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Suntrust Robinson Humphrey July 2019 Hotel P&L Analyzer

GOP margins -20 bps on Total RevPAR of +3.8%

FY19 RevPAR guide cuts at 2Q earnings add even more pressure to EBITDA margins

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: July: 20 bps of GOP margin loss on approximately +3.8% Total RevPAR (Total RevPAR includes Rooms RevPAR plus outside-of-the-room spend). July RevPAR results came in very slightly better than expected with modest Rooms RevPAR of +1.6% and relatively better Total RevPAR. Margins were slightly down y/y, reflecting the continuing impact of labor cost growth as a material headwind for hotel owners today. Margins would likely be far softer if not for relatively stronger revenue growth in out-of-room spend (food and beverage, ancillary revenue, etc.) and cost containment measures.

During 2Q earnings, many REITS lowered their FY19 RevPAR guidance assumptions; we believe the increased challenges to maintain RevPAR growth (especially room rates) add slightly more pressure for owners to hold EBITDA margins flat in 2019.

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