Extended Stay America, Inc. (NYSE:STAY) Q4 2015 Earnings Conference Call February 23, 2016 10:00 AM ET
Robert Ballew - IR
Gerry Lopez - CEO
Jonathan Halkyard - CFO
Tom Bardenett - COO
Tom Seddon - CMO
Harry Curtis - Nomura Securities
Anthony Powell - Barclays
Chad Beynon - Macquarie Group
Shaun Kelley - Bank of America Merrill Lynch
Thomas Allen - Morgan Stanley
Greetings and welcome to the Extended Stay America Fourth Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Rob Ballew, Director of Finance and Investor Relations at Extended Stay America. Mr. Ballew, please go ahead.
Good morning and welcome to Extended Stay America's fourth quarter 2015 conference call. Both the fourth quarter earnings release and an accompanying presentation are available on the Investor Relations portion of our website at extendedstay.com, which you can access directly at aboutstay.com.
Joining me on the call are Gerry Lopez, Chief Executive Officer; Jonathan Halkyard, Chief Financial Officer; Tom Bardenett, Chief Operating Officer; and Tom Seddon, Chief Marketing Officer. After prepared remarks by Gerry and Jonathan, there will be a question-and-answer session.
Before we begin today, I'd like to remind you that some of our discussions will contain forward-looking statements, including the discussion of our 2016 outlook. Actual results may differ materially from those indicated in the forward-looking statements. Forward-looking statements made today speak only as of today. The factors that could cause actual results to differ from those implied by the forward-looking statements are discussed in our Form 10-Q filed this morning with the SEC and our other SEC filings.
In addition, on today's call we will reference certain non-GAAP financial measures. More information regarding these non-GAAP financial measures, including reconciliations to the most comparable GAAP measures are included in the earnings release and Form 10-Q filed this morning with the SEC.
With that, I'll turn it over to Gerry.
Thank you Rob. And thanks everyone for joining us this morning. At the outset, let me say that with our qualification, 2015 was a terrific year for Extended Stay America.
On the financial front, our comparable hotels, that is the 629 properties owned and operated by the company at the end of the year. So RevPAR growth of 6.1%, this in spite of the volatility in the year that we all know about and despite our hotels saw an increase in renovation disruption as we continue to work our way through that most important initiatives. The 6.1% RevPAR increase about our management teams from operating leverage resulting in an 8.5% increase in adjusted EBITDA for the comparable hotels. In turn, the improvement in adjusted EBITDA lifted our adjusted paired share income by 14.7%. All in all, we are pleased with a headline financial the way that held up and the way that our team responded to volatility that ends later in the later stages of the year.
Beyond the headline revenue and profit results, in 2015 we also enhanced our balance sheet and capital structure by paying down debt and delivering by nearly one turn, significantly we declared or returned $186 million to paired shareholders in the form of distribution, an increase of over 70% from 2014. As I think you all know by now, in December we completed the sale of 53 hotels, including all of the Crossland properties at a very attractive price. This sale not only improve our asset quality, RevPAR, unit operating margins and growing consistency, it also helped us retire debt and declare a special distribution of $0.25 per paired share which we paid just last month. Plus as you saw us announce in December and again this morning, it freed up additional capital to begin repurchasing share illustrating our commitment to return capital to shareholders while still meeting our leverage targets.
Moving onto the sales and marketing front, we successfully attacked and completed a number of important initiatives in 2015, initiatives that set us up well for this year and beyond. Late last summer, we rolled out our automated revenue management system that drives rates and occupancy during peak periods and shoulder dates. We have already began to see positive effects of this system, including a 26% RevPAR index increase versus our competitive set during the weaker Super Bowl for the hotels -- our hotels in the bay area. And a 15% RevPAR index increase in Charlotte during the ACC Championship football game. We continue to expect a 1% to 2% lift to our 2016 RevPAR numbers from this system with a majority of the benefit coming during the high occupancy period in the second and third quarter.
We've also added a centralized sales team and reengineered our sales processes to provide corporate clients of all sizes with better service and more comprehensive follow-up. The sales team saw revenue increased by over 10% in the third and fourth quarters of 2015 and now account for about 40% of our business. As we complete our renovation program, we continue to get improved traction with corporate client who look for a consistent product portfolio across the entire estate. In 2015, we also rolled out a new loyalty program, Extended Perks, we call it which now has approximately 1.1 million members, and that's even before we turned into its first year anniversary.
During the year we also centralized our booking and reservation call which allowed us to not only better allocate and use labor dollar for the property level to serve our guests but to sell those on the phone with value enhancing option such as nightly housekeeping service which we call Clean Plus. And that may not sound like a big deal except it added 20 basis points to our RevPAR in the fourth quarter in an environment where every point of RevPAR matters, I'll take 20 basis points. Within Clean Plus, an idea of like it can provide a sale win into 2016 and beyond.
Now beyond financials and sales and marketing initiative, 2015 was an important year for our fleet, our state as well. In the last twelve months, we completed a 128 hotel renovations, and at the end of January we are now 75% complete with our renovation program, in line with our prior guidance. As announced previously, we remain on track to finish our renovation program about a year from now. Our renovated hotels produce better results in every significant method including revenue, revenue growth, operating profit margins, associate engagement and customer satisfaction score. Net, we love renovation because they are a win for our guests, our employees, and by consequence, our shareholders.
Now let me shift gears to the fourth quarter more specifically. For the quarter, we're happy to report that in spite of some turbulence and confusing news for the industry as you all know about it, Extended Stay America once again had strong consistent revenue growth plus posting comparable hotel RevPAR growth of 6%. The 6% RevPAR is impressive, not just because of how favorably it compares to the industry but because we've posted strong revenue growth even in the face of significantly increased renovation disruptions over the same quarter in 2014. But renovations are short-term pain for long-term gain as our results were indeed driven by the renovator hotels.
We've posted an even stronger growth with RevPAR rising 8.5% during the quarter. This compares to quarterly industry RevPAR growth of 4.4% and 3.7% for the economy and mid-scale segment respectively. The bottom-line is that in the fourth quarter our adjusted EBITDA grew to $127.1 million despite an impact of approximately $3 million from having sold the 53 hotels I mentioned a moment ago.
Now looking ahead for a moment, we are positive about demand growth for Extended Stay America and our ability to replicate the strong performance in 2016 and beyond. Many see dark clouds in the horizon, and only the dark clouds, but we see the current unexpected supply growth in the economy and mid-scale segments that we're competing continues to be very limited. And outside with few large urban cities where we have slightly minimal exposure, industry supplies growth after whole is low. That limited exposure to the large gateway cities and our lot dependence on inbound international travel combined with our lean operating model and initiatives already in place, we are confident that whether the headwinds materialize from that, we will continue to grow our revenue and deliver on the bottom line this year.
This in spite of an expected increase in room disruption for renovations in 2016 as we embark on our last but largest renovation space ever. The net of it is, Extended Stay America is through its own work and because of its positioning will see waited whether their cycle remains stable or begins to slowdown. We look forward to expanding on this idea on how we think we can advance in the future, an upcoming Investor Day in early June.
Now before I turn the call over to Jonathan to cover our financial results in more detail, and our initial outlook for 2016, I'd like to recap the strong year Extended Stay America had in 2015. We improved the quality of our product and brands are renovating a 128 hotels and selling 53 economy hotels at an expected price. We've significantly expanded our revenues, marketing and sales scalability, we've posted strong consistent RevPAR and EBITDA increase each quarter and increased our hotel margins throughout the course of the year. We improved our guest satisfaction score, and we improved our leverage rates here which allowed us to declare and return significant capital to our shareholders. A busy but rewarding year that sets us well for the future.
Thanks a lot, Gerry. Our fourth quarter continued to build on the strong results we posted all year long. Total revenues in the fourth quarter increased 4.8% to $296.3 million while Comparable Hotel defined as the 629 extended stay hotels owned as of December 31, 2015 posted revenue growth of 6.2% to $283.7 million.
For 2015 total revenue grew 5.9% to $1.285 billion and Comparable Hotel total revenues grew 6.2% to $1.217 billion. We estimate the loss of revenue from the 53 hotels that we sold in December was $4.5 million during the fourth quarter. Overall RevPAR grew 7.1% in the fourth quarter driven by ADR growth at 6.7%. Overall occupancy during the quarter increased 30 basis points to 69.1% despite a significant increase in room nights displaced from hotel renovation. Comparable Hotel posted a RevPAR increase of 6% in the fourth quarter to $43.71 driven by ADR growth of 5.9% and occupancy expansion of 10 basis points.
Our renovated properties continues to outperform posting an 8.5% increase in RevPAR driven by an ADR growth of 5.5% and an occupancy improvement of 200 basis points for the fourth quarter. Our non-renovated properties saw 5.3% RevPAR growth in the fourth quarter driven by an ADR growth of 3.2% and an occupancy increase of 140 basis points.
Occupancy this quarter was hurt by our properties undergoing renovation. And they saw an approximate 17 percentage point occupancy decline. Excluding those properties undergoing renovations Comparable Hotel saw occupancy gains of 180 basis points and RevPAR growth of 7.9%. Revenue from our Clean Plus program grew nearly 500% from the fourth quarter of 2014 adding over 20 basis points to RevPAR growth during the quarter. This program continues to gain momentum and in addition to driving higher revenue, it more importantly helps increase debt satisfaction for us.
In 2015 overall RevPAR grew by 6.7% to $45.89 driven by ADR growth of 7.4% while Comparable Hotel posted a RevPAR increase of 6.1% to $47.36 driven by ADR growth of 7.2% and an occupancy decline of 80 basis points to 73.7%. The occupancy decline was primarily due to increased renovation activity for the year as we had a 139,000 more room nights displaced from renovation than compared to 2014. So for 2015 renovated hotels posted a RevPAR increase of 8.5% while non-renovated hotels grew RevPAR by 4.4%.
Hotel operating margin was flat at 50.2% in the fourth quarter on approximately 50% flow-through. Flow-through tends to be lower in the first and fourth quarter due to seasonality of revenue and also this quarter our hotel operating expenses were impacted by higher short-term incentive compensation, increased maintenance expense and higher real estate taxes compared to the same quarter of 2014. These increases were partially offset by favorable utility expenses during the fourth quarter. But remember, for all of 2015 though, hotel operating margins expanded 200 basis points on approximately 88% flow-through.
Adjusted EBITDA grew 3% to $127.1 million in the fourth quarter near the top end of our guidance range after adjusting for our 53 hotel sale in December. Adjusted EBITDA for the quarter includes about a $3 million impact to EBITDA from the loss of revenue and associated expenses with the hotels that we sold. For 2015, overall adjusted EBITDA increased 8.3% to $603.1 million while Comparable Hotel adjusted EBITDA increased 8.5% to $574.1 million.
Net income for the fourth quarter increased by 371.8% to $132.1 million. Net income this quarter includes a free tax gain on the sold hotels of approximately $130.9 million. Our effective tax rate for the fourth quarter was 17.7%. The company's tax rate was lower due to the 53 hotels disposition during the quarter and our cash taxes this quarter were reduced by the use of $18.6 million net operating loss to offset taxable income on the gain of the sale, and we deferred cash taxes on the special distribution paid in January 2016.
Net income for 2015 grew 88% to $283 million. Our effective tax rate for the year was 21.3% illustrating the tax effectiveness of company's paired share structure. Our adjusted paired share income for paired share for the quarter was down slightly to $0.15 per paired share due primarily to higher depreciation expense from renovations and higher interest expense. But for 2015 it increased 14.5% to $0.95 per paired share. Adjusted paired share income which is the non-GAAP measure represents net income as adjusted attributable to our consolidated enterprise. These adjustments are detailed in this morning's press release.
We ended the year with total cash of $457.7 million comprised of $373.3 million in unrestricted cash, and $84.4 million of restricted cash. During the quarter we paid of $86.1 million of mortgage debt in conjunction with the hotel sale, and in January we paid a special distribution to our shareholders of $51.2 million. Net debt was approximately $2.3 billion at the end of the fourth quarter and net debt to trailing twelve months adjusted EBITDA was down to 3.9x but excluding the adjusted EBITDA of the 53 hotels we sold, and adjusting for the special distribution declared in December but paid in January, our net debt to trailing twelve months adjusted EBITDA was 4.2x. We continue to expect this leverage ratio to be at or below 4x by the end of this year.
Capital expenditures for the fourth quarter totaled $63.6 million. CapEx for 2015 totaled $204.7 million including a $108.1 million on renovation, $88.5 million in maintenance capital, and $8.1 million in IT and corporate spend. This morning the Boards of Directors of Extended Stay America Inc. and ESH Hospitality Inc. declared a cash distribution totaling $0.17 per paired share for fourth quarter of 2015. These distributions include $0.15 per ESH Hospitality Class A and Class B common share, and $0.02 per Extended Stay America common share. The distributions are payable on March 22, 2016 to shareholders of record as of March 08, 2016.
Also this morning the Boards of Directors approved an increase in our share repurchase authorization amount to $200 million. We believe our shares represent a very compelling value today with the company at EBITDA multiples near industry historical loads even while our EBITDA is at historic high.
Looking ahead to 2016, we expect total revenue of $1.266 billion to $1.290 billion representing Comparable Hotel revenue growth of approximately 4% to 6%. This includes the impact from an increase in room displacement from a hotel renovation and assumes industry RevPAR growth in the low single digits. The estimated 2016 quarterly room displacement and renovation completion schedule is available at our earnings presentation released this morning on our website www.aboutstay.com.
We expect $600 million to $620 million in adjusted EBITDA in 2016 representing 4.5% to 8% growth over Comparable Hotel results in 2015. In 2016, we expect our operating profit flow-through to trend higher as the year progresses due to budgeted initiatives and a higher revenue base in the middle of the year. We expect capital expenditures for the year to total $240 million to $260 million driven by an increased pace of renovations over 2015.
Our guidance for the first quarter of 2016 is as follows; we expect total revenue of $281 million to $287 million which represents a growth of 4% to 6% over Comparable Hotel revenue in the first quarter revenue of 2015. This includes an estimated 135,000 room nights displaced in the first quarter of 2016 due to ongoing renovations compared to approximately 76,000 room nights displaced in the first quarter last year.
We expect adjusted EBITDA of $118 million to $123 million during the first quarter which represents growth of approximately 2% to 6% over Comparable Hotel results in the first quarter last year. While we do not normally comment on results during the quarter, given recent softness in industry numbers so far this year, we are happy to report our Comparable Hotel RevPAR growth for January was 6.1% despite significant renovation activity in our system compared to last year.
Extended Stay America will be participating at several upcoming investor conferences. On March 1, we will be attending the JPMorgan global high yield and leverage finance conference in Miami Beach, and the JPMorgan Gaming, Lodging, Restaurant and Leisure Conference on March 10 and March 11 in Las Vegas. On March 21, we will be attending the Macquarie Consumer Focus Conference in New York, and on March 30, we will be attending the Morgan Stanley Consumer Conference also in New York.
Rob, let's now go to questions.
Thanks, Jonathan. Before we begin the question and answer session, I'd like to ask everyone to limit their questions to one, with one follow-up in order to try to accommodate everyone in the queue. Operator, we will now go to questions.
Thank you. [Operator Instructions] Our first question today is coming from Harry Curtis from Nomura Securities. Please proceed with your question.
Hi, good morning everyone. Two quick questions. The first is, Jonathan can you give us a little bit more color on what you are seeing year-to-date in your booking page? Are you seeing any incremental weakness in either your leisure or your corporate sectors?
Sure. Good morning, Harry. Our booking window is relatively short although there are those who have shorter booking windows than Extended Stay America. At this point the visibility that we have is good and it's consistent certainly with the guidance that we've given for the first quarter. Our corporate negotiated rate which has been an area of intense focus of our sales team over the past couple of months, are going well. We have not seen any declines in the booking pace in either our leisure travelers or our corporate customers.
That's helpful. And then Gerry, a quick question for you. Now that you have been in Extended Stay for a while, can you talk about what are the opportunities you see both from an operational perspective and then are there any opportunities from growth of the brand that you are considering?
Yes, absolutely Harry, and good morning to you. I see the opportunities kind of mere, closing and then a little bit further out. The closing opportunity is to finish the strategy the company embarked upon three years ago. The renovations which we referred, made reference to during the prepared remark are working and are working really well. That's why this year the final phase is the biggest of all is, we want to get it done and we want the impact -- the positive impact of all of those renovations across the entire stake. Behind those there is quite a bit of focus and execution. So I see the near-term opportunity as exactly that, finishing the renovations that have been ongoing for the last -- call it three years or so. And then executing very strongly behind them and I think you've seen the results certainly over the last few quarters and the quarters that we reported this morning as delivering on both of those fronts.
Now over the more medium-term, I see us having any number of fronts -- any number of areas that we could attack. As we sit here and looked over the end of this renovation phase etcetera, we think that there is nothing that is not on the table. So we need to get back on unit growth, we know that, how we choose to chase down that unit growth is very much a subject of debate. We've said before and we will reiterate this morning that franchising is very much on the table, how we choose to finance that unit growth is very flexible. I think though that as many options are as on the table for us, there -- it's equally important to point out some that may not be.
So for example, you will not see at least over the medium-term launching other brands and expanding into other chain scale segments. We will continue to focus on what our bread and butter is because we think that the runway there is long. So you will not see us going into, and I've made a funny remarks about it to some of our investors about -- you're not going to see us do beach resorts and go, swim outside of our lane, it's the way that I think about it. We will focus on what we do, we will focus on executing very well, we will focus on unit growth and then we will discuss how we best finance it. That's how we see it shaping up.
All sorts of opportunities are frankly coming along, and as we look at the second half of the year we'll see how we -- how they come together. Through it all, Harry, we're going to keep -- we're going to stay focused on return-of-capital to our shareholders and delivering on the execution because we have a large state that is working really well, and then we spent quite a bit of money over the last three or four years bringing up to par. We're not going to take our eye off of that important ball, even as we choose to focus on the future.
Very good, Gerry. Thank you.
Thank you. Our next question today is coming from Anthony Powell with Barclays. Please proceed with your question.
Hi, good morning everyone. Just a question on the share repurchases. Do you have to set a certain leverage target before you start buying back stock and how do you prioritized repaying debt and share repurchases at the time?
Good morning, Anthony. No, we do not have to meet a certain leverage target before we begin repurchasing stock. We think right now our shares are at a very attractive value. We have a significant amount of unrestricted cash on our balance sheet. Our leverage has been declining steadily for the past two and a half years. We did repay some debts in December in connection with the asset sale but right now with our multiple being below that which we sold our portfolio of lower RevPAR hotels in December, and a dividend yield that is well above our marginal cost of debt. We think that this represents a very attractive value for our shareholders and now that our window is open we expect that we will be doing so.
Got it, thanks. And just on the revenue mix, there wasn't much of a change between the short-term and the longer term guest in the quarter. Are you still targeting to increase your shorter term guests or are you more focused now in just generating higher revenue growth amongst all either segment?
This is Tom Seddon. We're probably at a point now where we feel quite comfortable with the rough mix where around 45% of our business is coming from monthly guests. That's where the company traded most of the 2000s and where we had initially targeted to get back down to. So now I think we see the mix of long-term and short-term really being more of an output of the revenue management system. Every hotel, every night, just looking at exactly what the operational profit mix is, rather than something that we need to target shifting. So on average roughly where we want to be but it may shift as a result of hotel-by-hotel and night-by-night revenue management decisions.
All right, that's it for me. Good quarter.
Thank you. Our next question today is coming from Chris Woronka with Deutsche Bank. Please proceed with you question.
Good morning guys. Gerry, you outlined some pretty impressive results from the Clean Plus Program, and I know it's still kind of early. The question is how significant can that get overtime? And then second part of it is anything further on the -- I guess I'll call at the convenience store in the lobby concept, just more things driving ancillary revenue. Where do you see yourself going this year on that?
Hi, Chris. The Clean Plus results are very encouraging for a couple of reasons. The most obvious and the one that I made reference to in the prepared remarks is obviously the financial impact, and we love that. At the moment, we're selling the Clean Plus option almost exclusively to our central reservations office. So we haven't really even began the sales effort in earning behind Clean Plus across our many other channels, whether it's the website or through our salesforce, etcetera, and the reason for that is we wanted to make sure that we could deliver on it. It was kind of new, that idea of allowing the guest to customize their stay, shape to stay as I call it. It was something that we wanted to make sure that we could deliver before we went ahead and overpromised it, and it's worked out really well, and that's really what the opportunity there is all about.
And the second element the guest is excited about is that beyond the impact on RevPAR and of course on financials is what it does with the guest. It allows them to shape their stay. So today when you check into many hotels they'll ask you whether you really need your room clean every night. Well, even when you go into your room they'll put a little card in your pillow, well do you really need the sheets -- Shane's Tonight [ph] is subtractive. The way that we're trying to address is additive. So in the process of doing that we think we may be allowing the guest, God forbid, to have greater control over their stay. So we like kind of that positive implication that it gives the guest a greater voice, a greater say on what it is that they choose to pay for and not. So it works, it kind of works both ways.
Now, the second part of your question as to what we may be able to do in the lobby. The reality of our operating model is that we've optimized it and it's pretty lean on the labor side. Whatever we have any number of ideas and experiments and things that we're looking at, but we're going to be respectful of that flow through. We're going to be very respectful that at the hotel, operating unit level, we don't wind up saddling that building with cost that frankly our beyond what we've consider reasonable. So that the chase for the incremental dollar that may come in food and beverage, just to pick on something that a lot of people seem to be doing. If it involve adding an unreasonable labor load, if it involves adding another set of skills to the workforce that are beyond our core expertise we're likely to not foresee it or at least be very, very cautious about it. Frankly one of the reasons we like Clean Plus is we're delivering on things that we already do, we're just being more intense and more purposeful about it.
So no particular intension at the moment behind expanding food and beverage programs and things to that nature in the lobby. Frankly, one of the characteristics of our hotel rooms is that we have full kitchens in them, full-sized refrigerators in them, and it's very difficult to compete with the supermarket down the street for assortment and prices. And that typically our location is just literally down the street from venues where people can avail themselves with anything that they need particularly for the 40% plus of our guests who are there for a while, they know where the store is. They can go buy anything they need and then they can store it in a full-sized refrigerator and freezer. So it's kind of a tricky question for us, and hopefully that answers your question, Chris.
Yes, that's a great color Gerry. And then my follow up would be on the, I think you did a perfect job of selling the cross plan and the other few hotels. You always have a kind of a bottom 5% to 10% of your portfolio. Would you guys consider, and I know you have still 160 some other hotels not renovated, most of them are planned for this year. But is there any thought of selling the next bottom 5% or so whether they're renovated or not?
We always consider it, but we did go through a thorough process back in last June/July evaluating all of our Extended Stay America Hotel for that purpose to include or not with the Crossland portfolio, and we concluded there were six assets that we would include in that sale. So I wouldn't hold your breath for any more disposition this year. But that being said, we are always evaluating the portfolio. Our assets are always competing for continued inclusion in the portfolio. But having gone through that process just about five or six months ago, I feel as though the portfolio will be generally stable this year.
All of our portfolio is adding, is contributing now, right. Every single property is cash flow positive. Frankly it's just been optimized. Now we have some outlined properties in geographies, they're essentially by themselves away from our normal market where we tend to plaster. And giving current violation, a particular property or small group of had a buyer that was to offer an attractive price, we're going to listen, we're going to pay attention. That helps us optimize our capital for shareholders, right? So we're not going to be dogmatic about turning things away just because 629 is some sort of magic number, that's not our [ph] at all.
Okay, very good. Thanks guys.
Thank you. Our next question is coming from Chad Beynon from Macquarie Group. Please go ahead with your question.
Hi, guys. Thanks for taking my questions. Thanks for all the color this morning. Just wanted to get back to the guidance. So, you mentioned that you expect a 1% to 2% lift from the RMS initiative talked about Clean Plus benefits in a strong January on 1Q. Just trying to maybe get some more color on your low single-digit outlook in terms of RevPAR for the year. Not that we need to set the bar too high, but is there anything within your outlook outside of just kind of the economy and the GDP projections to kind of help us think about how you're seeing the economy mid-scale business and more particularly your property? Thanks.
No problem, Chad. Thanks for the question. In the near term, our best source of information for our guidance is our own performance and our expectation of our sight with the various initiatives that we have going on right now. The most important one there are the sales force reorganization, although now it's complete and really delivering for us, the revenue management system and then the renovations. The renovations will be a bit of a drag particularly in the first six months of this year. You know that during our prepared comments the increase in renovated rooms this quarter compared to first quarter of 2015 is significant. That's a bit of a drag the first six months. But we really are encouraged by our earlier results in the revenue management system. I would say that that is probably, for the year, the largest benefit that we have compared to the rest of the industry. But we've got a salesforce that delivered 10% revenue growth from our corporate accounts on the third and fourth quarter of 2015. So we think that that's going to be a nice tailwind for us as well. In our planning process we assume a GDP growth of about 2%, and we've looked at what other larger hotel companies are forecasting for 2016 and that feels like it's kind of in the 3% to 5% growth rate. So we're comfortable in our ability to outperform the industry this year once again as we've done for the past couple of quarters. But RMS and the sales force, I would say are the two main drivers for us.
Okay, thank you. And my follow up, just thinking about cash flow in the next couple of years, so guided to I believe $100 million of maintenance CapEx and you said you're about a year away from finishing the project. Is that maintenance CapEx the right number going forward or does that actually include some kind of one time software IT project CapEx that would roll off maybe in 2017? Just trying to think about how much available cash flow you'll have in the out years.
We guided for about $100 million in maintenance CapEx in 2015, we spent $88 million. We're guiding again to $100 million this year and I think that that's the right number for 2016, and I would expect it would be a bit lower in 2017 and beyond. As we indicated that a year a half ago we thought 2015 and 2016 would be slightly elevated because we are dealing with some longer live assets, things like elevators and roofs, and to a lesser extend our parking services. And I expect that that will come down in 2017, probably in that 6% to 7% of net revenue.
Okay. Thank you very much. And congrats on the quarter.
Thanks. Our next question is coming from Shaun Kelley from Bank of America Merrill Lynch. Please proceed with your question.
Good morning, guys, thank you for taking my question. So Gerry, maybe the lead off is a little bit of a follow-up from an earlier question in the Q&A. You mentioned franchising as sort of a longer term potential opportunity. I'm curious if you guys could give us a little bit of thought around what do you think it would cost to bill one of your properties right now. It might be helpful just to sort of get a sense given that we have seen other brands launch probably in little bit different part of the scale than you are but sort of trying to think about the attractiveness of the model to developers.
So that's work that is ongoing. And figuring that in fact we have quite the work stream on developing the product with a future, the consumer insight work of that is now in its final stages, the architectural design work and it's in initial stages. So it's a little premature to give you too many specifics. That's caviar though, Shaun, I will tell you that we would anticipate a per key cost of somewhere into $80,000 to $120,000, right. That would include land but as we know in this business, the cost of that [ph] is a significant component for that. It's a wide range obviously, 80 to above 20, but that's because we're in the early stages of this thing.
Through our work as we move forward with it, one of the things that we're going to be very respectful of and thoughtful about is, what -- how do we engineer the operating efficiencies into the new product so that we can maintain that kind of margin, operating margin that we have in our hotels today. That's where all of that -- that's lot of work is going. We're going to size them and define them, as if it was going to be our own money in play because guess what? On a [indiscernible] it will be our own money in play. And we think that, that kind of operating model that we present and the kind of segment, the kind of guest segment that we focus on will -- to a lot of a potential franchisees out there be a very attractive business opportunity. And that's why we want to come at people [ph], a very attractive business opportunity that very nicely fits or compliments their already existing portfolio.
That's very helpful, I appreciate the detail even at this early stage. And then, my follow-up Jonathan just for you it would be on the renovations, I think in the prepared remarks you mentioned -- if I caught it correctly, that I think it was excluding renovations, you saw RevPAR was up 7.9%, I think that might have been for the quarter. If I got that right or correct me if I'm wrong. Are you expecting to see a sort of similar gap or drag as we roll out through the balance of this year? Do you expect that drag to sort of lessen as we get through the first six months when maybe you’re maxing out on total disruption?
I think that the drag will lessen in the third quarter and the first quarter this year. Our RevPAR performance out of the renovated hotel has been pretty consistent through 2015 and we certainly expect that from the new class, i.e., joining that group of renovated hotels, and where they don't, we're on it very quickly to correct that performance. But you know, the fact of the matter is that as we go through 2016, we're going to have more and more hotels that are renovated, fewer there are unrenovated and we'll also have a bit less year-over-year drag because of the renovation themselves which really heard the occupancy of the hotel that are undergoing renovations. So all of those factors I think conspire to help that improvement, better performance as we go through the year.
Perfect. Thank you very much. And our next question today is coming from Joe Greff from JPMorgan. Please proceed with your question.
Good morning everybody. Jonathan, I think you may have answered this in an earlier question but you repurchased any stock quarter to date?
We haven't Joe. When we approved our authorization, we were in a period where we were unable to do that. So that period has now concluded.
Okay. And do you have any impact from share repurchase in your full year guidance?
We do not.
Thanks. And then lastly, maybe I'll could follow-up with -- you may have it handy but do you have the revenues and EBITDA associated with the cost plan portfolio by quarter for 2015?
No, we have not disclosed for that, but what we have done is disclosed the comparable hotel adjusted EBITDA for 2015 as well as for the first quarter. So I guess by processes of traction we can get to that. It's about $29 million to $30 million on a trailing twelve month basis in EBITDA.
In adjusted EBITDA, right.
Thank you. Our next question today comes from David [ph] from Robert W. Baird. Please proceed with your question.
Gerry, Jonathan, just to continue on the share repurchase. I saw that you hadn’t repurchased any but -- you've been locked up, have been in a quiet period for the entire time since the $100 million authorization put in place?
We put that authorization in place around mid-December and yes, we have a very conservative lock up period couple of weeks before the end of the quarter all the way into release, so we couldn't buy anything until frankly today, tomorrow.
So, and not to put too fine a point, but what was the point of putting in an authorization of $100 million and then changing it to $200 million when you could have just put this authorization today or done $200 million at the beginning?
Remember, we announced our authorization in December, at the same time as the announcement of the closing of the Crossland transaction. We thought it was important to let our shareholders know what our intentions were with respect to the use of that cash, not only the retirement of the debt, the distribution which we declared and then paid in January. And then the share repurchase authorization. So it was really in an effort to communicate fully what our intentions were. In terms of the increase, we've certainly been paying attention to what's been happening to valuation and I also wanted our shareholders to understand that. And that we believe that our own shares represent an attractive value for us and because of the strength of our business model and our free cash flow, we can put that amount of capital to work if we feel the value is there. So I thought that was an important disclosure to make.
Okay, I appreciate that. Just then to follow-up, have you looked at 10b5-1 plan to avoid these kind of loan blank out periods?
Yes, we have.
Okay, thank you.
Thank you. Our final question today is coming from the line of Thomas Allen from Morgan Stanley. Please proceed with your question.
Hi, good morning. Just in terms of -- in the past you've said [indiscernible] exposure to Texas but for example in Houston, most of your exposures to medical sector and then Austin have been holding up pretty well. Can you just give us an update for the quarter on how your oil market exposure is instead or Texas exposure?
It's Jonathan, I'll be happy to do this and invite Gerry or Tom to comment as well. Our -- Texas is, as we've noted in the past it's about 10% of our property. We did have RevPAR growth in the fourth quarter in Texas. It was overall pretty flat for 2015, but that includes Houston which saw negative RevPAR growth in the fourth quarter and for all of 2015. It is true that we have not a lot of direct exposure to oil and gas companies, the medical sector is an important and growing business for us down there but the whole market pricing environment has been affected by the economy down there and so it's affected what we've been able to drive in terms of pricing. But as a whole, in the fourth quarter, our Texas operations grew RevPAR.
Thank you. We've reached end of our question-and-answer session. I'll turn the floor back over to Gerry for any further closing comments.
I want to thank everybody for joining us on the call this morning. As you can tell, we're very pleased with the result in 2015 and very excited about the opportunities for 2016. We look forward to connecting with all of you in the conferences as Jonathan outlined over the next couple or three months. And connecting again with all of you in April to discuss first quarter results. Thank you everyone, have a good day.
Thank you. That does concludes today's teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.
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