Morgans Hotel Group Co.Q4 2007 Earnings Call Transcript

| About: Morgans Hotel (MHGC)

Morgans Hotel Group Co. (NASDAQ:MHGC)

Q4 2007 Earnings Call

March 12, 2008 5:00 pm ET

Executives

Jennifer Foley - Publication Relations Director

David T. Hamamoto-Chairman of the Board

Fred J. Kleisner-President, Chief Executive Officer, Director

Richard T. Szymanski-Chief Financial Officer

Marc Gordon-Executive Vice President - Capital Markets, Chief Investment Officer

Scott Williams-Chief Marketing Officer

Analysts

Celeste Brown-Morgan Stanley

William Marks-JMP Securities

Amanda Bryant-Merrill Lynch

David Katz-Oppenheimer & Co.

Operator

Good afternoon and welcome to Morgans Hotel Group Company Fourth Quarter 2007 Earnings Conference Call. My name is Mary and I’ll be your conference operator today. At this time I would like to inform all participants that your lines will be in a listen only mode. After the speakers remarks there will be a question and answer period. (Operator Instructions) As a reminder ladies and gentlemen, this conference call is being recorded and your participation implies consent to our recording of this call. I would now like to turn the cal over to Jennifer Foley of Morgans Hotel Group. Please go ahead ma’m.

Jennifer Foley

Good afternoon. Thank you for joining us on our Fourth Quarter 2007 Conference Call. Joining us for today’s conference call are: David T. Hamamoto, Chairman of the Board, Fred Kleisner, President and Chief Executive Officer, Rich Szymanski, Chief Financial Officer, Marc Gordon, Chief Investment Officer and Scott Williams, Chief Marketing Officer of Morgans Hotel Group.

Before we begin, I need to remind everyone that part of our discussion this afternoon will include forward-looking statements. They are not guarantees of future performance and therefore undue reliance should not be placed upon them. We refer all of you to the company’s filings with the Securities and Exchange Commission for a more detailed discussion of the risks that may have a direct bearing on the company’s operating results, performance and financial conditions.

With that, I’ll pass the call onto David.

David Hamamoto

Thanks Jen and thanks everyone for joining today’s call. Before I turn the call over to Fred to discuss the company’s results, I just wanted to make a few brief comments. Despite the current challenges of the economic environment, we’ve continued to perform exceptionally well and deliver outstanding results with industry leading comparable RevPAR growth as Fred will later discuss. MHG has remained at the forefront of the boutique hotel sector because we have some of the most distinguished brands in the industry with significant unrealized embedded value and a well defined growth plan. I’d like to take a moment to talk about our capital philosophy. With recent financings in 2007 that raised approximately $200 million of capital we have a very strong financial position. Because we have significant underlying real estate value and high barrier to entry markets, we will explore selling interests in our assets while retaining brand rights and long-term management agreements as a way to raise capital accretively for our continued growth. We believe our business model of growing through minority equity investments with partners, coupled with long-term management agreements, will be the most productive way to create long-term shareholder value. This combination of our outstanding operating results, strong financial position, well-defined growth plan and strategic repositioning through aggressive reinvestment in our existing assets, we believe MHG is well positioned for the future.

And with that I’d like to turn the call over to Fred to discuss the results of the quarter.

Fred Kleisner

Thanks, David and thank you everyone for joining us today to discuss our fourth quarter and year end results. I’ll start off by reviewing some of the highlights of the quarter, and then I’ll turn things over to Rich who will provide detailed financial results. After that Rich, David and I, Scott and Mark will be happy to take your questions.

Let me begin with absolute clarity. Our results were exceptional. We have once again achieved outstanding RevPAR increases at our comparable hotels up 14.1% for the fourth quarter of 2006, well in excess of industry averages, highest in our sector, with absolute RevPAR level and RevPAR growth among the highest of all branded public hotel companies. This is our seventh straight quarter of double digit, comparable hotel RevPAR growth, driven by the quality of our assets, the quality of our guest experience, our superior locations and strong market trends, specifically in Miami, San Francisco and New York.

MHG operates hotels primarily in 24 hour gateway cities where we see the highest growth opportunity. During the quarter our hotel’s benefited from strong broad based business and leisure demand including continued increase in foreign travel to our key markets. We have always achieved best in sector operating margins of comparable hotels. In the fourth quarter, we continued to build on those superlatives, increasing our margins by 230 basis points as compared to the fourth quarter of 2006.

Despite having three owned hotels under renovation during the quarter, our strong comparable hotel operations and its growth led to a 30.2% increase in adjusted EBITDA from the prior year and a total of 34.2 million. At MHG our greatest asset is our unique portfolio properties, which are among the most sought after destinations for sophisticated travelers seeking a dynamic guest experience. We believe we remain at the forefront of the boutique sector not only by developing new properties, but also by reinvigorating our existing ones to keep them daring and surprising to the MHG guests. Our customer base is extremely broad and this broad base along with our locations that attract foreign travelers should mitigate any impact of uncertain economic environment on MHG. Our renovations help maintain the appeal and prestige of our properties while delivering improved profitability.

Let me provide some specific evidence of that improved profitability. As you know our Delano hotel in South Beach was undergoing refurbishment in October and November of both 2007 and 2006. This included all of our guest rooms, the complete renovation of our Agua spa, a new fitness center and the Florida room our new lounge designed by Lenny Kravitz and Kravitz Design. Our customers have reacted very favorable as Delano achieved a 34%RevPAR increase in the fourth quarter of 2007 and a 20.1% increase in RevPAR for the full year. As a result we generated a 29% return on our renovation investment in the first year following the renovation.

Our Royalton Hotel in New York’s theatre district was closed and under renovation during June through October of 2007. We held the properties grand opening in October of 2007 where we unveiled upgraded luxurious accommodations, a redesigned lobby and an exciting new restaurant. We’re very encouraged by the early returns at Royalton. In the quarter ADR (average daily rate) increased by 20,8% compared to the same period last year.

Our customer’s reaction to these recent upgrades at Delano and Royalton have been exceptional and demonstrated our ability to drive higher room rates. Encouraged by those early returns, on both Delano and Royalton, we’re looking forward to the repositioning projects ongoing at Mondrian LA and upcoming at Morgans in New York and ongoing at Hard Rock in Las Vegas this year.

At Mondrian LA on Sunset Boulevard we’re doing a complete renovation of the property, restoring it to its original Hollywood glamour, which includes a total redesign of the guest rooms, new bathrooms, totally redesigned public spaces to create a daring and breathtaking experience. Leading the design project is Benjamin Noriega-Ortiz, a talent we deeply believe in. I’d invite everyone on this call to check out the new rooms at Mondrian LA if you have the opportunity. They will absolutely blow you away. The renovations are scheduled for completion in the third quarter of 2008.

This summer we’ll also begin a complete update to Morgans in New York’s fashion district. This will include everything from new rooms, to new elevators, to a redesigned lobby. The Morgans experience has always provided a home-away-from home atmosphere for its’ guests. We’re pleased to be working with the hotels original designer, Andree Putman to maintain that urban home concept of hotel. While refreshing the ultra comfortable rooms and public spaces at Morgan, we plan to unveil the redesigned property at the end of the summer.

We have considerable investments today and assets that are not currently producing EBITDA. We believe these assets have significant value and we’re transitioning them to EBITDA production.

Moving onto Hard Rock, the expansion is fully financed and we currently do not anticipate making any additional equity contributions from this time on. We’re extremely excited about the project and are finalizing the design plans and executing the expansion. Upon completion the new Hard Rock is expected to have an additional 900 rooms and suites, approximately 60,000 square feet of additional meeting space and convention space, along with an additional new casino totaling 35,0000 square feet, as well as new food and beverage and entertainment amenities. We recently announced the opening of AGO, the famous LA and South Beach restaurant noted for its celebrity roster. That’s consistent with Hard Rocks trend-setting reputation and brings a true cache to the property. This project also includes renovations of our existing rooms and suites as well as common spaces of the existing hotel. That construction is expected to be completed in the second half of 2009.

In January we received the approval of the Nevada Gaming Commission to operate the casino at the Hard Rock. We’ve been operating the casino since the beginning of March. The casino did not perform to expectations in 2007 under a short-term lease arrangement we had in place. By operating the casino ourselves we provide a more integrated environment for our hotel and casino guests, which we believe will generate greater profitability.

Now an update on the Echelon project, which is our 50% joint venture with Boyd Gaming to create a Delano and a Mondrian on the Las Vegas strip. Boyd gaming has already broken ground on the Echelon project. We have equity commitments from both ourselves and Boyd Gaming and we’re in the process of securing financing to complete the project.

We are also excited about our new Mondrian in Chicago, located directly off Michigan Avenue’s Miracle Mile at the intersection of State, Rush and Cedar streets. This is a highly desirable location in close proximity, right on top of the dining, night life and high-end retail boutiques that make that section of Chicago the place to be. We’re in the process of finalizing our financing on that project.

Turning now to our Mondrian South Beach, we’re targeting an opening of Mondrian South Beach for the second half of 2008, in time for the start of the season in December. We’ve closed on 56 condominium units and have deposits on another 184 units. That is a true testament to the power of our brands in these times.

Now let me turn to our newest project. In January we announced a new joint venture to manage the Mondrian hotel in downtown Palm Springs with a joint venture partner. Downtown Palm Springs is a target market for MHG and is experiencing a dramatic revitalization, attracting a hip, younger crowd.

In addition to our announced projects, the pipeline for our brands is very strong. Morgans Hotel Group has just been chosen as the boutique operator of choice among a total myriad, a group of our key competitors in two recent situations in both New York City and the Caribbean. We’re close to announcing those projects.

We will maintain our strategy of growing our brands through management agreements and minority equity investments.

Lastly, let me highlight recent additions to our Board of Directors. In December we appointed Jeff Gault to our board. He has over three decades of relevant industry experience, having built and owned a number of residential hotels and commercial real estate assets across the country. In February, we appointed Mike Malone to the Board of Directors who joins the Morgans Hotel Group board after 24 years of experience in investment banking across a number of sectors including real estate, lodging, leisure and gaming. We’re proud to have directors of this caliber on our board.

With that, I’d like to turn the call over to Rich, who can run through our financial results in greater detail.

Richard Szymanski

Thank you, Fred. The fourth quarter was another outstanding quarter for us. Our 30% increase in adjusted EBITDA from the prior period was achieved despite having three hotels under renovation, 1.4 million of one time pre-opening costs and the under performance of our leased gaming operations at Hard Rock where gaming income was $2 million below last years quarter. Our operating results were driven by our high RevPAR level which was $328.00 for comparable hotels during the fourth quarter and this reflects an increase of 12.1% or 12.4% excluding the effects of currency fluctuations.

For the fourth quarter, comparable hotel average daily rate increased by 10.4% to $403.00 and our occupancy grew by 3.3% to 81.3%. Our flow through for the quarter was outstanding, with adjusted EBITDA margins rising by 230 basis points over the prior year.

Among the highlights for the quarter was Delano’s 34% RevPAR growth, which Fred mentioned earlier and the 17.7% RevPAR growth generated at the Clift in San Francisco. For the year, EBITDA at the Clift was 6.8 million, $800,000.00 greater than the lease payment. And although this amount is not included in our adjusted EBITDA, due to how we report the Clift as a capital lease, it’s another example of the value in our assets. As of December 31, our consolidate debt, excluding the Clift lease, was 649 million and our cash and cash equivalents were 123 million for a net debt amount of 526 million. Our debt primarily consists of mortgages on three hotels: Hudson, Mondrian LA and Mondrian in Scottsdale and two equity like instruments, the convertible notes and the trust preferred notes. We have no borrowings against three of our owned hotels: Delano, Royalton and Morgans, since these hotels are collateral for our $225 million revolver which remains un-drawn today. All of our debt at December 31 was at fixed rates either directly or as a result of hedging arrangements.

Now it is important to note that we had approximately 235 million at December 31 invested in non-EBITDA producing assets in the form of consolidate assets, equity investments and joint ventures and our proportionate share of joint venture debt. An these projects include Mondrian, South Beach, the excess land in branding rights at Hard Rock, the Mondrian Las Vegas in Delano, Vegas, the Delano expansion, Mondrian SoHo and Mondrian Chicago. And while we have made significant investments in growth, we also believe that repurchasing our stock at its recent levels makes economic sense. Since the beginning of the fourth quarter we spend approximately 50 million to repurchase approximately 2.8 million shares of our stock.

Looking ahead, we believe that the economic drivers that impact underlying lodging fundamentals are likely to weaken in 2008. And while trends in most of our markets remain strong, the uncertainty in the economy and the transient nature of our business makes it difficult to forecast 2008 results with a high degree of accuracy. And while demand growth may moderate in 2008, we believe that supply growth in most of our markets will also continue to be below historical averages, which should be a positive factor in the long-term growth of our company. Our guidance for 2008 assumes a 5 to 7% RevPAR growth at comparable hotels and adjusted EBITDA in the range of 110 to 115 million.

This guidance anticipates approximately 12 to 15 million in EBITDA displacement due to the renovations planned at Mondrian LA, Morgan and Hard Rock. Due to these renovations, we believe that the 2008 adjusted EBITDA level is not indicative of the normalized run rate adjusted EBITDA of the portfolio. And while we do not give quarterly guidance, I do want to point out that the first quarter of 2008 will have a tough comparison to 2007 due to the impact of the Super Bowl on our two South Beach hotels in February 2007.

Our guidance also assumes a 33% interest in the Hard Rock joint venture. Our ownership interest is expected to decrease, resulting in a lower proportionate share of adjusted EBITDA, but also a lower proportionate share of adjusted debt.

Based on our current estimates, in 2008 we plan to spend approximately 75 million to fund equity investments in unconsolidated joint ventures of which approximately 50 million relates to the echelon project with Boyd Gaming. We also plan to spend approximately 50 million in capital expenditures for renovations of existing hotels and expansion opportunities at our owned assets. We plan to fund these commitments through a combination of our cash balance at December 31, which was 123 million, and our estimated 2008 free-cash flow in the range of 30 million. Our issuance of convertible notes and our secondary offering in 2007 has put us in a strong financial position where we are not forecasting the need to borrow or to sell assets to execute our existing projects.

In conclusion, it was a very strong quarter. We continue to deliver outstanding operating results and our recent financings have provided us with significant liquidity. We believe we have also positioned ourselves well for future growth. We have invested heavily in our business to renovations and new projects and we are beginning to see the results. By 2009 we will have completed major renovations on four owned hotels: Delano, Royalton, Mondrian LA and Morgans and we anticipate that many of our new projects, Mondrian South Beach, Mondrian SoHo and the Hard Rock expansion will begin to contribute to our EBITDA growth.

I would like to now turn it over to Fred for some closing remarks.

Fred Kleisner

Thanks, Rich. To summarize, we believe we’re extremely well positioned to navigate the current economic environment, because of the strength of our brands, our highly desirable locations and the significant value of our existing real estate in our current and future projects. We’ll continue to target major markets where we see the highest growth opportunities both in the US and Internationally. We anticipate funding our committed pipeline through existing cash balances and free-cash flow. We’ll also explore selling interest in our assets while retaining brand rights and long-term management agreements to become more asset right and raise capital for our continued growth. The combination of strong comparable hotel operating growth, new projects and renovations underway increased financial capacity, we believe we’re well positioned for the future.

With that, I’ll open the call to questions.

Question-and-Answer Session

Operator

Certainly, sir. (Operator Instructions) And our first question comes from Celeste Brown from Morgan Stanley. Please go ahead.

Celeste Brown-Morgan Stanley

Hi guys, good afternoon. A couple of questions on the Hard Rock. You mentioned that you wouldn’t be putting in anymore equity there and your ownership will decline. Do we see that reflected in your pro rata share of the EBITDA as the expansions open or will that happen right away?

Richard Szymanski

It’s as the expansion is funded, so not as it opens.

Celeste Brown-Morgan Stanley

So you’ll have the 30, oh as it’s funded?

Richard Szymanski

As it’s funded, yes.

Celeste Brown-Morgan Stanley

And then what kind of impact to the Hard Rock overall do you think you’d have on an annual basis by running the casino yourself rather than leasing it?

Richard Szymanski

Well it’s difficult to estimate the exact impact, but right off the bat we were paying about, the venture, was paying about 3.3 million to our operator, so right there we’ll save that money. Secondly, I mean it really comes down to sort of three things. I mean we think we’ll gather better data on customers, we think we’ll provide better service and we also believe that we’ll be able to integrate the marketing and integrate the hotel with the casino better, so those factors should help us.

Fred Kleisner

And just to emphasize, Celeste, as we approach the take over date on March 1, we have in position, fully ready and having shadowed for since the first of the year a new casino director, a new marketing director, a new slots and table director, we’ve hired new hosts for the casino. The leadership is going to be impactful and customer friendly both to the hotel guests and to local players as well. We’re very enthusiastic about the potential we see in controlling that vital end of a Las Vegas entity.

Celeste Brown-Morgan Stanley

Okay and then sticking to Vegas, do you anticipate an announcement sort of before the June 30, I think is it June 30 date that you and Boyd have discussed in terms of funding the debt piece? And then also can you talk about bringing in another equity partner at that project?

Richard Szymanski

We’re in the market right now and our target is to be well ahead of that date, however since we’re in the market and unconfirmed on the total financing package, I’d best leave it as a “to be designated”.

Celeste Brown-Morgan Stanley

Okay, thank you.

Operator

And our next question comes from Will Marks from JMP Securities. Please go ahead.

William Marks-JMP Securities

I have a question first on the Mondrian in South and you mentioned that you had closed on, I believe 56 units, meaning I get that you collected full cash payment, is that on your balance sheet as of the end of the year?

Fred Kleisner

It is on the balance sheet of the joint venture, the head cash. And some of those proceeds, according to our agreement, have gone to pay down the debt.

William Marks-JMP Securities

But why have, I’m curious, are full payments collected well in advance of the project opening?

Fred Kleisner

Because, people love our brand and want to be in on the project.

William Marks-JMP Securities

I didn’t mean to feed that one that you so easily took off. And in your guidance do you include, is there any benefit from this project in your guidance?

Richard Szymanski

No, for 2008 you know, we anticipate a second half opening, which in Miami will not contribute much to our EBITDA in the year.

William Marks-JMP Securities

Okay and then in terms of selling assets, have you hired brokers and if so hedge book sent out recently, any helpful data for me?

David Hamamoto

Yes well this is David. You know it’s become a priority, as I said, in terms of trying to monitor some of the real estate value and I think we’re exploring a number of different situations, but suffice it to say that we are actively engaged in trying to raise capital from the real estate.

William Marks-JMP Securities

Okay great and then in terms of your top-line growth, the RevPAR guidance, are you assuming, we’ve had pretty strong growth year-to-date in some of your markets including Miami and New York, this past week New York was a little, bit weak but San Francisco. Are you assuming a significant slow down particularly in New York?

David Hamamoto

No, I think what, you know, it’s difficult for us, as I said in my remarks, given the transient nature of our business, it’s very difficult to predict what’s going to happen over the course of a year. We see a lot of strong trends in our markets currently and even though there has been some decline in corporate business, we’ve seen a huge pick up in foreign travel. So we’ve seen very strong trends in our market. But again, we are very transient based and looking ahead we don’t know what the economic climate is for the year, so that’s why we came up with that guidance.

Richard Szymanski

Let’s expand a little further on this. So, on the one hand our guidance is reflective of appropriate caution. We read the same papers everyone else reads. However, having said that, if I look at the most important market to this company, New York City, this could be representative of any of our gateway 24 hour markets. In New York City, because we control spectacular locations, what we’ve seen is where certain demand generators might fall off a bit of demand. It’s immediately replaced by new demand generators that want to be at these locations within the destination and they want to be in our atmosphere. We haven’t seen any drop off in our demand trends, we’re appropriately cautious.

William Marks-JMP Securities

Okay great, that’s really helpful. I have one final question. Last year you guys had projected in excess of 110 million of EBITDA and you had said that, a figure I can’t remember if it was 10 or 15 million of EBITDA that you would lose, because of displacement or disruption and I feel like we’re hearing the exact same thing this year, and I’m sure there are reasons for it. But, maybe you could explain because while the RevPAR growth seems to be sufficient this year or better than industry averages, you’re really showing flat EBITDA, so any comments would be helpful, thanks.

Richard Szymanski

Sure. Last year, Will, we had given guidance of 8 to 10 million of EBITDA displacement; the number came out at around 8 million. This year, given the fact that Mondrian LA will be under renovation probably through September, we’ll have Morgans and we also will have Hard Rock and that numbers is going to be higher. We’re forecasting between 12 and 15 million so we’re looking at a number that might be almost double the renovation disruption this year versus last year. They are different assets. Part of the renovations we had last year were in Miami, which has an off-season and we were able to do the renovations then. In LA the demand is fairly consistent through out the year and I think that’s part of it also. And I think the good news is that once we finished the renovations of our owned assets, it sets us up for a great 2009.

William Marks-JMP Securities

Great well thank you Rich, thanks Fred.

Operator

(Operator Instructions) and our next question comes from Amanda Bryant from Merrill Lynch. Please go ahead.

Amanda Bryant-Merrill Lynch

Great thanks, good afternoon. I just had two questions for you. First what sort of contingency plans do you have in place in the event you start to see demand soften in some of your major markets and then second question would be how much stock based compensation expense have you excluded from your adjusted EBITDA guidance? Thanks.

Fred Kleisner

Let me take the first question. We built in, as we went through our budgeting process in the fourth quarter, looking at our expectations for 2008; we built in the appropriate contingency plans both in expense reduction and in revenue focus. Let me take the revenue focus first. This is in each hotel and expense reduction in the corporate office. The revenue side first. We’ve asked each hotel in each resort to focus not just on their direct competitive set, but that competitive set above then and below them so that they widen their focus on the demand generators where our sales desk will knock on more doors to take a bigger piece of a shrinking pie if we see the pie shrinking. We’ve already quantified those targets so that we know what the market platform of our broad base of competitor is in each market, who the demand generators are to the competitive base, what we have now and what we want from each of those demand generators. It’s simply widening the periphery of who we’re asking for business to our hotels. In the expense area, we asked each hotel and each department in our corporate office to have a two level contingency plan ready to fall into place in 2008 for expense reduction and expense control. We’ve begun to turn the valve on contingency level one, again simply as a precaution. We read the same papers everyone does. I’d rather make sure our reaction time is a little bit ahead of the wave then to be behind when it’s time to react. These are line by line specific plans, we are absolutely ready. But I’ll emphasize, with the strength of our locations and the condition of our assets, we’re not seeing anything at this point.

Amanda Bryant-Merrill Lynch

And what’s going to be the trigger affect essentially, that kind of puts you into the level two contingency plan, what do you have to see to put that into effect?

Fred Kleisner

What I have found from my past experience relates exactly to what Rich has said. We have a significant proportion of our business comes from individual business, both business travelers and leisure travelers that book individually. We look at our call volume and our hit volume both in our call centers, proprietary call centers and non-proprietary call centers, as well as our proprietary website and the non-proprietary websites on a daily basis. So as we look at the numbers we’re looking for demand figures that show us what Thursday to Thursday looks like, what Wednesday to Wednesday and so on, on a actual demand basis. If we see a drop that is in excess of 10% over what we believe is a trend period, that’s a full week or moving into two to three weeks, we’ll blow the whistle on phase two.

Amanda Bryant-Merrill Lynch

Great thanks, that’s very helpful. And on the second question?

Richard Szymanski

The second question, Amanda, we’ve modeled about 3.5 million of stock comped expense per quarter.

Amanda Bryant-Merrill Lynch

Okay great, thank you very much.

Operator

We have time for one more question and that question is from David Katz from Oppenheimer. Please go ahead sir.

David Katz-Oppenheimer & Co.

After funding your personal share on the Hard Rock, what percentage will you own? Or rather after not funding your share how much will you own of the Hard Rock?

Richard Szymanski

Based on the expansion equity we’ll probably get down to the 20% range.

David Katz-Oppenheimer & Co.

Alright and it looks like you had pretty high losses in unconsolidated JVs and I apologize if I missed it in some of the commentary, but could you give us a little color on what that was about?

Fred Kleisner

Yes a few reasons, one where it was a non-operating cost at the JVs for accounting reasons on echelon, Hard Rock relating to the development that we expense rather than capitalized. There were some other costs at Hard Rock related to the gaming, the applications for gaming that we expense and in addition to that there’s the interest carry at Hard Rock.

David Katz-Oppenheimer & Co.

Alright, I have kind of a specific and then a general question about occupancy at the World and it looked like it moved around quite a bit. But I do also know that some of the hotels running at occupancy is up in the 90s. Is that really an efficient way, is it not potentially prudent to maybe push rate a little bit higher at the expense of some occupancy? Where do the efficiencies kick in?

Fred Kleisner

In the markets where we have significance and consistent demand, New York is a great example, we find that we can still run in the 90s yet reserve specific inventory for premium rates. It does take risk and what we track, very simply David is, we want to be the last to sell out in each of our completive sets. We’ll let our competitors fall on the discount bombs if they wish and hold back a bit. We’ve done that consistently, but in these high demand markets, right down to day of we’re still selling. You know that’s a good reason why, if you look at our market share premium, on rate therefore on RevPAR, it’s evidence of that yield management approach. I’ve said internally and I’ve said externally to many, I’ll say it again, this company has the best yield management system than any hotel management company I’ve seen and I’ve seen a lot.

Fred Kleisner

Well also David, on Royalton, keep in mind we did 80% in the quarter versus 90% or so last year, but we didn’t have all the rooms back in service, really fully back in service until the late part of October.

David Katz-Oppenheimer & Co.

Great, thanks very much. Nice quarter.

Fred Kleisner

Thank you.

Operator

This ends our Q&A session. I’d like to turn the floor over to Mr. Fred Kleisner for any final comments.

Fred Kleisner

I think there’s only one thing to say. Thanks very much everyone. We’ll look forward to talking to you again next quarter.

Operator

Thank you everyone. This does conclude today’s conference call. You may disconnect your lines at this time and please have a wonderful day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!