov improvement could have been because of Thanksgiving as we know leisure periods have been stronger. Total RevPAR growth the past 4 months declined 78%/79%/79%/79% y/y, suggesting that the recovery has stalled. The sequential m/m improvement in rooms RevPAR growth has similarly moderated for the data set, with Aug/Sept/Oct/Nov falling of 77%/77%/77.5%/78% y/y.

Expense metrics. Total costs fell 63%/62%/68%/66% y/y in Aug/Sept/Oct/Nov, with the uptick in Aug/Sept perhaps attributable to hotels re-opening and expenses ramping before moderating slightly in Oct/Nov. Similarly, labor costs declined 62.5%/62%/71%/68% y/y in Aug/Sept/Oct/Nov. The sequential m/m decline in both total costs and labor costs in Oct was the result of higher severance costs and employee benefits in union markets such as NYC in Sept.

Margins. Gross Operating Profit (GOP) margins were (6)% in Nov, a sequential setback as margins in Oct were positive for the first time since Feb. Aug/Sept/Oct/Nov margins were (12)%/(12)%/+10%/(6)%. GOP margins at open hotels in our data set have been positive since Jul, but similarly experienced a sequential decline in Nov. Open hotel margins were 3%/7%/22%/6% in Aug/Sept/Oct/Nov.

Implications for Lodging REITs' 4Q results. The hotels in the data set are concentrated in higher-end chain scales and gateway cities, and appear to have had a strong correlation with our covered Lodging REITs' (DRH, HST, SHO, XHR) performance. For example, our covered REITs experienced average RevPAR declines of 24%/95%/83% in 1Q/2Q/3Q vs. HotStats reported declines of 20%/91%/79%. We expect the REITs' avg 4Q RevPAR growth to fall 76% y/y vs. Hotstats avg Oct/Nov RevPAR came in at (78)%. Additionally, the REITs' total comparable revenues, ex dispositions, fell 22%/94%/81% in 1Q/2Q/3Q vs. HotStats 19%/92%/80%. We expect the REITs' avg 4Q revenue growth to fall 73% y/y vs. Hotstats avg Oct/Nov revenue came in at (79)%. In 1Q/2Q/3Q, our covered REITs experienced average expense reductions of 9%/72%/62% vs. Hotstats reported reductions of 8%/74%/65%. We expect the REITs' avg 4Q expenses to fall 56% y/y vs. Hotstats avg Oct/Nov expenses came in at (67)%. With both revenue and expenses coming in a bit below our forecasts, we are generally comfortable with our current 4Q estimates, with potential slight upside for DRH, HST, SHO from expense savings, but downside for XHR from lower revs.

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