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Strategic Hotels & Resorts, Inc. (NYSE:BEE)

Q2 2012 Results Earnings Call

August 7, 2012 10:00 AM ET

Executives

Jon Stanner – VP, Capital Markets and Treasurer

Laurence Geller – President and CEO

Diane Morefield – Chief Financial Officer

Analysts

Smedes Rose – Keefe, Bruyette & Woods

Ryan Meliker – MLV & Co.

Jeffrey Donnelly – Wells Fargo Securities

Bill Crow – Raymond James & Associates

Enrique Torres – Green Street Advisors

Tim Wengerd – Deutsche Bank

Operator

Good day, ladies and gentlemen. Welcome to the Second Quarter 2012 Strategic Hotels & Resorts Earnings Conference Call. My name is Chris, and I will be your conference moderator for today. Presently, all participants are in a listen-only mode. Later, we will facilitate a question-and-answer session. (Operator Instructions)

As a reminder, this conference is being recorded for replay purposes. And at this time, I would now like to turn the conference over to your presenter for today, Mr. Jon Stanner, VP, Capital Markets and Treasurer. Sir, you may proceed.

Jon Stanner

Thank you, and good morning, everyone. Welcome to the Strategic Hotels & Resorts second quarter 2012 earnings conference call. Our press release and supplemental financials were distributed yesterday and are available on the company’s website in the Investor Relations section. We’re hosting a live webcast of today’s call, which can be accessed by the same section of the site with a replay of today’s call also available for the next month.

Before we get underway, I’d like to say that this conference call will contain forward-looking statements under Federal Securities Laws. These statements are based on current expectations, estimates and projections about the market and the industry in which the company operates in addition to management’s beliefs and assumptions.

Forward-looking statements are not guarantees of performance and actual operating results maybe affected by a wide variety of factors. For a list of these factors, please refer to the forward-looking statement notice included within our SEC filings.

In the press release and supplemental financials the company has reconciled all non-GAAP financial measures to the directly comparable GAAP measures in accordance with Reg G requirements.

I would now like to introduce the members of the management team here with me today. Laurence Geller, President and Chief Executive Officer; and Diane Morefield, our Chief Financial Officer. Laurence?

Laurence Geller

Thank you, Jon. Good morning, everybody. Yesterday we reported yet another quarter of industry leading results. Most importantly, the strong and positive trends that we previously reported on continue.

Diane will cover the specifics of the quarter in more details shortly but as I did last quarter, I will frame our results in a broader context which demonstrates the continued and the potential Superior performance of our unique high end portfolio.

The second quarter marked the 10th consecutive quarter of improved lodging demand and occupancy in our total North American portfolio. This was close to 75% which is full -- a full 8 percentage points higher than the second quarter of 2009, which marked our previous cyclical trough.

Six of our assets are currently above their previous peak occupancy. Our industry has experienced a broad recovery in lodging demand across all segments. But absolute luxury lodging demand is currently at an all-time high. It shows no signs of diminishing and is outperforming other segments.

Lastly, driven by the new supply additions near the end of the last cycle, our portfolio is still 4% below the peak occupancy levels we achieved in the second quarter of 2007, inclined there is still considerable runway for growth.

ADR at our hotels increased for the ninth consecutive quarter and is 15% above the second quarter 2009 trough, but still 4% below peak. The second quarter was also our eighth consecutive quarter of RevPAR index growth for our individual hotels, which is our best measure of market share performance.

RevPAR index was over 110 points for the combined portfolio, a 0.8% increase to the second quarter of 2011. This is a clear reflection of our best-in-class asset management, as our hotels continued to aggressively outperform their direct competitive sets, as well as the broader market.

We are experiencing similar cumulative positive trends in non-room spending, a very important piece of our business model given historically nearly half of our total revenues are generated from outside of the guest rooms.

Revenue at our food and beverage outlets is 32% higher than in the second quarter of 2009, which equates to over $6 million of incremental revenue across the portfolio and is driving total RevPAR levels that are now 25% higher than the 2009 trough, but still 8% below the second quarter of 2007, again implying growth runway.

As room rates are aggressively grown it will be more challenging for non-rooms revenue growth to keep pace with rooms revenue growth. Our non-room segment of the business obviously has lower profit margin in the rooms department, so logically we measure profitability on an EBITDA per room basis.

In the second quarter we earned over $8,500 per room of EBITDA, which is 36% higher than trough levels and 14% better than last year, yet still 15% below peak, giving us significant growth opportunity for profits.

Our productivity has improved a healthy 10% compared to the second quarter of 2007, indicating a systemic change in our operations. Since the first quarter of 2010 when lodging demand started to improve, our total portfolio RevPAR CAGR on a trailing 12-month basis is 9% with EBITDA growing over 18% on a compounded annual basis.

This meets our stated goal of two times ratio of EBITDA growth to RevPAR growth. Significantly, our cumulative EBITDA margin performance over that same period of time is 420 basis points or 190 basis points on an annual basis.

It is difficult to track similar metrics for this time period for our peers given the constantly changing portfolios. However, we are confident that our margin improvements are amongst if not the best in the industry.

And while these statistics are clearly indicative of our strong results in relative our performance, they naturally set a far higher bar going forward for us than for others and they will inevitably result in the tougher year-over-year comparisons going forward.

We continue our focus on two discrete operating segments, our resort properties and our urban hotels. As we did last quarter, we once again reported this portfolio segmentation in our quarterly supplemental package.

For the quarter, RevPAR at our urban hotels increased nearly 10%, while RevPAR at our resort properties increased 7.6%. To date and consistent with past recoveries, resorts have been slower to recover than urban hotels, though there appears to be more long-term upside currently in the room -- in the resort market based on group and incentive trends, and supply dynamics.

For example, we’ve seen our biggest improvements in group pace this year at our resorts where revenues are up 7% for 2012, compared to 3.5% in our urban portfolio. Replacement cost excluding land is much greater in the resort market than the urban market, and the more significant valuation GAAP generally exists between the trading values of our resorts and their corresponding replacement costs.

The planning, consents and development time of resort -- of the resort can be much more than double that of an urban property, indicating a significant longer time period where there should be no new competitive supply, even if the economy -- economics would begin to justify such development.

Despite the macro economic volatility we all daily read about, the healthy fundamentals of the high end lodging environment remains steady and current trends indicate they are likely to do so in the future.

In that context, our productivity continues to improve. Demand at our hotels and resorts continues to rise. Our room rates continue to increase. Both RevPAR and total RevPAR continue to grow. Food and beverage spending in our outlets continues to increase both on an absolute basis and on a per customer basis.

Our profit per room continues to increase. Our group pace continues to improve. Our group room productions continues to grow virtually each and every month. Our market share continues to grow and improve relative to our competitors.

There is no new supply or the threat of new supply in our markets, and the demographic and cryptographic trends continue to clearly favor high end hotels. As a result, we continue to remain confident, we’re in the midst of a sustained period of improving lodging performance particularly in the high end. Diane?

Diane Morefield

Thank you, Laurence. Good morning, everyone. We filed our second quarter results last night and reported comparable EBITDA of $50.9 million, a 20% increase from the second quarter of 2011. Our comparable FFO was $0.11 per share more than double the $0.05 per share last year.

RevPAR in our same store North American hotel portfolio which for the quarter now includes a Four Seasons Silicon Valley and Jackson Hole increased to robust 9.5% during the quarter, driven by a 5.8% increase in ADR and a 2.5 percentage point increase in occupancy.

Our North American results continue to be impacted by the performance of the Four Seasons Punta Mita which had a 5.1% RevPAR decline in the second quarter. This actually lowered our same store North American RevPAR growth by 0.7% from 10.2% to the reported 9.5%.

Consistent with the reporting in the first quarter, we also now report the results for our 14 hotel U.S. portfolio, which also includes our unconsolidated joint ventures in the Hotel del Coronado and the Fairmont Scottsdale Princess. We believe this is a broader and more representative measure of our total operating performance.

The RevPAR in our total U.S. portfolio grew 8.9% during the second quarter driven by a 6.3% increase in ADR with total RevPAR increasing 7%.

Occupancy increase nearly 2 percentage points year-over-year, driven by an 8% increase in transient room nights, which helped to offset an actual 4% decline in group room nights.

Importantly, our transient demand increased with concentrated in the highest rated premium segment where room nights increased over 50% from the second quarter of last year, rates on these premium transient room nights were up 9% year-over-year.

Conversely, discounted transient room nights, a lower rated segment of our business, which is driven primarily by online bookings declined nearly 9% during the quarter. This demonstrates the continuing and very healthy shift of business from lower rated to higher rated transient customers. In total, transient ADR increased to healthy 6.5% in the second quarter.

As noted, we did see a 4% decline in group room nights in the quarter, primarily attributable to the Westin St. Francis which felt the impact of a two-month closure of the Moscone Convention Center in San Francisco. However, group rates increased 5.4% in the second quarter and overall group revenue increased 1%.

Group room pays for the full year of 2012 is 0.5% higher than same time last year and group rates are projected to increase 4.5% for the year. Therefore, we view this blip in the second quarter as an anomaly and not any type of indication of a slowdown in overall group trends. In fact, 2013 group pace is even more favorable with room nights up 6% compared to same time last year and at rates 2% higher, yielding the group RevPAR pace 8% higher than same time last year.

Guests spending outside the rooms remain very strong across the portfolio as non-rooms revenue increased 5% for the quarter despite the decline in group room nights. For example, banquet revenue per occupied group room increased 9%, which clearly highlights that the propensity for group spend is ever increasing.

In total, Food & Beverage revenue increased 5% year-over-year, which includes a $1.8 million contribution from the Michael Jordan steakhouse at the Intercontinental and Chicago which opened in the fall of 2011.

EBITDA margins expanded a very healthy 160 basis points in the second quarter reflecting continued success in our ability to control hotel level expenses. Productivity which we measure by hours worked per occupied room improved by 1%.

The RevPAR increased at all 14 of our U.S. hotels in the second quarter with half of them actually achieving double-digit top line improvement. InterContinental Miami and Marriott Lincolnshire had 20% plus RevPAR growth during the quarter. These hotels were beneficiaries of the strong group base. And we’re able to push transient rates aggressively on compression nights.

Our reported European RevPAR declined 6.6% for the quarter. However, this was heavily influenced by the euro dollar currency movements and on a constant dollar basis RevPAR declined only 0.9% driven by a 7.6% constant dollar RevPAR decline at the Marriott Hamburg which as you know has a very limited impact on the company’s overall financial results.

RevPAR Marriott Grosvenor Square increased 3.4% in constant dollars during the second quarter. The Olympics are providing a nice boost to the city’s hotels in August and occupancy at the Marriott is forecasted to run 96% for the month at rates of 385 pounds per night.

However, the weeks leading up to the games were slightly slower than anticipated as travelers generally avoided the area given the negative publicity about transportation and immigration processing problems at Heathrow.

RevPAR at InterContinentals, Chicago and the Fairmont Chicago properties increased 4.5% and 11.6% respectively despite the impact of the widely publicized NATO Summit hosted in Chicago in May.

We estimate of lost approximately $1 million in revenue and over $500,000 in EBITDA at our two Chicago properties related to the NATO event. However, these hotels still performed well overall and in line with our expectations.

Turning to the balance sheet and our liquidity. During the second quarter, we successfully raised nearly $115 million in an overnight offering of 18.4 million shares of common stock. The offering effectively funded 50% of the preferred tender plus accrued, preferred dividends and our near-term capital projects.

On the last business day of the quarter, we made 14 quarters of accrued dividend payment totaling $85 million to the holders of our preferred common stock, I’m sorry, preferred stock bringing us completely current on our preferred dividend payment.

Our total annual preferred dividend obligation is now been reduced from $31 million to $24 million as result of our successful preferred equity tender offer completed at the end of last year.

We continue to work with the lender and our joint venture partner toward a successful resolution on the refinancing of the Hyatt Regency La Jolla loans which matures in September of this year. We intend to provide an update at the appropriate time and at our prior to the scheduled maturity of the loan.

We currently have $43 million outstanding on our revolving credit line and approximately $50 million of unrestricted cash at the corporate level, resulting in over $250 million of corporate liquidity in addition to our two unencumbered assets.

Regarding guidance, we are also reaffirming our full year guidance range today. We project North American same store RevPAR growth to be in the range of 6% to 8% and total RevPAR growth in the range of 5% to 7%. Year-to-date RevPAR in our same store North American portfolio has increased 9.2%. So our guidance range implies slower growth in the second half of the year.

Naturally, some of this is due to increasingly difficult comparisons from last year but also our concern over the impact on corporate America due to uncertainty about taxes and pending fiscal clip highlighted in the last part of the year.

In addition, we are forecasting about $3 million in revenue displacement related to capital work across the portfolio which reduces our full year RevPAR growth metric by nearly a full percentage point.

The bulk of this capital work is concentrated at Four Seasons DC where we are making planned garage repairs and other projects during the hotel slower season in order to minimize that disruption. Finally, comparable EBITDA is still expected to be in the range of $165 million to $180 million and comparable FFO per share between $0.21 and $0.29.

With that, we would now like to open the call for questions.

Question-and-Answer Session

Operator

(Operator Instructions) And our first question comes from the line of Smedes Rose. You may proceed.

Smedes Rose – Keefe, Bruyette & Woods

Hi. It’s Smedes. You addressed a lot of my questions in your remarks, but I wanted to ask you, it seems like the Punta Mita property continues to decline in its year-over-year results. And do you have a sense of where this could settle down and maybe kind of update us on the -- I think they’re trying to market at maybe more to South American groups and how that’s going?

Laurence Geller

Good morning.

Smedes Rose – Keefe, Bruyette & Woods

Good morning.

Laurence Geller

It seems to us that the Punta Mita properties is now settling and hopefully, we’ve seen its slow ebb. The results of the election were somewhat gave some confidence to the business community in Mexico. And the President has recently visited Punta Mita and made some very encouraging statements about the property and about security matters.

What we -- we obviously on marketing to a Latin America. It does has a rate differential for us. It looks very interesting and the most important thing is here our repeat customers from North America and from Europe are coming back. The people who have tried the property are returning. It is the aspirational traveler who hasn’t been there that we are having difficulty in attracting.

And as a result, later in this year, we’ll be announcing some unique marketing related initiatives that hopefully will drive attention and drive the aspiration traveler in. So to sum up, it doesn’t appear to be deteriorating significantly. Hopefully, it’s stabilized.

I’m optimistic that the new President will bring in, slowly but gradually bring in a new era of security, at least publicize security, and life will go on. We’ve had no security issues in or around our property.

Smedes Rose – Keefe, Bruyette & Woods

Okay. And then I just wanted to ask you, you said your guidance incorporates obviously the risk of, kind of, corporate America slowing down with all the uncertainty. Are you hearing that at all from your customers or do you sense any kind of delay in group bookings for next year? People that are waiting to see how things shake out or what are some of your customers telling you?

Laurence Geller

Frankly, we are more reacting to the headlines in the newspapers. Yeah, there’s New York Times for example, talked about uncertainty in the Corporate America just for blip. As far as our booking windows, our window hasn’t started to lengthen and it is still short by historical standards.

For instance, in June 2007, our production would have given us 54% for Q3 and 46% for Q4 but now its 58% for Q3 and 42% for Q4. So what we’re seeing is a shortening of it and people are booking at the last minute. Frankly, it appears to us they’re booking when they book airline tickets.

Smedes Rose – Keefe, Bruyette & Woods

Okay. Okay. Thank you.

Operator

Our next question comes from the line of Ryan Meliker. You may proceed.

Ryan Meliker – MLV & Co.

Hey, good morning guys. Just a couple of quick questions for you. First of all, I was wondering can you give us some color on what you’re seeing from a transient demand standpoint at your resort properties? I guess, what I’m trying to get at is are we seeing transient returns to these high end resort properties that you guys are on?

And then the second thing, I was hoping you guys could talk to me a little bit about was not necessarily your property specific. But if you have an idea of how you think London is going to trend in 3Q? Obviously, you’ve got the Olympics that are positive, but as you talked about there’s always kind of heading into the Olympics and then kind of hangover following the Olympics that impacts it. Are you expecting London RevPAR to be up, flat, down, et cetera, that would be helpful. Thanks.

Laurence Geller

Okay. First of all, we’re really pleased with the transient business at our resort. The leisure business during summer has been as expected in some cases better. We’ve had absolutely no need for discounting or any last-minute changes or plan.

So transient at the resort is healthy, it’s good. We still -- I mean, we like the mix. We obviously like group business because we can sell them three or four meals a day whereas transient necessarily going to capture them all the time.

As far as London is concerned, it is interesting we had a slow period as Diane mentioned building out to the Olympics, the negative publicity was reminiscent to us of the later publicity that impacted us so much in Chicago.

However, it was not as bad as we thought and we had expected post the Olympics a real big let-down. But what has been happening in the last couple of weeks -- last three weeks, in fact, we started to see a fill-in in London in that trough period. We’ll then start with the Paralympics which were -- won’t impact us particularly will give us some compression business.

And the full looks very strong from a group booking business. And I’m pleased to say that the social business in the winter, which is always a good barometer despite the English lack of confidence seen in their overall business confidence -- business aspects that the social business is starting to fill in very strongly for the winter.

Ryan Meliker – MLV & Co.

Okay. Looks like you’ve identified from potential FX headwinds, if you’re not expecting London to hold the portfolio back -- in the back half of the year.

Laurence Geller

Not really. We’ve been so aggressive here and the -- we have, obviously, London has to switch markets because so much of its business is into Europe and there have been a slowdown in much of the European leisure business.

But it’s able to switch to the Middle East to Eastern Europe and to Asia. But most importantly, we are seeing return of the American business and the reason, I mentioned that importantly, its longer stay.

Ryan Meliker – MLV & Co.

Yeah. That makes sense. Great. Thank you very much.

Operator

The next question comes from the line of Jeffrey Donnelly. You may proceed.

Jeffrey Donnelly – Wells Fargo Securities

Good morning, guys. Laurence, I’m just curious. What’s been the trend in cancellations and attrition in the quarter versus last year or even versus the prior quarter? Just interesting, is there been any shift?

Laurence Geller

Nothing. Jeff, we watch this very, very closely and I can say the answer is no change at all, nothing.

Jeffrey Donnelly – Wells Fargo Securities

Okay. And then just more of a…

Laurence Geller

Jeff, if I can interrupt you? Let me just stress again, what I said previously to Smedes. The issue is more importantly that the booking window has shortened, so you’re getting less uncertainty when people go from tentative to hard, is when they book their airline tickets. So that window shortening a bit, few days on an average is the differential, that’s the proxy for attrition.

Jeffrey Donnelly – Wells Fargo Securities

Okay. That’s helpful. And then, I’m curious, out in Santa Monica, I think you guys back in June tried to renew or looking to renew your approvals for building the condos there on the beach, if I’m not mistaken, where does that stand? I mean, is that something that you think ultimately can happen or is that?

Laurence Geller

The approvals will certainly be extended and we look forward to monetizing that at the appropriate time. At the moment, we’ve started work on the -- some repositioning work in Santa Monica on the (inaudible) and on the interiors. So we’ll look at that and we’ll keep those approvals going.

What is very interesting, how Santa Monica has taken the place of Beverly Hills as the high rated and the most highest RevPAR, part of the L.A. market? So we are now repositioning the hotel up to take advantage of that opportunity, which is a clear opportunity.

Jeffrey Donnelly – Wells Fargo Securities

Is it conceive or I guess are you, do you conceive those units much like the ones down at the Hotel del where there would be for sale, but if actually put back into a pool or are these just actual full time residential units?

Laurence Geller

There are some -- some restrictions, but it is not inappropriate to suggest. We do a full new somewhat like the Delaware, they may be sold and we would be using them for – we would be servicing the hotel one way or another.

Jeffrey Donnelly – Wells Fargo Securities

Just one, one last question. Just I’m curious what your sense is on sort of a luxury hotel market, specifically if its transaction market for luxury hotels and if we saw some headlines about the Plaza transacting maybe during the quarter. Have you found that -- is the interest there is still fairly strong? Have you seen any shifts from maybe earlier in the year?

Laurence Geller

The answer is yeah. We have seen a shift from earlier in the year. We see increasing interest and increasing activity. It is not unusual in that -- when you have the uncertainty throughout Middle East volatility in the European markets, there is a -- all of this -- it is not unusual to see a flight into capital and into hard real estate assets in the United States.

We are seeing an increasing activity throughout. I personally think the strength in rich equities will have a determining role in how much activity in the second half of the year. But people are now looking at the supply dynamics and the relative discounts to replacement costs.

So we believe there will be a steady increase in the larger high end assets in the market and I think there’ll be a steady increase in investment activity. The bid ask gap is narrowing.

Jeffrey Donnelly – Wells Fargo Securities

That’s helpful. Thank you.

Operator

Next question comes from the line of Bill Crow. You may proceed.

Bill Crow – Raymond James & Associates

Hey. Good morning, guys. Apologize if I missed this earlier, but Laurence, can you comment on incentive based corporate travel demand, what you’re seeing for future bookings from that perspective?

Laurence Geller

We saw a large uptick -- a large, a significant percentage increase in it in the early part of the year. And the second -- early in the second quarter, we saw incentive travel we had very interesting, one of our hotels, a buyout of the whole hotel for internal incentive travel by a major financial institution. In other words, it wasn’t for their suppliers, it was for their staff.

We are seeing a steady increase but it is not dramatic and we are coming off a very low base of it. Its -- when -- what does happen when the incentive travel gets to the hotel they tend to buy out on-site, so they will tend to upgrade there various offer, the offerings they take on-site. But it hasn’t jump back into full force and frankly, while this corporate uncertainties out there, it would be impolitic for them to do it.

Bill Crow – Raymond James & Associates

Right. Right. No material slowdown or change, just you haven’t seen the recovery as robust as you might see, is that fair?

Laurence Geller

Absolutely. It is just so robust and so I would’ve hoped for it to accelerate more, but it is improving and there has been no decline since this improvement started at the second half of last year. It’s just not going as fast as we’d like, so could you tell Ray J to book some stuff at our hotels, please?

Bill Crow – Raymond James & Associates

I will do my best. Finally, from me, Laurence, what are you seeing on the East Coast from a perspective -- acquisition perspective, I know it is an area that you would eventually like to expand and if you can?

Laurence Geller

Well, we’ve certainly like. We certainly have been very consistent that we look selectively and opportunistically at our acquisitions. We like high end product. We like high barrier to entries. We like North America focused and yeah, we’d like to expand in the East Coast, as well as in resorts which we feel represents an opportunity.

Look, our underwriting is pretty rigorous and we have very stringent financial metrics. So for us it’s more likely the not -- we’ll do an off market or a complex or structure transaction either in resorts or on the East Coast, and we can use them a stock as a currency if we have to.

Bill Crow – Raymond James & Associates

Yeah. Okay. Thank you very much.

Operator

The next question comes from the line of Enrique Torres. You may proceed.

Enrique Torres – Green Street Advisors

Hi. Good morning, guys. Question on you London asset, is that asset still being marketed for sale on a selective basis or is there any update on how that process is going now that you’re going to have some of the Olympic results and clarity on what the rest of the year looks like?

Laurence Geller

We didn’t, look, we are not aggressively marketing London, but we’ve made it very clear in calls like this and in interviews that we put into the media, that we are open to offers. The property is improving. We are -- we have another very small project going on in London, which will even increase profits more.

Sooner or later, the price that we want will come across the trends and then we will grab it. The people know its there, we get a lot of inquiries and I don’t think an aggressive public marketing process makes it any easier.

Enrique Torres – Green Street Advisors

Okay. Thanks. That’s all the questions -- all the questions I had were all answered. Thank you.

Operator

(Operator Instructions) Our next question comes from the line of Tim Wengerd. You may proceed.

Tim Wengerd – Deutsche Bank

Hi. Good morning. Can you talk a little bit about your expectations for the del Coronado this summer and into second half during the busy season?

Laurence Geller

We are pleased with results of the del for the summer, they are pretty well as expected. We didn’t see any turndown in it. So the headlines didn’t have an impact on the travel -- on the discretionary travel for the del. Group bookings are good, are as expected for the del for the fall and winter and into next spring.

San Francisco -- San Diego is still absorbing meetings hotel supply. We are still outperforming our markets there. So the del I think is performing as expected and I’m pleased about the summer because, obviously, it’s a good barometer for leisure travel.

Tim Wengerd – Deutsche Bank

Thanks. And then just on the CapEx side, I guess where do you stand with the CapEx projects that you have in place right now in Scottsdale and how are bookings at Scottsdale for later in the year?

Laurence Geller

Okay. I will let Diane deal with the CapEx in general. But let me give you some notes on Scottsdale. As you know, we are expanding it fairly dramatically at the moment from ballroom perspective. So here’s the interesting thing.

We have -- we didn’t meet our expectations for group rooms in the second quarter, yet for the whole of the year we are up 4% in group pace let say some 3,200 room nights over the previous year. But for 2013, our pace is up 50% to -- with 22,000 room nights largely driven increased, largely driven by the new ballroom where that’s an interesting number.

I think the one that pleases me personally the most is that for the new ballroom itself, we booked over 57,000 room nights generated by that ballroom for all future years, clearly we made a good decision there.

Diane Morefield

Yeah. And regarding CapEx projects for 2012 in total, we’re projecting $35 million to $40 million in under funded capital expenditure trends, I mean, I’m sorry, spend. As you know, we require at least a sort of mid teens and above ROI on projects before we proceed.

The major projects this year, we’re finishing the renovation of rooms at the InterCon Miami. We are also renovating the lobby in common areas and upgrading the restaurant in the lobby of the Miami InterCon.

We have two ENO wine bars to be opened later this year in the Four Seasons D.C. and Westin St. Francis. And as Laurence mentioned, we are doing enhancements, say exterior of the Loew Santa Monica.

And finally, we are moving forward on a re-concept and upgrade of the food and beverage offering at the Four Seasons Jackson Hole, which we certainly want completed before the ski seasons. So those are the major projects.

Tim Wengerd – Deutsche Bank

Thanks, Diane. Thanks a lot.

Operator

And we have no further questions at this time. I would now like to turn the call back over to Laurence for any closing remarks.

Laurence Geller

Thank you, everybody for dialing in today. I know this has been a long earnings season and we are really delighted with what we keep seeing despite the negative resume of the headlines. The problems of Europe, I personally hope that this election season gets over quickly and we can resolve this deficit situation and fiscal cliff, and remove some of the uncertainty, because I think that will all alter 2013 and 2014 group bookings. We thank you all and we believe the trends will continue. Thank you.

Diane Morefield

Thank you.

Operator

Ladies and gentlemen, that concludes today’s conference. Thank you so much for your participation. You may now disconnect. Have a great day.

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