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Suntrust Robinson Humphrey August 2019 Hotel P&L Analyzer

GOP margins flat on Total RevPAR of +3.2%

Resort fee legislation another possible profit headwind if implemented

What's Incremental To Our View

Based on “big data” observations from ~1,000 higher-rated U.S. hotels (data source: HotStats) in our hotel data analytics lab: August: 0 bps of GOP margin growth on approximately +3.2% Total RevPAR (Total RevPAR includes Rooms RevPAR plus outside-of-the-room spend). August RevPAR results came in as expected with Rooms RevPAR of +2.3% and relatively better Total RevPAR. August data reflects a seasonally heavier mix of leisure demand. Flat margin growth in August, in-line with YTD results, reflects the continued headwind of labor cost growth balanced by excellent efforts by owners to push non-rooms revenue spending and cost containment. One potential headwind that we are watching is legislation surrounding the disclosure of resort fees. We believe the elimination of resort fees is unlikely although legislation could encourage some hoteliers to change fee strategies.

Our 3Q19 margin forecast remains -75 bps to +25 bps (our wide range holds given very noisy holiday calendar shifts in late September). We are holding our 2019 margin forecast at flat to -50 bps. Three big potential impacts to the margin forecast remain in 4Q -- 1) the degree of negative RevPAR in October from the holiday shifts 2) the degree of very positive RevPAR in late December through New Year's Eve due to calendar shifts (a material positive to many Upper Upscale and Luxury hotels) and 3) any further deterioration in transient demand/room rates.

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Industry Notes

Third-Quarter Profit Narrowing a Symptom of Global Revenue Slowdown

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