Strategic Hotels & Resorts (BEE) continues to get beat down by the bad economy, and while I do believe that this stock - and other stocks like it - will eventually recover as people start spending money on luxury weekends and vacations again, I don't think that a recovery in this sector is imminent.

I think it'll be a long time before things 'return to normal' in that sector and these companies will merely survive for the time being.

Q2 2009 Earnings Call

August 6, 2009 10:00 am ET

According to a GlobeSt.com article, "Last month, 13 hotel loans totaling $596 million defaulted. These included the $190-million Pointe South Mountain Resort in Phoenix, the $117-million Loews Lake Las Vegas in Las Vegas, and the $100-million Dream Hotel located in New York City."

Now, Urban Digs readers know that the New York City Hotel market is one of the strongest in the country, if not the world, in terms of occupancy (New York City Hotels Going From Foist to Woist). However, you also know that even very tight markets can suffer in a demand recession, and it doesn't help if a bunch of new supply is coming to market as it is in New York City (Hotel Hell - The Zombies Cometh). I thought I would give a little update on the New York City lodging market, since the last time we checked in (chuckle-inducing word play intended) back in March. At the time my outlook was negative and I believed that industry estimates for the New York City market would have to come down.

Hotels have started to reduce construction on new additions after years of accelerating growth, but BCA Research does not see this leading to a rebound in room prices or a sign for investors to pick up hotel stocks, either.

"Hotel stocks are not a 'reflation' play," the Montreal-based analysis firm said in a note Friday. "While this is a necessary development to soak up excess capacity, it is far too early to be betting on a recovery in room rates."

• Hotel Del Coronado (site of "Some Like it Hot" with Marilyn Monroe)
• Ritz-Carlton Half Moon Bay
• Ritz-Carlton Laguna Niguel
• Fairmont Chicago
• Four Seasons Washington D.C.

With an enterprise valuation of 2.07B and with a 2% projected increase in luxury hotels over the next 3-years, any recovery in the economy will present ample opportunity for revenue growth. Their 19 hotels with 8,358 rooms are situated in the most posh Western European and North American cities. With no debt maturities until 2011/2012, there's ample time for the economy to recover over the next two years, plus for many of the people who stay at such exquisite hotels of this nature the prospect of paying $250 p/n for a room is quite feasible, there are just fewer-and-fewer of these people to go around. Its directorship includes British knights and American financiers. Further Warren Buffett keeps a home in Dana Point as does Bill Gross of Pimco, within minutes of the Ritz-Carlton Laguna Niguel and its remarkable golf course nestled against the Pacific. A full 38% of its EBIDTA comes from oceanfront hotels.

Q1 2009 Earnings Call

May 7, 2009 10:00 am ET

Sure, who wouldn’t like the market to show its true bottom and start a new climb to the stars? However, it’s not happening now. So, are there any lemonade recipes out there for the lemons we’re drowning in?

Good recipes usually have their roots in the concoctions of the master chefs. One of the aromas emanating from Chez Buffett lately has been preference shares. Now I’m as eager to follow him (and as battered by the Dow) as the next person, so I considered the idea of following his lead. But how? Picture the reaction from Goldman Sachs to my offer to invest $5,000 of my precious IRA in these preferred shares paying 15% per year. Yeah, right.

Q4 2008 Earnings Call

February 27, 2009 11:00 am ET

Q3 2008 Earnings Call

November 6, 2008 10:00 am ET

In a recent report Standard and Poors predicted that dividend growth will slow in 2008 and probably become negative in 2009 as more industries are affected by the current economic slowdown. There were several dividend cuts and eliminations last week. Stocks that cut or eliminate their dividends tend to underperform the S&P 500 over time. It’s interesting to note that investors reacted differently about each occasion where a dividend cut or elimination occurred.

Carnival Corp (CCL) announced on October 31 that it will suspend its dividend for 2009. The company announced that the dividend suspension would result in annualized cash savings of approximately $1.3 billion. The significant liquidity provided by the dividend suspension gives the company the flexibility to fund its 2009 capacity growth without the need to access credit markets. The stock proceeded to lose 15% of its value by the end of the week, following the announcement.

In a 13D filing on Strategic Hotels & Resorts, Inc. (BEE), Bill Gates' Cascade Investment disclosed a 5.63% stake (4,190,000 shares) in the company and changed its filing status from 13G (passive) to 13D (active). The firm changed its status due to recent market declines and may now engage in discussions with the board of directors and management concerning the business and strategic direction.

Gates' Cascade Investment showed a 5.23% stake (3,890,000 shares) in the August 13G filing.

Q2 2008 Earnings Call Transcript

August 7, 2008 10:00 am ET

Q1 2008 Earnings Call

May 8, 2008 10:00 am ET

Q4 2007 Earnings Call

February 28, 2008 10:00 am ET

Quote of the Day

I've been doing some research the past weeks, looking for great technicals and fundamentals, and finally I have come up with the following allocations.

INTERVIEW: REITs' Still-Rosy Outlook by Sandra Ward

Highlighted companies: Cohen & Steers (CNS), Trizec Properties (TRZ), Mills Corporation (MLS), Starwood Hotels & Resorts Worldwide (HOT), Hilton Hotels Corporation (HLT), Strategic Hotels & Resorts Inc. (BEE)
Summary: Interview of Marty Cohen, Co-CEO of $23 billion investment-services giant Cohen & Steers. The article focuses on Real-Estate Investment Trusts (REITs), one of Cohen & Steers' main empire-building instruments. Over the past two years, REITs have consistently outperformed other sectors. Cohen attributes their current growth to stagnant supply coupled with increased demand, leading to rent and revenue increases (rent increases have a high 'flow-through' to overall profitability, because operating costs don't change substantially with increased rents). Cohen concedes that if the economy slows substantially, real-estate values and profits will likely slow as well. However, he does not see signs of a recession, and believes that current Fed policy improves the probability of a soft landing or continued growth. A slow-but-consistent economy is ideal for REITs, because as long as real-estate fundamentals continue to improve and interest rates remain low, REITs will continue to be a solid investment. Buyouts and takeovers, which have dominated the sector over the past two years, have helped its performance as well. Looking at the world markets, Cohen is bullish on European and Asian REITs, particularly in Hong Kong. On the domestic front, Cohen sees the hotel sector as a standout among the REITs, due to an unprecedented increase in the revenue per available room (revpar).
Quick comment: ETF REIT plays: Cohen & Steers provides the underlying index for the iShares Cohen & Steers Realty Majors ETF (ICF). That, along with iShares Dow Jones US Real Estate (IYR), streetTRACKS DJ Wilshire REIT (RWR), and Vanguard REIT ETF (VNQ) all perform similarly and are viable plays on the US REIT market. As noted in the article, Cohen & Steers stock (CNS) has grown explosively over the past two years, vastly outperforming the REIT ETFs, who themselves have way outdone the major overall indexes (see chart). This illustrates the advantage of investing in a REIT-focused company who continues to seek-out other income-oriented investments like utilities and high-yielding stocks, rather than focusing entirely on one sector. While Cohen makes the case for a 'soft-landing' of the current real-estate slowdown, SeekingAlpha contributor Richard Kang paints a far gloomier picture, asking, "Does a minor soft-landing follow the most extended residential real-estate cycle on record?"

It’s another cash flow statement restatement, this time by Strategic Hotels Capital Inc (BEE). Their non-reliance 8-K spells out the issue: a misclassification between “operating” cash flows and “investing” cash flows.