Chesapeake Lodging Trust (NYSE:CHSP)
Q2 2016 Earnings Conference Call
July 29, 2016 11:00 AM ET
Douglas Vicari - Executive Vice President and Chief Financial Officer
James Francis - President and Chief Executive Officer
Austin Wurschmidt - KeyBanc Capital Markets, Inc.
Good morning. My name is Dan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Chesapeake Lodging Trust Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you.
Doug Vicari, you may begin your conference.
Okay. Thank you, Dan. Good afternoon and welcome to the Chesapeake Lodging Trust second quarter 2016 earnings call. This is Doug Vicari, Executive Vice President and CFO of Chesapeake. Also on the call this morning are Jim Francis, our President and CEO; and Graham Wootten, our Chief Accounting Officer.
As is our custom, I’ll begin with a brief overview of our quarter, including a review of our consolidated results, our summary hotel operating performance, our financial position and an update on our near-term outlook.
After I conclude my commentary, Jim will provide greater detail on the performance of our hotel portfolio. He will also provide some general thoughts on the macro industry trends and more specifics regarding the outlook for our hotel performance.
As a reminder, any statement we make this morning about future results and performance or plans and objectives are forward-looking. Actual results may vary as a result of factors, risks and uncertainties over which we have no control. And with that housekeeping behind us, let me begin with a brief review of our highlights and consolidated results for the quarter.
So for the quarter, we reported total revenue of $169.4 million and net income available to common shareholders of $26.1 million or $0.44 per diluted share. Our adjusted corporate EBITDA was $57.9 million, and our adjusted AFFO was $43.9 million or $0.75 per diluted share.
Let me move on to our hotel operating statistics. As you’re all aware, we pre-announced our RevPAR performance for the second quarter on July 12. And for the quarter our portfolio of 22 hotels produced RevPAR of $208.43, it represents an increase of 2.2% over the prior year and was driven by strong occupancy of 88.1% and an average daily rate of $236.69.
These revenue trends resulted in adjusted hotel EBITDA of $62.6 million and our adjusted hotel EBITDA margin was a very strong 36.9% and that was a 50 basis point increase over the prior year. Our top line results came in below the guidance we provided to the market on April 28. And obviously, we are disappointed with that outcome.
However, we were able to increase our occupancy during the quarter. But where flatten RevPAR’s transient pricing strength prove to be inconsistent throughout the period. Additionally we’re able to increase our market share during the quarter in comparison to our direct competitors in this environment, given the quality of our assets.
Our asset management initiatives also enable us to drive solid flow-through and margin growth, as our EBITDA and AFFO were well within our original guidance ranges. Jim will provide much more detailed information on our individual hotel performance in commentary in a few moments.
Let me move on and discuss briefly capital markets and our balance sheet. And for the quarter, we were quite with regard to general capital market activities. Specifically, we did not sell any common shares under our ATM order nor did we utilize our share repurchase program.
We continue to see improvement in our balance sheet and financial position as we ended the quarter. Our total assets at quarter-end were $2.0798 billion and that includes $1.9305 billion of real estate assets. Our long-term debt at quarter-end was $766.7 million. And our shareholder equity was $1.1997 billion.
Our leverage ratio at quarter-end was 32.3%. And our fixed cover charge ratio was 3.34 times and we ended the quarter with net debt to EBITDA ratio of 3.9 times. We currently estimate we do have investment capacity based upon our cash position and targeted leverage ratios. However, while we do up capacity, we continue to carefully evaluate how we allocate capital in the current environment with the near-term drivers for capital decisions being our blended overall cost of capital, our current and projected operating performance, as well as current investor sentiment.
We remain confident and committed to our strong dividend payout performance, which is currently set at our quarterly payout rate of $0.40 per share and that reflects currently a 6.4% yield on our current stock price.
In terms of transactions for the quarter, as we previously disclosed, we paid down our mortgage loan on Hyatt Regency Boston, utilizing our revolving credit facility on April 6. On June 23, we then closed on a new 10-year $150 million mortgage loan with MetLife. This loan bears interest at a rate of 4.25%, with payments based upon a 30-year amortization. And an approximate 55% loan-to-value reflects a strong appreciation in the value of this hotel since our acquisition.
Additionally, during the quarter we sold our five-room villa building and its associated land parcel at the Hyatt Centric in Santa Barbara for $2.1 million. As you may recall, we purchased this building as part of our acquisition of the main hotel and we reflected a modest gain on sale during our second quarter results.
Let me now spend a couple of minutes updating you on our 2016 outlook. Today, based upon our recent results and the current conditions we’re facing in the lodging environment, we are adjusting our full year 2016 outlook that we previously provided to the markets. We now expect to generate adjusted corporate EBITDA ranging between $188 million and $193.5 million, and AFFO available to common shareholders will now range from $2.45 to $2.53 per diluted share.
Consistent with our past practices, this guidance does not reflect any future hotel acquisitions or dispositions. We are resetting our full-year 2016 RevPAR increase range for our portfolio to 3% to 4.5%, and that compares to the prior range of 5% to 7%.
We also now expect our third quarter rep RevPAR increase for our 22 hotel portfolio to be in the range of 0% to 2%. And this top-line growth is expected to result in third quarter 2016 adjusted corporate EBITDA of $53.5 million to $55.8 million, and the corresponding AFFO available to common shareholders for the quarter is now expected to range between $0.72 and $0.76 per diluted share.
Let me now turn the call over to Jim to provide more color on our outlook for 2016 as well as a review of our recent hotel performance.
Thanks, Doug. As Doug has highlighted, despite falling short of our revenue expectations for the second quarter, we remain highly focused at each hotel and we’re able to achieve the middle of our guidance range in terms of EBITDA and AFFO.
It was a choppy and difficult quarter to manage and digest the changing dynamics occurring in each of our markets. RevPAR growth in April was 2.5%, followed by 0.6% decline in May, without meaningful growth in group rooms on the books in several of our key markets; in particular, Chicago was a significant drag on our growth with RevPAR down over 20% in the month of May at our two Ws.
June rebounded with a solid group base, driving RevPAR growth of 4.6% for our portfolio. Our asset management team did an outstanding job working with our operators and generating 50 basis points of margin growth in the quarter. We were able to increase F&B margins by almost 400 basis points. And we held most other expense categories flat to low-single-digit increases.
As we all realized that lodging cycle is maturing and macroeconomic conditions have softened leading to RevPAR growth decelerating for the industry. This is particularly true in the business transient segment, where we are seeing limited pricing power at the current time. We entered the quarter with mid- to upper-single-digit transient pace growth, but as the quarter progressed, this pace declined, and we ended the quarter essentially flat to last year in transient revenue.
Both transient room nights and ADR were essentially flat. Growth in the quarter was driven by our group and contract segments, which increased approximately 9% to 9.5% in revenue.
While consumer spending in Q2 was relatively robust and unemployment is low, modest GDP growth, and most importantly from my perspective, four consecutive quarters of corporate profit declines have created a macro environment that is not currently generating robust business transient lodging demand.
While we remain hopeful that the overall environment will improve, we no longer feel comfortable forecast the pickup in transient demand in the second-half of the year. Given this transient weakness, our updated projections for the second-half of the year reflect lower RevPAR growth.
Transient business is expected to remain essentially flat to last year in Q3 and generate a very modest increase in Q4. Group and contract business remains solid with Q3 stronger than Q4.
Now, let me provide a little more color on Chesapeake’s markets. San Francisco is our largest market in terms of EBITDA contribution and it continues to be a market with positive long-term supply-demand fundamentals.
Q2 was solid with mid- to upper-single-digit RevPAR growth for most of our San Francisco hotels. Q3 and Q4 generally are expected to be softer, again by the continuing dynamics we see in the transient segment and the well-known Moscone Center construction impact to citywide beginning late in Q4.
While our San Francisco portfolio is up group pace, the softness in the citywide calendar is expected to impact our ability to drive transient ADR around what would traditionally be high-compression convention dates. We expect the Boston market to continue to be a solid performer for 2016 and stronger in 2017 with limited supply growth that competes with our hotels and a solid convention center and group demand.
Our Downtown Hyatt generated low-single-digit growth and Newton was flat in RevPAR growth in Q2. We expect modest acceleration from these levels in the second-half of the year. We remain on schedule to begin our normal guestroom renovation at the Marriott Boston Newton property in December of this year and is expected to be completed in early Q2 of 2017.
The timing of this renovation is centered around the traditionally lowest-demand-time of the year for the Boston market. In Chicago, as previously mentioned, based on the timing of citywide’s in 2016, the first-half of the year was expected to be much weaker than the second-half. Q2 showed upper-single-digit RevPAR decline, which was worse than expected. There was not adequate transient demand in Q2 to backfill the known weakness in group.
We expect Q3 to improve at Lakeshore with low- to mid-single-digit RevPAR growth, supported by a stronger group days. However, City Center is expected to have a decline again in Q3 and then turn modestly positive in Q4.
In Miami, at our Royal Palm Hotel in Q2, while highly competitive with the new luxury supply additions, we generated solid performance. We significantly increased occupancy running almost 97% and generated mid-single-digit RevPAR growth, which is expected to continue. EBITDA margin growth was approximately 350 basis points.
We continue to be pleased with our revenue management strategy and direct sales efforts with group bookings continue to be encouraging. I’ll also note that our transient pace continues to materially improve, driven by the marketing efforts of 2015 to introduce this new branch the marketplace, which is paying dividends today.
The heavy lifting of reengineering the operational model is now behind us, but we continue to tweak operations to find additional efficiencies and feel that further improvements can be made in the F&B department. We began our lobby, F&B and pool-deck repositioning renovation this month and expect to be completed by the end of September. When finished, we will restore the true Art Deco design narrative back to the Royal Palm, will double the high-profit beverage offerings and expand the pool-deck with additional lounge seating options.
In New Orleans, we own one of the finest hotels in the city, the W French Quarter, which produces RevPAR results at the very top-end of the market, driven by a significant ADR premium. Given its current high-performance level, for 2016 we expect French Quarter to be down in RevPAR for the year.
At our second hotel, the Le Meridien, where we completed our $25 million comprehensive asset repositioning and brand conversion, Q2 was robust with double-digit RevPAR growth. While growth is expected to moderate in the second-half of the year, based on the softer convention calendar, Le Meridien will still have a very solid year with roundly 7% RevPAR growth.
Out west in Denver, our group pace is strong for 2016, with group revenues expected to increase over 10% for the balance of the year compared to same time last year. We completed the transformation of lobby restaurant and bar renovation, and added a new 3500 square-foot junior ballroom in 2015.
We remain on schedule to complete our hotel repositioning program with the guestroom renovation starting in December and expected to be completed in early Q2 2017, the lowest demand timeframe for the Denver market. Q2 was solid as expected based on the timing of citywide and our internal group bookings in the second-half of the year. It’s expected be very healthy with mid- to high-single-digit RevPAR growth as guest enjoy our new public areas and expanded meeting space offering.
Our LA area properties include Hilton Checkers and our Ace Hotel and Theater, as well as the Hyatt Santa Barbara, downtown LA continues to be a robust market. Our two Downtown hotels for 2016 look very solid with citywide’s up and the growth of the Downtown market expected to continue. In Q2 we generated double-digit RevPAR growth in both hotels and these strong trends are expected to continue.
In Santa Barbara, we continue to focus on correcting the revenue management mistakes made at the property in 2015 and have replaced most of the key on-site management personnel. With these changes, we generated RevPAR growth in the upper-single-digits in Q2. And we expect this level of growth to continue.
In Chesapeake’s smaller markets, our Seattle RevPAR growth for 2016 is expected to be in the lower-single-digits. Q2 was slow, but the second-half of the year looks to be modestly stronger. In DC, RevPAR growth is expected to be flat for the year. In New York pricing remains a challenge and RevPAR growth was modestly negative in Q2. And this trend is expected to continue for the second-half of the year, while, Downtown San Diego got off to a slow start in first half of the year with negative RevPAR growth. Mission Bay was more stable with low-single-digit growth. Q3 is shaping up, and as expected to generate mid-single-digit growth for both of our San Diego hotel.
And finally in Minneapolis, we generated mid-single-digit growth in Q2, and we expect Q3 to be modestly stronger.
With that, I’ll open it up for your questions.
[Operator Instructions] Your first question comes from the line of Austin Wurschmidt from KeyBanc Capital. Please go ahead.
Hey, good morning, guys. Just I wanted to touch on guidance here, and make sure that I was understanding, kind of the back half of the year. So what you kind of put out there for the third quarter. And my corrective think that you are expecting around 3% growth in the fourth quarter?
Roundly at the midpoint, that’s correct. Yes.
So I guess, my question is with some of the trends that we’re seeing, I know, groups a little bit better in the back half of the year, but my understanding is fourth quarter could be a little bit more difficult in San Fran. What kind give you the confidence the things could reaccelerate, I guess latent to the year.
I wouldn’t necessarily call a re-exhilaration as an industry per se. I think, it just more - the specific dynamics in some of our hotels and were group is booked. How Royal Palm and Miami’s performing - in a few facts like that in look. I mean, give or take 100 basis points, I don’t want to refine the forecast too much, there’s not enough precision out there to know, but at this point in time we’re comfortable around the 3% mark, which is - again maybe a 100 basis points higher than Q3. But it’s more…
Okay. Fair enough.
It’s not that we’re suggesting the industry overall as we’re accelerating in Q4, it’s just some specific dynamics around our 22 hotels.
It’s more our mix often, just when you go through property by property, and you look at some of the individual markets, some are comps and some are particular pockets of strength. But I think the trend line for the second-half, we reflected basically in our full year is consistent. I mean, the things that we’re seeing, as we open up the third quarter will apply in the fourth quarter just that - again the mix changes a little bit for us. That’s all.
Great. Thanks for the detail there. And then, just on the third quarter were through July here, you kind of have some visibility I assume into August. I’m just curious, how much of you really locked in of the third quarter at this point from the top line perspective?
Well, I mean, the other thing about the condition of our - the industry right now, it’s choppy by month, right. It depends on your portfolio and where it’s weighted and where the group rooms are. Similar to Q2, where Q2 - strength of Q2 was driven by the month of June, we have similar story in Q3 where the quarter will be - the strength of the quarter will be driven by the month of September. In the month of September, we have the most significant year-over-year increase in group homes across our portfolio within the month of September. November is also strong and June was also strong, but September is the strongest. So July is weaker as expected. August is modestly stronger than July. And then, September is the strength of the quarter, which is fairly similar to the layout of Q2.
Okay. Thanks for that. And then, just last one for me. I was just curious, if you could update on potential asset sales, you talked about marketing and asset potentially in San Francisco. Where are you in the process? What’s the level of interest at this point? Do you think that something can close here in the second half of the year?
I think it’s always a possibility something can close in the second half of the year, we continue to evaluate the portfolio both from our perspective as far as long - short term and long term prospects, supply issues, capital issues, et cetera. And I wouldn’t think that anything is going to close in the very near term. But we continue to look at that.
And then, of course, as you said the other side of the coin is looking at investor interest and demand. Certainly, there isn’t San Francisco. There is a decent amount of demand across most West Coast markets. And we just have to play this out and see where we end up. But we continue to evaluate that and work on that.
Great, thanks for taking the question.
Your next question comes from the line of Pat Schultz. [ph] Please go ahead.
Hey, good morning, couple of questions here. First is 3Q shaking out as far as occupancy growth or decline versus ADR growth or decline, where do you see that mix? What is baked into your costs?
Certainly again, we have some room on the occupancy side. And you will see some more growth and occupancy than ADR, so ADRs are roundly flattish, and I can’t say for sure exactly where they will end up, but flattish to maybe slightly just slightly negative, very slightly negative. And occupancy would be the growth driver.
Yes, that’ll be very similar to what the trends that we see in the second quarter. I mean, little bit of bump and knock, and basically rates across the portfolio would be just flat to slightly down.
Okay. Thank you. And then secondly, as I go back at my notes a couple quarters ago, there had been some speculation that your folks were under a strategic review or shopping there portfolio around and that was chatter earlier in the year. Can you comment if - where that stands or is it not happening, is it happening etcetera?
As we’ve said earlier in the year, we make no comment on market rumors. If we have something to - nor do we disclose confidential board discussions. Yes. If there is a point in time where there is something the disclosure will certainly disclose that. We’ve never commented on that rumor before and we won’t comment on that now.
Fair enough. And that’s the answer I had in, when I asked the call back - asked the question back in February as well.
We got it.
Lastly and you may have mentioned this, LA has been a pretty strong market for you. Is that just the city-wide convention counter that’s driving that?
Well, certainly, the city-wide convention counter is driving, but it’s also just I would call the renaissance of downtown LA. This tremendous growth across downtown LA residential office, retail and we are benefiting that in a very strong way and expect that to continue.
Okay. Very good. Thank you.
Your next question comes from the line of David Loeb [ph] please go ahead.
Good morning Jim, Doug. Doug specifically, you mentioned a keen focus on capital allocation. Can you just go a little further into that? What are you thinking? What are the variables? What might you do or not do, given that close eye on capital allocation?
Yes. We dated this point. I think, we are going through an assessment as to property by property, do we think that it make sense to potentially sell or exit a property. And that would be the primary driver of capital allocation. In a rate structure, there is always the pros and cons.
We could sell a property at a big gain, but we may be in a position where we may have to distribute out some capital gains, given that we get properties that probably have some significant gains built in if we decided to sell. And that’s - it’s an ongoing process David. I mean, I think that we certainly would think about potentially putting some capital towards repurchasing stock at certain values.
I think, as we look at that though, I think, we want to understand what’s happening with the price of the stock, sentiment of the market place, as well as what’s happening fundamentally within our portfolio before we make any decisions. But for us right now, I think, the evaluation on the capital allocation is do we see property that are going to be running up against what we would define as diminishing returns.
And then again, if we decide to move forward and dispose and take that capital off the table, where would it go? The potential there would be pay down a little bit of debt, which we don’t have much flexibility on and then, look at stock repurchase in probably in that order.
And that’s - I mean, that’s the analysis that we’re running through, right now. So I think that’s what you’re looking for in terms of how we’re thinking about the allocation. I mean, right now to be honest, I mean, we are not thinking about buying property, selling property to buy another property, it’s more about - what can we do to figure out exactly, which direction we want to head with the portfolio.
And then, if capital is raised through that process and what’s going to be your best using. And debt and equity, right now, some combination of that - it’s probably going to be in our best interest in the short term.
I would just add that, as you think about that - as we think about and as you hear our comments. I don’t - I know, I think Pebblebrook’s put total number out of a $1 billion or something like that in asset sales. Given our size, given the age of our portfolio, and what we consider the core, non-core. I mean, I wouldn’t expect, I don’t want to give an indication that you’re going to see massive asset sale, but certainly that’s - something we’re looking as far as one or two here across the portfolio.
Yes. Totally makes sense, Jim. How do you think your NAV has changed recently where would you peg it today?
It’s a tough call, David. And we evaluate that certainly the numerators are a little easier for us to get our hands on and maybe the denominator in NAV calculation, right now. Certainly given the low growth, low yield environment that I think across the globe that’s expected to continue for a long period of time.
We’re trying to assess exactly what that cap rate should be or is it in our NAV calculation, but I would without getting to a specific number in the high-20s kind of frame, is where I kind of put it. Maybe with - the two calculations offset - two numbers offsetting a little bit of modest decline on the top line and also a little bit of an impact on cap rate from…
David, there is a lot of variability on those cap rates by market. As Jim mentioned earlier, the West Coast markets, the San Francisco and LA’s are going to drive some pretty - pretty competitive cap rates, other markets are not, right. So it’s a balancing act for us that goes back to the evaluation process that we will have as we think about where does it make most sense, if we think that selling an asset it’s in our best interest at this point.
Okay, great. Thank you.
Your next question comes from the line of Chris Woronka. [ph] Please go ahead.
Hey, good morning, guys. I want to ask you, if you have with your operators if you’ve shifted strategy for the back half of the year was grouping operating like that, and also on the OTA side. Is there, Jim, what’s your sense of landscape there in terms of what the brands are trying to do, and is that impacting your RevPAR or your real rate at all?
Well - excuse me, Chris. I think that from a group perspective, we’ve been pushing as much group as we can into our assets - for period of time, now. So I would - I don’t want to call that a change in strategy, it’s a continuation of that given the transient softness.
And I don’t think by, quote, grouping up, it’s certainly not that we are - we don’t think we are leaving rate on the table by the way. In previous parts of the cycle, certainly in the really strong growth years, you could argue that by putting too much group on the books was hurting ADR growth, because of the strong transient demand, week or two before kind of consumption of rooms we have very high ADRs, certainly that’s not the case today.
And all of our peers have seen that and so we are pushing as much group as we can, we are - modestly ticking up our segmentation towards group. Given the amount of meeting space and the kind of assets we have - they can only go so far, but certainly we are continued to push group.
Regarding the OTAs, I mean, I don’t have any specific data from the brand, I know, it continues to - the continue push from all the brands and their pricing to push business to their website, I know, there has been some success, but I can give you - I don’t have any statistics in front of me to quote how big of change that’s been, but certainly Marriott and Hilton, both as the larger companies have had success. And we’ve seen certainly some of that success in our properties.
Okay, great. And just I guess to kind of follow through on the group conversation. I mean, you look at next year, and I’m not asking for guidance by any means, but in a quarter like 2Q you’re running 88.5% occupancy I think, which is to me is pretty darn close to 100% the way it’s available. I mean what - as you run through all different scenarios, I mean, what happens - can you really push oc anymore or at some point is this just going to be a kind of a remixing of the business, and the rates are going to kind of reflect that. What’s your general sense?
Well, I mean, there’s still - every time we think we’re getting close to kind of, quote, theoretically max occupancy, we find a little bit more. But sure, I mean, at a point there - at some point you can’t go much further. I think as you look into 2017, again, I think you’ll see some modest increase, very modest, but modest increase in occupancy. We can always squeeze out a little bit more.
I think from rate perspective, I don’t have a crystal ball. It’s hard to know. I would say that - and again, this is not a strategy to grow the business, but just a reality. Some of the - I would say, the hotels that we have the most significant rate issues are hotels that we had the most significant rate premium to our comp-set. And so, as that premium has declined to our hotels - Chicago City Center is a great example.
JW Marriott San Francisco is a great example. French Quarter W is a good example, where we’ve had huge rate premiums to the comp-set. And the reason our portfolio ADR or one of the major reasons our portfolio ADR is roughly flat is because of a handful of hotels. And Royal Palm is another great example where the strategy is reduced rates and drive occupancy.
So as those rates come down, I feel more comfortable that there is kind of a floor there if you will, the premium is been reduced. And now does that mean we can dramatically grow rate in the 2017? I’m not suggesting that. I’m just saying that the downward pressure on those rates in a lot of our hotels with the big premiums should diminish or not be there in 2017.
Now, how does that all play out in guidance? I can’t tell you yet.
Sure, understood. Very good, thanks, Jim.
[Operator Instructions] Your next question comes from the line of Wescoladay [ph]. Please go ahead.
Hey, good morning, guys. Jim, with that last comment you made, is there a certain level where people will say, okay, I’ll just stay at your hotel rather than trade down; is it like a - if you get within 10% premium or you’re 20%, 25% above the market; and they were, no; at what point do they stop switching down?
I mean, I think direct - I can only talk about directionally. I can’t give you specifics. But, I mean, I think - again, in Chicago City Center, JW Marriott, Royal Palm, W French Quarter, where we had significant percentage in dollar-wise rate premiums to our direct comp-set. Those gaps have declined from an ADR perspective. So what I’m saying is I think that relative to our comp-set, even though we - across the portfolio have outperformed and gained share, in a handful of hotels - the majority of our rate decline across the portfolio is in a handful of hotels that has a dramatic impact on the overall portfolio.
And all I’m suggesting is that I think that pressure is going - the magnitude of the pressure for our specific hotels is declining as we go into 2017, because that premium gap has declined. Where exactly does it end up, I can’t say for sure. I can only tell you directionally that that pressure should be declining.
Okay. So one last headwind going into 2017 is the bottom line?
Correct. That’s right. Now, I can’t say where transient demand is going to go and where GDP is going to be next quarter and how that is - and again, where corporate profits are going into next year, which I think is a huge driver. But, yes, that’s a headwind that should - for our premium rated hotels should be less next year.
Okay, all things being equal. Now, looking at the Royal Palm it seems like you have turned the corner with that asset. How much RevPAR do you have left to gain there? It seems that you have the cost cutting strategy has been implemented and it’s just about taking back share.
Yeah, so the rest of the year is still - from a RevPAR perspective the rest of 2016 still looks really good at the Royal Palm for us. And I realize that that’s not a comment for the overall health of the Miami market. It’s still digesting luxury supply. But for our hotel, given the - given the way it was managed, given that last year was our first year and it is an evolution trying to take something over and get it right-sized, both from a revenue management and a cost perspective it takes time.
So we still have room at the Royal Palm for good solid mid to slightly above mid-single-digit RevPAR growth the rest of this year, and driven by occupancy of course.
Now, as we go into 2017, again, the rate premium that we had has come down significantly, but we gained RevPAR and we gained share and we reengineered the expense side of the hotel. So we won’t be able to grow occupancy in 2017 at the same rate we did in 2016. But we should be in a better position to not have the downward pressure on ADR, whether we can grow ADR or not in 2017 is something that remains to be seen. But we won’t have the downward pressure on ADR.
Okay, and then citywides next year, do you have an opinion on how they will be for Chicago and New Orleans?
New Orleans, if the tenant is - there is a lot of attendance in the New Orleans numbers, but as they come into get booked, New Orleans roundly flat, maybe up just slightly. Chicago is mid-single digit, less than 10%, but more than five, I believe. I don’t have the number in front of me, but call it 6%, 7% I think in Chicago.
Okay. Thanks a lot.
[Operator Instructions] And there are no further questions in queue at this time. I turn the call back over to the presenters.
All right, thank you, Dan. And again, thanks for everybody being on the call today. And we are available here in the office if there is any follow-up.
This concludes today’s conference call. You may now disconnect.
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