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INDUSTRY SURVEYS Hotels, Restaurants & Leisure December 2015
TUNA N. AMOBI Equity Analyst
www.spcapitaliq.com
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December 2015 INDUSTRY SURVEYS Hotels, Restaurants & Leisure
PERFORMANCE
Sector Overview
Industry Overview Revenues Expenses Profits & Margins Valuation Capital Markets
INDUSTRY PROFILE Trends
CONTACTS INQUIRIES & CLIENT SUPPORT 800.523.4534
[email protected] SALES 877.219.1247
[email protected]
How The Industry Operates
Key Ratios And Statistics
How To Analyze This Industry
Glossary
Industry References
Comparative Company Analysis
MEDIA Michael Privitera 212.438.6679
[email protected] S&P CAPITAL IQ 55 Water Street New York, NY 10041
All of the views expressed in these research reports accurately reflect the research analyst’s personal views regarding any and all of the subject securitiesor issuers. No part of the analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. For important regulatory information, go to www.standardandpoors.com and click on Regulatory Affairs and Disclaimers. Copyright © 2015 Standard & Poor’s Financial Services LLC, a part of McGraw-Hill Financial. All rights reserved.
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December 2015 INDUSTRY SURVEYS Hotels, Restaurants & Leisure
TOPICS COVERED BY INDUSTRY SURVEYS
CONTRIBUTORS ROBERT KEISER Vice President, Global Markets Intelligence
Aerospace & Defense
Household Products
Airlines
Insurance
Automobiles
Internet Software & Services
Banks
Information Technology Services
Beverages
Life Sciences Tools & Services
Biotechnology
Machinery
Capital Markets
Media
Chemicals
Metals & Mining
Commercial Services & Supplies
Multiline Retail
Communications Equipment
Oil, Gas & Consumable Fuels
Consumer Finance
Paper & Forest Products
Electric Utilities
Pharmaceuticals
Electronic Equipment
Real Estate Investment Trusts
Energy Equipment & Services
Road & Rail
Food & Staples Retailing
Semiconductors & Equipment
Food Products
Software
Gas Utilities
Specialty Retail
Health Care Equipment & Supplies
Technology Hardware
Health Care Providers & Services
Telecommunications
Hotels, Restaurants & Leisure
Textiles, Apparel & Luxury Goods
Household Durables
Thrifts & Mortgage Finance
KENNETH LEON Global Director, Equity Research RICHARD PETERSON Director, Global Markets Intelligence TODD ROSENBLUTH Director, ETF Research BETH PISKORA Senior Director, Content SAM STOVALL Managing Director, U.S. Equity Strategy
All of the views expressed in these research reports accurately reflect the research analyst’s personal views regarding any and all of the subject securitiesor issuers. No part of the analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. For important regulatory information, go to www.standardandpoors.com and click on Regulatory Affairs and Disclaimers. Copyright © 2015 Standard & Poor’s Financial Services LLC, a part of McGraw-Hill Financial. All rights reserved.
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December 2015 INDUSTRY SURVEYS Hotels, Restaurants & Leisure
To our valued Industry Survey clients: S&P Capital IQ is pleased to inform you of many insightful enhancements and modifications to our product offering. First of all, you will notice an entirely new Performance section in addition to our traditional coverage of key industry statistics and trends that are now contained in the Industry Profile portion of our publication. The new and innovative Performance section is predominantly driven and empowered by S&P Capital IQ company fundamental data that is aggregated and market capitalization index weighted according to Global Industry Classification Standards (GICS) methodology. By taking this customized proprietary approach to data collection and analysis we are now able to provide our clients with a unique, contemporary and highly relevant perspective on the financial performance of entire sectors and related specific industries representing groupings of multinational corporations included in the S&P 1500 index, according to the most current financial reporting metrics available to the marketplace. Appropriately, the specific industry titles covered by our Industry Survey report service offering have now also been aligned to the widely recognized and accepted GICS format. This new approach provides a direct connection between the data and insights provided in our upgraded reports, and many stock market indices and index-based securities, such as Exchange Traded Funds (ETFs). We have also added a new Sector Overview portion at the beginning of each report that is designed to summarize the fundamental sector-level backdrop in which the specific industry in-focus operates and competes on a peer-group basis. Coverage of capital market activity (M&A and, IPOs), inclusive of data, trend and deal analysis, has also been significantly enhanced as part of our upgraded service offering. The sector and industry level data, observations and analysis are presented in a deliberate ordered fashion where the cumulative insights flow in a logical and decision-supportive progression, specifically:
All of the views expressed in these research reports accurately reflect the research analyst’s personal views regarding any and all of the subject securitiesor issuers. No part of the analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. For important regulatory information, go to www.standardandpoors.com and click on Regulatory Affairs and Disclaimers. Copyright © 2015 Standard & Poor’s Financial Services LLC, a part of McGraw-Hill Financial. All rights reserved.
EXECUTIVE SUMMARY S&P Capital IQ foresees a somewhat mixed fundamental outlook for the hotels, restaurants &
leisure industry. Still, a cyclical backdrop for gradual economic recovery will likely support the outlook for consumer spending on general discretionary items. The industry landscape portends increased concentration among a number of behemoths and
other key players with well-known brands across domestic and international markets. Increased scale could offer some competitive advantages, despite some potential regulatory pitfalls. Following a multi-year cycle of capacity expansion, the industry appears relatively well-
positioned to further capitalize on pent-up demand for hotel bookings and cruise reservations. However, customer traffic could stay relatively challenging for certain restaurant segments. Given a relatively saturated domestic market, S&P Capital IQ notes a recurring theme of
international expansion into Asia and other emerging markets. However, supplier issues for some restaurants in China and a sharp degradation in Macau’s casino revenues recently tempered this outlook. S&P Capital IQ expects a near-term stabilization following recent improvements in some key
financial indicators for the industry, against foreign currency headwinds that could persist into 2016. This is mostly consistent with Capital IQ consensus estimates for some key profitability and liquidity metrics. A multi-year improvement in overall sentiment is further underscored by some notable merger
and acquisition (M&A) transactions, spin-offs, and initial public offerings (IPOs). Still, there are likely opportunities for further expansion of relative valuation multiples, with a number of the S&P 1500 industry constituents recently trading below their multi-year historical averages. S&P Capital IQ sees relatively stable fundamentals in the evolving competitive landscape for
the hotels, restaurants & leisure industry. However, some speed bumps on cyclical exposure are likely, as well as lingering overhang pertaining to the industry’s prospects in China and other international markets.
INDUSTRY SURVEYS
HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
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SECTOR OVERVIEW The consumer discretionary sector is comprised of five industry groups, according to the S&P Global Industry Classification System (GICS). The five categories are automobiles & components, consumer durables & apparel, consumer services, media, and retailing. On a market capitalization-weighted basis, the consumer discretionary sector represents 13.1% of both the S&P 500 index and the S&P 1500, as of December 2015. CONSUMER DISCRETIONARY BREAKDOWN BY MARKET CAPITALIZATION* Automobiles & Components 8%
Consumer Durables & Apparel 15%
Retailing 42%
Consumer Services 17%
Media 18%
*Data as of December 2015. Source: S&P Capital IQ. SECTOR AND INDEX PRICE PERFORMANCE* (values in percent) SECTOR
Consumer Discretionary Sector Index Consumer Staples Sector Index Energy Sector Index Financials Sector Index Health Care Sector Index Industrials Sector Index
YEAR ENDED 2014
FIRST 11 MONTHS 2015
5-YEAR CAGR
8.0
9.5
17.0
13.5
1.2
11.9
(11.3)
(15.6)
0.9
12.6 22.9
(0.2) 4.3
11.1 19.0
6.4
(1.9)
11.4
Information Technology Sector Index Materials Sector Index
17.2 4.3
6.7 (7.4)
13.7 6.0
Telecommunication Services Sector Index Utilities Sector Index
(1.5) 22.9
(3.4) (9.5)
4.3 7.2
S&P 500 S&P MidCap 400 S&P SmallCap 600 S&P Composite 1500
11.4
1.0
12.0
8.2 4.4
0.6 1.7
11.4 12.8
10.9
1.0
12.0
*Values as of November 30, 2015. Source: S&P Capital IQ.
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HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
INDUSTRY SURVEYS
In terms of stock market sector performance year to date through December 8, 2015, the 8.8% advance recorded by the S&P 1500 consumer discretionary sector index outperformed the 0.02% increase for the S&P 1500. The consumer discretionary sector is considered a leading indicator of economic activity due to the consumptive nature of the US economy. As of the third quarter of 2015, personal consumption expenditures (PCE) increased to 68.7% of the gross domestic product (GDP) in the US, from 65.3% at year-end 2000. This highlights the key role of the US consumer as a contributor to domestic GDP and corporate earnings growth, even as domestic-originated sales account for a shrinking share (52%) of collective S&P 500 corporate revenues. S&P Capital IQ considers US retail sales to be a valuable proxy for the overall health of the consumer discretionary sector. Retail sales reached a record-high monthly level of $447.3 billion in October 2015, equating to a 1.7% growth rate (year on year). Excluding the influence of declining and volatile retail gasoline prices, retail sales grew by a much healthier 4.1% as of October 2015. US TOTAL RETAIL SALES & FOOD SERVICE (seasonally adjusted, year-on-year percent change) 18 15 12 9 6 3 0 (3) (6) (9) (12) Oct 1993
Oct 1995
Oct 1997
Oct 1999
Oct 2001
Oct 2003
Oct 2005
Oct 2007
Oct 2009
Oct 2011
Oct 2013
Oct 2015
Sources: US Census Bureau; S&P Capital IQ.
In this Sector Overview, data are calculated on an aggregated per-share basis within the consumer discretionary sector as a component of the S&P 1500 index constituent universe. The average is market-weighted, which means that larger companies are more influential than smaller ones.
Sector Revenues Aggregate S&P 1500 consumer discretionary sector revenue has improved since bottoming at $59.7 per share in the second quarter of 2009, as the US economy commenced the ongoing recovery cycle.
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HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
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REVENUE AND REVENUE GROWTH (aggregate value weighted per share, $) Percent 120
30
100
20
80
10
60
0
40
(10)
20
(20)
0
(30) 2005
2006
2007
2008
2009
Revenue per Share (left scale)
2010
2011
2012
2013
2014
2015
Revenue per Share Growth (right scale)
Source: S&P Capital IQ.
Year-on-year revenue growth held within a 5.9% to 15.2% range between the fourth quarter of 2010 and the fourth quarter of 2014, dipped to 4.9% in the first quarter of 2015, and then rebounded to 7.0% according to latest reported data for the third quarter of 2015. It still waits to be seen whether revenues will recover toward the middle of the past five years’ range, or if recent weakness is indicative of an emerging slowdown in US economic activity. As of year-end 2015, the consumer discretionary sector remains underpinned by solid macroeconomic fundamentals that include sustained personal income growth and declining household energy-based expenditures that boost discretionary income.
Sector Profit Margins Consumer discretionary profit margins have improved considerably over the course of the latest
and ongoing recovery cycle in place since mid-year 2009. Disciplined cost management and the implementation of productivity-enhancing technologies,
combined with healthy 5%–15% revenue growth, have resulted in an improvement in margins driven in part by economies of scale. As of the third quarter of 2015, the consumer discretionary sector’s gross margin remains
elevated at 33.6%, while the EBITA margin continues to post near decade high levels at 15.2%. The last five years of improved profit margins leaves the consumer discretionary sector wellpositioned to capitalize on the prospect of continued healthy sales growth in 2016.
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HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
INDUSTRY SURVEYS
PROFIT MARGINS (in percent, quarterly) 38 34 30 26 22 18 14 10 6 2005
2006
2007
2008
2009
Gross Margin
2010
2011
2012
2013
2014
2015*
EBITDA Margin
*Data through third quarter. Source: S&P Capital IQ.
Sector Earnings Corporate earnings collapsed during and immediately after the financial crisis and recession in 2008–2009, but have since rebounded strongly. EARNINGS PER SHARE (aggregate value weighted per share, $) 10 8 6 4 2 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* 2016* S&P Composite 1500 Index
Consumer Discretionary Sector of S&P 1500
*Projected values start from fourth quarter of 2015. Source: S&P Capital IQ.
As of December 8, consumer discretionary earnings per share (EPS) improved further to a very
respectable 16.8% growth rate in the third quarter from 10.3% in the first quarter of 2015. INDUSTRY SURVEYS
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Earnings growth is expected to dip to 7.7% in the final quarter of 2015 but is then seen accelerating to 14%–16% during the four quarters of 2016, according to S&P Capital IQ consensus forecast. S&P 1500 index companies posted negative 0.95% earnings growth in the third quarter of 2015, due in large part to suppressed conditions in the energy and materials sectors in line with declining commodity prices. EARNINGS PER SHARE GROWTH (in percent, quarterly) 100 75 50 25 0 (25) (50) (75) (100) 2002
2003
2004
2005
2006
2007
2008
2009
2010
Consumer Discretionary Sector of S&P 1500
2011
2012
2013
2014 2015* 2016*
S&P Composite 1500 Index
*Projected values start from fourth quarter of 2015. Source: S&P Capital IQ.
Sector Balance Sheet Inventory Days Consumer discretionary inventories continued to decline, reaching 65 days as of the third quarter of 2015 from 70 days in the first quarter of 2015. Inventories are now just below the 10year (40-quarter) average of 67 days recorded since the fourth quarter of 2005. Inventory levels should be monitored to ascertain whether supply is deliberately being adjusted
in anticipation of changes in consumer demand, or alternatively if inventories are involuntarily changing due to surprises in underlying consumer demand, which could require a real-time adjustment in current production and future orders.
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HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
INDUSTRY SURVEYS
AVERAGE INVENTORY (in days, quarterly) 78 75 72 69 66 63 60 57 2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015*
Consumer Discretionary Sector of S&P 1500 *Data through third quarter. Source: S&P Capital IQ.
Debt-To-Capitalization The consumer discretionary sector’s debt-to-capital ratio continued its ascent as of the third quarter of 2015, rising to 54.5%, which is the highest reading since the first quarter of 2009 at 59.4%. The sector has now maintained a debt-to-capital ratio in excess of the pre-recession peak of 53.5% set in the first quarter of 2006. This development represents a potential credit risk concern should future economic activity fall short of investor expectations. DEBT-TO-CAPITALIZATION (in percent, quarterly) 64 60 56 52 48 44 40 2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015*
Consumer Discretionary Sector of S&P 1500 *Data through third quarter. Source: S&P Capital IQ.
INDUSTRY SURVEYS
HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
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Interest Coverage Over the past several years, consumer discretionary companies have exhibited improving interest coverage, which means that the sector, in general, offers improved stability to creditors from a cash flow and credit perspective. However, the sector could become vulnerable to sharply higher interest rates and/or the possibility of a steep decline in consumer demand, which at least for the moment does not appear to be a near-term concern for the US economy. INTEREST COVERAGE* (in multiples, quarterly) 9 8 7 6 5 4 3 2 2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015†
Consumer Discretionary Sector of S&P 1500 *EBITDA less CAPEX. †Data through third quarter. Source: S&P Capital IQ.
The aggregate S&P 1500 consumer discretionary sector earnings before interest, taxes, depreciation, and amortization (EBITDA) less capital expenditure (capex)/interest expense ratio has improved to a range of 7x to 8.5x during the current economic recovery cycle since 2009 from the range of 4.5x to 6.7x that is characteristic of the prior expansion cycle. The prolonged period of historically low interest rates, providing the opportunity for expense-
reduction debt refinancing, combined with ample cash flow during the recovery cycle, have likely contributed to the observed significant improvement in interest coverage.
Sector Valuation The forward price-to-earnings (P/E) ratio hit 21.7x in the fourth quarter of 2013, pulled back slightly to 20.1x in the first quarter of 2015, and then retrenched to 18.2x at the end of the third quarter of 2015. The 12-month trailing P/E escalated to 21.6x in the fourth quarter of 2013 and 22.0x in the first quarter of 2015, in line with the peaks of 22.2x and 22.0x recorded back in the fourth quarter of 2003 and the second quarter of 2007, respectively. As of the end of the fourth quarter of 2015 (December 8), the trailing P/E pulled back to a more reasonable 21.0x.
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HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
INDUSTRY SURVEYS
PRICE-TO-EARNINGS RATIO (in multiples, quarterly) 65 60 55 50 45 40 35 30 25 20 15 10 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* Forward Four Quarters P/E Ratio
Trailing Four Quarters P/E Ratio
*Fourth quarter data is projected. Source: S&P Capital IQ.
Consumer discretionary P/E valuations are no longer as elevated as those recorded in late 2013
or early 2015, but they should nonetheless be monitored within the context of consumer demand and the overall health of the economy. TOTAL ENTERPRISE VALUE-TO-EBITDA RATIO (in multiples, trailing 12 months) 13 12 11 10 9 8 7 6 2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015*
Consumer Discretionary Sector of S&P 1500 *Data through third quarter. Source: S&P Capital IQ.
The consumer discretionary sector’s 12-month trailing total enterprise value (TEV)/EBITDA ratio established new decade-high watermark valuation of 12.2x in the fourth quarter of 2014, held steady at this level through the second quarter of 2015, and then retraced slightly to 11.6x in the third quarter of 2015. Consistently elevated readings for this particular valuation ratio INDUSTRY SURVEYS
HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
13
continue to suggest some degree of caution for the sector relative to potential, and eventual, risks of a slowing US economy. The prospect of accelerating revenue and profit growth in 2016 would help justify the existing elevated TEV/EBITDA valuation of 11.6x.
Conclusion At year-end 2015, following recently reported third-quarter results, S&P 1500 consumer discretionary sector companies, in aggregate, grew EPS by 16.8% in the third quarter and are expected to grow earnings by 7.7% in the fourth quarter of 2015, according to S&P Capital IQ consensus data. Earnings growth is then expected to accelerate 14%–16% in 2016. Bullish expectations for consumer discretionary earnings potentially place the sector in a position of market leadership in 2016, depending in large part on the propensity of the US consumer to continue underpinning US economic activity in the year ahead. Considering the current historically elevated valuations seen in the sector, the margin for disappointing news about the US consumer and global consumption trends appears to be fairly thin as we head into calendar year 2016.
ETF Market Flows and Investing Landscape Investors interested in exploring opportunities aligned with either the broad consumer
discretionary sector, or more specifically, the hotels, restaurants & leisure industry, may want to consider exchange-traded funds (ETFs). In recent years, investors have increasingly turned to ETFs when seeking exposure to specific sectors or industries within the stock market. In addition to market focus, ETFs offer investors added benefits, such as intraday market liquidity and lower management fees, relative to other diversified financial instruments. In 2014, $41.1 billion was added to ETFs across all sectors. In the first 11 months of 2015, ETF investments amounted to $15.7 billion, with a number of sectors experiencing outflows. Consumer discretionary products had $3.4 billion of inflows. SECTOR ETF INFLOWS (total inflows for the period ended, in $, millions) SECTOR Consumer Discretionary Consumer Staples Energy Financials
4,212 2,104 11,428 3,685
Health Care Industrials Information Technology Materials REITs
6,427 227 2,440 (1,871) 7,429
7,711 (3,473) 2,639 460 1,569
478 4,501
(101) (3,219)
Telecommunication Services Utilities Source: State Street Global Advisors.
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YEAR ENDED FIRST 11 2014 MONTHS, 2015 3,461 (953) 7,915 (327)
HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
INDUSTRY SURVEYS
Investors can participate in the industry through diversified, market capitalization-weighted consumer discretionary ETFs such as Consumer Discretionary Sector SPDR (XLY) and Vanguard Consumer Discretionary (VCR). Both have double-digit percentage of assets exposure to this industry as well as allocations to the retail and media industries. Smaller ETFs that recently had more meaningful exposure to the hotels, restaurants & leisure industry include PowerShares Dynamic Leisure & Entertainment (PEJ) and PowerShares DWA Consumer Cyclicals Momentum Portfolio (PEZ). Both are rebalanced quarterly, and constituents are selected based on a variety of momentum characteristics. As such, the industry exposure can and will shift. In October 2015, the ETF Managers Group, a leading private label services provider to the ETF business, launched the Restaurant ETF (BITE). BITE is the first ETF that focuses solely on the restaurant sub-industry and holds 45 companies, including large-caps such as Starbucks and small-caps such as Buffalo Wild Wings. ETFS WITH MEANINGFUL HOTELS, RESTAURANTS & LEISURE EXPOSURE TICKER
ETF
XLY FXD VCR
Consumer Discretionary Select Sector SPDR First Trust Consumer Discretionary AlphaDEX Vanguard Consumer Discretionary
IYC FDIS PEZ PEJ
iShares US Consumer Services Fidelity MSCI Consumer Discretionary PowerShares DWA Consumer Cyclicals Momentum Portfolio PowerShares Dynamic Leisure & Entertainment
RCD Guggenheim S&P 500 Equal Weight Financial PSCD PowerShares S&P SmallCap Consumer Discretionary BITE Restaurant ETF Source: S&P Capital IQ ETF Report November 12, 2015.
ASSETS UNDER
NET
MANAGEMENT (in $, millions)
EXPENSE RATIO
11,600 2,481 2,160
0.14 0.70 0.12
1,058 302 269 243
0.45 0.12 0.60 0.63
178 112 2
0.40 0.29 0.75
XLY, VCR, PEZ, and PEJ experienced inflows during the first 11 months of 2015, led by XLY’s approximately $1.4 billion.
INDUSTRY SURVEYS
HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
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INDUSTRY OVERVIEW Industry Weighting The hotels, restaurants & leisure industry is dominated by the restaurants sub-industry, which,
as of October 13, 2015, represented nearly 72% of the industry’s market-capitalization weighting. The other sub-industry groups are hotels, resorts & cruise lines, about 25%; casinos & gaming, 3%; and leisure facilities, less than 1%. HOTELS, RESTAURANTS & LEISURE MARKET CAP WEIGHTINGS BY SUB-INDUSTRY*
Casinos & Gaming 3.0% Hotels, Resorts & Cruise 25.1%
Leisure Facilities 0.4% Restaurants 71.5% *Values as of October 13, 2015. Source: S&P Capital IQ.
There is a relatively high degree of ownership concentration across the industry. As of October 13, 2015, only three companies, namely, McDonald’s Corp., Starbucks Corp., and Carnival Corp., together accounted for more than 54% of the industry’s market-capitalization weighting. Including Yum! Brands, Inc. and Chipotle Mexican Grill, Inc., the top five companies
represented more than two-thirds of the overall market-capitalization weighting. Meanwhile, the top 10, including Royal Caribbean Cruises Ltd., Marriott International, Inc., Starwood Hotels & Resorts Worldwide Inc., Wyndham Worldwide Corp., and Darden Restaurants Inc., represented over 84% of the market-cap weighting. Other notable constituents with market-cap weightings of more than 1% include Wynn Resorts Ltd., Domino’s Pizza, Inc., and Panera Bread Co.
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HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
INDUSTRY SURVEYS
HOTELS, RESTAURANTS & LEISURE MARKET CAP WEIGHTINGS BY COMPANY* Wyndham 2.2%
Others† 15.9%
Darden 2.1%
McDonald's 23.5%
Starwood Hotels 2.8% Royal Caribbean 4.9%
Starbucks 21.5%
Chipotle 5.6% Marriott 4.8%
Carnival 9.4%
Yum! Brands 7.3%
*Values as of October 13, 2015. †Others greater than 1% market cap include Wynn Resorts, Domino's Pizza, and Panera Bread. Source: S&P Capital IQ.
Industry Revenues Revenues Over the past decade, the aggregate revenues for the hotels, restaurants & leisure industry have been on an upward trajectory, as many constituents pursued further expansion in domestic and international markets, based on a combination of organic growth and acquisitions. REVENUE PER SHARE AND REVENUE GROWTH (aggregate value weighted per share, in $, quarterly) 295
Percent 25
270
20
245
15
220
10
195
5
170
0
145
(5) (10)
120 2005
2006
2007
2008
2009
2010
Revenue per Share (left scale)
2011
2012
2013
2014
2015
Revenue Growth (right scale)
Source: S&P Capital IQ.
INDUSTRY SURVEYS
HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
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After hunkering down during the Great Recession, consumers and businesses have gradually but steadily increased various aspects of their discretionary spending, including restaurant meals, hotels, and casinos, as well as cruises and other leisure and business pursuits. PROJECTED US FOODSERVICE INDUSTRY SALES—2015 (in $, b illions) SALES Commercial foodservice, total Eating places
648.1 471.1
Bars and taverns Managed services
20.6 49.5
Lodging place restaurants
36.7
Retail, vending, recreation, mobile Other foodservice
70.2 58.5
TOTAL US FOODSERVICE SALES Source: National Restaurant Association.
706.6
In recent years, some of the key operating metrics have shown notable improvement across the industry—in some cases toward pre-recession levels—including revenue per available room (RevPAR), average daily rate (ADR), occupancy levels, cruise passenger revenue per available lower-berth day (ALBD), and net yields (ticket pricing). LODGING FUNDAMENTALS* (Selected performance measures)
YEAR 2014 2013
ROOM SUPPLY DEMAND
OCCUPANCY
AVERAGE DAILY ROOM RATE
REVENUE PER AVAILABLE ROOM
YR-TO-YR % CHANGE 0.9 4.5 0.7 2.2
RATE (%) 64.4 62.2
(in $) % CHG. 115.02 4.2 110.35 3.9
(in $) 74.12 68.64
INDUSTRY REVENUE
% CHG. (in $, b illions) 8.0 176.0 5.3 163.0
2012 2011
0.6 0.6
3.0 5.0
61.4 59.9
106.15 101.85
4.2 4.4
65.16 61.02
6.8 3.7
155.5 146.9
2010 2009
2.0 3.2
7.7 (5.8)
57.5 54.5
98.06 98.17
(0.1) (8.8)
56.43 53.50
5.5 (16.7)
133.7 125.7
2008 2007 2006
2.7 1.4 0.3
(1.6) 1.2 0.7
60.3 63.2 63.3
106.96 103.64 97.89
2.8 5.9 7.2
64.49 65.50 61.96
(1.9) 5.7 7.7
140.6 139.4 133.4
2005 2004
0.4 0.9
3.3 4.5
63.1 61.3
90.91 86.23
5.4 4.0
57.37 52.88
8.5 7.8
122.7 113.7
2003 1.2 1.7 59.2 83.12 0.1 49.18 0.6 Note: Some historic numbers may not reflect subsequent updates. *Latest available.
105.3
Sources: Smith Travel Research, Inc. Republication or other re-use of this data without the express written permission of Smith Travel Research, Inc. is strictly prohibited.
However, other indicators, while also generally improving, have been relatively mixed, including restaurant same-store sales, and margins and average check. Other mixed statistics for casino and gaming operators include rolling chip volume, non-rolling chip table games drop, and slot handle. Even so, overall revenue growth for the industry has benefited from a sustained period of multi-
year international expansion for some of the leading restaurant chains, as well as supply growth and a capacity expansion for hotels, casinos, and cruise operators.
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HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
INDUSTRY SURVEYS
S&P Capital IQ thinks this trend reflects a combination of organic growth and merger and
acquisition (M&A) activity in both domestic and international markets, including Asia, where restaurants such as Yum! Brands and Starbucks have significantly increased their store base over the past few years, while the major casino operators such as Wynn Resorts have also aggressively expanded in Macau, China’s semiautonomous territory, which has overtaken Las Vegas as the world’s gambling capital. After a peak of mid- to high-teens revenue growth toward the latter part of 2008, the industry experienced a sharp low- to mid-single digits revenue decline from the third quarter of 2009 through the second quarter of 2010. Thereafter, revenue growth rebounded to low double digits in early 2012—thanks in part to a combination of restaurant expansion and easing industry fundamentals, as well as continued strong growth in fee-based income for hotels such as Marriott and Wyndham, both of which also increased their portfolio of hotel properties through acquisitions. Subsequently, the industry’s revenue growth gradually decelerated to mid-to-high single digits
in early 2014, easing to what S&P Capital IQ views as a more normalized range of growth. Of note, revenues for most cruise-ship operators were adversely affected following the sinking of Carnival’s ship (Costa Concordia) off the Italian coast in January 2012. In recent years, revenues for restaurants such as McDonald’s and Yum! Brands have been constrained by safety and regulatory concerns resulting from key supplier issues in China, a major international market for both companies. Meanwhile, over the past two years, Wynn Resorts and other major casino operators have also
been severely hurt by a sharp deceleration in international gaming revenues from Macau, amid increased Chinese government controls. Of note, revenue growth for 2014 through the first nine months of 2015 were significantly
constrained by foreign currency headwinds—on a stronger US dollar—negatively affecting reported revenues for several companies with relatively sizable international operations, including McDonald’s, Starbucks, Yum! Brands, Marriott, Starwood, Carnival, Royal Caribbean, Wynn Resorts, and Wyndham. In the near term, S&P Capital IQ expects low-single-digit improvement in restaurants’ comparable sales, on modestly higher customer traffic and low-single-digit menu price increases. Comp stores are also expected to decline in some S&P 1500 index constituents, and to be outweighed by growth in others, with some divergence across companies and segments (including quick-service, fast casual, and casual dining). For fiscal 2015, the S&P Capital IQ consensus projects a median revenue growth of 3.3% for the major constituents of the S&P 1500 hotels, restaurants & leisure index. The lower end of this range includes declines of 8.9%, 3.0%, and 1.0% for McDonald’s, Starwood, and Carnival, respectively. Conversely, Chipotle and Starbucks represent the higher end of the range, with projected revenue growth of 14.9% and 16.4%, respectively. Meanwhile, for fiscal 2016, the S&P Capital IQ consensus projects a median revenue growth of
6.2% for the major constituents of the S&P 1500 hotels, restaurants & leisure index. The lower end of this range includes a 3.6% decline for McDonald’s and increases of 4.0% and 4.2% for Darden and Wyndham, respectively. Conversely, Starbucks and Chipotle represent the higher end of the range, with projected revenue growth of 12.0% and 14.8%, respectively.
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Consumer Confidence Consumer confidence levels, as measured by the Conference Board, significantly improved over the past few years, with US consumers feeling increasingly optimistic about their economic prospects. However, the Consumer Confidence Index declined to 90.4 in November 2015 from 99.1 in
October, amid a less favorable view of the employment market. The present situation index decreased to 108.1 in November from 114.6 in the previous month. Meanwhile, the expectations index edged down to 78.6 from 88.7 in the same period. Over the past few years, the index has steadily trended toward pre-recessionary levels (versus a nadir reading of 26.9 in early 2009). Decreased confidence does not bode well for consumer spending, and indicates a somewhat mixed fundamental outlook for the hotels, restaurants & leisure industry. S&P Capital IQ thinks some hotels, restaurants & leisure companies could face constraints as consumers at both ends of the income spectrum become more hesitant to open their wallets. CONSUMER CONFIDENCE INDEX 1985=100 135 120 105 90 75 60 45 30 15 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* *Data through November. Source: The Conference Board.
Consumer Spending and Gasoline Prices The fundamental outlook for the hotels, restaurants & leisure industry is largely correlated to the outlook for consumer spending, which in turn represents more than two-thirds of US gross domestic product (GDP) growth. Lately, consumer spending has suffered a setback, mainly due to a pessimistic view of the job
market. Although gas prices and the unemployment rate remain low, this has not been enough to raise consumer sentiment. Sales and production in major US corporations have slowed, and this trend is expected to continue in 2016.
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GASOLINE RETAIL PRICES (in $ per gallon, quarterly) 4.3 4.0 3.8 3.5 3.3 3.0 2.8 2.5 2.3 2.0 2010
2011
2012
2013
2014
2015*
US Retail Gasoline Prices (All Grades, All Formulations) *Data through October. Source: US Energy Information Administration.
As of early December 2015, gasoline prices were down more than 40% from recent peak levels
during the summer of 2014, according to data from the US Energy Information Administration (EIA). Thus far in 2015, gasoline prices have shown little change since the beginning of the year, as an earlier ascent was mostly offset by a sharp retreat over the past few weeks. With the typical American household buying more than 1,000 gallons of gas annually, savings on gasoline can leave a little more cash in consumers’ wallets. Standard & Poor’s Economics expects real consumer spending to grow faster at 3.1% and 3.3% in 2015 and 2016, respectively, than the 2.7% increase in 2014. A gradually increasing wage growth will likely further support consumer spending and, in turn, economic expansion in 2015.
Employment and Wage Growth The state and outlook for employment affects consumers’ ability and willingness to spend on discretionary items, which in turn affects the overall revenue outlook for the hotels, restaurants & leisure industry, since consumers spend more on such items when they are gainfully employed. The labor market downshifted at the end of the summer, following a long stretch of healthy job creation. US job growth averaged 177,000 in the third quarter of 2015, compared with 242,000 in the second quarter. The economy added jobs at a pace of 213,000 in the first half of the year after adding jobs at a 260,000 per-month clip in 2014. In November 2015, the unemployment rate was unchanged at 5%, still a post-recessionary
multi-year low. The US economy added 211,000 jobs in November, and over the past 12 months, employment growth averaged 218,000 per month.
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THE UNEMPLOYMENT SITUATION Percent 11
Thousands 600
10
400
9
200
8
0
7
(200)
6
(400)
5
(600)
4
(800)
3 2008
(1,000) 2009
2010
2011
2012
Net Change in Nonfarm Employees (right scale)
2013
2014
2015*
Unemployment Rate (left scale)
*Data through October. Source: US Bureau of Labor Statistics.
In 2014, the US economy added more than three million jobs—the highest level in 15 years— during which Standard & Poor’s Economics noted that the economy recovered all the jobs lost during the Great Recession. Average hourly earnings rose 2.0% in 2014, and average weekly earnings were up a stronger 2.9% over the year. Despite a tightening labor market, wage growth in October remained almost stagnant; combined with hours and payroll gains, take-home pay increased 0.6% in October, up 4.6% from the prioryear period. Private wages grew just 2.2% between September 2014 and September 2015.
EBITDA Over the past few years, the industry’s earnings before interest, taxes, depreciation, and amortization (EBITDA) reflected some organic growth and otherwise relatively mixed fundamentals across the sub-industry groups, with further capacity expansion for restaurants, hotels, casinos, and cruise operators in both domestic and international markets. Over the past decade, the aggregate EBITDA for the hotels, restaurants & leisure industry has been on an upward trajectory, due to some of the same factors that have driven aggregate revenue growth. Amid recessionary pressures, however, EBITDA growth fell sharply from its peak of 15% growth during the first half of 2008 to a low-single-digit decline in the second half of 2009. The subsequent period saw an acceleration to low-double-digit growth through the end of 2012, partly on easier comparisons, but also reflecting the benefit of notable restructuring actions by companies such as McDonald’s and Starbucks, in some cases resulting in significant workforce reductions. Despite improved operating leverage for Marriott, Wyndham, and other hotels, S&P Capital
IQ noted a sharp deceleration in the industry’s EBITDA growth, to the low- to mid-single-digit range through early 2015. Results for cruise ship operators were hurt by the Concordia incident in early 2012.
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The decline is also partly attributed to commodity (food) and labor cost inflation for restaurants, such as Starbucks, McDonald’s, and Yum! Brands, with the latter two companies also hurt by key supplier issues in China. In addition, results for casino operators such as Wynn Resorts were hurt by a severe revenue decline in Macau. EBITDA PER SHARE AND EBITDA GROWTH (aggregate value weighted per share, in $, quarterly) Percent 70
18
65
16
60
14
55
12
50
10
45
8
40
6
35
4
30
2
25
0
20
(2) (4)
15 2005
2006
2007
2008
2009
2010
EBITDA per Share (left scale)
2011
2012
2013
2014
2015
EBITDA Growth (right scale)
Source: S&P Capital IQ.
Over the past two years, the industry’s EBITDA growth was significantly constrained by foreign currency headwinds which, to varying degrees, weakened the results of constituents such as McDonald’s, Starbucks, Yum Brands!, Carnival, Marriott, Royal Caribbean, and Wyndham. For fiscal 2015, the S&P Capital IQ consensus projects a median adjusted EBITDA growth of 16.2% for the major constituents of the S&P 1500 hotels, restaurants & leisure index. The lower end of the range includes declines of 10.4% and 4.5% for McDonald’s and Starwood, respectively, and a relatively modest 1.1% growth for Yum! Brands. Conversely, Royal Caribbean, Chipotle, and Darden represent the higher end of the range, at 20.9%, 24.1%, and 27.3%, respectively. For fiscal 2016, the S&P Capital IQ consensus projects a median EBITDA growth of 11.6% for the major constituents of the S&P 1500 hotels, restaurants & leisure index. The lower end of the range includes growth of 5.1%, 6.1%, and 6.9% for McDonald’s, Wyndham, and Darden, respectively. Conversely, Carnival and Starbucks represent the higher end of the range, at 15.4% and 15.5%, respectively, as well as Royal Caribbean and Chipotle, at 17.0% and 17.6%, respectively.
Industry Profit Margins EBIT Margin In recent years, EBIT margins for the hotels, restaurants & leisure industry have steadily improved, reaching 18.0% in the third quarter of 2014, before retreating slightly to 17.5% in the third quarter of 2015. For several constituents, margins expanded on improved operating leverage, thanks to the combination of revenue growth and cost containment on targeted restructuring actions. INDUSTRY SURVEYS
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Industry margins are exposed to fluctuations in commodity (food) costs—particularly for restaurants. In addition, labor costs are crucial to the results of restaurants, hotels, and casinos, while cruise ship operators are also exposed to the fuel prices gyrations. EBIT MARGIN (last 12 months, in percent, quarterly) 19.00 18.25 17.50 16.75 16.00 15.25 14.50 13.75 13.00 2005
2006
2007
2008
2009
2010
2011
2012
S&P Composite 1500 Hotels, Restaurants & Leisure Index
2013
2014
2015
Period Average
Source: S&P Capital IQ.
BEEF, PORK, AND POULTRY PRICES (Index, 1982=100) 275 250 225 200 175 150 125 100 75 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* Beef & Veal
Pork
Chicken
*Data through September. Source: US Bureau of Labor Statistics.
For some of the major restaurant chains such as McDonald’s and Yum! Brands, however, EBIT margins have been essentially range-bound since 2010, with supply issues in China weighing on both companies at least through the third quarter of 2015. On the other hand, margins for other chains such as Starbucks and Chipotle broke to the upside in 2014. 24
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Still, overall margins in 2015 will likely benefit from relatively moderate price increases for certain menu items, and even more so for restaurant chains where food cost pressures could ease after two years of rising costs. However, margins will likely reflect some transition costs related to mobile and online offerings. Meanwhile, hotel operators such as Marriott and Wyndham have mostly benefited from
increased scale and operating leverage, as well as a systematic mix shift toward higher-margin feebased income, outweighing increased marketing spending. Conversely, margins for Starwood and others have been constrained by investments in IT infrastructure and international expansion costs, despite a tighter rein on domestic costs. While international expansion into Macau (China) was a major driver of margin expansion in the post-recession years for Wynn Resorts and other major casino operators, such margins have since deteriorated significantly over the past two years, amid a severe downturn in that market. EBIT margins for both Carnival and Royal Caribbean have been relatively mixed over the last five years—hurt in 2012 by higher fuel costs, ticketing price pressures, and the Concordia incident, but subsequently stabilizing on higher ticket pricing, increased operating leverage, easing fuel costs, and ongoing cost containment. For fiscal 2015, the S&P Capital IQ consensus projects a median EBIT margin of 15.7% for
the major constituents of the S&P 1500 hotels, restaurants & leisure index. The lower end of this range includes EBIT margins of 9.0% and 9.6%, for Darden and Marriott, respectively. The higher end of the range is represented by McDonald’s, at 28.3%, as well as Chipotle, Starbucks, and Wyndham, at 18.8%, 18.9%, and 19.2%, respectively. For fiscal 2016, the S&P Capital IQ consensus projects a median EBIT margin of 17.4% for the major constituents of the S&P 1500 hotels, restaurants & leisure index. The lower end of this range includes EBIT margins of 9.6% and 10.2%, for Darden and Marriott, respectively. The higher end of the range is represented by McDonald’s, at 31.5%, as well as Chipotle, Wyndham, and Starbucks, at 19.3%, 19.6%, and 19.9%, respectively.
Return on Equity Over the past several years, the hotels, restaurants & leisure industry’s return on equity (ROE) has markedly and consistently improved, more than doubling from a nadir of less than 12% throughout 2009 to more than 24% by the third quarter of 2015. S&P Capital IQ thinks this trend reflects a confluence of margin expansion and increased operating efficiency (on notable improvements in productivity). In addition, S&P Capital IQ thinks that improved ROE is consistent with an increase in financial leverage for the hotels, restaurants & leisure industry (as later discussed in the “Industry Liquidity and Solvency” section of this report). Across the industry, a number of companies have been among the beneficiaries of ROE
improvement, including Wyndham, Chipotle, and Starbucks. However, the industry’s ROE was hurt by Starbucks’ $2.8 billion charge in the third quarter of 2013 related to litigation arbitration with Kraft Foods. ROE for restaurants such as Yum! Brands and McDonald’s, while relatively healthy, significantly fluctuated and/or decelerated over the past several years. ROE for cruise operators Carnival and Royal Caribbean—relatively low in comparison with other sub-industry constituents—also fluctuated in line with their EBIT margins. INDUSTRY SURVEYS
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Over the last 12 months, the median ROE for the major constituents of the S&P 1500 hotels, restaurants & leisure index was 28.8%, according to the S&P Capital IQ database. The lower end of this range includes ROE of 5.5% and 9.7% for Carnival and Royal Caribbean, respectively. Yum! Brands, Wyndham, and Starbucks represent the higher end of the range, with ROE of 40.1%, 44.4%, and 49.3%, respectively. RETURN ON EQUITY (last 12 months, in percent, quarterly) 26 24 22 20 18 16 14 12 10 2005
2006
2007
2008
2009
2010
2011
2012
2013
S&P Composite 1500 Hotels, Restaurants & Leisure Index
2014
2015*
Period Average
*Data through third quarter. Source: S&P Capital IQ.
Excluded as a potential outlier is Marriott, with the associated ROE deemed not meaningful. Despite reporting net income of $836.0 million over the past 12 months, Marriott also reported negative shareholders’ equity of about $3.0 billion, which is likely mostly attributable to accumulated treasury stock with ongoing share repurchases. Looking ahead through 2015 and 2016, with several of the factors discussed above expected to
remain in play, S&P Capital IQ thinks the hotels, restaurants & leisure industry could sustain relatively modest improvements in ROE, likely remaining well above 20%. Capex/Revenues Over the past several years, the capital expenditure (capex)/revenues ratio for the hotels,
restaurants & leisure industry has fluctuated, partly in tandem with capital allocation for capacity expansion during both the pre- and post-recessionary years. After peaking at more than 10.0% for much of 2008, the industry’s capex/revenues ratio declined sharply over the next few years, dipping below 5.5% in the third quarter of 2010, before steadily rebounding for the most part thereafter—reaching 8.6% in the third quarter of 2015.
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INDUSTRY SURVEYS
CAPITAL EXPENDITURE AS A PERCENTAGE OF REVENUE (last 12 months, in percent, quarterly) 12 11 10 9 8 7 6 5 4 2005
2006
2007
2008
2009
2010
2011
2012
2013
S&P Composite 1500 Hotels, Restaurants & Leisure Index
2014
2015*
Period Average
*Data through third quarter. Source: S&P Capital IQ.
S&P Capital IQ surmises that the intervening declines in the ratio partly reflected a reduced pace of new store openings by McDonald’s, Starbucks, Yum! Brands, and others. Facing some lingering weakness in consumer spending following the recession, restaurant chains sought to mop up some excess capacity, particularly in the domestic market. S&P Capital IQ would also highlight some systematic multi-year divestitures of a sizable portion of hotel portfolios owned by Starwood, Marriott, and others, in a shift from a capitalintensive ownership model toward property management and franchising, consistent with the socalled “asset-light” strategy. The rebound in capex/revenues appears to partly reflect a pickup in the pace of new restaurant
openings, including Chipotle, which has expanded aggressively in the US, as well as Yum! Brands and Starbucks, which have significantly added to their international locations. In recent years, hotel chains such as Wyndham and Marriott also accelerated their pipeline of development for new properties around the world in order to capitalize on pent-up demand from transient and business travelers. In addition, a number of the major casino operators committed significant capital toward ongoing expansion in Macau (prior to a sharp downturn in that market). On June 25, 2016, Wynn Resorts plans to open a $4.1 billion full-scale integrated resort in Macau. Cruise operators also added new ships to their fleet in order to capitalize on increased demand.
For companies such as Carnival and Royal Caribbean, the result has been a significant increase in global cruise-industry passenger capacity in the aftermath of the recession. Over the last 12 months, the median capex/revenues for the major constituents of the S&P 1500 hotels, restaurants & leisure index were 7.4%, according to the S&P Capital IQ database. The lower end of this range includes capex/revenues of 2.9%, 4.3%, and 4.8% for Marriott,
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Darden, and Wyndham, respectively. Conversely, Carnival and Royal Caribbean represent the higher end of the range, with capex/revenues of 16.6% and 32.4%, respectively. Looking ahead, S&P Capital IQ expects capex/revenues ratio for the industry to track its recent
trend line, with a relatively modest pace of new restaurant openings in 2016, and a continued strong development pipeline for the leading hotel brands, with additional proceeds from targeted asset divestitures.
Industry Liquidity and Solvency EBITDA/Interest Expense Earnings before interest, taxes, depreciation, and amortization (EBITDA)/interest expense for the hotels, restaurants & leisure lines industry notably improved over the past several years, providing creditors with some cushion from a cash flow and credit perspective. The industry’s EBITDA/interest expense ratio topped 11.2x in early 2014 (compared with 8.1x in early 2009), before retreating slightly to 10.2x in the second and third quarters of 2015. INTEREST COVERAGE (last 12 months, in multiples, quarterly) 14 13 12 11 10 9 8 7 2005
2006
2007
2008
2009
2010
2011
2012
2013
S&P Composite 1500 Hotels, Restaurants & Leisure Index
2014
2015*
Period Average
*Data through third quarter. Source: S&P Capital IQ.
S&P Capital IQ thinks the mostly favorable trend has been partly supported by a series of debt refinancing activity by several companies (amid historically low interest rates) and some targeted deleveraging. The trend has also likely benefited from the industry’s growth in aggregate EBITDA. Most recently, S&P Capital IQ surmises an increase in debt-financing obligations as several companies accelerated and/or replenished their share repurchase programs, while others also instituted some dividend increases amid more stable cash flows. Over the last 12 months, the median EBITDA/interest expense for the major constituents of the
S&P 1500 hotels, restaurants & leisure index was 10.9x, according to the S&P Capital IQ database.
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The higher end of this range includes Starbucks, at 38.1x, as well as Yum! Brands and
McDonald’s, at 20.0x and 15.2x, respectively. Both McDonald’s and Starbucks have a strong investment grade credit rating of A-, according to Standard & Poor’s Ratings Services (a separate entity from S&P Capital IQ Equity Research Services), while Yum! Brands sports a BBB rating (lower investment grade). The lower end of the range is represented by Royal Caribbean and Darden, with
EBITDA/interest expense of 6.8x and 8.0x, respectively. Standard & Poor’s Ratings Services rates both companies under the speculative credit levels of BB+ and BB, respectively. Excluded as a potential outlier is Chipotle, which generated EBITDA of $828 million over the last 12 months, but had no debt-financing obligations and therefore zero interest expense. Looking ahead through 2015 and into 2016, S&P Capital IQ expects interest coverage ratios for the industry to remain healthy. This will likely be supported by the combination of improving fundamentals and relatively strong balance sheets, with ample liquidity and growing financial flexibility, thanks in part to steady free cash-flow generation.
Total Debt-To-Capitalization Over the past decade, the total debt-to-capitalization ratio for the hotels, restaurants & leisure industry has, for the most part, steadily increased, as more companies shifted to higher levels of debt financing. From less than 38% in early 2005, this ratio topped 60% in the third quarter of 2015, after a period of decline from early 2009 through the third quarter of 2011. TOTAL DEBT-TO-CAPITALIZATION RATIO (last 12 months, in percent, quarterly) 65 60 55 50 45 40 35 30 2005
2006
2007
2008
2009
2010
2011
2012
2013
S&P Composite 1500 Hotels, Restaurants & Leisure Index
2014
2015*
Period Average
*Data through third quarter. Source: S&P Capital IQ.
S&P Capital IQ surmises that the intervening declines in the ratio, between 2009 and 2011,
partly reflected some targeted deleveraging as a number of companies adopted a more conservative stance to shore up their balance sheets in the wake of the recession, including some additional paid-in capital.
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However, the years since 2012 indicate an increase in financial leverage across the industry. This reflects a confluence of favorable capital market conditions for debt issuance (on historically low interest rates) and improved financial capacity on free cash-flow generation. In addition to capacity expansion, these debt proceeds were partly deployed toward total return initiatives, including share repurchases as well as recurring and/or special dividends. Fewer companies deployed incremental debt toward M&A activity. As of the third quarter of 2015, the median total debt-to-capitalization ratio for the major constituents of the S&P 1500 hotels, restaurants &leisure industry was 57.2%, according to the S&P Capital IQ database. The lower end of this range includes Carnival, Starbucks, and Darden, with total debt-to-capitalization ratios of 24.5%, 33.4%, and 37.5%, respectively. The higher end of the range is represented by Starwood and Wyndham, at 63.6% and 83.1%, respectively. Excluded from this set as potential outliers are Chipotle, which had no outstanding debt-
financing obligation, and Marriott, which had total debt-to-capitalization of 270.2%—evidently skewed by its negative shareholders’ equity of about $2.5 billion versus $4.0 billion of total debt. Through 2015 and into 2016, S&P Capital IQ expects the factors highlighted above to continue to support the industry’s total debt-to-capitalization ratios near its current peak levels, with a continuing focus on shareholder return initiatives.
Net Debt/EBITDA Over the past decade, the net debt/EBITDA for the hotels, restaurants & leisure industry fluctuated from a low of 1.1x in 2006 to 2.0x–2.1x for much of 2008 and 2009. After dipping again to about 1.4x in early 2012, the ratio subsequently increased, reaching nearly 2.1x in the third quarter of 2015. Overall, S&P Capital IQ thinks these ratios indicate ample capacity for ongoing debt service obligations. NET DEBT-TO-EBITDA RATIO (last 12 months, in multiples, quarterly) 2.50 2.25 2.00 1.75 1.50 1.25 1.00 2005
2006
2007
2008
2009
2010
2011
2012
2013
S&P Composite 1500 Hotels, Restaurants & Leisure Index
2014
2015*
Period Average
*Fourth quarter data is projected. Source: S&P Capital IQ.
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S&P Capital IQ surmises that the earlier decline in the industry’s net debt/EBITDA from 2009 to 2011—much like total debt-to-capitalization—was partly attributable to some deleveraging activities in tandem with EBITDA growth over this period. To some extent, net debt was also likely affected by cash proceeds from targeted asset divestitures of some owned hotel properties. The uptrend in net debt/EBITDA since 2012 portends increased financial leverage across the
industry, thanks in part to favorable capital market conditions and improved financial capacity across the industry. Debt proceeds were deployed in part for share buybacks, dividends, and some M&A activity. Over the last 12 months, the median net debt/EBITDA for the major constituents of the S&P 1500
hotels, restaurants & leisure index was 1.5x. The lower end of this range includes net debt/EBITDA of 0.2x, 0.8x, and 0.9x for Starbucks, Yum! Brands, and Darden, respectively. The higher end of the range is represented by Wyndham and Royal Caribbean, at 3.8x and 4.8x, respectively. S&P Capital IQ expects the industry’s net debt/EBITDA to remain healthy into the near future. This will likely be supported by the combination of improving fundamentals and relatively strong balance sheets, with ample liquidity and growing financial flexibility on steady free cash-flow generation.
Industry Valuation P/E Ratio In recent years, the hotels, restaurants & leisure industry has steadily experienced a notable price-to-earnings (P/E) multiple expansion. Based on forward 12-month estimates, the industry recently sported a P/E multiple of about 21.7x, a sizable expansion compared with 12.5x in early 2010, and well above the relatively depressed P/E multiples of the preceding recessionary years. S&P Capital IQ thinks the broad-based P/E multiple expansion across the industry has been supported by increasing profitability, enhanced earnings visibility, and an improvement in the overall fundamental outlook. Consequently, a number of constituents were recently trading above their 10-year average P/E multiples, including Wyndham, McDonald’s, and Yum! Brands. Still, S&P Capital IQ notes that a number of the constituents were recently trading below their 10-year historical average P/E multiples—and in some cases meaningfully below the peak levels of the prior economic expansion—including Yum! Brands, Marriott, Carnival, Royal Caribbean, Starwood, and Darden Restaurants. We see some opportunities for further multiple expansion across the industry. McDonald’s, Starbucks, Chipotle, and Wyndham were recently trading above their 10-year historical averages. For fiscal 2015, the S&P Capital IQ consensus projections imply a median P/E multiple of 21.6x for the major constituents of the S&P 1500 hotels, restaurants & leisure index. The lower end of the range includes Wyndham, Royal Caribbean, and Carnival, with forward P/E multiples of 15.4x, 18.5x, and 18.7x, respectively. The higher end of the range is represented by Starbucks and Chipotle, at 37.1x and 41.4x, respectively. For fiscal 2016, the S&P Capital IQ consensus projections imply a median P/E multiple of 19.1x for the major constituents of the S&P 1500 hotels, restaurants & leisure index. The lower end of the range includes Wyndham, Royal Caribbean, and Carnival, with forward P/E multiples of 13.9x, 14.4x, and 14.6x, respectively. Conversely, the higher end of the range is represented by Starbucks and Chipotle, at 31.3x and 34.8x, respectively. INDUSTRY SURVEYS
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FORWARD PRICE-TO-EARNINGS PER SHARE RATIO (in multiples, quarterly) 23 22 21 20 19 18 17 16 15 14 13 12 2006
2007
2008
2009
2010
2011
2012
2013
S&P Composite 1500 Hotels, Restaurants & Leisure Index
2014
2015*
2016*
Period Average
*Projected values start from fourth quarter of 2015. Source: S&P Capital IQ.
The S&P Composite 1500 hotels, restaurants & leisure index provides a market capitalization-
weighted dividend yield of 2.1%, which is meaningfully higher than the 1.5% average dividend yield for the S&P consumer discretionary sector, but about in line with a 2.0% yield for the S&P Composite 1500. EPS Growth After a multi-year period of double-digit earnings per share (EPS) growth from early 2006
through the first half of 2008, the industry experienced a retreat to single-digit growth in the second half of 2009, which was followed by single-digit EPS declines throughout 2009 amid the recession. Thereafter, EPS growth steadily rebounded, reaching mid-teens growth in 2012, before decelerating to single-digit growth in 2015. S&P Capital IQ thinks the post-recessionary rebound is partly due to easier comparisons and a resumed pace of share repurchases. We attribute the deceleration in EPS growth in part to higher depreciation and amortization (D&A), and, to some extent, certain exogenous events such as the supplier issues in China for Yum! Brands and McDonald’s. Given a relatively sizable (and growing) international exposure for a number of the S&P 1500 industry constituents, S&P Capital IQ surmises that foreign exchange headwinds also had a major negative impact in 2014 and through the third quarter of 2015. Consistent with guidance from some of the companies’ management, currency headwinds will likely persist through the year. For fiscal 2015, the S&P Capital IQ consensus projections imply a median operating EPS
growth of 19.5% for the major constituents of the S&P 1500 hotels, restaurants & leisure index. The lower end of the range includes declines of 8.5% and 0.9% for McDonald’s and Starwood, respectively, as well as an increase of 4.1% for Yum! Brands. Carnival and Royal Caribbean represent the higher end of the range, at 31.8% and 38.7%, respectively.
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HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
INDUSTRY SURVEYS
NORMALIZED DILUTED EPS GROWTH (last 12 months, in percent, quarterly) 25 20 15 10 5 0 (5) (10) 2006
2007
2008
2009
2010
2011
2012
2013
S&P Composite 1500 Hotels, Restaurants & Leisure Index
2014
2015*
Period Average
*Fourth quarter data is projected. Source: S&P Capital IQ.
For fiscal 2016, the S&P Capital IQ consensus projections imply a median operating EPS growth of 16.9% for the major constituents of the S&P 1500 hotels, restaurants & leisure index. The lower end of the range includes growth of 9.7%, 10.7%, and 13.5% for McDonald’s, Wyndham, and Starwood, respectively. Conversely, Marriot, Carnival, and Royal Caribbean represent the higher end of the range, at 21.3%, 28.2%, and 28.5%, respectively.
EV/EBITDA The hotels, restaurants & leisure industry has experienced a pronounced enterprise value (EV)/EBITDA multiple expansion over the past several years. Based on forward 12-month S&P Capital IQ consensus estimates, the industry sported an EV/EBITDA multiple of about 12.4x as of early November, a sizable expansion compared with a nadir of 7.4x in early 2010, and well above the multiples of the recessionary years. In addition to improving fundamentals across the industry, S&P Capital IQ thinks the
EV/EBITDA multiple expansion was also supported by a wave of M&A activity. This includes notable public and private market transactions, such as Blackstone’s $3.9 billion acquisition of Extended Stay America in 2010; Bally Technologies’ $5.1 billion deal for Scientific Games in 2014; and International Game Technology’s $4.7 billion acquisition by GTECH in 2015. S&P Capital IQ thinks the multiple expansion has benefited from a number of spin-off transactions and initial public offerings (IPOs), notably Marriott International’s spin-off of Marriott Vacations Worldwide in 2011 and Blackstone’s IPO of Hilton Worldwide in 2013, which likely helped to unlock some shareholder value. Investor activism has also likely played a role in the EV/EBITDA multiple expansion for the
industry, albeit to a relatively limited extent. Among the companies that have been recently targeted by activists—to varying degrees of success—are Darden Restaurants (an S&P 1500 industry constituent), Boyd Gaming, BJ’s Restaurants, and Pinnacle Entertainment.
INDUSTRY SURVEYS
HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
33
For fiscal 2015, the S&P Capital IQ consensus projections imply a median EV/EBITDA multiple of 12.2x for the major constituents of the S&P 1500 hotels, restaurants & leisure index. The lower end of the range includes Darden, Wyndham, and Carnival, with forward EV/EBITDA multiples of 9.4x, 10.7x, and 10.9x, respectively. The higher end of the range is represented by Starbucks and Chipotle, at 19.6x and 21.1x, respectively. FORWARD TOTAL ENTERPRISE VALUE-TO-EBITDA RATIO (in multiples, quarterly) 13 12 11 10 9 8 7 6 2006
2007
2008
2009
2010
2011
2012
2013
2014
S&P Composite 1500 Hotels, Restaurants & Leisure Index
2015*
2016*
Period Average
*Projected values start from fourth quarter of 2015. Source: S&P Capital IQ.
For fiscal 2016, the S&P Capital IQ consensus projections imply a median EV/EBITDA multiple of 10.8x for the major constituents of the S&P 1500 hotels, restaurants & leisure index. The lower end of the range includes Darden and Carnival, with projected forward EV/EBITDA multiples of 8.8x and 9.5x, respectively. The higher end of the range is represented by Starbucks and Chipotle, at 17.0x and 17.9x, respectively.
Capital Markets Consumer Discretionary Sector Announced consumer discretionary M&A deal value, with transactions involving an S&P 1500 company as target, buyer, or seller, topped $175.7 billion in 2014, up from $70.1 billion in 2013. More than half of last year’s deal value came from two announced deals: Comcast’s $69.2 billion proposed purchase of Time Warner Cable and AT&T’s $68.9 acquisition of DirecTV.
34
HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
INDUSTRY SURVEYS
CONSUMER DISCRETIONARY M&A TRANSACTIONS* Count 400
$, Billions 180 160
375
140
350
120
325
100
300
80
275
60
250
40
225
20
200 2004
2005
2006
2007
2008
2009
2010
Transaction Amount (left scale)
2011
2012
2013
2014 2015†
Number of Deals (right scale)
*Involving S&P 1500 companies as target, buyer, or seller. †Data through September. Source: S&P Capital IQ.
Of note, in previous years when consumer discretionary M&A deal value saw a spike, for
example between 2005 and 2009, the following year saw a decline in deal value. If this trend continues, 2015 will likely see a decline in deal value from the elevated levels in the previous year. Last year saw 369 announced M&A transactions in the consumer discretionary sector involving S&P 1500 companies as target, buyer, or seller. This is an increase from the deal count of 355 in 2013, and represents the best showing over the time span under review (2004–2014). Since reaching a recent high of 4.9x in 2011, the average multiple based on total enterprise value (TEV) to revenue (TEV/revenue) declined to 1.9x in 2014. The reported multiple, as calculated by S&P Capital IQ, represents the lowest multiple since 2008; when the credit crisis unfolded, it fell to less than 1.5x. In contrast with the declining multiple seen based on TEV/revenue, the multiple based on the
target’s EBITDA saw an advance to 28.5x in 2014 from 11.5x in 2013. In the absence of last year’s two largest deals, the average multiple for consumer discretionary
M&A deals based on revenue would have risen to 29.8x.
INDUSTRY SURVEYS
HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
35
CONSUMER DISCRETIONARY M&A VALUATION RATIOS* TOTAL ENTERPRISE VALUE-TO-REVENUE MULTIPLE 5.25 4.50 3.75 3.00 2.25 1.50 0.75 0.00 2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014 2015†
TOTAL ENTERPRISE VALUE-TO-EBITDA MULTIPLE 35 30 25 20 15 10 2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014 2015†
*Involving S&P 1500 companies as target, buyer, or seller. †Data through September. Source: S&P Capital IQ.
Texas-based automotive retailer Group 1 Automotive, Inc. ranks as the most active acquirer based on the number of deals announced last year. Florida-based automotive retailer AutoNation, Inc. ranks as the most active acquirer based on the number of deals announced this year. Among the top 10 buyers based on transactions, homebuilders dominated the list.
Hotels, Restaurants & Leisure Announced M&A deal value for transactions in the hotels, restaurants & leisure industry involving companies in the S&P 1500 approached $18 billion in 2014. Two deals accounted for over half of the deal value last year—Scientific Games Corporation entering into a definitive agreement to acquire Bally Technologies, Inc. for $5.2 billion on August 1, 2014 and GTECH S.p.A. signing a definitive merger agreement to acquire International Game Technology for an aggregate value of $6.4 billion on July 15, 2014.
36
HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
INDUSTRY SURVEYS
HOTELS, RESTAURANTS & LEISURE M&A TRANSACTIONS* Count 90
$, Billions 22 20
85
18
80
16
75
14
70
12
65
10
60
8
55
6
50
4
45
2
40
0
35 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015† Transaction Amount (left scale)
Number of Deals (right scale)
Percent 100 90 80 70 60 50 2004
2005
2006
2007
2008
2009
2010
2011
2012
2013 2014‡
Completion Rate *Involving S&P 1500 companies as target, buyer, or seller. †Data through October. ‡Latest available. Source: S&P Capital IQ.
In 2015 to date, the top announced M&A transaction involved Marriott International, Inc. entering into a definitive agreement to acquire Starwood Hotels & Resorts Worldwide Inc., for $13.1 billion on November 15, 2015. The transaction ranks as the second-largest hotel M&A transaction ever, according to S&P Capital IQ data. Deal count for S&P 1500 related M&A deals in the hotels, restaurants & leisure industry
slipped to 65 in 2014 from 74 in 2013. Last year’s deal count was the lowest for such deals since 2010. To date in 2015, 57 transactions have been announced. Valuation of M&A transactions in the hotels, restaurants & leisure involving companies in the
S&P 1500 saw an average multiple of 2.37x revenue for deals announced in 2014. In 2015, announced deal valuation was calculated at 2.1x revenue, the lowest valuation for deals in the industry since 2009 when a typical deal was valued at 1.7x revenue.
INDUSTRY SURVEYS
HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
37
Announced M&A transactions in the hotels, restaurants & leisure industry among S&P 1500
companies in 2014 saw their highest valuation based on deal value to EBITDA. However, this year finds announced deal valuation at 8.9x EBITDA, the lowest annual multiple since 2007. HOTELS, RESTAURANTS & LEISURE M&A VALUATION RATIOS* TOTAL ENTERPRISE VALUE-TO-REVENUE MULTIPLE 5.00 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015† TOTAL ENTERPRISE VALUE-TO-EBITDA MULTIPLE 25 20 15 10 5 0 2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014 2015†
*Involving S&P 1500 companies as target, buyer, or seller. †Data through October. Source: S&P Capital IQ.
Recently, 2010 was the only year in which the completion rate for M&A transactions in the
hotels, restaurants & leisure industry, based on deals announced and completed in the same calendar year, fell to less than 80%.
38
HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
INDUSTRY SURVEYS
RECENT M&A TRANSACTIONS (top transactions in terms of size for the past six months) ANNOUNCED DATE
CLOSED DATE
10/28/15 6/8/15
6/8/15
6/4/15 8/19/15 6/25/15 7/7/15 11/5/15
7/1/15 8/19/15 6/25/15 7/7/15 -
TARGET
BUYERS / INVESTORS
Starwood Vacation Ownership The Phoenician
Interval Leisure Group Host Hotels & Resorts
Biglari Holdings The Westin Excelsior Rome PEPPER DINING Element Denver Park Meadows Ruby Tuesday, Eight Corporate-Owned Lime Fresh Mexican Grill Locations in Florida
Biglari Capital, Lion Fund II Katara Hospitality Brinker International Denver Hospitality Rubio's Restaurants
SIZE ($M) 1,710 400 259 250 107 16 6
Source: S&P Capital IQ.
BUYBACK TRANSACTIONS* (top transactions in terms of size for the past six months) ANNOUNCED DATE
CLOSED DATE
TARGET
SIZE ($M)
6/3/15
-
The Wendy's
10/27/15 10/23/15
-
Domino's Pizza Royal Caribbean Cruises
1,400 800 500
9/21/15
-
Jack in the Box
200
11/11/15
-
Popeyes Louisiana Kitchen
200
10/2/15 8/6/15
-
DineEquity Sonic
150 145
7/21/15
-
Chipotle Mexican Grill
100
9/28/15 Cracker Barrel Old Country Store *Cancelled transactions are not included in the results.
25
Source: S&P Capital IQ. REGISTRATIONS AND OFFERINGS (top transactions in terms of size for the past six months) ISSUER
REGISTRATION FILED
OFFER DATE*
PRIMARY TRANSACTION FEATURES
SECURITIES ISSUED
SIZE ($M)
Chipotle Mexican Grill
5/21/15
-
Shelf Registration
Common Stock
McDonald's
5/18/15
5/26/15
Fixed-Income Offering
Corporate Debt (Non-Convertible)
866.90
10/30/15
10/30/15
Fixed-Income Offering
Corporate Debt (Non-Convertible)
768.82
McDonald's
5/18/15
5/26/15
Fixed-Income Offering
Corporate Debt (Non-Convertible)
653.27
McDonald's Carnival
5/18/15 10/30/15
5/26/15 10/30/15
Fixed-Income Offering Fixed-Income Offering
Corporate Debt (Non-Convertible) Corporate Debt (Non-Convertible)
652.78 604.68
6/1/15
6/1/15
9/21/15
-
Carnival
Starbucks Darden Restaurants
1,382.13
Fixed-Income Offering
Corporate Debt (Non-Convertible)
499.91
Shelf Registration
Common Stock
467.21
Marriott International
9/9/15
9/9/15
Fixed-Income Offering
Corporate Debt (Non-Convertible)
448.90
Wyndham Worldwide
9/10/15
9/10/15
Fixed-Income Offering
Corporate Debt (Non-Convertible)
349.88
*Offer date is only available for a given transaction if a prospectus has been filed with the SEC for that transaction. Source: S&P Capital IQ.
INDUSTRY SURVEYS
HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
39
ACTIVIST STAKES (latest annual)
Biglari Holdings Cracker Barrel Old Country Store
INDEX CONSTITUENTS S&P SmallCap 600 Index S&P MidCap 400 Index
ACTIVIST INVESTORS (PERCENT OWNED) 53.04 19.91
The Wendy's Pinnacle Entertainment BJ's Restaurants
S&P MidCap 400 Index S&P SmallCap 600 Index S&P SmallCap 600 Index
19.17 16.25 15.31
S&P 500 Index S&P 500 Index
15.18 11.95
COMPANY NAME
Wynn Resorts Starwood Hotels & Resorts Worldwide Source: S&P Capital IQ.
CASH BALANCE LEADERS (latest annual, in $, millions) COMPANY NAME
INDEX CONSTITUENTS
McDonald's Starbucks
S&P 500 Index S&P 500 Index
Wynn Resorts Chipotle Mexican Grill The Wendy's
S&P 500 Index S&P 500 Index S&P MidCap 400
TOTAL CASH LONG-TERM INVESTMENTS & SHORT-TERM INVESTMENTS 3,999 2,175 1,617 879 1,198
TOTAL
860 750
4,859 2,925
121 601 71
1,738 1,480 1,268
Source: S&P Capital IQ.
Of the 39 companies in the S&P 1500 hotels, restaurants & leisure industry, only seven have activist investor-ownership stakes of more than 10%. The company with the highest activist ownership stake is Biglari Holdings, Inc., with a 53% position. The single largest activist owner of BH shares is Biglari Capital Corp., which operates as an investment arm of Biglari Holdings Inc.
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HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
INDUSTRY SURVEYS
INDUSTRY TRENDS The hotels, restaurants &leisure industry comprises four sub-industry groups, namely, hotels, resorts & cruise lines; casinos & gaming; leisure facilities; and restaurants. Our discussion in this section of the Survey mainly focuses on the restaurants sub-industry group, which currently represents approximately 72% of the industry’s overall market-capitalization weighting. Over the past decade, the hotels, restaurants & leisure industry has witnessed some notable merger and acquisition (M&A) activity. In addition, a number of other strategic actions, such as corporate spin-offs and initial public offerings (IPOs), have also sought to capitalize on favorable capital market conditions. INDUSTRY M&A TRANSACTIONS (significant transactions from 2006 to present, arranged b y size) COMPLETION DATE
TARGET
ACQUIRER
SIZE ($M)
Pending Caesars Acquisition JW Marriott
Caesars Entertainment Blackstone
1,222 1,200
2015 International Game Technology
GTECH Holdings
4,705
2/18/15
Waldorf Astoria
Anbang Insurance
1,950
2/27/15
Equity Inns Lodging
American Realty
1,808
12/19/14
Nevada Property
Blackstone
5,225
11/21/14
Bally Technologies
Scientific Games
5,149
11/19/14
Prestige Cruises
Norwegian Cruise Line
3,075
4/7/15
2014
7/28/14
Red Lobster
Golden Gate Capital
2,113
5/25/14
JCC/3535 LV/Parball/Corner
Caesars Growth
1,985
5/30/14
24 Hour Fitness USA
AEA Investors/Ontario Teachers
1,850
7/28/14
521 Properties/Red Lobster
ARC Properties
1,590
2/14/14
CEC Entertainment
Apollo Global
1,330
12/19/14
Multimedia Games
Global Cash Access
1,111
10/27/14
Portfolio of 52 Hotels
NorthStar Realty/Chatham
1,071
2013 8/14/13
Ameristar Casinos
Pinnacle Entertainment
2,880
5/21/13
Kayak Software
Priceline
1,828
10/18/13
WMS Industries
Scientific Games
1,560
MSR Resort Golf Course
450 Lex/C Hotel
1,500
SHFL Entertainment
Bally Technologies
1,384
2/22/13 11/25/13 2012 10/8/12 11/20/12 7/2/12 10/29/12
IBL/Studio 6
Blackstone
1,900
Peninsula Gaming
Boyd Gaming
1,417
P.F. Chang's China Bistro
Centerbridge Partners
1,109
Peet's Coffee & Tea
JAB Holdings/BDT Capital
1,010
2011 3/10/11 6/6/11 10/27/11
Highland Hospitality/28 Hotels
Prudential/Ashford Hospitality
1,277
Universal Orlando Resort
Comcast/NBCUniversal
1,025
64 Hotels
Cerberus Capital/Chatham
1,020
2010 Extended Stay America
Blackstone and others
3,930
7/12/10
CKE Restaurants
Apollo Global
1,047
12/1/09
SeaWorld Entertainment
Blackstone
2,700
9/29/08 2/21/08
Wendy's International American Casino & Entertainment
Wendy's Goldman Sachs
2,929 1,457
Seven Seas Cruises
Prestige Cruise
1,072
10/21/10 2009 2008
2/1/08 2007
Hilton Worldwide
Blackstone and others
25,142
6/12/07
Extended Stay America
Arbor Realty/Lightstone
8,000
6/14/07
OSI Restaurant
Catterton/Bain Capital
3,501
4/12/07
CNL (51 Hotels)
Ashford Hospitality
2,400
11/29/07
Applebee's
DineEquity
2,084
10/10/07
RARE Hospitality
Darden Restaurants
1,405
Red Roof Inns Ruffin Gaming
Westbridge Hospitality and others
1,320
El Ad US Holding
1,200
Bally Total Fitness
Harbinger Capital
1,068
ClubCorp Club
KSL Advisors
1,984
Tharaldson (140 Hotels)
Goldman Sachs
1,300
10/24/07
9/10/07 6/8/07 10/1/07 2006 12/26/06 5/11/06
Source: S&P Capital IQ.
INDUSTRY SURVEYS
HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
41
INDUSTRY SPIN-OFFS AND IPOS (significant transactions from 2006 to present, arranged b y size) COMPLETION DATE
TYPE
TARGET COMPANY/ ISSUER
PARENT ENTITY/ SELLER
SIZE ($M)
6/22/15
Spin-Off
J. Alexander's Holdings
Fidelity National
5/8/15
IPO
Bojangles'
Advent International
147
6/12/15
IPO
Wingstop
Roark Capital
110
1/30/15
IPO
Shake Shack
SSE Holdings
105
2/3/14
IPO
ARC Hospitality Trust
American Realty Capital
4/8/14
IPO
La Quinta
Blackstone
650
1/30/14 7/25/14
IPO IPO
Intrawest Resorts
Intrawest Europe Trimaran Capital
188 107
2015 157
2014
El Pollo Loco
2,500
2013 12/11/13
IPO
Hilton Worldwide
Blackstone
2,353
10/18/13
IPO
Caesars Acquisition
Caesars Entertainment
1,173
12/11/13
IPO
Aramark
Goldman Sachs & others
725
4/18/13
IPO
SeaWorld Entertainment
Blackstone
702
11/12/13
IPO
Extended Stay America
Blackstone and others
565
1/18/13
IPO
Norwegian Cruise
NCL
447
9/19/13
IPO
ClubCorp
KSL Advisors
252
7/19/13
IPO
Diamond
217
10/4/13
IPO
Diamond Resorts Potbelly
Benchmark Capital and others
105
5/8/12 8/8/12
Spin-Off IPO
Fiesta Restaurant Bloomin' Brands
Carrols Restaurant Catterton Partners and others
276 176
11/21/11
Spin-Off
Marriott Vacations
Marriott International
623
7/27/11
IPO
Dunkin' Brands
Bain Capital and others
423
10/21/10 2009
IPO
Bravo Brio Restaurant
Bruckmann and others
140
11/5/09
IPO
Hyatt Hotels
Pritzker family
950
8/21/08
Spin-Off
Interval Leisure Group
IAC/InterActive
736
6/1/07
Spin-Off
Circle Entertainment
CORE Media Group
153
2012
2011
2010
2008 2007 2006 8/1/06
Spin-Off
Wyndham Worldwide
Avis Budget Group
10/13/06
Spin-Off
Chipotle Mexican Grill
McDonald's
834
12/20/06
IPO
Carrols Restaurant
Carrols Restaurant
130
6,602
Source: S&P Capital IQ.
Competitive Environment The US foodservice business comprises a large and varied range of away-from-home eating facilities (from commercial eating and drinking places such as restaurants, bars, and cafeterias, to food contractors and institutional providers). The restaurant industry in the US is comprised mostly of large multi-unit restaurant companies that are publicly traded on the US stock exchange, not privately owned. They range from fastfood operators, such as McDonald’s Corp., Burger King Worldwide Holdings, Inc., and Wendy’s Co., to companies that run full-service chains, such as the privately held Red Lobster, Olive Garden, and LongHorn Steakhouse restaurants, Brinker International Inc. (Chili’s Grill & Bar and Maggiano’s Little Italy), and DineEquity, Inc. (IHOP and Applebee’s).
42
HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
INDUSTRY SURVEYS
LARGEST US RESTAURANT CHAINS (ranked b y 2014 US systemwide foodservice sales) ---- US SALES (in $, mil.) ---CHAIN McDonald's Starbucks Coffee
2013 35,856 11,864
2014 35,447 13,019
Subway Burger King
12,221 8,501
12,265 8,632
0.4 1.5
Wendy's Taco Bell Dunkin' Donuts
8,477 7,800 6,743
8,568 8,200 7,176
Chick-fil-A Pizza Hut Applebee's
4,989 5,700 4,517
Panera Bread KFC Domino's Pizza
----------- US UNITS ----------
% CHG. 2013 (1.1) 14,278 9.7 11,438
2014 14,350 11,939
% CHG. 0.5 4.4
26,334 7,155
26,530 7,129
0.7 (0.4)
1.1 5.1 6.4
5,791 5,769 7,677
5,750 5,921 8,082
(0.7) 2.6 5.3
5,711 5,500 4,577
14.5 (3.5) 1.3
1,759 7,846 1,861
1,871 7,863 1,870
6.4 0.2 0.5
4,029 4,200 3,770
4,260 4,200 4,116
5.7 0.0 9.2
1,656 4,491 4,986
1,759 4,370 5,067
6.2 (2.7) 1.6
Chipotle Mexican Sonic Drive-In
3,191 3,882
4,061 4,033
27.3 3.9
1,572 3,522
1,755 3,518
11.6 (0.1)
Olive Garden Chili's Grill & Bar Little Caesars
3,625 3,537 3,100
3,763 3,634 3,405
3.8 2.7 9.8
831 1,262 3,886
840 1,263 4,087
1.1 0.1 5.2
Buffalo Wild Wings
2,784
3,238
16.3
978
1,052
Dairy Queen 2,960 3,192 Source: Nation's Restaurant News .
7.8
4,460
4,446
7.6 (0.3)
Although a few public companies operate in the fine-dining sub-segment of the full-service part of the industry, individuals, families, or limited partnerships more often run these high-end restaurants, which are typically located in cities or resort areas, and cater to business people, the affluent, and those who aspire to affluence. There is an overlap between the US lodging and gaming industries. Most of the highest-volume casinos in the US are part of or linked to big hotels. Moreover, some of the largest hotels, with more than 2,000 rooms each, are located in gaming markets such as Las Vegas and Atlantic City. However, most US hotels do not offer casino activity. By S&P Capital IQ’s estimates, less than 10% of the approximate 4.9 million hotel rooms in the US are part of gaming facilities. From a larger perspective, the US hotel and gaming businesses are part of the US economy’s travel and tourism segment, which generated $458 billion in total economic impact in 2014 and is forecast to increase to $472 billion (an estimated 3.0% of gross domestic product, or GDP) in 2015, according to the World Travel & Tourism Council (WTTC). The WTTC estimates that the economic impact of tourism and travel in 2014 was $2.4 trillion worldwide. Direct industry employment globally was at 277 million in 2014; the WTTC estimates that the industry’s impact on employment directly and indirectly will account for 284 million jobs by the end of 2015. Restaurants: Market Profile and Segmentation Overall US foodservice industry sales will reach a record high of $709 billion in 2015, up 3.8% from $683 billion in 2014, according to the January 27, 2015 estimates from the National Restaurant Association (NRA), an industry trade group. For 2015 Top 100 chains, total systemwide sales in 2014 increased 4.6% to $232 billion, higher than the systemwide sales of $222 billion 2013, according to the Nation’s Restaurant News (NRN), a magazine and website covering the foodservice industry.
INDUSTRY SURVEYS
HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
43
US FOOD SALES GROWTH* (in $, billions) 700 600 500 400 300 200 100 0 1995
1997
1999
2001
2003
2005
2007
Eating & drinking places
2009
2011
2013
2015†
All food stores
*Change in data compilation from SIC categories to NAICS categories was implemented since 1992. †Annualized data based on January to October 2015. Source: US Department of Commerce, S&P Capital IQ estimates.
To understand the various sectors of the restaurant industry in a convenient way, restaurants are grouped into different segments. However, the dividing lines between these segments are becoming more blurred, as some restaurants have broadened their menus into several different food types. In addition, some casual dining chains are expanding their lunch menus and are now competing with fast-food outlets. S&P Capital IQ views the restaurant sub-industry as one competitive market, with all participants trying to serve a diverse customer base. RESTAURANT MARKET SHARES—2014 C-Store 2.4% Family Dining 5.4%
Bakery-Cafe 2.3%
Others 2.1% Burger 31.8%
Mexican 6.1% Pizza 7.5% Chicken 7.7% Sandwich 8.4% Beverage-Snack 9.7%
Casual Dining 16.8% TOTAL: $232.2 billion*
*Total sales are the combined domestic sales of the top 100 chains. Source: Nation's Restaurant News.
44
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Fast Food Meals to eat in or take out, quick counter service, low prices, and plain décor are features common to fast-food (or limited-service) restaurants. These outlets tend to specialize in a few menu items—hamburgers, pizza, sandwiches, and/or chicken—and generally do not serve alcohol. Limited-service establishments in the US are expected to see a nominal sales growth of 4.3% in 2015, according to the NRA. The fast-food industry is less fragmented than its full-service counterpart is. The segment’s focus on quick service and price means that larger chains have an advantage: their economies of scale allow them to develop the operational expertise to improve efficiency, speed up transactions, and purchase supplies more cheaply. Sales figures and comparisons that follow reflect the latest available data. Burger chains. Limited-service restaurants (LSR)/Burger chains topped the NRN 2015 Top 100, accounting for 31.8% of the restaurant chain market in 2014. Although the main menu offerings are hamburgers, these restaurants chains offer a larger variety of main-course items, such as chicken and fish sandwiches. Many offer salads as a popular and healthy alternative to sandwiches. Nontraditional service hours, including breakfast, snack, and overnight parts of the day, have been a major source of growth for sandwich chains in recent years. New menu items, such as dessert-like coffee drinks and fruit smoothies, are seen as a source of future growth.
Several large competitors, with chains that are generally recognizable throughout the nation, dominate the sandwich chain category. McDonald’s is the largest fast-food chain by a wide margin. However, the concept faces strong direct competition in this segment from Burger King and Wendy’s. (Casual dining, the second-largest segment of the restaurant chain market, is discussed in the “Full service” section below). Beverage-Snack. This category is the third largest in the fast-food segment, accounting for a
9.7% share of Top 100 sales. The market leader is Starbucks Corp. Starbucks has benefited from increased demand for coffee and continued growth in the breakfast items. In addition, it has broadened its menu offerings, including other specialty drinks, such as smoothies and orange juice, pastries, breakfast sandwiches, and salads. Other restaurant chains in this category include Dunkin’ Donuts (owned by Dunkin’ Brands Group Inc.), and Krispy Kreme Doughnuts Inc. Sandwich chains. The fourth-largest category in the fast-food segment is sandwich, which
accounted for 8.4 % share of Top 100 sales in 2014. This category is led by Subway (operated by privately held Doctor’s Associates Inc.). Other players in this category are Arby’s and Jimmy John’s Gourmet Sandwiches. Chicken. This category ranked fifth in the fast-food segment. Since 2013, Chick-fil-A Inc. has been leading in this category, ahead of KFC Corp., a division of Yum! Brands. Other competitors in the category include Popeye’s Chicken & Biscuits (operated by AFC Enterprises Inc.) and Zaxby’s. Pizza. The sixth-largest category in the fast-food segment is pizza. The nation’s largest seller of
pizza is Pizza Hut, a division of Yum! Brands, followed by Domino’s Pizza, Inc. Little Caesars (a division of Ilitch Holdings Inc.) and Papa John’s International, Inc. are other large, nationally known pizza concepts. These four account for some 89% of the aggregate sales in the pizza chainrestaurant segment. Total US sales of the top 100 pizza chains reached $17.4 billion in 2014, up 4.2% from $16.7 billion in 2013.
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Fast Casual There is a separate category in the fast-food segment called “fast casual,” which refers to a growing group of restaurant operators that promise a higher quality of food than at a traditional fast-food restaurant and at a lower price point than at a full-service restaurant. The typical cost per meal ranges from $8 to $12. Some of the largest and most successful players in this growing segment are Panera Bread Co., Chipotle Mexican Grill, and Five Guys Burgers and Fries. The fast-casual segment has grown faster than in the previous years, with a collective annual sales increase of 12.8% to $30 billion in 2014—almost double the next-largest increase from other segments, according to Technomic’s 2014 Top 500 chain restaurant report published in April 2015. Success of fast casuals has motivated operators in other segments to renovate and upgrade their offerings in order to compete with fast casuals and drive more traffic. Many of the Top 10 growth chains on this year’s list experienced a shrinking growth rate for sales in 2014, according to the NRN. Despite the economic challenge, newcomers Jersey Mike’s Subs and Yard House (owned by Darden Restaurants Inc.), ranked first and sixth in America’s top growth chains (with sales growth of 29.3% and 21.0%, respectively). Wingstop, the only chicken chain in this year’s top 10 growth chains, ranked fifth, with sales growth of 22.9%. Based on the 2015 US Top 100 systemwide sales, top chains in this segment include Chipotle Mexican Grill, Five Guys Burgers and Fries, Panera Bread, Qdoba Mexican Grill, and Einstein Bros. Bagels. Full-service restaurant chains have begun participating in the fast-casual segment through brand spin-offs, according to the NRN, aiming to capitalize on the benefits that fast-casual restaurants enjoy, such as lower capital and labor costs. Full Service All full-service restaurants offer some form of table ordering, though their price points range from low to high. These restaurants have much higher per-unit sales volume, on average, than do fastfood outlets. Consumers in this segment are from higher income households and are more engaged with technology. About 20% of consumers report that technology options are an important feature when choosing a full-service restaurant, according to NRA surveys. For example, they use their smartphones to look up directions and their computer to view menus or make reservations. Full-service restaurants are expected to reach record sales in 2015, up 3.8% from last year, according to the NRA’s January 2015 forecast report. Casual dining. Casual dining chains (also called the dinnerhouse segment) encompass a host of
restaurant types, including seafood, Asian, and Italian. Consumers in this segment prefer to dine in restaurants that have video menu boards and tabletop devices, according to NRA surveys. US systemwide sales for the casual dining chains in the Top 100 rose 5.1% to $38.9 billion in 2014 compared with $37.0 billion in 2013, according to NRN data. On a market share by segment, this category ranked second, after LSR/Burger. The market leader in this segment is Applebee’s Neighborhood Grill & Bar (operated by DineEquity, Inc.), followed by Olive Garden (Darden Restaurants, Inc.), and Chili’s Grill & Bar (Brinker International). Others include Buffalo Wild Wings Grill & Bar (Buffalo Wild Wings, Inc.), Red Lobster (Darden), and Outback Steakhouse (Bloomin’ Brands, Inc.). Family restaurants. A family restaurant aims to appeal to customers of all ages by offering a
relaxed atmosphere, low prices, and menus geared to both children’s and adults’ palates. These
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restaurants are sometimes referred to as “midscale.” Also referred to as Family Dining, this segment constitutes a 5.4% share in the NRN’s 2015 Top 100, with total sales of $12.4 billion in 2014. The category leader is International House of Pancakes (IHOP), operated by DineEquity, Inc., followed by Denny’s (a division of Denny’s Corp.), and Cracker Barrel Old Country Store (a division of CBRL Group Inc.). Also participating in this category is Big Boy/Frisch’s Big Boy. Others Some chains do not easily fit into specific categories, due to the kind of product they sell or the way in which they serve the product. Examples include bars and taverns, caterers, and snack and beverage bars.
Operating Environment Increased Focus On “Asset-Light” Strategies Over the past few years, a growing number of companies with the hotels, restaurants & leisure industry have pursued various iterations of so-called asset-light strategies as a potential vehicle to help unlock shareholder value. While the exact specifics may differ among individual companies or sub-industry groups, such strategies may include some combination of a sale, spin-off or divestiture of designated properties of businesses, and a shift from the ownership of capitalintensive assets toward an increased mix of franchising or fee-based revenues. With some of these initiatives notably spurred by increased pressure from activist investors across the industry—amid stock market volatility and relatively favorable capital market conditions—S&P Capital IQ thinks such strategies could gain further ground in the years ahead. There are some notable recent examples of asset-light strategies within the restaurant space. In October 2015, after a year-long strategic review, Yum! Brands unveiled plans for a 2016 spin-off of its China division, which has struggled over the past few years as the company was dogged by certain supplier-related issues in that country. Meanwhile, over the past few years, the company has gradually migrated to a franchising-based model, with plans to have at least 95% of its restaurants owned and operated by franchisees by the end of 2017. Separately, in November 2015, Darden Restaurants completed the spin-off of its select real estate and restaurant assets into Four Corners Property Trust, Inc. (FCPT). As an independent, public company, FCPT intends to elect and qualify as a real estate investment trust (REIT). Conversely, McDonald’s concluded that it would not spin-off its company-owned US restaurants into a REIT. In recent years, a number of the major hotels and casinos have also embarked on asset-light strategies. For example, after selling off much of its owned hotel portfolio over the past several years, Starwood Hotels & Resorts (to merge with Marriot International in mid-2016 when the transaction is expected to close) now primarily focuses on maximizing earnings and cash flow by managing and franchising hotels, selling vacation ownerships, and investing in real estate assets. In February 2015, the company unveiled plans to spin-off its vacation ownership business (Vistana) by the end of 2015. Later, in October 2015, Starwood unveiled plans for a $1.5 billion merger of Vistana (post spin-off) with Interval Leisure Group by the second quarter of 2016. Hyatt Hotels has been negotiating with Starwood Hotels & Resorts for weeks for a possible buy-out. Separately, in October 2015, MGM Resorts International unveiled its own plans to transfer seven of its casinos in Las Vegas, plus three other regional casinos, into a REIT and then lease back those properties. MGM expects to complete the transaction in the first quarter of 2016.
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Restaurants Pursue Global Opportunities Global expansion is nothing new for most US restaurant operators, especially those in the quickservice segment. Indeed, efforts by companies such as Yum! Brands and McDonald’s to expand into the BRIC nations (Brazil, Russia, India, and China) have been ongoing for over a decade. Many restaurants are mostly pursuing organic growth strategies in those markets, occasionally complemented by joint ventures with local partners and, in some cases, targeted acquisitions. S&P Capital IQ sees China as one of the lucrative regions for these restaurant operators, with growth likely to continue apace in the years ahead. Companies have accelerated their plans to expand in the region due to factors such as rising working population, increasing purchasing power, and changing lifestyles and eating habits of the people in the country. In addition, since 1991, China’s annual per capita disposable income of the urban population has increased on a double-digit compound annual growth rate (CAGR), according to the National Bureau of Statistics of China (NBSC). Unlike China, which posted a decline in fast-food sales in 2014, India provides an attractive market for restaurant operators, with the world’s largest youth population (356 million people between the ages of 10 to 24, according to a 2014 UN report), and with changing consumer preferences. In recent years, companies such as McDonald’s, Yum! Brands, Starbucks, and Dunkin’ Donuts have notably grown their business in India through planned expansion. Enabling Technology Initiatives Companies are integrating modern technology to enhance their services and to retain their customers. Restaurant operators are more rapidly adopting various forms of consumer-facing options, which narrow the gap between what diners want and what is offered, according to an NRA report in February 2015. When it comes to choosing a restaurant, more and more consumers consider the availability of technology and want more. The NRA’s 2015 Restaurant Industry Forecast reported that 79% of customers said technology increases convenience; 70% said it speeds up service and increases order accuracy; 45% said that tech options make dining out more fun; 35% said tech options make them choose one restaurant over another; and 34% said they dine out or order takeout more often with tech options. Mobile-friendly websites are also provided by family-dining restaurants (47%), casual dining operators (60%), fine-dining operators (54%), quick service operators (63%), and fast-casual restaurants (53%), according to the same report by the NRA. Increased Focus on Health Concerns In recent years, the fast-food industry has been hit with lawsuits alleging that specific corporations are responsible for obesity-related health problems faced by consumers—particularly children. Plaintiffs have sought remedies such as menu changes, nutritional labeling, advertising restrictions, and monetary damages. These lawsuits reflect an American culture that has become significantly more health-conscious and litigious over the last several decades. This is a result of rising obesity rates, skyrocketing health care costs, and growing concerns about the impact of obesity on overall health. An important driver in the new health-conscious trend has likely been various diet crazes. An increasing awareness of foods’ glycemic index (a measure of the effect of carbohydrates on blood sugar levels) also seems to be on the rise.
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In October 2015, a multistate outbreak of Salmonella and E. coli resulted in temporary closures of restaurants in Washington and Oregon, including Chipotle Mexican Grill. The US Food and Drug Administration (FDA), together with the Centers for Disease Control and Prevention (CDC) as well as Federal and state authorities issued orders to investigate. The use of antibiotics in the meat and poultry supply chains of the 25 largest US fast-food and fast-casual restaurants has also raised health concerns, according to a September 2015 report by CNN. Out of two million Americans who contract antibiotic-resistant infections every year, 23,000 die as a result, according to the CDC estimates. In response to this issue, big names in the restaurant industry such as Burger King Corp. and Starbucks said they would review the findings and work with their suppliers to address the concerns. Although dietary health issues have been a point of controversy in the fast-food industry in recent years, they have also played a substantial part in promoting an avenue of “healthy” competition among operators in the industry. The kids’ menu has become an area of concern for restaurant operators as the problem of childhood obesity has become a rising concern. Around 17% of American children and adolescents between the ages of 2 and 19 are obese or overweight, according to data from the CDC. Food and restaurant companies are also troubled over the trend toward reduced salt, fat, sugar and other ingredients in food. Although most restaurants comply with the guidelines, many are hesitant to admit their concern that consumers will find the healthier food less tasty.
Regulatory/Legislative Environment Given the campaigns for healthier food served by restaurants and other food establishments, many cities are becoming more aware and vigilant in providing health initiatives and implementing health grade requirements for restaurant operators. The National Salt Reduction Initiative (NSRI), a partnership of more than 95 state and local health authorities and national health organizations, set voluntary targets for salt levels in 62 categories of packaged food and 25 categories of restaurant food in an attempt to guide salt reductions in 2012 and 2014. Different agencies and organizations have joined the group, and they are committed to reducing population salt intake by at least 20% in the next five years through defined targets and continuous transparent monitoring. In recent years, this initiative has gradually been embraced by restaurant operators such as Darden Restaurants, as well as Yum! Brands, Taco Bell, KFC, and Pizza Hut. Meanwhile, New York and Los Angeles are among a growing host of cities (as well as states) that operate a health grade system under which restaurants are subjected to annual inspection, after which the establishment is given a health grade that must be posted. Other recent governmental efforts are aimed at helping consumers to be better informed about their dining decisions. On September 9, the New York City Board of Health unanimously passed a proposal requiring chain restaurants to post labels next to menu items that contain high levels of sodium, starting December 1, 2015. Furthermore, the FDA is finalizing a rule that requires chain restaurants and other such establishments to provide nutrition labeling on their menus and menu boards. A final rule was released on July 10, 2015, extending the compliance date to December 1, 2016. Various courts subsequently upheld these laws following challenges by the restaurant subindustry, which has essentially come around to supporting what it views as the lesser of two evils: a national standard for menu labeling, rather than a different standard in each state.
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HOW THE INDUSTRY OPERATES Over the past 50 years, eating out gradually became part of the way of life for many Americans. In the US, meals eaten away from home rose steadily from just 26% in 1960 to around 49% in 2011, according to the US Department of Agriculture (USDA). Further, the USDA reported that in 2013 (latest available), the share of income spent on food away from home was 4.3%. Food prepared away from home accounted for 50% of American’s food expenditures in 2013 (latest available), according to a study by the USDA Economic Research Service. Projected restaurant sales for 2015 will reach $709 billion, according to the National Restaurant Association (NRA), a trade group; this would account for 4.0% of the projected US gross domestic product (GDP). With an estimated 14 million employees in 2015, the restaurant subindustry is the nation’s second-largest private-sector employer. Contributing heavily to this trend has been the rise of fast-food dining that began in the 1950s with industry trendsetters Jack in the Box Inc. and McDonald’s Corp. By offering drive-through service and revolutionizing workflow processes, these companies significantly improved customer satisfaction while lowering wait times. The establishment of large chains, in both the fast-food and casual-dining categories, has helped to streamline operations and lower costs further. Economic trends have played an important role in the popularity of eating out. With the rise in single-parent and dual-income households, domestic life has become more time-pressured. Restaurants provide a quick option for feeding the family. In addition, median household income has continued to increase, boosting the propensity to eat out. The convenience of eating out and the large number of reasonably priced options mean that restaurant meals will likely remain an integral part of daily life in America. Meanwhile, the hotels, resorts & cruise line sub-industry provides travelers a refuge for rest and privacy. However, many hotel properties possess features well beyond the basic bed, bathroom, and telephone. For example, some facilities specialize in catering to large business meetings or conventions, while others maintain recreational facilities, such as pools and tennis courts, for the benefit of both vacation and business travelers. Numerous resorts are centered on golf, with several courses available. Room prices reflect the level of amenities and service that a hotel provides. The casinos & gaming sub-industry is more dependent on recreational visitors than the hotel business. Whether it is for a day trip, a long weekend, or a more extended vacation, many patrons visit a gaming facility to engage in games of chance and entertain their fantasies. Larger casino complexes typically also offer hotel rooms; food and beverages; entertainment, such as nightclubs and theater shows; and shopping. Some of the largest US hotels (based on the number of lodging rooms) are connected to casinos, especially in Las Vegas, where the MGM Grand property is the biggest, with 6,852 rooms or suites. Casinos compete with many other forms of recreation for patrons’ discretionary dollars. The potential for winning money from a casino creates excitement for visitors, which may offset their knowledge that odds favor the house. In some cases, gaming businesses offer free amenities, such as lodging, food, and beverages, as a means of rewarding and attracting preferred customers.
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KEY INDUSTRY RATIOS AND STATISTICS Industrywide revenues are driven by consumer spending, which in turn is influenced by the health of the overall economy. To gain knowledge of the economy’s current and anticipated state of health, and its potential impact on the hotels, restaurants & leisure industry, investors consult the following indicators. Real growth in gross domestic product. Reported quarterly by the Bureau of Economic Analysis (BEA), part of the US Department of Commerce, inflation-adjusted (or real) gross domestic product (GDP) growth is a measure of the health of the overall US economy. The BEA also issues advance and preliminary estimates of GDP before reporting the final GDP figure for the quarter. Most major economies are cyclical, advancing, and contracting with the business cycle. The business cycle dating committee of the National Bureau of Economic Research establishes the official beginning and end of recessions. Disposable personal income. Reported each month by the BEA, disposable personal income (DPI) is a measure of aggregate consumer income, minus taxes and adjusted for inflation. Changes in this measure are important, because they influence the level of consumer spending that can be expected. When personal income is growing, consumers are more willing to loosen their purse strings. Conversely, when it is stagnant or weak, consumers are less willing to spend. They may shift to eating at less expensive restaurants or at quick-service chains or to cooking at home. Consumer confidence. Measures of consumer confidence indicate how Americans feel about the
current economic environment and its prospects. If their mood is positive, they are more likely to open their wallets. If they are worried about their financial situation, they are more likely to postpone or forgo discretionary purchases such as restaurant meals, casino visits, and vacation travel, which may include hotel stays. One source of information on consumer sentiment is the Conference Board Inc., a nonprofit business research organization that surveys a representative sample of 5,000 US households to produce a monthly index. Its two components—the present situation index and the expectations index—reflect consumers’ views of current and future business and economic conditions, and consumers’ expectations about how they will be affected. This qualitative measure of consumer attitudes is expressed as an index, with 1985 used as a base year (1985=100). A reading of more than 90 is considered a strongly positive outlook on the economy. Unemployment rate. Wages are often the largest single expense at restaurants. When
unemployment rates are relatively low, restaurants may have to raise pay levels to attract and retain workers. Released monthly by the Bureau of Labor Statistics (BLS), an agency within the US Department of Labor, the unemployment rate tracks the number of working-age people currently searching for employment as a percentage of those employed or looking for work. Consumer price index. Released monthly by the BLS, the consumer price index (CPI) measures
changes in the price of commodities, fuel oil, electricity, utilities, telephone services, food, and energy, and thus serves as an inflation indicator. The “core” CPI smooths out the index by removing the volatile food and energy categories. Restaurants, like most companies, try to pass on increased costs for supplies and labor to customers. However, given the highly competitive environment, restaurant chains are generally reluctant to raise menu prices. Same-store sales. This is the most closely watched quantitative indicator for restaurants, defined as year-over-year sales changes for units open and operating at post-startup levels in both INDUSTRY SURVEYS
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years. It is important to note that some chains compare same-store sales for units open only 13 months—a less reliable indicator of sales strength than the 18-month period. Stores often take several months, if not years, to reach the maturity necessary to make meaningful comparisons. Revenue per available room. Revenue per available room (RevPAR) is calculated as the number of rooms available, times the occupancy rate (percentage of rooms occupied), times the average room price in dollars (or average daily rate, ADR). It measures dollars generated in-room sale revenue, on average, for each room available, both sold and unsold, on an industrywide basis, as well as for individual companies, chains, and properties. Commodity costs. Food commodity costs are one of the largest input costs of a restaurant company; they can significantly affect profitability. Rising costs can erode profit margins if the company cannot pass the added expense on to the customer in the form of a price increase. Supply growth or expansion. The capacity expansion (or supply growth) for the overall industry should be in line with increases in demand to ensure a healthy overall business. If industry supply grows faster than demand, this may signal trouble for industry revenue and profit growth for both restaurants and hotels.
For example, in the early 1990s, restaurant industry expansion caused supply to outpace demand. This situation led to store closings and concept failures. The number of new hotel properties or rooms being added may be found from research firms such as Smith Travel Research Inc. (STR), Lodging Econometrics Inc., or PricewaterhouseCoopers LLP. Casino revenues. Casino revenues include the amount of money won by casinos from various
gaming activities, such as slot machines, table games, and sports betting. Various sources—an individual facility, a company, a state, or another entity—report casino revenues. Composite US numbers reflect a total of actual and estimated numbers from various states or categories. Monthly information for casinos in individual states is available from local regulatory groups, such as the Nevada Gaming Control Board. The kind of information provided varies by jurisdiction. Some states track revenues for each casino (excluding Native American facilities) and publish a statewide total. At least one state (Nevada) provides information on a regional and statewide basis, though not for individual gaming facilities. Information may also be found in industry newsletters and magazines and, increasingly, on Internet sites maintained by various states. Statewide figures can be affected significantly by changes in the number of casinos operating during a given period or in the regulatory environment. Composite casino revenue numbers for the entire US gaming industry are likely to be estimates, because precise numbers generally are not available for various casinos on Native American land. In addition, some data may include gaming revenues from non-casino locations, such as coin-fed machines at racetracks or bars. Visitor levels. Because much of the gambling at US casinos is done by people who live in other areas, it can be helpful to know how many out-of-town visitors a particular gaming market is attracting. Estimates, if not actual statistics, may be available from marketing groups such as the Las Vegas Convention and Visitors Authority (LVCVA). Hold percentage. This number indicates the percentage of customers’ gambling dollars that are
won by casinos. For example, if a gambler buys $1,000 worth of chips to play blackjack and walks away from the table with $850 in chips, the casino’s “win” is $150, and its “hold
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percentage” is 15% ($150 of $1,000). Chips purchased by gamblers, of which the casino generally ends up winning a percentage, are sometimes referred to as “table drop.” Typically, the hold percentage is available as an aggregate of all the casinos in a given gaming market. Occasionally, however, it may be disclosed for individual gaming facilities or for all facilities operated by a particular company. Hold percentage indicates whether a market (or casino or casino group) has been particularly lucky or unlucky during a specific period. A sizable fluctuation in the hold percentage is more likely to occur in casinos that emphasize high-stakes games (such as baccarat) versus lower-stakes activities (such as blackjack or slot machines). Sources for hold percentage information include state regulatory groups, industry publications, and the companies themselves. Gaming taxes. When looking at a casino company, it is important to know what kind of tax
obligations it is likely to face. Tax levels can change, which could affect the profit outlook for a casino. Information related to tax levels in various gaming markets can be found in corporate filings (e.g., annual 10-K filings) with the Securities and Exchange Commission (SEC), and at websites of government regulatory bodies. Proposed changes in tax levels can be monitored through newspaper and magazine reports and, at times, through company news releases.
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HOW TO ANALYZE A COMPANY IN THIS INDUSTRY The first, and perhaps the most important, step in analyzing a hotels, restaurants & leisure company is relating the fundamental outlook for the industry to the company under consideration. A range of factors, both quantitative and qualitative, can be helpful in comparing and contrasting a company with its competitors, sub-industry peer group, and the restaurant industry in general. Although absolute numbers are critical to the assessment of any company, comparative analysis is used to measure the relative success of a company under given industry conditions. For example, if a restaurant’s same-store sales are declining while the rest of the industry is showing gains, clearly there is cause for concern and further investigation. However, if a company’s competitors are also experiencing weak financial performance, even as the industry is doing relatively well, then the problem may lie beyond the company itself. Further study then would likely suggest where the problems lie. Have consumer tastes or preferences shifted? Have costs, prices, or other factors changed in ways that make the potential investment return of the business more or less attractive? Analysis then could suggest how to address the problems or indicate that they may be too large or too broad for the company to fix. Conversely, if a company’s financial performance is stellar versus its peers, analysis could show if or for how long the outperformance can be sustained.
Qualitative Factors Numerous qualitative judgments contribute to the overall assessment of a hotel, restaurant, or leisure company. The following section describes some of the most important factors. Competitive position. It is important to consider how a company is competitively positioned.
This should be evident in the company’s strategy—likely developed over many years, and thus difficult to change in the short term. Factors to consider include the size and operating strategy of a company, be it owning, managing or franchising properties. An example of this would be that a luxury hotel company would likely need to maintain a high degree of management control, if not ownership, of its properties, in order to ensure that quality is maintained. Furthermore, in this example, each property might have unique design features, as opposed to sharing similar construction details with other properties in the portfolio, and each hotel may have a singular name. For a large diversified company, it may have brands that target multiple segments of the market. Each company should position itself to differentiate itself from its rivals in ways that give it a competitive advantage. Moreover, one should consider how a company’s market position would be supported and maintained over the long term, via brand promotion, property upgrades, etc., in order to fend off competitors. One may also consider whether a hotel, restaurant, or leisure business is likely to be viewed as providing good value to customers. The perception of value may likely influence the number of repeat visits that a property receives and what types of recommendations are passed on to other people. An emerging trend is for individual hotels, hotel brands, and independent third parties to set up blogging websites for guests to share their views and recommendations. Another, perhaps more reliable source of such information are surveys of guests conducted by third parties, such as Business 54
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Travel News, a provider of news for business travelers, which conducts an annual hotel chain survey to measure the opinions of corporate travelers regarding most major US hotel brands. Management. As in any other business, management quality is a key success factor for
entertainment companies. S&P Capital IQ looks favorably on seasoned management teams that have performed well relative to their peers in both good times and bad. In evaluating a company’s management team, an analyst should first ask whether its strategy makes sense in light of current and long-term industry trends. If the strategy is a good one, is the current management capable of executing it? What is management’s record for working together as a team? The quality of management often spells the difference between success and failure. Some executives excel at cost containment, while others are better at creating new products or managing expansion activity. In evaluating a company, it is a good idea to look at top managers’ records—both with that company and with other firms—in addressing the same kinds of needs and goals that are currently pertinent to the company. One way to gain insight into management is by its comments that typically accompany quarterly earnings reports. Does management relate its strategy to results? If not, management itself may not know if its strategy is likely to result in the desired results. In general, we generally prefer situations in which top executives own stock in the company, because that should bring managers’ interests more in line with those of other shareholders. It is also important to examine the reward potential in place for management. Are short-term results emphasized over long-term performance? An example of ill-suited management incentives would be to allow necessary property renovations to be deferred until management incentives are realized; by then, the property may have lost its competitive position. Scale and diversification. Is bigger better? A large company tends to enjoy economies of scale,
with overhead expenses supported by a bigger revenue stream and spread over a larger asset base than those of a smaller firm. A large company is also more likely to have stronger purchasing power and greater influence with customers. Small companies, however, may be more nimble in responding to market conditions. A similar argument can be made for diversifying into multiple industries, because improving conditions in one sector may offset a slowdown elsewhere. However, diversification also carries risks; it may dilute the focus of top management or distract the company from its core strengths. A company’s expansion strategy is key to its long-term profitability potential. Companies may choose to grow via internal unit expansion or via acquisitions. In addition, many restaurant chains are hedging their bets on the success of one format and developing or acquiring other restaurant formats. Conversely, some companies prefer to focus on one concept or several similar concepts. These strategies allow a company to develop expertise it might not gain from a split focus. S&P Capital IQ advises looking at the geographic mix of a company’s business. A relatively narrow geographic focus may heighten its sensitivity to changes in local conditions, including economic and regulatory factors. Some US companies have expanded overseas in the pursuit of markets that are less mature or developed than those in the US. However, foreign markets may exhibit different consumer behaviors and be subject to varying expectations, as well as different economic and regulatory environments. On a property-by-property level, site selection is an important consideration. However, not all companies have the same approach when it comes to locating a new property. Some pay top dollar for prime locations, while others are satisfied with lower-cost locations that enable them to INDUSTRY SURVEYS
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operate at lower price points. Offsetting factors can diminish the importance of location. These might include price, as well as the presence (or absence) of nearby competitors or amenities. Brand names. For chains, the value of company brands depends on several factors, including
how the brands are perceived by consumers and how successfully shared services such as national advertising are administered. However, even non-chain properties can create valuable brand equity, as in the case of a unique resort that gains recognition for its ambiance and amenities. Meanwhile, hotels that are part of a chain may still cultivate an image of uniqueness. Customer mix. S&P Capital advises looking at whether the customer mix of a hotel is weighted
more toward business or leisure travelers. Are the property’s location and facilities well suited toward attracting such customers? In general, S&P Capital IQ expects that room prices will be more of a determining factor in the choice of a hotel by leisure travelers than they will be for business customers. However, special corporate rates or volume discounts provide opportunities for businesses to lower their travel costs. Industrywide, Monday through Thursday are likely the peak travel nights for business travelers, and Friday and Saturday bring the heaviest demand from leisure customers. Furthermore, in the case of casinos, it is a good idea to look at what the mix is between local visitors and those from out of town. If, for example, the emphasis is on customers who live nearby, the facility would likely be more sensitive to how well the local economy is doing. Regulation. In the US, casino operations are generally regulated by individual states. Some, such
as Illinois and Indiana, restrict the number of casino licenses they issue, so that owning a casino license in those states, particularly in populous areas, is an important asset. State regulations may require that a casino be located at a waterfront site or that it receive local approval. Regulation has its benefits: states that limit gaming licenses also somewhat protect companies from competition. However, a state with a limited number of gaming licenses may choose to increase the number, leading to additional competition for existing casinos. In addition, increasing competitive threats may arise from neighboring states, as well as from gaming facilities on Native American land that are subject to a different approval process. Furthermore, a number of US companies have operations or possible opportunities for expansion in international markets. In the US, both casino and nongaming hotel businesses are likely to face local zoning review, which can affect the location, size, and other specifications of their projects. For a casino project, state regulation may require that a minimum number of hotel rooms be part of the development. Furthermore, state or federal environmental regulations could keep a project from being built in a protected or environmentally fragile area. Taxation is a significant form of regulation. In some gaming markets, the state or local tax on casino winnings may be less than 10%, while in others, it exceeds 20%. Tax rates and the likelihood of their being changed should be part of evaluating projections of a company’s current and future profitability and cash flow. Technology. Lodging and gaming companies use technology to differentiate themselves from
the competition. Many travelers are aware that most properties have wireless Internet connectivity throughout the facility, as well as in-room wired connectivity, a standard feature. Frequently, these services are included in the room charge, as opposed to being a room premium with an added charge.
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More importantly, lodging companies are using technology to make travel easier and more efficient. For example, automated checkout and other scheduling services have become widespread, as some guests value the timesaving features of such services, helping hotels trim their labor costs. Other uses of technology allow companies to keep track of guests’ visits, what services they used, and how much they wagered in the casino. They can then use this information to differentiate the level and types of services that it provides based on guest preferences, guest loyalty, or other factors. In the gaming business, technology is spurring the development of new features for slot machines. Some jurisdictions now refer to these machines as “electronic gaming devices,” presumably taking into account their non-mechanical designs—such as video screens, lack of handles to pull, use of tickets rather than coins for payment, and so on. Over the long term, the Internet may become a more common means for people using their personal computers and mobile devices as a gateway to gambling. Labor relations. Since restaurant, lodging, and gaming businesses are relatively labor intensive, it is advisable to be aware of a company’s relationships and contracts with major employee groups. For example, is a significant union contract scheduled to expire soon? What are the prospects for the contract being renewed without labor unrest, a strike, or a significant change in the company’s labor costs? Even if there is not a major union presence in the company’s work force, it is a good idea to be aware of labor market conditions, how difficult it is to hire and retain workers, and whether there is likely to be increased pressure on profits from wage costs.
Quantitative Factors When analyzing a company in the hotels, restaurants & leisure industry, quantitative factors need to be assessed as well. Some of the most important are described in the following section. Analyzing Financial Statements An analysis of a media company involves scrutinizing the firm’s financial statements. Some important factors to consider are listed below. Same-store sales. The same-store sales trends of a restaurant company should be considered within the context of its peers, as well as the demographic and geographic markets it serves. A company that experiences declining same-store sales while the rest of the industry posts strong revenue gains is losing market share, and reasons for this loss need to be closely examined.
Gains in same-store sales can be achieved through increases in prices and through increases in customer count or traffic. Price increases are often necessary to offset wage and commodity cost inflation. Traffic gains often reflect customer satisfaction. Diners are the ultimate judges of whether a restaurant’s food, price, and service meet their needs. If a chain fails to please customers and to report sufficient sales gains, its long-term growth—even its survival—can be in doubt. A company that is expanding rapidly by adding new units can boost overall sales growth, but it is important to monitor sales trends at existing units to be sure the concept is doing well. One additional component of same-store sales is product mix. Shifts in mix can reflect menu changes, advertising and promotions, or changes in customer preferences—any factor that affects the size of the average check, other than price increases. Restaurants can raise the amount of the average check by adding higher-priced items to the menu, such as an increased assortment of appetizers and alcoholic beverages, or can lower it by featuring value products in an advertising campaign designed to spur traffic. Consumer choices also can alter product mix. In difficult INDUSTRY SURVEYS
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economic times, for example, customers tend to avoid ordering desserts and drinks, or select less expensive options. Other nonrecurring factors can also influence same-store sales comparisons. These may include the inclusion of an extra 14th week in a quarter or a 53rd week in a year. Often these extra weeks are at the end of the year, and the week between Christmas and New Year’s Day is one of the strongest sales weeks throughout the year. Whether this week falls into the fourth quarter of the current fiscal year or the first quarter of the next can skew comparisons. Revenue outlook and profile. What are the revenue sources, and how diverse is the customer base?
Are industry revenues expanding, or will a company have to take market share from competitors in order to grow? Are there opportunities to expand through sales to international markets? In analyzing a hotel company, one should look at the mix of properties it operates. For example, does it primarily control full-service hotels in big cities and well-known or upscale resorts, or is it principally running smaller, limited-service properties located alongside highways or in smaller communities? A big-city hotel may benefit if business travel is especially strong or if tourism has increased in that area. However, full-service hotels may be more sensitive to rising labor costs, since their staffing levels are likely to be higher than those of properties that offer fewer amenities. Furthermore, hotel companies may have various revenue streams, based largely on the extent to which they own, manage, and/or franchise various properties. If a hotel company’s revenues and profitability come primarily from franchising hotels rather than operating or owning them, one should look at such factors as fees generated from current franchisees and the prospect of adding more properties to the system. For example, if credit conditions are tight, franchise development may slow, since developers of new hotels are less likely to get attractive terms from lenders. Some companies have diversified beyond the traditional hotel business into such related areas as timeshare operations and the selling of condominiums within their hotel properties. When analyzing such a company, it is a good idea to look at how much capital it is committing to various parts of its operations, how much exposure the company has to potential losses from lending money to timeshare owners, and what the returns from such investments may be. When analyzing a casino business, one should look at its mix of gaming revenue. If it has an unusually large contribution from table games, the casino is likely more dependent on bigspending individuals, whose business can yield quite volatile results. If the winnings are heavily weighted toward slot machines, the casino is probably emphasizing middle-market customers, and revenues are likely to be more stable. S&P Capital IQ advises looking at a casino company’s financial statements for its levels of accounts receivable and allowance for bad debt. This includes both examining trends over time, and comparing them with recent revenue trends and with competitors’ comparable numbers. If a casino is giving too much credit to marginal customers, significant bad debt write-offs could lie ahead. Hotel operating statistics. Look for data such as occupancy levels, average daily room rate
(ADR), and revenues per available room (RevPAR). RevPAR is calculated as the number of rooms available, times the percentage of rooms occupied, times the average room price. Hotels typically seek to maximize revenues, profits, and cash flow by finding the optimal relationship between occupancy and room rates. When using this measure for gaming companies, keep in mind that some may offer attractive hotel prices—even free rooms—to boost casino activity.
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New store openings. Opening new restaurant stores signifies that the company is expanding—a
strategy that enables the company to penetrate the existing markets considering the associated risks involved in the restaurant business. By way of increasing store visibility, brand awareness is also increased. Generally, companies tend toward densely populated areas with heavy foot traffic; hence, population and demographics are important factors to consider when planning to open a new store. Systemwide sales. This measures the total revenues from restaurants operated by the company, its franchisees, and, in some cases, its licensees and affiliates. Sales from franchisees, and from affiliates that are less than 50% company-owned, are not recorded in a company’s revenues, although fees charged by the company to the franchisees are often incorporated.
Systemwide sales growth is an important factor in projecting the top-line growth potential of a company. It can occur through expansion of sales capacity or through same-store sales growth. Many restaurant companies rely more on expansion than same-store sales growth to achieve earnings growth. Earnings quality. Are there any one-time factors to consider? When looking at either revenues
or profits, try to assess any one-time factors that may have inflated or depressed results. For example, earnings may be unsustainably high due to a gain from an asset sale, or they may be unusually low due to a restructuring charge or a one-time write-down of an asset’s value. Other items that can cause major swings in reported profits or in year-to-year earnings comparisons include unusual tax rates and accounting rule changes. If there are significant onetime or nonrecurring items, it is advisable to adjust the reported earnings to what would be considered “normalized” levels. This should help reveal the underlying growth and quality of the company’s profits, and may provide a better base from which to project future levels of earnings. Profitability ratios. Profitability ratios or margins are measures of how successful a company is
in turning revenues into profits. Operating margin—expressed as a percentage—is calculated by dividing operating profit by revenues. Net margin is calculated by dividing net income by revenues. When analyzing profitability ratios, the analyst should compare a company against its own past performance and against the performance of similar companies. Cash flow. How healthy is cash flow? Reported earnings may not be an accurate reflection of a
company’s cash flow generation or financial strength. Keep in mind that some expenses on a company’s income statement—such as depreciation, amortization, and write-downs—are noncash items (i.e., they do not represent an actual cash outlay). It is particularly important to evaluate capital-intensive and acquisitive businesses such as hotels and gaming companies in terms of how much cash they generate and how much cash they require to maintain and expand the business. These figures may differ substantially from reported earnings. To analyze sources and uses of cash, S&P Capital IQ advises consulting a company’s consolidated statement of cash flows. Capital expenditures should be analyzed, to separate funds being used to expand a company’s business from investments required simply to maintain existing business. While funds for expansion are intended to increase future funds available for shareholders, amounts required to renovate, remodel, and maintain existing structures can be recurring, and should be seen as a consistent drain on cash from operations.
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Balance sheet ratios. A company’s balance sheet provides a snapshot of its financial condition.
Some balance sheet ratios may offer a view of a company’s financial health and indicate how well it is putting its assets or capital to work. For example, a company’s dependence on debt as a source of capital can be measured by comparing the amount of debt on its balance sheet to the level of equity it has (known as the debt-to-equity ratio). A company’s success in investing its capital is indicated by ratios such as return on assets (ROA) and return on equity (ROE). In these calculations, annual net income is typically divided into an average asset or equity level during the year being examined. Because the lodging industry is subject to cyclical conditions, there may be unusual income items in various periods. Thus, it is a good idea to look at average returns over a multi-year period (such as five or 10 years). Asset values. When looking at a balance sheet, try to judge whether the values reported are an
accurate measure of the assets’ current worth. For example, undeveloped land may be valued at what it cost the company 20 years ago; in such cases, the current market value may be much higher. Conversely, changes in business conditions or strategy may mean that some assets are overvalued. For example, if a hotel company decides to halt an expansion project, it may end up writing down the value of some land that it had acquired. Also, look for noncore assets that could possibly be divested, generating proceeds that could be used to reduce debt, repurchase stock, or invest in other businesses. When considering significant potential divestitures, it is advisable to consider whether an asset sale would lead to a sizable tax bill. When analyzing companies that own significant hotel and casino properties (including the land they sit on), S&P Capital IQ advises considering what the replacement and/or real estate value of their properties might be. Book value. This number measures the balance sheet value of a company’s assets minus its
liabilities. Particular attention should be paid to “tangible” book value, which gives credit to assets such as land, buildings, and equipment, but excludes items such as goodwill (which may include a portion of the purchase price of previous acquisitions). Keep in mind that balance sheet valuations may not reflect assets’ replacement cost or their worth to someone else. In addition, the extent to which intangible assets (like a brand name or customer loyalty) contribute to a company’s worth may not be adequately reflected in a company’s book value, even though they may add greatly to the company’s worth. Off-balance-sheet items. Does the company have any commitments or prospective liabilities
that are not included on its balance sheet? This could include a conditional guarantee to repay debt of another firm (such as a franchisee) or a commitment to buy back, upon request, some of its own debt at a future point. Try to determine the existence or likelihood of any triggering events (e.g., weaker operating results) that could cause debt holders to demand early repayment. Valuation metrics. Valuation metrics are used to determine how much a company or its stock is
worth. The most common valuation metric for the hotels, restaurants & leisure industry is the price-to-earnings (P/E) ratio, or multiple. Another frequently used metric is enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple. EV is calculated as market capitalization plus debt, minus cash equivalents; EBITDA is a measure of operating cash flow. In deciding which multiples to pay, an investor might consider projected growth rates for earnings or cash flow, the relative attractiveness of the markets to which a company has exposure, and debt levels. Keep in mind that valuations depend on various factors, including overall investor 60
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sentiment, industry conditions, the level of interest rates, and the extent to which future earnings seem predictable. As is the case with other measures, valuations of a particular company should be compared with those of similar companies in the same industry.
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GLOSSARY Average check—A common tool in the restaurant business to measure the average amount spent by a customer. Average daily room rate (ADR)—A measure of the average rate paid for rooms sold, calculated by dividing room revenue by rooms sold. Casino winnings—Funds or money won in a casino—a facility for gaming (betting), entertainment, and leisure. Corporate travel—Corporate group trips for business purposes such as a convention or trade association meeting. Fast-casual restaurants—A category within limited-service or quick-service restaurants that offers healthier, fresher, and more varied dishes than traditional fast food at a price point below that of casual dining restaurants. These restaurants are positioned between fast food and casual dining (hence, the hybrid name “fast casual,” also called “quick casual” and “limited service”). Fast-food restaurants—Also called limited-service or quick-service restaurants, these outlets specialize in rapid food preparation and low prices (the average check is usually less than $7), with or without seating (table service is generally not available). Food packaging is often disposable, and takeout orders account for a large portion of this business. Franchise—Part of a group of independently owned operations, which have been issued a contract to use a specific name and logo, purchased for an annual fee plus “royalties” usually based on a percentage of sales. Franchise agreement—A business contract between two companies: a franchisor (or parent company) and a franchisee (or individual business operator). It gives the franchisee the right to construct and operate a restaurant on a site accepted by the franchisor, and to use the franchisor’s operating and management systems. The franchisee pays the franchisor a one-time franchise fee, and then makes royalty payments based on gross receipts from restaurant operations, with specified minimum payments. In the US, royalty payments are generally 4%–5% of total receipts. Franchise contracts vary in length, but may be for periods of 10 to 20 years. Full-service restaurants—Restaurants that generally feature moderate to high prices (the average check is generally at least $10) and sit-down service. Meals are often served with flatware and china, and alcoholic beverages may be available. Hold percentage—The percentage of customers’ gambling dollars that is won by casinos. License—A contract similar to a franchise agreement, except that the contractual period is shorter, the rights are not as broad, and an initial fee may not be required. This contract gives the licensee the right to use the licenser’s name for a fee. Licensing is often used for nontraditional points of distribution, such as airports and gas stations. Non-rolling chip table games drop—A casino revenue measurement, table games drop of mostly non-VIP players or nonpremium players, are measured as the sum of markers issued, plus cash deposited in the table drop box. Occupancy level—The percentage of available rooms that were sold during a specified period. Occupancy is calculated by dividing the number of rooms sold by rooms available. Revenue per available room (RevPAR)—An industrywide measure of hotel room-sale revenue that measures dollars generated, on average, for each room available (both sold and unsold). It is calculated as the number of rooms available, times the occupancy rate (percentage of rooms occupied), times the average room price in dollars. Rolling chip volume—A casino revenue measurement, measured as the sum of all nonnegotiable chips wagered and lost by VIP (who play exclusively in dedicated VIP rooms) and premium players. (Excludes Paiza cash players, which are characterized by non-rolling chip play.) Same-store sales—Year-to-year sales changes at units open for a specified period, often at least 18 months.
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Slot handle— The total value of slot machine credits wagered resulting from coins and bank notes in the drop box, plus the value of any electronic money transfers made to the slot machine with a cashless wagering system. Systemwide sales—A figure comprising sales by restaurants operated by the company, franchisees, and affiliates operating under joint venture agreements. Total revenues—A comprehensive figure consisting of sales by company-operated restaurants and fees from restaurants operated by franchisees and affiliates.
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INDUSTRY REFERENCES PERIODICALS
GOVERNMENT AGENCIES
Business Travel News (BTN) http://www.businesstravelnews.com Newspaper published 17 times a year, including news related to corporate travel.
US Bureau of Labor Statistics (BLS) http://stats.bls.gov A division of the US Department of Labor. The BLS is the principal fact-finding agency of the federal government in the broad fields of labor, economics, and statistics. Its major programs include the consumer price, producer price, and employment cost indices and the national compensation survey.
Nation’s Restaurant News (NRN) http://nrn.com Magazine and website covering the foodservice industry. TRADE ASSOCIATIONS Las Vegas Convention and Visitors Authority (LVCVA) http://www.lvcva.com Quasi-governmental agency that serves as a marketing organization; operates the Las Vegas Convention Center and publishes data pertaining to the Las Vegas area.
US Department of Commerce http://www.commerce.gov Cabinet-level department responsible for various government agencies that monitor and regulate US commerce. Among its many divisions is the Census Bureau, which publishes population statistics and projections.
National Restaurant Association (NRA) http://www.restaurant.org/Home Restaurant trade organization offering certification, training materials, and news and trends. World Travel & Tourism Council (WTTC) http://www.wttc.org Forum for business leaders in the travel and tourism industry that works to raise awareness of Travel & Tourism as one of the world’s largest industries; produces industry research.
RESEARCH AND CONSULTING FIRMS Lodging Econometrics Inc. (LE) http://www.lodgingeconometrics.com Research division of National Hotel Realty, a real estate advisory and hotel brokerage firm; provides information and forecast related to US hotel real estate. PricewaterhouseCoopers (PwC) http://www.pwc.com Provides services and information related to the hospitality and leisure industries. STR Global http://www.strglobal.com Provides lodging industry information and analysis.
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COMPARATIVE COMPANY ANALYSIS Operating Revenues Million $ Ticker
Com pany
CASINOS & GAMING‡ BYD § BOYD GAMING CORP MCRI § MONARCH CASINO & RESORT INC PNK § PINNACLE ENTERTAINMENT INC SGMS § SCIENTIFIC GAMES CORP WYNN [] WYNN RESORTS LTD HOTELS, RESORTS & CRUISE LINES‡ CCL [] CARNIVAL CORP/PLC (USA) IILG § INTERVAL LEISURE GROUP MCS § MARCUS CORP MAR [] MARRIOTT INTL INC VAC § MARRIOTT VACATIONS WORLDWIDE RCL HOT WYN
[] ROYAL CARIBBEAN CRUISES LTD [] STARWOOD HOTELS&RESORTS WRLD [] WYNDHAM WORLDWIDE CORP
Yr. End
2014
2013
DEC DEC DEC DEC DEC
2,701.3 C 187.8 F 2,210.5 1,786.4 A 5,433.7
2,894.4 188.7 1,487.8 1,090.9 5,620.9
NOV DEC # MAY DEC DEC
15,884.0 614.4 A 488.1 13,796.0 1,736.0
15,456.0 497.7 447.9 12,784.0 1,750.0
DEC DEC DEC
2012 D F A,C A,C
2,487.4 A 170.4 A,F 1,197.1 940.6 5,154.3
15,382.0 473.3 412.8 A 11,814.0 1,648.0
CAGR (%) 2010
2009
2004
2,336.2 140.6 F 1,141.2 D 878.7 5,269.8
2,140.9 142.0 F 1,098.4 D 882.5 4,184.7
1,641.0 133.7 F 1,045.6 927.7 3,045.6
1,734.1 A 129.5 553.3 725.5 0.2
4.5 3.8 14.9 9.4 NM
10.5 7.0 16.2 14.0 12.3
(6.7) (0.5) 48.6 63.8 (3.3)
9,727.0 NA 272.7 D 10,099.0 NA
5.0 NA 6.0 3.2 NA
3.8 8.7 5.2 4.8 1.7
2.8 23.4 9.0 7.9 (0.8)
163 ** 179 137 **
159 ** 164 127 **
158 ** 151 117 **
162 ** 152 122 **
149 NA 138 116 NA
15,793.0 428.8 413.9 12,317.0 1,613.0
14,450.0 409.4 377.0 11,691.0 1,584.0
13,157.0 405.0 379.1 10,932.0 1,596.0
10-Yr. 5-Yr.
Index Basis (2004 = 100)
2011
1-Yr.
2014 156 145 400 246 2,786,493
2013 167 146 269 150 2,882,531
2012 143 132 216 130 2,643,223
2011 135 109 206 121 2,702,458
2010 123 110 199 122 2,145,999
8,073.9 5,983.0 5,281.0
7,959.9 6,115.0 5,009.0
7,688.0 6,321.0 4,534.0
7,537.3 5,624.0 C 4,254.0 A
6,752.5 5,071.0 C 3,851.0 A
5,889.8 4,712.0 D 3,750.0
4,555.4 5,368.0 A NA
5.9 1.1 NA
6.5 4.9 7.1
1.4 (2.2) 5.4
177 111 **
175 114 **
169 118 **
165 105 **
148 94 NA
LEISURE FACILITIES‡ ISCA † INTL SPEEDWAY CORP -CL A ACAT § ARCTIC CAT INC BC † BRUNSWICK CORP ELY § CALLAWAY GOLF CO HAS [] HASBRO INC
NOV # MAR DEC DEC DEC
651.9 698.8 A 3,838.7 D 886.9 4,277.2
612.6 730.5 3,887.5 842.8 C 4,082.2
612.4 671.6 3,717.6 D 834.1 4,089.0
629.7 585.3 3,748.0 886.5 4,285.6
645.4 464.7 3,403.3 967.7 4,002.2
693.2 450.7 2,776.1 950.8 4,067.9
647.8 D 689.1 5,229.3 934.6 A 2,997.5
0.1 0.1 (3.0) (0.5) 3.6
(1.2) 9.2 6.7 (1.4) 1.0
6.4 (4.3) (1.3) 5.2 4.8
101 101 73 95 143
95 106 74 90 136
95 97 71 89 136
97 85 72 95 143
100 67 65 104 134
MAT PII RGR VSTO
DEC DEC DEC # MAR
6,023.8 4,479.6 544.9 2,083.4
6,484.9 3,777.1 688.9 1,873.9 A
6,420.9 3,209.8 492.6 1,196.0
6,266.0 2,656.9 329.7 NA
5,856.2 1,991.1 255.6 NA
5,430.8 1,565.9 271.5 NA
5,102.8 1,773.2 D 145.6 NA
1.7 9.7 14.1 NA
2.1 23.4 15.0 NA
(7.1) 18.6 (20.9) 11.2
118 253 374 **
127 213 473 **
126 181 338 **
123 150 226 **
115 112 176 NA
RESTAURANTS‡ BH § BIGLARI HOLDINGS INC BJRI § BJ'S RESTAURANTS INC BOBE § BOB EVANS FARMS EAT † BRINKER INTL INC BWLD † BUFFALO WILD WINGS INC
SEP DEC # APR JUN DEC
793.8 845.6 1,349.2 2,905.5 1,516.2
755.8 C 775.1 1,328.6 D 2,846.1 1,266.7
740.2 708.3 1,608.9 A 2,826.9 1,040.5
709.2 620.9 1,652.4 2,761.4 784.5
673.8 A 513.9 1,676.9 2,858.5 D 613.3
627.0 426.7 1,726.8 3,620.6 538.9
553.7 129.0 1,460.2 A 3,707.5 171.0
3.7 20.7 (0.8) (2.4) 24.4
4.8 14.7 (4.8) (4.3) 23.0
5.0 9.1 1.6 2.1 19.7
143 655 92 78 886
137 601 91 77 741
134 549 110 76 608
128 481 113 74 459
122 398 115 77 359
CAKE CMG CBRL DRI DIN
† [] † [] §
CHEESECAKE FACTORY INC CHIPOTLE MEXICAN GRILL INC CRACKER BARREL OLD CTRY STOR DARDEN RESTAURANTS INC DINEEQUITY INC
DEC DEC JUL # MAY DEC
1,976.6 4,108.3 2,683.7 6,764.0 655.0
1,877.9 3,214.6 2,644.6 6,285.6 D 640.5
1,809.0 2,731.2 2,580.2 8,551.9 849.9
1,757.6 2,269.5 2,434.4 7,998.7 1,075.2
1,659.4 1,835.9 2,404.5 7,500.2 1,333.1
1,602.0 1,518.4 2,367.3 7,113.1 1,414.0
969.2 470.7 2,380.9 5,278.1 359.0
7.4 4.3 24.2 22.0 1.2 2.5 2.5 (1.0) 6.2 (14.3)
5.3 27.8 1.5 7.6 2.3
204 873 113 128 182
194 683 111 119 178
187 580 108 162 237
181 482 102 152 299
171 390 101 142 371
DPZ DNKN JACK MCD PNRA
† † † [] †
DOMINO'S PIZZA INC DUNKIN' BRANDS GROUP INC JACK IN THE BOX INC MCDONALD'S CORP PANERA BREAD CO
DEC DEC SEP DEC DEC
1,993.8 748.7 1,484.1 27,441.3 2,529.2
1,802.2 713.8 1,489.9 D 28,105.7 2,385.0
1,678.4 658.2 1,545.0 D 27,567.0 2,130.1 A
1,652.2 628.2 2,193.3 27,006.0 1,822.0 A
1,570.9 577.1 2,297.5 24,074.6 1,542.5 A
1,404.1 NA 2,471.1 A 22,744.7 1,353.5
3.3 NA (4.4) 3.7 18.1
7.3 NA (9.7) 3.8 13.3
10.6 4.9 (0.4) (2.4) 6.0
138 ** 64 144 528
125 ** 64 147 498
116 ** 67 145 445
114 ** 94 142 380
109 NA 99 126 322
PZZA PLKI RRGB RT RUTH
§ § § § §
PAPA JOHNS INTERNATIONAL INC POPEYES LOUISIANA KITCHEN RED ROBIN GOURMET BURGERS RUBY TUESDAY INC RUTHS HOSPITALITY GROUP INC
1,439.0 206.0 1,017.2 1,168.7 408.6 D
1,342.7 178.8 977.1 1,251.5 D 398.6
1,217.9 153.8 914.8 1,325.8 A 369.6 D
1,126.4 146.4 860.8 1,265.2 A 357.6
1,106.0 A 148.0 841.0 1,194.8 344.6 D
942.4 163.9 C,D 409.1 1,110.3 192.2 D
5.4 3.7 10.9 0.1 6.1
7.6 9.7 6.4 (1.2) 0.1
11.1 14.4 12.7 (3.6) (15.3)
170 144 280 101 180
153 126 249 105 213
142 109 239 113 207
129 94 224 119 192
120 89 210 114 186
SONC SBUX TXRH WEN YUM
§ [] § † []
SONIC CORP STARBUCKS CORP TEXAS ROADHOUSE INC WENDY'S CO YUM BRANDS INC
542.6 14,892.2 A 1,422.6 2,487.4 13,084.0
543.7 13,299.5 A 1,263.3 2,505.2 13,633.0 C
546.0 11,700.4 1,109.2 2,431.4 D 12,626.0
536.4 5,294.2 363.0 A 328.6 A 9,011.0
0.3 (5.1) 12.0 11.0 15.9 10.9 20.2 (10.5) 4.0 4.1
1.8 10.4 11.2 (17.1) 1.5
103 311 436 627 147
101 281 392 757 145
101 251 348 762 151
102 221 306 740 140
103 202 277 1,040 126
[] † § †
MATTEL INC POLARIS INDUSTRIES INC STURM RUGER & CO INC VISTA OUTDOOR INC
DEC DEC DEC # MAY DEC AUG SEP DEC DEC DEC
1,598.1 235.6 1,146.1 1,126.6 346.1 D 552.3 16,447.8 1,582.1 2,061.1 13,279.0
550.9 10,707.4 1,005.0 3,416.4 11,343.0
718.8 9,774.6 942.3 3,580.8 10,868.0
1,446.5 NA 2,322.4 19,064.7 479.1
Note: Data as originally reported. CAGR-Compound annual grow th rate. ‡S&P 1500 index group. []Company included in the S&P 500. †Company included in the S&P MidCap 400. §Company included in the S&P SmallCap 600. #Of the f ollow ing calendar year. **Not calculated; data for base year or end year not available. A - This year's data reflect an acquisition or merger. B - This year's data reflect a major merger resulting in the f ormation of a new company. C - This year's data ref lect an accounting change. D - Data exclude discontinued operations. E - Includes excise taxes. F - Includes other (nonoperating) income. G - Includes sale of leased depts. H - Some or all data are not available, due to a fiscal year change.
INDUSTRY SURVEYS
HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
65
Net Income Million $ Ticker
Com pany
CASINOS & GAMING‡ BYD § BOYD GAMING CORP MCRI § MONARCH CASINO & RESORT INC PNK § PINNACLE ENTERTAINMENT INC SGMS § SCIENTIFIC GAMES CORP WYNN [] WYNN RESORTS LTD HOTELS, RESORTS & CRUISE LINES‡ CCL [] CARNIVAL CORP/PLC (USA) IILG § INTERVAL LEISURE GROUP MCS § MARCUS CORP MAR [] MARRIOTT INTL INC VAC § MARRIOTT VACATIONS WORLDWIDE
CAGR (%)
Index Basis (2004 = 100)
Yr. End
2014
2013
2012
2011
2010
2009
2004
10-Yr.
5-Yr.
1-Yr.
2014
2013
2012
2011
2010
DEC DEC DEC DEC DEC
(53.0) 14.2 38.4 (234.3) 731.6
(91.1) 18.0 (133.3) (25.6) 728.7
(908.9) 8.9 (22.6) (62.6) 502.0
(3.9) 5.7 30.2 (12.6) 613.4
10.3 8.2 (39.6) (149.2) 160.1
4.2 4.8 (257.8) (39.9) 20.7
111.5 16.5 9.2 65.7 (205.6)
NM (1.5) 15.4 NM NM
NM 24.0 NM NM 104.1
NM (21.0) NM NM 0.4
(48) 86 419 (356) NM
(82) 109 (1,455) (39) NM
(815) 54 (247) (95) NM
(3) 34 330 (19) NM
9 50 (432) (227) NM
1,978.0 42.4 13.6 458.0 67.0
1,790.0 38.2 16.1 (346.0) (521.0)
1,854.0 NA 19.2 594.0 NA
(4.0) NA 2.2 2.4 NA
(7.1) 15.6 8.3 NM NM
14.7 (2.8) (4.0) 20.3 1.3
67 ** 125 127 **
58 ** 130 105 **
70 ** 91 96 **
103 ** 118 33 **
107 NA 70 77 NA
4.9 5.7 NA
36.3 NM 12.5
61.3 13.8 22.5
161 174 **
100 153 **
4 127 **
128 136 **
115 84 NA
NOV DEC # MAY DEC DEC
1,236.0 78.9 24.0 753.0 81.0
1,078.0 81.2 25.0 626.0 80.0
1,298.0 40.7 17.5 571.0 16.0
DEC DEC DEC
764.1 643.0 529.0
473.7 565.0 432.0
18.3 470.0 400.0
607.4 502.0 417.0
547.5 310.0 379.0
162.4 (1.0) 293.0
474.7 369.0 NA
LEISURE FACILITIES‡ ISCA † INTL SPEEDWAY CORP -CL A ACAT § ARCTIC CAT INC BC † BRUNSWICK CORP ELY § CALLAWAY GOLF CO HAS [] HASBRO INC
NOV # MAR DEC DEC DEC
67.4 4.9 194.9 16.0 415.9
45.3 39.4 775.2 (18.9) 286.2
54.6 39.7 147.4 (122.9) 336.0
69.4 29.9 71.9 (171.8) 385.4
54.6 13.0 (110.6) (18.8) 397.8
7.0 1.9 (586.2) (15.3) 374.9
126.3 28.3 269.8 (10.1) 196.0
(6.1) (16.1) (3.2) NM 7.8
57.4 21.3 NM NM 2.1
48.8 (87.5) (74.9) NM 45.3
53 17 72 NM 212
36 139 287 NM 146
43 140 55 NM 171
55 106 27 NM 197
43 46 (41) NM 203
MAT PII RGR VSTO
DEC DEC DEC # MAR
498.9 454.0 38.6 79.5
903.9 381.1 111.3 133.3
776.5 312.3 70.6 64.7
768.5 227.6 40.0 NA
684.9 147.1 28.3 NA
528.7 101.0 27.5 NA
572.7 136.8 4.3 NA
(1.4) 12.7 24.5 NA
(1.2) 35.1 7.0 NA
(44.8) 19.1 (65.3) (40.3)
87 332 897 **
158 279 2,585 **
136 228 1,641 **
134 166 930 **
120 108 656 NA
RESTAURANTS‡ BH § BIGLARI HOLDINGS INC BJRI § BJ'S RESTAURANTS INC BOBE § BOB EVANS FARMS EAT † BRINKER INTL INC BWLD † BUFFALO WILD WINGS INC
SEP DEC # APR JUN DEC
28.8 27.4 16.6 154.0 94.1
140.3 21.0 31.0 163.4 71.6
21.6 31.4 (2.9) 151.2 57.3
34.6 31.6 72.8 141.1 50.4
28.1 23.2 54.2 103.7 38.4
6.0 13.0 70.3 79.2 30.7
27.6 6.3 37.0 150.9 7.2
0.4 15.9 (7.7) 0.2 29.3
36.9 16.0 (25.1) 14.2 25.1
(79.5) 30.3 (46.5) (5.7) 31.5
104 437 45 102 1,307
508 336 84 108 994
125 504 197 93 700
102 370 147 69 533
CAKE CMG CBRL DRI DIN
† [] † [] §
CHEESECAKE FACTORY INC CHIPOTLE MEXICAN GRILL INC CRACKER BARREL OLD CTRY STOR DARDEN RESTAURANTS INC DINEEQUITY INC
DEC DEC JUL # MAY DEC
101.3 445.4 132.1 196.4 36.5
114.4 327.4 117.3 183.2 72.0
98.4 278.0 103.1 412.6 127.7
95.7 214.9 85.2 476.5 75.2
81.7 179.0 85.3 478.7 (2.8)
42.8 126.8 66.0 407.0 31.4
66.5 6.1 111.9 290.6 33.4
4.3 NM 1.7 (3.8) 0.9
18.8 28.6 14.9 (13.6) 3.0
(11.4) 36.0 12.7 7.2 (49.4)
152 NM 118 68 109
172 NM 105 63 216
DPZ DNKN JACK MCD PNRA
† † † [] †
DOMINO'S PIZZA INC DUNKIN' BRANDS GROUP INC JACK IN THE BOX INC MCDONALD'S CORP PANERA BREAD CO
DEC DEC SEP DEC DEC
162.6 176.4 94.8 4,757.8 179.3
143.0 146.9 82.6 5,585.9 196.2
112.4 108.3 63.0 5,464.8 173.4
105.4 34.4 80.6 5,503.1 136.0
87.9 26.9 70.2 4,946.3 111.9
79.7 NA 131.0 4,551.0 86.1
62.3 NA 74.7 2,278.5 38.6
10.1 NA 2.4 7.6 16.6
15.3 NA (6.3) 0.9 15.8
13.7 20.0 14.8 (14.8) (8.6)
261 ** 127 209 465
230 ** 111 245 508
180 ** 84 240 450
169 ** 108 242 352
141 NA 94 217 290
PZZA PLKI RRGB RT RUTH
§ § § § §
PAPA JOHNS INTERNATIONAL INC POPEYES LOUISIANA KITCHEN RED ROBIN GOURMET BURGERS RUBY TUESDAY INC RUTHS HOSPITALITY GROUP INC
51.9 22.9 7.3 46.9 16.6
57.5 18.8 17.6 45.3 2.5
23.2 (14.3) 23.4 102.3 6.4
12.2 NM 3.4 NM 15.4
5.0 15.1 13.1 NM 60.3
5.4 11.4 1.0 NM 12.3
316 NM 139 (3) 420
299 NM 138 (63) 374
266 NM 121 (23) 258
236 NM 88 (0) 300
224 NM 31 46 260
SONC SBUX TXRH WEN YUM
§ [] § † []
SONIC CORP STARBUCKS CORP TEXAS ROADHOUSE INC WENDY'S CO YUM BRANDS INC
63.0 390.6 21.7 1.5 740.0
(2.7) 18.1 14.9 NM 3.6
(0.6) 30.6 39.5 24,816.9 12.9 8.2 103.1 165.4 (0.4) (3.7)
76 530 401 NM 142
RCL HOT WYN
[] ROYAL CARIBBEAN CRUISES LTD [] STARWOOD HOTELS&RESORTS WRLD [] WYNDHAM WORLDWIDE CORP
[] † § †
MATTEL INC POLARIS INDUSTRIES INC STURM RUGER & CO INC VISTA OUTDOOR INC
DEC DEC DEC # MAY DEC AUG SEP DEC DEC DEC
73.3 38.0 32.6 (3.2) 26.7 47.9 2,068.1 87.0 121.4 1,051.0
69.5 34.1 32.2 (64.9) 23.8 36.7 8.3 80.4 45.8 1,091.0
61.7 30.4 28.3 (23.4) 16.4 36.1 1,383.8 71.2 5.6 1,597.0
1,912.0 41.1 22.7 198.0 (178.0)
54.7 24.2 20.6 (0.2) 19.1 19.2 1,245.7 64.0 17.9 1,319.0
21.2 945.6 58.3 (4.3) 1,158.0
49.4 390.8 47.5 3.5 1,071.0
58 2 371 3,098 147
78 501 (8) 100 795 148 4,538 92 142 382
57 354 328 377 216
144 3,509 76 164 225
31 319 295 1,213 178
123 2,922 76 165 (8)
34 242 269 (293) 156
Note: Data as originally reported. CAGR-Compound annual grow th rate. ‡S&P 1500 index group. []Company included in the S&P 500. †Company included in the S&P MidCap 400. §Company included in the S&P SmallCap 600. #Of the follow ing calendar year. **Not calculated; data for base year or end year not available.
66
HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
INDUSTRY SURVEYS
Return on Revenues (%) Ticker
Com pany
Return on Assets (%)
Return on Equity (%)
Yr. End
2014
2013
2012
2011
2010
2014
2013
2012
2011
2010
2014
2013
2012
2011
2010
DEC DEC DEC DEC DEC
NM 7.6 1.7 NM 13.5
NM 9.5 NM NM 13.0
NM 5.2 NM NM 9.7
NM 4.0 2.6 NM 11.6
0.5 5.8 NM NM 3.8
NM 5.7 0.8 NM 8.4
NM 7.3 NM NM 9.3
NM 4.2 NM NM 7.1
NM 3.2 1.6 NM 9.0
0.2 4.5 NM NM 2.2
NM 8.3 15.6 NM NA
NM 11.8 NM NM NA
NM 6.6 NM NM 54.9
NM 4.5 5.9 NM 28.4
0.9 7.0 NM NM 6.1
NOV DEC # MAY DEC DEC
7.8 12.8 4.9 5.5 4.7
7.0 16.3 5.6 4.9 4.6
8.4 8.6 4.2 4.8 1.0
12.1 9.6 5.5 1.6 NM
13.7 10.4 3.6 3.9 4.2
3.1 6.7 3.0 11.0 3.1
2.7 8.4 3.3 9.5 3.1
3.3 4.3 2.4 9.3 0.6
5.0 4.2 3.2 2.7 NM
5.3 4.4 1.9 5.4 2.0
5.1 21.7 7.2 NA 7.1
4.4 26.4 7.9 NA 6.8
5.4 15.6 5.4 NA 1.4
8.2 17.4 6.7 49.3 NM
8.8 21.2 4.0 33.6 3.2
DEC DEC DEC
9.5 10.7 10.0
6.0 9.2 8.6
0.2 7.4 8.8
8.1 8.9 9.8
8.1 6.1 9.8
3.7 7.4 5.4
2.4 6.4 4.5
0.1 5.1 4.3
3.1 5.2 4.5
2.9 3.3 4.0
8.9 26.3 36.8
5.5 17.4 24.3
0.2 15.4 19.2
7.4 18.5 16.2
7.1 14.4 13.5
LEISURE FACILITIES‡ ISCA † INTL SPEEDWAY CORP -CL A ACAT § ARCTIC CAT INC BC † BRUNSWICK CORP ELY § CALLAWAY GOLF CO HAS [] HASBRO INC
NOV # MAR DEC DEC DEC
10.3 0.7 5.1 1.8 9.7
7.4 5.4 19.9 NM 7.0
8.9 5.9 4.0 NM 8.2
11.0 5.1 1.9 NM 9.0
8.5 2.8 NM NM 9.9
3.3 1.5 6.4 2.5 9.3
2.3 12.2 29.0 NM 6.6
2.8 14.2 6.0 NM 7.9
3.6 11.3 2.8 NM 9.4
2.9 5.0 NM NM 10.0
5.1 2.7 17.6 5.6 26.4
3.6 21.9 138.9 NM 17.9
4.4 25.4 271.5 NM 23.0
5.8 18.6 142.0 NM 25.4
4.7 7.4 NM NM 24.8
MAT PII RGR VSTO
DEC DEC DEC # MAR
8.3 10.1 7.1 3.8
13.9 10.1 16.2 7.1
12.1 9.7 14.3 5.4
12.3 8.6 12.1 NA
11.7 7.4 11.1 NA
7.6 24.1 14.5 3.2
13.9 24.0 49.3 8.2
12.7 23.0 37.1 NA
13.9 19.9 22.0 NA
13.4 16.1 18.9 NA
16.1 65.0 21.2 6.3
28.6 62.2 81.2 19.0
27.4 52.5 60.8 NA
29.3 52.3 31.8 NA
26.5 51.1 26.9 NA
RESTAURANTS‡ BH § BIGLARI HOLDINGS INC BJRI § BJ'S RESTAURANTS INC BOBE § BOB EVANS FARMS EAT † BRINKER INTL INC BWLD † BUFFALO WILD WINGS INC
SEP DEC # APR JUN DEC
3.6 3.2 1.2 5.3 6.2
18.6 2.7 2.3 5.7 5.6
2.9 4.4 NM 5.3 5.5
4.9 5.1 4.4 5.1 6.4
4.2 4.5 3.2 3.6 6.3
2.7 4.4 1.6 10.5 12.1
15.9 3.6 3.0 11.3 11.0
3.0 5.9 NM 10.4 10.5
5.6 6.8 6.7 8.5 11.5
5.2 5.7 4.9 5.5 11.1
4.8 7.3 4.3 145.0 18.1
30.7 5.4 6.4 71.1 16.9
6.9 8.9 NM 40.4 16.3
13.1 10.2 11.0 24.2 17.5
10.4 8.6 8.3 15.1 16.5
CAKE CMG CBRL DRI DIN
† [] † [] §
CHEESECAKE FACTORY INC CHIPOTLE MEXICAN GRILL INC CRACKER BARREL OLD CTRY STOR DARDEN RESTAURANTS INC DINEEQUITY INC
DEC DEC JUL # MAY DEC
5.1 10.8 4.9 2.9 5.6
6.1 10.2 4.4 2.9 11.2
5.4 10.2 4.0 4.8 15.0
5.4 9.5 3.5 6.0 7.0
4.9 9.7 3.5 6.4 NM
8.8 19.6 9.4 3.0 1.5
10.3 17.8 8.4 2.6 3.0
9.3 18.0 7.6 6.4 5.0
9.3 16.9 6.5 8.4 2.7
7.9 17.2 6.7 8.9 NM
17.9 25.1 26.1 8.7 12.3
19.8 23.5 27.1 8.7 23.1
17.5 24.3 31.7 21.2 59.7
16.9 23.2 37.1 25.2 95.4
14.7 23.6 52.1 25.0 NM
DPZ DNKN JACK MCD PNRA
† † † [] †
DOMINO'S PIZZA INC DUNKIN' BRANDS GROUP INC JACK IN THE BOX INC MCDONALD'S CORP PANERA BREAD CO
DEC DEC SEP DEC DEC
8.2 23.6 6.4 17.3 7.1
7.9 20.6 5.5 19.9 8.2
6.7 16.5 4.1 19.8 8.1
6.4 5.5 3.7 20.4 7.5
5.6 4.7 3.1 20.5 7.3
28.4 5.5 7.3 13.4 13.9
28.5 4.6 5.9 15.5 16.0
23.4 3.4 4.3 16.0 15.1
22.4 1.1 5.7 16.9 13.9
19.2 NA 4.9 15.9 12.7
NA 45.5 26.0 33.0 25.0
NA 39.0 18.7 35.7 25.8
NA 19.8 15.4 36.8 23.5
NA 32.6 17.4 37.9 21.7
NA NA 13.4 34.5 18.8
PZZA PLKI RRGB RT RUTH
§ § § § §
PAPA JOHNS INTERNATIONAL INC POPEYES LOUISIANA KITCHEN RED ROBIN GOURMET BURGERS RUBY TUESDAY INC RUTHS HOSPITALITY GROUP INC
DEC DEC DEC # MAY DEC
4.6 16.1 2.8 NM 7.7
4.8 16.6 3.2 NM 5.8
4.6 17.0 2.9 NM 4.1
4.5 15.7 2.2 NM 5.2
4.6 15.6 0.8 3.7 4.6
15.0 16.5 4.8 NM 12.0
15.4 18.3 5.2 NM 10.4
14.9 19.7 4.8 NM 6.7
13.6 18.7 3.5 NM 6.6
12.8 19.0 1.2 4.2 5.6
65.5 61.0 9.2 NM 27.1
43.6 73.3 9.9 NM 26.0
31.9 126.7 9.4 NM 17.4
27.1 210.4 6.9 NM 18.0
27.7 NA 2.5 8.3 23.1
SONC SBUX TXRH WEN YUM
§ [] § † []
SONIC CORP STARBUCKS CORP TEXAS ROADHOUSE INC WENDY'S CO YUM BRANDS INC
AUG SEP DEC DEC DEC
8.7 12.6 5.5 5.9 7.9
6.8 0.1 5.7 1.8 8.3
6.6 10.4 5.6 0.2 11.7
3.5 10.6 5.8 0.7 10.4
3.8 8.8 5.8 NM 10.2
7.3 18.6 9.6 2.9 12.3
5.5 0.1 9.6 1.1 12.3
5.3 17.8 9.3 0.1 17.9
2.7 18.1 8.9 0.4 15.4
2.7 15.8 8.5 NM 15.0
68.4 42.4 14.6 6.7 56.6
53.7 0.2 14.5 2.3 50.5
65.1 29.2 14.0 0.3 80.3
51.9 30.9 12.9 0.9 77.6
234.7 28.1 12.7 NM 89.0
CASINOS & GAMING‡ BYD § BOYD GAMING CORP MCRI § MONARCH CASINO & RESORT INC PNK § PINNACLE ENTERTAINMENT INC SGMS § SCIENTIFIC GAMES CORP WYNN [] WYNN RESORTS LTD HOTELS, RESORTS & CRUISE LINES‡ CCL [] CARNIVAL CORP/PLC (USA) IILG § INTERVAL LEISURE GROUP MCS § MARCUS CORP MAR [] MARRIOTT INTL INC VAC § MARRIOTT VACATIONS WORLDWIDE RCL HOT WYN
[] ROYAL CARIBBEAN CRUISES LTD [] STARWOOD HOTELS&RESORTS WRLD [] WYNDHAM WORLDWIDE CORP
[] † § †
MATTEL INC POLARIS INDUSTRIES INC STURM RUGER & CO INC VISTA OUTDOOR INC
Note: Data as originally reported. ‡S&P 1500 index group. []Company included in the S&P 500. †Company included in the S&P MidCap 400. §Company included in the S&P SmallCap 600. #Of the follow ing calendar year.
INDUSTRY SURVEYS
HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
67
Current Ratio Ticker
Com pany
Debt as a % of Net Working Capital
Debt / Capital Ratio (%)
Yr. End
2014
2013
2012
2011
2010
2014
2013
2012
2011
2010
2014
2013
2012
2011
2010
DEC DEC DEC DEC DEC
0.7 1.2 0.8 2.1 2.1
0.7 1.3 1.6 2.1 2.0
0.5 1.2 0.9 1.9 1.9
0.7 1.1 1.0 1.7 1.1
0.5 0.9 1.7 2.1 1.8
85.5 20.7 89.7 93.0 100.0
87.4 24.7 92.0 86.0 102.7
91.6 36.5 76.1 77.3 103.8
69.1 15.8 70.1 73.2 56.7
67.3 18.5 69.7 73.0 58.5
NM 888.3 NM NM 500.0
NM 753.8 NM 626.9 435.2
NM NM NM 635.2 539.8
NM NM NM 793.3 NM
NM NM 939.3 637.8 485.0
NOV DEC # MAY DEC DEC
0.2 1.3 0.4 0.6 NA
0.3 0.8 0.4 0.7 NA
0.2 1.2 0.4 0.5 NA
0.2 1.6 0.2 0.5 NA
0.2 1.5 0.4 1.4 NA
23.3 50.6 38.8 271.6 33.2
24.8 36.8 41.1 180.2 30.2
23.1 42.0 42.6 200.5 31.7
25.3 50.7 26.2 173.0 36.7
25.8 53.6 34.0 62.6 32.0
NM 687.3 NM NM NA
NM NM NM NM NA
NM 762.6 NM NM NA
NM 316.0 NM NM NA
NM 376.1 NM 305.4 NA
DEC DEC DEC
0.2 0.9 1.0
0.2 1.0 1.1
0.2 0.9 1.0
0.3 1.3 1.1
0.3 1.1 1.1
48.0 62.2 66.1
42.5 30.9 62.2
45.6 34.0 56.7
48.3 46.4 53.4
50.0 56.3 47.1
NM NM NM
NM NM NM
NM NM NM
NM 479.0 NM
NM NM NM
LEISURE FACILITIES‡ ISCA † INTL SPEEDWAY CORP -CL A ACAT § ARCTIC CAT INC BC † BRUNSWICK CORP ELY § CALLAWAY GOLF CO HAS [] HASBRO INC
NOV # MAR DEC DEC DEC
2.1 2.0 2.2 2.1 2.5
2.9 1.9 1.7 1.9 1.8
1.7 2.0 1.5 2.4 2.6
1.8 1.9 1.5 2.5 2.4
1.6 2.7 1.6 3.1 3.1
13.6 0.0 27.7 25.0 50.8
14.1 0.0 30.4 25.2 35.7
14.8 0.0 76.8 23.3 48.1
17.0 0.0 86.0 0.0 49.7
17.1 0.0 85.4 0.0 46.4
242.2 0.0 42.2 54.3 94.9
176.7 0.0 72.5 55.2 85.9
539.5 0.0 133.3 47.5 90.2
414.3 0.0 154.1 0.0 106.8
520.1 0.0 141.8 0.0 93.0
MAT PII RGR VSTO
DEC DEC DEC # MAR
2.9 1.3 2.0 3.5
3.2 1.2 1.8 2.6
2.1 1.6 1.6 1.9
3.3 1.4 2.9 NA
2.4 1.4 3.2 NA
40.6 20.0 0.0 15.3
32.2 33.3 0.0 48.3
25.6 13.1 0.0 0.0
36.1 17.3 0.0 NA
26.2 21.2 0.0 NA
100.1 91.0 0.0 43.9
68.7 241.7 0.0 196.3
59.8 27.0 0.0 0.0
62.4 39.7 0.0 NA
50.6 44.7 0.0 NA
RESTAURANTS‡ BH § BIGLARI HOLDINGS INC BJRI § BJ'S RESTAURANTS INC BOBE § BOB EVANS FARMS EAT † BRINKER INTL INC BWLD † BUFFALO WILD WINGS INC
SEP DEC # APR JUN DEC
1.6 0.8 0.8 0.5 1.4
1.7 0.8 0.2 0.5 1.1
2.8 1.0 0.4 0.5 0.9
2.1 1.2 0.5 0.5 1.2
1.2 1.3 0.7 1.1 1.7
30.0 13.0 53.1 93.0 0.0
25.0 0.0 0.2 83.9 0.0
36.0 0.0 0.1 65.5 0.0
39.6 0.0 12.1 53.4 0.0
30.6 0.0 15.8 41.9 0.0
430.4 NM NM NM 0.0
256.6 NM NM NM 0.0
102.6 0.0 NM NM NM
173.0 0.0 NM NM 0.0
744.8 0.0 NM NM 0.0
CAKE CMG CBRL DRI DIN
† [] † [] §
CHEESECAKE FACTORY INC CHIPOTLE MEXICAN GRILL INC CRACKER BARREL OLD CTRY STOR DARDEN RESTAURANTS INC DINEEQUITY INC
DEC DEC JUL # MAY DEC
0.7 3.6 1.0 0.9 1.3
0.9 3.3 1.0 1.2 1.2
0.9 2.9 1.1 0.5 1.1
0.8 3.2 0.9 0.4 1.1
0.9 3.3 0.8 0.5 1.3
10.6 0.0 39.0 36.0 70.7
8.9 0.0 42.5 50.9 67.5
7.6 0.3 54.1 51.3 67.3
7.8 0.3 62.1 41.2 76.0
7.1 0.4 69.8 39.1 81.4
NM NM NM NM NM
NM NM NM 707.9 NM
NM 0.9 NM NM NM
NM 1.0 NM NM NM
NM 1.3 NM NM NM
DPZ DNKN JACK MCD PNRA
† † † [] †
DOMINO'S PIZZA INC DUNKIN' BRANDS GROUP INC JACK IN THE BOX INC MCDONALD'S CORP PANERA BREAD CO
DEC DEC SEP DEC DEC
1.6 1.2 0.7 1.5 1.2
1.4 1.3 0.6 1.6 1.0
1.3 1.2 0.8 1.4 1.7
1.7 1.3 0.9 1.3 1.5
1.6 1.0 1.0 1.5 1.6
492.0 66.5 65.8 50.9 11.5
657.7 65.2 42.5 44.5 0.7
653.0 66.7 49.6 44.8 0.7
528.7 52.4 52.1 43.5 0.2
530.0 67.5 40.4 41.9 0.0
936.1 NM NM NM 196.7
NM NM NM 751.5 NM
NM NM NM 897.5 3.1
NM NM NM NM 1.3
NM NM NM 796.3 0.0
PZZA PLKI RRGB RT RUTH
§ § § § §
PAPA JOHNS INTERNATIONAL INC POPEYES LOUISIANA KITCHEN RED ROBIN GOURMET BURGERS RUBY TUESDAY INC RUTHS HOSPITALITY GROUP INC
DEC DEC DEC # MAY DEC
1.5 1.1 0.6 1.1 0.6
1.3 1.3 0.6 0.9 0.5
1.1 1.2 0.7 1.1 0.4
1.2 1.3 0.8 1.0 0.4
1.2 1.3 0.6 0.7 0.4
66.3 57.3 29.0 33.4 11.9
48.1 48.0 20.1 35.3 15.9
29.6 60.6 30.1 35.7 35.3
18.5 74.1 33.1 33.9 15.1
33.2 80.5 31.6 34.2 32.9
468.0 NM NM NM NM
581.0 586.8 NM NM NM
586.6 742.2 NM NM NM
376.1 593.9 NM NM NM
456.6 659.6 NM NM NM
SONC SBUX TXRH WEN YUM
§ [] § † []
SONIC CORP STARBUCKS CORP TEXAS ROADHOUSE INC WENDY'S CO YUM BRANDS INC
AUG SEP DEC DEC DEC
1.2 1.4 0.7 1.7 0.7
1.9 1.0 0.8 2.6 0.7
1.3 1.9 0.8 2.5 0.9
1.3 1.8 0.8 2.0 0.9
1.1 1.5 1.0 1.8 0.9
81.8 28.0 7.6 38.7 65.8
80.4 22.4 7.9 37.1 55.5
84.7 9.7 8.8 37.3 55.4
86.6 11.1 11.0 35.4 61.6
93.8 13.0 9.3 37.6 64.2
NM 181.3 NM 628.4 NM
678.3 NM NM 248.8 NM
NM 27.6 NM 341.6 NM
NM 32.0 NM 356.6 NM
NM 56.2 NM 466.2 NM
CASINOS & GAMING‡ BYD § BOYD GAMING CORP MCRI § MONARCH CASINO & RESORT INC PNK § PINNACLE ENTERTAINMENT INC SGMS § SCIENTIFIC GAMES CORP WYNN [] WYNN RESORTS LTD HOTELS, RESORTS & CRUISE LINES‡ CCL [] CARNIVAL CORP/PLC (USA) IILG § INTERVAL LEISURE GROUP MCS § MARCUS CORP MAR [] MARRIOTT INTL INC VAC § MARRIOTT VACATIONS WORLDWIDE RCL HOT WYN
[] ROYAL CARIBBEAN CRUISES LTD [] STARWOOD HOTELS&RESORTS WRLD [] WYNDHAM WORLDWIDE CORP
[] † § †
MATTEL INC POLARIS INDUSTRIES INC STURM RUGER & CO INC VISTA OUTDOOR INC
Note: Data as originally reported. ‡S&P 1500 index group. []Company included in the S&P 500. †Company included in the S&P MidCap 400. §Company included in the S&P SmallCap 600. #Of the follow ing calendar year.
68
HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
INDUSTRY SURVEYS
Price / Earnings Ratio (High-Low) Ticker
Com pany
CASINOS & GAMING‡ BYD § BOYD GAMING CORP MCRI § MONARCH CASINO & RESORT INC PNK § PINNACLE ENTERTAINMENT INC SGMS § SCIENTIFIC GAMES CORP WYNN [] WYNN RESORTS LTD HOTELS, RESORTS & CRUISE LINES‡ CCL [] CARNIVAL CORP/PLC (USA) IILG § INTERVAL LEISURE GROUP MCS § MARCUS CORP MAR [] MARRIOTT INTL INC VAC § MARRIOTT VACATIONS WORLDWIDE RCL HOT WYN
[] ROYAL CARIBBEAN CRUISES LTD [] STARWOOD HOTELS&RESORTS WRLD [] WYNDHAM WORLDWIDE CORP
Yr. End
2014
2013
2012
2011
Dividend Payout Ratio (%) 2010
Dividend Yield (High-Low, %)
2014
2013
2012
2011
2010
2014
2013
2012
2011
2010
DEC DEC DEC DEC DEC
NM24 43 NM34 -
NM 13 31 NM 18
NM20 NMNM27 -
NM 8 NM NM 16
NM21 NMNM28 -
NM 13 NM NM 19
NM38 32 NM35 -
NM 24 16 NM 20
NM26 NMNM90 -
56 13 NM NM 46
NM 0 0 NM 86
NM 0 NM NM 97
NM 0 NM NM 195
NM 0 0 NM 132
0 0 NM NM 654
0.0 0.0 0.0 0.0 4.7 -
0.0 0.0 0.0 0.0 2.5
0.0 0.0 0.0 0.0 6.2 -
0.0 0.0 0.0 0.0 3.6
0.0 0.0 0.0 0.0 10.5 -
0.0 0.0 0.0 0.0 6.9
0.0 0.0 0.0 0.0 6.4 -
0.0 0.0 0.0 0.0 3.8
0.0 0.0 0.0 0.0 14.2 -
0.0 0.0 0.0 0.0 7.2
NOV DEC # MAY DEC DEC
29 22 23 30 32 -
21 14 15 18 19
29 23 16 24 24 -
23 13 13 19 17
24 29 23 24 92 -
17 18 16 17 38
20 25 18 76 NM-
12 14 10 46 NM
19 23 32 34 NA -
12 15 19 20 NA
63 32 44 30 10
108 23 38 31 0
60 69 213 28 0
41 0 44 69 NM
16 0 74 16 NA
3.0 2.3 3.0 1.6 0.5 -
2.2 1.4 2.0 1.0 0.3
4.8 1.8 3.0 1.7 0.0 -
3.7 1.0 2.3 1.3 0.0
3.4 3.9 13.0 1.6 0.0 -
2.5 2.4 9.3 1.2 0.0
3.5 0.0 4.3 1.5 0.0 -
2.1 0.0 2.5 0.9 0.0
1.3 0.0 4.0 0.8 NA -
0.8 0.0 2.3 0.5 NA
DEC DEC DEC
24 - 13 25 - 20 21 - 16
22 - 15 27 - 20 23 - 16
NM- NM 25 - 19 20 - 13
18 - 7 25 - 14 15 - 10
19 - 9 37 - 20 15 - 9
32 115 33
34 46 36
550 51 33
7 19 23
0 18 23
2.4 5.8 2.1 -
1.3 4.6 1.6
2.4 2.3 2.2 -
1.6 1.7 1.6
2.0 2.6 2.5 -
1.2 2.0 1.7
1.1 1.4 2.4 -
0.4 0.8 1.6
0.0 0.9 2.5 -
0.0 0.5 1.5
25 16 18 NM15 -
22 13 34 NM17 -
28 24 NMNM18 -
20 10 NM NM 11
17 132 22 19 52
23 13 1 NM 55
17 0 3 NM 67
12 0 6 NM 40
14 0 NM NM 33
0.9 1.7 1.2 0.6 3.6 -
0.6 0.8 0.9 0.4 2.8
0.8 1.2 0.3 0.7 3.4 -
0.6 0.7 0.2 0.4 2.2
0.9 0.0 0.3 0.8 5.5 -
0.7 0.0 0.2 0.5 4.4
0.9 0.0 0.4 0.9 3.7 -
0.6 0.0 0.2 0.5 2.4
0.7 0.0 0.5 0.7 3.1 -
0.5 0.0 0.2 0.4 1.9
LEISURE FACILITIES‡ ISCA † INTL SPEEDWAY CORP -CL A ACAT § ARCTIC CAT INC BC † BRUNSWICK CORP ELY § CALLAWAY GOLF CO HAS [] HASBRO INC
NOV # MAR DEC DEC DEC
26 NM25 49 18 -
19 79 18 32 15
37 21 6NM25 -
MAT PII RGR VSTO
DEC DEC DEC # MAR
33 23 43 NA -
20 17 17 NA
19 - 14 26 - 15 14 - 8 NA - NA
17 - 12 20 - 12 16 - 9 NA - NA
13 - 10 20 - 11 17 - 7 NA - NA
14 - 10 18 - 10 12 - 7 NA - NA
104 28 81 0
55 30 37 NA
55 33 157 NA
42 27 20 NA
44 36 22 NA
5.3 1.6 4.8 NA -
3.2 1.2 1.9 NA
4.1 2.0 4.7 NA -
3.0 1.1 2.6 NA
4.5 2.8 17.5 NA -
3.3 1.6 9.6 NA
4.1 2.6 2.9 NA -
3.1 1.4 1.2 NA
4.4 3.8 3.3 NA -
3.1 2.0 1.8 NA
RESTAURANTS‡ BH § BIGLARI HOLDINGS INC BJRI § BJ'S RESTAURANTS INC BOBE § BOB EVANS FARMS EAT † BRINKER INTL INC BWLD † BUFFALO WILD WINGS INC
SEP DEC # APR JUN DEC
30 51 80 26 37 -
19 25 60 19 25
555 51 21 40 -
4 34 34 14 19
27 49 NM19 31 -
20 28 NM 13 20
18 50 15 18 26 -
11 29 11 13 15
22 46 19 22 25 -
13 21 13 14 16
0 0 177 41 0
0 0 103 35 0
0 0 NM 33 0
0 0 39 36 0
0 0 44 46 0
0.0 0.0 2.9 2.2 0.0 -
0.0 0.0 2.2 1.6 0.0
0.0 0.0 3.0 2.6 0.0 -
0.0 0.0 2.0 1.7 0.0
0.0 0.0 3.2 2.6 0.0 -
0.0 0.0 2.6 1.8 0.0
0.0 0.0 3.5 2.9 0.0 -
0.0 0.0 2.6 2.0 0.0
0.0 0.0 3.4 3.4 0.0 -
0.0 0.0 2.2 2.1 0.0
CAKE CMG CBRL DRI DIN
† [] † [] §
CHEESECAKE FACTORY INC CHIPOTLE MEXICAN GRILL INC CRACKER BARREL OLD CTRY STOR DARDEN RESTAURANTS INC DINEEQUITY INC
DEC DEC JUL # MAY DEC
25 49 26 39 54 -
21 33 17 28 39
23 52 24 39 23 -
15 25 13 32 17
20 50 16 18 10 -
15 27 11 14 6
20 50 15 15 15 -
14 31 10 11 9
24 46 16 15 NM-
15 15 10 10 NM
30 0 59 143 163
24 0 45 157 80
13 0 26 62 0
0 0 24 47 0
0 0 22 37 NM
1.5 0.0 3.5 5.1 4.2 -
1.2 0.0 2.3 3.7 3.0
1.6 0.0 3.5 5.0 4.7 -
1.0 0.0 1.9 4.0 3.5
0.8 0.0 2.3 4.6 0.0 -
0.7 0.0 1.7 3.5 0.0
0.0 0.0 2.4 4.2 0.0 -
0.0 0.0 1.6 3.2 0.0
0.0 0.0 2.2 3.8 0.0 -
0.0 0.0 1.4 2.5 0.0
DPZ DNKN JACK MCD PNRA
† † † [] †
DOMINO'S PIZZA INC DUNKIN' BRANDS GROUP INC JACK IN THE BOX INC MCDONALD'S CORP PANERA BREAD CO
DEC DEC SEP DEC DEC
33 32 35 21 29 -
22 24 21 18 21
28 36 26 19 28 -
17 24 15 16 22
22 39 21 19 30 -
14 26 15 15 23
20 NM15 19 32 -
9 83 11 14 21
11 NA 21 17 29 -
6 NA 15 13 18
34 55 17 68 0
31 55 0 56 0
151 64 0 53 0
0 0 0 47 0
0 NA 0 49 0
1.5 2.3 0.8 3.7 0.0 -
1.0 1.7 0.5 3.2 0.0
1.8 2.3 0.0 3.5 0.0 -
1.1 1.5 0.0 3.0 0.0
10.6 2.5 0.0 3.4 0.0 -
6.9 1.6 0.0 2.8 0.0
0.0 0.0 0.0 3.5 0.0 -
0.0 0.0 0.0 2.5 0.0
0.0 NA 0.0 3.7 0.0 -
0.0 NA 0.0 2.8 0.0
PZZA PLKI RRGB RT RUTH
§ § § § §
PAPA JOHNS INTERNATIONAL INC POPEYES LOUISIANA KITCHEN RED ROBIN GOURMET BURGERS RUBY TUESDAY INC RUTHS HOSPITALITY GROUP INC
DEC DEC DEC # MAY DEC
32 35 35 NM20 -
21 22 21 NM 14
29 31 38 NM22 -
16 18 15 NM 11
21 22 19 NMNM-
14 11 14 NM NM
18 18 29 NM19 -
12 12 15 NM 10
15 - 11 17 - 9 62 - 36 19 - 9 19 - 6
30 0 0 NM 26
16 0 0 NM 17
0 0 0 NM NM
0 0 0 NM 0
0 0 0 0 0
1.4 0.0 0.0 0.0 1.9 -
0.9 0.0 0.0 0.0 1.3
1.0 0.0 0.0 0.0 1.7 -
0.5 0.0 0.0 0.0 0.8
0.0 0.0 0.0 0.0 0.0 -
0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0 -
0.0 0.0 0.0 0.0 0.0
0.0 0.0 0.0 0.0 0.0 -
0.0 0.0 0.0 0.0 0.0
SONC SBUX TXRH WEN YUM
§ [] § † []
SONIC CORP STARBUCKS CORP TEXAS ROADHOUSE INC WENDY'S CO YUM BRANDS INC
AUG SEP DEC DEC DEC
32 31 27 31 35 -
19 25 18 23 28
33 NM25 79 33 -
15 NM 15 39 25
18 34 19 NM22 -
11 24 14 NM 17
38 28 21 NM21 -
20 19 14 NM 16
37 26 22 NM22 -
0 38 48 62 64
0 NM 42 150 57
0 37 45 500 34
0 31 36 200 37
0 18 0 NM 36
0.0 1.5 2.6 2.7 2.3 -
0.0 1.2 1.7 2.0 1.8
0.0 1.6 2.8 3.8 2.3 -
0.0 1.0 1.7 1.9 1.7
0.0 1.6 3.2 2.4 2.0 -
0.0 1.1 2.4 1.8 1.6
0.0 1.7 2.6 1.9 2.2 -
0.0 1.1 1.7 1.4 1.7
0.0 1.1 0.0 1.7 2.7 -
0.0 0.7 0.0 1.2 1.7
[] † § †
MATTEL INC POLARIS INDUSTRIES INC STURM RUGER & CO INC VISTA OUTDOOR INC
27 11 4 NM 16
20 7 11 NM 12
14 6 16 NM 11
21 17 13 NM 13
Note: Data as originally reported. ‡S&P 1500 index group. []Company included in the S&P 500. †Company included in the S&P MidCap 400. §Company included in the S&P SmallCap 600. #Of the follow ing calendar year.
INDUSTRY SURVEYS
HOTELS, RESTAURANTS & LEISURE / DECEMBER 2015
69
Earnings per Share ($) Ticker
Com pany
CASINOS & GAMING‡ BYD § BOYD GAMING CORP MCRI § MONARCH CASINO & RESORT INC PNK § PINNACLE ENTERTAINMENT INC SGMS § SCIENTIFIC GAMES CORP WYNN [] WYNN RESORTS LTD HOTELS, RESORTS & CRUISE LINES‡ CCL [] CARNIVAL CORP/PLC (USA) IILG § INTERVAL LEISURE GROUP MCS § MARCUS CORP MAR [] MARRIOTT INTL INC VAC § MARRIOTT VACATIONS WORLDWIDE
Yr. End
2014
DEC DEC DEC DEC DEC
(0.48) 0.85 0.64 (2.77) 7.25
2013
Tangible Book Value per Share ($)
Share Price (High-Low, $)
2012
2011
2010
2014
2013
2012
2011
2010
2014
2013
2012
2011
2010
(0.94) (10.37) 1.10 0.55 (2.27) (0.37) (0.30) (0.70) 7.25 4.87
(0.04) 0.35 0.49 (0.14) 4.94
0.12 0.51 (0.65) (1.61) 1.30
(10.81) 8.59 (19.52) (81.65) (1.39)
(11.89) 7.90 (20.37) (18.38) (2.13)
(17.39) 6.54 6.38 (7.20) (2.88)
4.79 8.09 7.21 (5.23) 16.42
5.97 7.60 7.67 (4.84) 17.64
14.58 20.39 27.45 17.25 249.31 -
8.78 11.22 19.66 6.97 133.58
14.75 22.12 26.58 19.48 194.53 -
6.27 8.64 13.28 7.55 113.39
9.75 11.52 16.31 13.08 138.28 -
4.75 7.05 8.89 5.53 90.11
12.78 13.18 15.57 11.27 172.58 -
4.12 8.28 8.06 6.50 101.02
14.85 13.51 14.57 17.01 117.50 -
6.70 6.50 7.07 6.58 59.70
NOV DEC # MAY DEC DEC
1.59 1.38 0.88 2.60 2.40
1.39 1.42 0.93 2.05 2.25
1.67 0.72 0.63 1.77 0.46
2.43 0.72 0.78 0.56 (4.92)
2.51 0.75 0.46 1.26 1.85
25.60 (7.83) 10.53 (15.88) 33.65
25.84 (7.36) 9.96 (11.48) 34.41
25.05 (5.85) 9.31 (10.53) 32.86
24.68 (6.04) 9.99 (7.51) 33.50
23.28 (6.72) 9.55 (0.16) NA
46.31 31.03 19.97 79.25 76.29 -
33.11 18.83 12.95 47.21 46.63
40.47 32.13 15.00 49.84 53.71 -
31.44 18.82 11.63 38.14 38.30
39.95 20.70 14.37 41.84 42.16 -
29.15 12.67 10.27 29.73 17.35
48.14 17.94 13.75 42.78 22.50 -
28.52 10.19 8.00 25.49 15.75
47.22 17.54 14.64 42.68 NA -
29.68 11.61 8.60 25.63 NA
DEC DEC DEC
3.45 3.49 4.22
2.16 2.96 3.25
0.08 2.44 2.80
2.80 2.65 2.57
2.55 1.70 2.13
35.00 (2.50) (11.65)
36.99 6.92 (8.72)
35.06 5.76 (6.01)
34.29 4.58 (2.57)
32.23 2.09 1.53
83.90 86.11 87.12 -
45.95 68.53 66.32
47.66 79.77 74.18 -
31.35 57.76 52.84
36.18 61.09 55.41 -
22.12 47.41 36.26
49.99 65.51 38.35 -
18.70 35.78 24.76
47.83 62.72 31.41 -
21.97 33.15 19.44
LEISURE FACILITIES‡ ISCA † INTL SPEEDWAY CORP -CL A ACAT § ARCTIC CAT INC BC † BRUNSWICK CORP ELY § CALLAWAY GOLF CO HAS [] HASBRO INC
NOV # MAR DEC DEC DEC
1.45 0.38 2.08 0.21 3.24
0.97 2.97 8.50 (0.31) 2.20
1.18 3.02 1.64 (1.96) 2.58
1.46 1.79 0.81 (2.82) 2.88
1.13 0.71 (1.25) (0.46) 2.86
22.70 13.45 8.94 2.25 4.40
21.43 14.32 7.70 2.15 5.43
20.62 13.17 (2.81) 2.83 4.78
19.68 10.55 (3.46) 5.53 3.70
18.57 9.96 (3.13) 8.29 4.66
38.01 59.73 52.20 10.35 59.42 -
28.09 30.11 38.17 6.79 47.48
35.85 61.13 47.08 8.97 55.16 -
26.02 33.23 29.92 6.15 35.00
29.30 47.46 29.23 7.29 39.98 -
23.18 21.15 18.04 5.17 31.65
32.32 24.00 27.70 8.37 48.42 -
20.08 11.55 13.19 4.70 31.36
31.12 16.75 22.89 10.19 50.17 -
22.34 6.92 10.00 5.80 30.20
MAT PII RGR VSTO
DEC DEC DEC # MAR
1.46 6.86 1.99 1.25
2.61 5.56 5.76 2.10
2.25 4.54 3.69 1.02
2.20 3.31 2.12 NA
1.88 2.20 1.48 NA
2.41 9.61 9.72 5.47
4.38 4.66 9.08 NA
3.74 8.50 4.74 NA
4.69 6.17 6.98 NA
4.56 4.96 5.91 NA
47.72 159.33 85.93 NA -
28.67 118.80 33.60 NA
48.48 146.40 80.28 NA -
35.47 82.80 44.76 NA
37.96 89.83 60.11 NA -
27.73 53.64 33.13 NA
29.40 65.86 36.85 NA -
22.70 34.97 14.65 NA
26.70 40.69 17.97 NA -
19.07 21.02 10.01 NA
RESTAURANTS‡ BH § BIGLARI HOLDINGS INC BJRI § BJ'S RESTAURANTS INC BOBE § BOB EVANS FARMS EAT † BRINKER INTL INC BWLD † BUFFALO WILD WINGS INC
SEP 16.85 DEC 0.99 # APR 0.70 JUN 2.33 DEC 4.98
98.11 0.75 1.17 2.28 3.81
16.19 25.99 1.12 1.14 (0.10) 2.45 1.93 1.55 3.08 2.75
20.11 0.86 1.79 1.02 2.11
306.52 13.12 15.38 (1.38) 25.98
337.74 14.02 15.46 0.11 21.01
261.89 13.08 20.35 2.42 16.63
205.50 11.81 21.50 3.80 15.06
179.35 10.36 20.57 5.95 13.14
512.01 50.63 55.99 59.78 184.10 -
312.00 25.11 42.28 43.83 122.15
523.00 40.99 60.22 47.85 152.53 -
365.00 25.50 39.63 30.85 71.46
431.74 54.46 41.83 36.24 94.81 -
326.55 31.03 33.22 24.92 62.19
464.77 56.64 36.98 27.35 70.47 -
279.86 32.84 27.41 19.50 42.42
448.00 39.32 34.86 22.56 52.99 -
254.01 18.42 23.10 13.96 34.33
CAKE CMG CBRL DRI DIN
† [] † [] §
CHEESECAKE FACTORY INC CHIPOTLE MEXICAN GRILL INC CRACKER BARREL OLD CTRY STOR DARDEN RESTAURANTS INC DINEEQUITY INC
DEC 2.04 DEC 14.35 JUL 5.55 # MAY 1.54 DEC 1.92
2.19 10.58 4.95 1.40 3.75
1.85 8.82 4.47 3.20 6.81
1.70 6.89 3.70 3.66 3.96
1.39 5.73 3.71 3.50 (1.74)
10.74 64.15 22.19 6.26 (63.35)
10.79 48.86 20.34 4.68 (61.78)
10.52 39.37 16.30 3.49 (62.23)
9.66 32.71 11.73 5.78 (78.02)
9.85 25.39 8.43 6.50 (82.05)
51.44 697.93 141.79 59.59 104.13 -
42.00 472.41 92.84 43.56 74.07
49.74 550.28 118.63 55.25 85.74 -
32.63 266.02 63.40 44.11 64.44
36.24 442.40 69.30 57.93 68.47 -
28.58 233.82 49.53 43.80 40.28
34.07 347.94 55.53 53.81 60.11 -
23.65 213.06 37.31 40.69 35.20
34.00 262.77 57.79 50.83 57.80 -
20.75 86.00 36.17 33.72 22.13
DPZ DNKN JACK MCD PNRA
† † † [] †
DOMINO'S PIZZA INC DUNKIN' BRANDS GROUP INC JACK IN THE BOX INC MCDONALD'S CORP PANERA BREAD CO
2.96 1.67 2.33 4.85 6.67
2.58 1.38 1.91 5.59 6.85
1.99 0.94 1.43 5.41 5.94
1.79 0.28 1.63 5.33 4.59
1.50 0.22 1.27 4.64 3.65
(22.24) (18.63) 2.42 10.51 20.30
(23.43) (18.16) 7.20 13.26 17.96
(24.01) (19.08) 5.79 12.46 20.68
(21.24) (13.75) 6.39 11.49 16.18
(20.42) (70.69) 7.90 11.44 14.89
97.15 53.05 80.94 103.78 193.18 -
66.18 40.50 47.79 87.62 142.41
71.17 49.48 50.45 103.70 194.77 -
43.81 33.06 28.34 89.25 150.33
43.74 37.02 29.47 102.22 175.26 -
28.17 24.35 21.01 83.31 135.15
35.30 31.94 24.51 101.00 145.46 -
15.80 23.24 18.25 72.14 94.62
16.32 NA 26.37 80.94 106.87 -
8.41 NA 18.42 61.06 64.89
PZZA PLKI RRGB RT RUTH
§ § § § §
PAPA JOHNS INTERNATIONAL INC POPEYES LOUISIANA KITCHEN RED ROBIN GOURMET BURGERS RUBY TUESDAY INC RUTHS HOSPITALITY GROUP INC
1.78 1.63 2.29 (0.05) 0.76
1.58 1.44 2.27 (1.08) 0.69
1.32 1.27 1.97 (0.38) (0.58)
1.10 0.99 1.36 0.00 0.38
0.99 0.91 0.47 0.73 0.35
0.11 (1.73) 16.60 7.33 1.08
1.40 (0.24) 17.29 7.30 0.87
2.31 (1.29) 14.80 8.17 0.33
2.72 (1.80) 13.30 8.47 0.83
2.44 (1.90) 12.55 8.63 0.15
57.00 57.08 80.00 8.57 15.18 -
37.32 35.74 47.45 5.14 10.39
46.49 45.22 86.83 9.90 15.30 -
24.94 26.51 34.04 5.40 7.27
28.21 27.89 37.98 9.39 7.75 -
18.13 13.68 27.18 4.98 5.07
19.46 17.57 39.32 15.57 7.10 -
13.48 11.57 20.23 6.35 3.79
14.42 15.34 29.10 14.06 6.60 -
10.76 7.75 16.85 6.77 2.11
SONC SBUX TXRH WEN YUM
§ [] § † []
SONIC CORP STARBUCKS CORP TEXAS ROADHOUSE INC WENDY'S CO YUM BRANDS INC
0.87 1.38 1.25 0.33 2.37
0.65 0.00 1.15 0.12 2.41
0.60 0.92 1.02 0.02 3.46
0.31 0.83 0.90 0.04 2.81
0.35 0.63 0.82 (0.01) 2.44
(0.37) 2.76 6.97 (1.25) 1.22
(0.10) 2.22 6.58 (0.56) 1.44
(0.42) 3.05 5.83 (0.49) 0.95
(0.55) 2.65 5.38 (0.46) 1.83
(1.05) 2.25 5.19 (0.19) 0.94
27.97 42.10 34.32 10.27 83.58 -
16.92 33.97 22.87 7.61 65.81
21.48 41.25 29.07 9.51 78.68 -
9.87 26.26 16.90 4.68 59.68
10.94 31.00 19.35 5.50 74.75 -
6.50 21.52 14.59 4.09 58.40
11.86 23.25 18.52 5.62 59.79 -
6.35 15.38 12.21 4.29 46.27
13.11 16.58 18.28 5.55 52.47 -
7.28 10.63 10.56 3.83 32.49
RCL HOT WYN
[] ROYAL CARIBBEAN CRUISES LTD [] STARWOOD HOTELS&RESORTS WRLD [] WYNDHAM WORLDWIDE CORP
[] † § †
MATTEL INC POLARIS INDUSTRIES INC STURM RUGER & CO INC VISTA OUTDOOR INC
DEC DEC SEP DEC DEC DEC DEC DEC # MAY DEC AUG SEP DEC DEC DEC
Note: Data as originally reported. ‡S&P 1500 index group. []Company included in the S&P 500. †Company included in the S&P MidCap 400. §Company included in the S&P SmallCap 600. #Of the follow ing calendar year. J-This amount includes intangibles that cannot be identified.
The analysis and opinion set forth in this publication are provided by S&P Capital IQ Equity Research and are prepared separately from any other analytic activity of Standard & Poor’s. In this regard, S&P Capital IQ Equity Research has no access to nonpublic information received by other units of Standard & Poor’s. The accuracy and completeness of information obtained from third-party sources, and the opinions based on such information, are not guaranteed.
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