• Marriott and Choice raise hope

Both Choice and Marriott have this month upgraded their outlook for the full-year 2009 and Choice is indicating that it expects revpar to be close to flat in 2010.

The moves are encouraging signs that operating performance has stopped plunging. But it remains possible that the recovery will be long and flat.

The Marriott improved guidance is a tightening of the range of expected decline in revpar. So rather than a fall of 13% to 16% for the final quarter of 2009, it is now thought to be in the range 13% to 14%.

The previous guidance was first given in October and reiterated in December when the company revised upwards its expected number of room additions to its system.

For Choice, it is also net room additions that will drive growth in 2010. During a presentation at the start of January it said it expects the net growth to its room count in the US will be 2% in 2010.

Revpar is expected to fall 2% during the year. But CFO David White cautioned: "We are still in a difficult and relatively unpredictable environment." In recent months Choice's revpar results had remained in the mid to high teen declines, he said, and "so it is possible that revpar could fall outside of these ranges [the -2% given in the outlook]".

 In 2009, revpar is likely to be down 14.4% across the Choice system. Net room additions were 4%. Adjusted EBITDA is estimated to come in at $164.5m in 2009 but rise during 2010 to hit $170m.

The rate of franchise sales peaked in 2007 at 770 hotels, dropping to 698 in 2008 and 464 in the first nine months of 2009. Not surprisingly, the big plunge has been in sales of franchises to new build hotels down from 327 in 2007 to 261 in 2008 and just 109 in the first nine months of last year.

So far, conversion have also slipped back, failing to take up the slack, but they have proved far more resilient than new builds. According to Choice CEO Steve Joyce the stalled transaction market has held up the anticipated flow of conversion opportunities.

Some commentators argue that there is pent up demand for transactions that has built up over the last two years, said Joyce, and that when released this would lead to a flood of opportunities. On the other hand, Joyce said this business cycle has proved very different to previous ones he had experienced.

Whether there will be a flood or a trickle of transactions Joyce said: "I've heard people well informed argue both sides of it."

More positively, Joyce does believe that  the bid and ask gap seems to be narrowing and it appears that there are signs of the existing hotel market financing starting to improve.

In terms of construction finance, Joyce said he had not seen in his 30 years of experience "the unique circumstance" of the lack of funds. "In the previous cycles, there was interruption and there was a slowdown…  [but] I've never seen anything like this."

Outside of the US, Joyce said it was possible that the company might buy a short chain or cluster of franchised hotels if they were available. The company is spending up to $10m revamping its existing international franchise infrastructure.

A week after the outlook presentation, Choice announced it was buying the 60% it did not already own in Choice Hospitality (India). Choice currently has 28 flags in the country.

It was also reported this month in the Indian press that Marriott is bringing its Fairfield Inn brand to the sub continent on a franchising basis, with ambitions to grow its overall presence to 100 hotels across various brands by 2015.

HA Perspective: The Choice outlook was pretty definitive in suggesting the US market has now hit bottom. There remains huge uncertainty about the climb out.

The forthcoming results season should make clear how many other operators believe the worst is over. And while visibility has improved it is unlikely that anybody is confident about the nature of the recovery just yet.

But, there are signs that trends are turning positive. In December, PKF Hospitality Research in the US said that the pace of recovery had accelerated from previous expectations. This still leaves the firm expecting an annual profit decline (Net Operating Income at unit level) of 35% in 2009, the worst result since it began tracking hotel performance in the 1930s. For 2010 it is expecting a profit decline of another 5.3%.

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