Nov 1, 2014
Executives
Gee Lingberg - IR W. Edward Walter - President and CEO Greg Larson - EVP and CFO
Analysts
Andrew Didora - Bank of America Merrill Lynch Jeff Donnelly - Wells Fargo Kevin Barron - Citigroup Michael Bilerman - Citigroup Rich Hightower - ISI Group Thomas Allen - Morgan Stanley Joe Greff - JPMorgan Anthony Powell - Barclays Ryan Meliker - MLV & Company Chris Woronka - Deutsche Bank Jim Sullivan - Cowen and Company Wes Golladay - RBC Capital Markets
Gee Lingberg
Welcome to the Host Hotels & Resorts Third Quarter 2014 Earnings Call. Before we begin, I'd like to remind everyone that many of the comments made today are considered to be forward-looking statements under federal securities laws.
As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed, and we are not obligated to publicly update or revise these forward-looking statements. In addition, on today's call, we will discuss certain non-GAAP financial information, such as FFO, adjusted EBITDA and comparable hotel results.
You can find this information, together with reconciliations to the most directly comparable GAAP information, in today's earnings press release, in our 8-K filed with the SEC and on our website at hosthotels.com. With me on the call today is Ed Walter, our President and Chief Executive Officer; and Greg Larson, our Chief Financial Officer.
This morning, Ed will provide a brief overview of our third quarter results and then will describe our current operating environment, as well as the Company's outlook for 2014. Greg will then provide greater detail on our third quarter performance by markets.
Following their remarks, we will be available to respond to your questions. And now, here is Ed.
W. Edward Walter
Thanks, Gee and good morning, everyone. We are very pleased to report another quarter of outstanding operating results driven by strong rate in demand growth especially in group business.
Strong F&B and other revenue growth, combined with improved flow-through and better than expected margin performance led to earnings results that exceeded our expectations and which allow us to improve our full year guidance. We continue to feel quite good about the fundamentals in the business and our outlook, which I will discuss in more detail in a few minutes.
First let's review our results for the quarter. Adjusted EBITDA was $331 million for the quarter and $1.05 billion year-to-date.
Our adjusted EBITDA for the quarter increased 23% and exceeded a consensus estimate and our forecast for the quarter. Our adjusted FFO per diluted share grew 36% to $0.34 per share for the quarter and stands at $1.10 year-to-date.
These strong results were driven by several factors. First, our portfolio continued to achieve high occupancy levels of nearly 80% this quarter, our highest third quarter occupancy level since 2000.
The strong demand allowed our hotels to drive rate increases of 6.4% resulting in an improvement in comparable hotel RevPAR on a constant currency basis of 7.9%. Looking at our total portfolio, pro forma RevPAR growth for the quarter was 9.2%.
As Greg will describe in greater detail, our consolidated comparable international hotels continue to perform quite well, generating RevPAR growth of 11% in constant dollars in the quarter. Our growth in the third quarter was driven primarily by strong demand in all of our group segments, especially our highly rated associated association group business, which increased nearly 14%.
Our corporate business also performed well with a demand increase of more than 3.5%, complemented by a rate increase of better than 4.5%. While group trends were favorable for the entire quarter, the calendar shift related to the Jewish holidays helped cause our September group revenues to increase by more than 15%, which was the second strongest month of the entire year.
Overall group demand in the quarter increased nearly 6%, rate jumped by more than 4.5% and group revenues improved by more than 10.5%. Not surprisingly the significant increase in group bookings limit the trends in occupancy, which declined slightly, but it positions the hotels to push trends in rate increases that average more than 6.5%, leading to transient revenue growth of more than 6%.
Benefitting from the strong group demand, our banquet and AV revenues increased 8.4% for the quarter, leading to total comparable F&B revenue growth of 6.1%. The increase in banquet spending helped fuel better than 40% flow through in the food and beverage department, that combined with the rate driven RevPAR growth resulted in comparable hotel adjusted operating profit margin expansion of 305 basis points for the quarter.
Year-to-date we've seen constant currency RevPAR growth of 6.6%, which when combined with F&B revenue growth of 5.2% led to comparable total revenue growth of 6% and adjusted margin expansion of 155 basis points. Overall, we're extremely pleased with our results for the third quarter.
On the acquisition front, we continue to look for opportunities to increase our investment in our target markets. As we announced a few weeks ago, our European joint venture acquired a 90% interest in the 394 rooms Grand Hotel Esplanade in Berlin for a gross purchase price of €81 million.
The hotel is a short walk from the city's leading high-end retail street and strategically situated between the historic and the new sections of the city in proximity to many embassies. This acquisition further diversifies the current European JV portfolio, provides new exposure to a target market in Germany and created relationship with the talented local independent operator event holding group.
We also announced the acquisition of the B2 Miami Downtown Hotel for $58 million. The hotel is located in the heart of Miami's business and financial district within walking distance with the American Airlines Arena and situated on Biscayne Boulevard across from Bayfront Park ensuring that the hotel will continue to have unobstructed water views and long-term redevelopment potential.
I should note that the B2 Miami Downtown is heart of our broader strategic initiative to increase our exposure to third party operators and/or independent or soft brands, in order to complement our existing portfolio of high quality brand manage assets in our target markets. We intend to convert this hotel to a true independent brand and have brought in Destination Hotels and Resorts to operate the property.
Acquiring properties with management and brand flexibility whether it's in the recently acquired Powell Street in San Francisco or the B2, provides us with increased exposure to the growing urban lifestyle boutique segment and allows us to further differentiate and diversify our product in a given target market. Including the B2 Miami, we currently have seven hotels managed by third party operators and we're exploring opportunities for conversion to independent or soft brands with another three hotels we currently own.
On the disposition front, earlier this month we announced the sale of the $719 room Tampa Marriott Waterside Hotel & Marina for $199 million, bringing our total sales for the year to nearly $0.5 billion. The sale of this property is consistent with our plan to reduce our exposure in non-core markets.
In addition, our European joint venture sold the Sheraton Skyline Hotel & Conference Centre for £33 million. We continue to actively market properties and we expect to close on one or more transactions in the next few months with potential total incremental sales amounting to $50 million to $150 million.
These contemplated sales will have minimal effect on our 2014 earnings. Turning to our development and value enhancement projects, construction on the timeshare project at the Hyatt Regency Maui is nearly complete.
It will include a 131 timeshare units, totaling nearly 240,000 square feet. It features an 8,000 square foot open air lobby with direct ocean site line, a 3300 square foot fitness center and owners lounge casual dining restaurant and pool side bar.
We contributed excess land at the hotel as well as cash and exchange for a 67% interest in the timeshare venture. Sales efforts began in October of last year and we will expect they will continue to ramp-up as we approach the anticipated mid-December resort opening.
We're also making progress on our development project in Brazil. The Ibis and Novotel hotels are substantially complete and in the process of final inspections and occupancy permit.
The Ibis is scheduled to open in mid November. The Novotel should open in mid December.
Turning to capital investments, this quarter we invested approximately $28 million on ROI capital expenditures and invested approximately $57 million year-to-date. Several of these projects have included the conversion of underutilized space in our existing hotels to more profitable users.
For example, we completed the renovation of unfinished storage space on the 32nd floor of the Seaport Tower at the Manchester Grand Hyatt San Diego into two 2400 square foot meeting rooms with spectacular views. In addition, 11,000 square feet of meeting space is expected to be added across three other properties by yearend.
In total we invested approximately $8.5 million in these projects. I would expect to generate EBITDA lift of approximately $1.5 million per annum.
Other ROI projects include brand conversion such as the Sheraton Memphis Downtown. At this property, we are at the final stages of the assets rebranding effort, which includes a full soft and case goods renovation of the rooms, lobby, restaurant and public space, exterior facade, portico share, and various mechanical and fire light safety projects.
The hotel is now managed by Davidson Hotel Company, who has a deep understanding of the Memphis market. Since taking over management and completing the renovation plan, they have improved advanced bookings at this group oriented hotel by more than 38% at significantly higher rates.
And finally we continue to invest in projects, which reduce our energy cost. We have or are investing more than $17 million in two projects that are too large New York hotels, the Sheraton New York and the Marriott Marquis at Times Square.
It constructs low pressure boiler plants that will create steam that will create the steam we employ to heat the building and our hot water, allowing us to disconnect some of the local steam utility. Based on current utility cost, we would expect to save more than $3 million per annum from this investment.
For the full year, we would expect to spend $85 million to $100 million on redevelopment ROI and acquisition CapEx. We also expect to invest approximately $330 million to $345 million on renewal and replacement CapEx, including several large projects such as the meeting space renovations at the Manchester Grand Hyatt in San Diego and the Grand Hyatt DC and room renovations at the JW Marriot DC, JW Marriot Houston, New Orleans Marriot and San Antonio Riverwalk Marriott.
These projects are scheduled for the fourth quarter to take advantage of softer demand period, but it worth noting that approximately 50% of our CapEx spending related to projects causing disruption to our hotels will occur in the fourth quarter. Now let me spend some time on our outlook for the remainder of the year.
We're extremely pleased with our third quarter results, which exceeded our expectations in part because of the strength of our group production. Following the pattern we experienced in the first half of the year, because of holiday shifts and renovation timing I just mentioned, we do expect a softer quarter from group business in the fourth quarter.
This will likely result in flat banquet revenues compared to last year where F&B revenue growth was quite strong. Offsetting the lower groups demand, our trend in demand looks quite solid through the remainder of the year.
Overall, we would expect that our second half of the year results will be better than the first half of the year, which allow us to increase our operating guidance for the year. With that in mind, we expect a comparable hotel RevPAR for the full year will increase 6% and 6.25% and comparable hotel adjusted operating profit margin growth will be 120 basis points to 135 basis points.
These assumptions resulted in an EBITDA -- adjusted EBITDA range of approximately $1,400,000 to $1,410,000, which represents an increase of $12.5 million at the midpoint and adjusted FFO per share guidance of $1.47 to $1.49, which represents an increase of $0.250 at the midpoint. While it is premature to offer any specific guidance relative to RevPAR revenue growth for 2015, we do believe that the fundamentals for our business continue to be quite attractive.
Low supply growth will remain a positive factor for the lodging industry with only a few markets trending above the longer term average. Demand growth in the industry bolstered by robust international travel into the gateway markets has significantly outperformed the long-term average for the last three years, growing roughly at 3%.
If predictions of 3% plus GDP growth for 2015 prove to be correct, we think demand growth in 2015 could improve further. Domestic booking trends, adjusted to eliminate the impact of the Super Bowl in northern market are quite solid with both demand and rate up leading to booked revenue growth in excess of 4% and the first half of the year looks quite strong.
Perhaps more impactful both rate and room booked in 2014 for 2015 exceeds the prior year levels by approximately 5%. In fact our most recent activity in the third quarter for 2015 is even stronger with rate growth in excess of 10% suggesting momentum holding into the new year.
We expect to close 2014 with average occupancy in excess of 77%, which approaches our 2000 peak occupancy. As a result, we would expect that the bulk of our RevPAR growth going forward will be generated by increases in average rate and changes in business mix.
Overall we expect that 2015 should be another solid year for the industry, both the topline and bottom line. More to come on this front next February.
Thank you and now let me turn the call over to Greg Larson, our Chief Financial Officer, who will discuss our operating performance in more detail.
Greg Larson
Thank you, Ed. I am pleased with our impressive quarter, which was highlighted by the strongest quarterly RevPAR growth in the last three years and outperformance in comparable hotel adjusted margin growth and an exceptional increase of 305 basis points.
Let me now provide our market results. Consistent with the last quarter, our Latin America hotel were the best performing hotels in the quarter with a 26% RevPAR increase.
The World Cup final and the JW Mexico post-renovation lift continued to boost RevPAR for this region. Based on certain group business in Mexico, that will not repeat in the fourth quarter and the interruptions of business during elections in Brazil this month, we do not expect the outperformance to continue into the fourth quarter.
The West region continues to outperform the portfolio with RevPAR growth of 8.9%, entirely driven by average rate and primarily a result of strong group business. Group revenues for the hotels in the West grew 11.4% enabling the hotels to drive rate improvement of 9.3%.
Seattle, San Francisco, Denver and Los Angeles performed the best with double-digit RevPAR increases. On a combined basis, these hotels grew RevPAR 13% with a combined rate increase of over 13.5%.
Solid group business create a compression that allowed our managers to shift our mix into premium segment by limiting special corporate and discounted rooms. This allowed them to drive rates in these markets.
In the fourth quarter, we expect the hotels in San Francisco to continue to outperform our portfolio. We expect Seattle and Los Angeles to perform in line with our portfolio for the quarter and anticipate Denver will underperform the portfolio.
Phoenix also had high RevPAR growth of 8.7%, resulting from their successful strategy to drive transient occupancy that summer. Transient occupancy increased 7.4% and rate increased 5.1% for this market.
Based on a strong booking pace, we expect the strength to continue in the fourth quarter. Our Hawaii and San Diego markets underperformed the portfolio this quarter.
The hotels in our Hawaiian markets were impacted by higher air fares during the summer, customer anticipation of two hurricanes in August and room renovations at the Fairmont Kea Lani. The San Diego hotels were affected by the meeting space renovation of the highest Manchester and the start of pre-construction efforts related to Marriott Hall at the San Diego Marriott.
For the fourth quarter, our San Diego market will continue to be impacted by renovations at these two large hotels; however, the hotels in Hawaii are strategically replacing group room nights with rated transient business and we expect that this strategy should result in outperformance in the fourth quarter. The South Central region also posted great results with RevPAR of 7.9%.
The hotels in this region had strong group performance as group revenues increased 11.9%. This led to food and beverage leverage revenue growth of more than 8% with an 11% increase in the more profitable banquet and catering business.
The hotels in Atlanta and Chicago markets were the strong performers with RevPAR increases of 9.9% and 7.6% respectively. In Atlanta the four Buckhead hotels combined to grow both transient room nights and ADR by more than 7%.
Group volume growth of 8% was particularly strong in Chicago resulting in group revenue growth of 10.4%. We expect these markets to continue to outperform the portfolio in the fourth quarter.
The weakness at our hotels in Houston this quarter was primarily due to weaker than expected transient business at the JW Houston and St. Regis Hotels.
As you know Houston has been one of our strongest outperformers and these hotels space difficult comparisons compared to 2013. Renovations at the JW Houston and Houston airport hotels will negatively impact the results for the Houston market in the fourth quarter.
The East region reported a RevPAR increase of 6.6% with Boston up over 10% and Washington DC up 9%. Strong transient business led to transient revenues of 15.3% and 12.6% respectively and drove the outperformance in these markets.
Boston Hotels grew transient rate by 14.2% and strong September city-wide events in Downtown DC boosted transient ADR and Downtown hotels by 10%. We do not expect the hotels in Boston or DC to continue to outperformance in the fourth quarter.
Boston will have difficult comparisons from the World Series during the fourth quarter last year and renovations at the JW Marriot and Grant Hyatt hotels will negatively impact results for DC. The hotels in New York underperformed the portfolio with RevPAR gains of 4.1%.
In the third quarter, the hotels of New York experienced an 8.5% gain in group revenues, which led to a 24.4% increase in banquet and catering business. However, the hotels in New York continue to be impacted by select service supply inhibiting rate growth in that market.
The hotels in New York will continue to underperform the portfolio in the fourth quarter. The hotels in our European joint venture also had an excellent quarter with comparable hotel RevPAR and constant currency up 4.1% and total revenues up 5.6%.
Food and beverage revenues increased 11.3%, with banquet and catering revenues up over 23%. These results led to impressive EBITDA margin growth.
The RevPAR is driven by strong performance at the joint ventures hotels in Brussels and Spain. These two -- these hotels had double-digit total revenue increase and the two hotels in Spain had total revenue increase of over 20%.
The strong banquet performance at the European joint venture hotels was driven by increased corporate catering demand at nine of our hotels. Food and beverage profits at the joint venture hotels increased approximately 46%.
These meaningful improvements in part are driven by the deep dives performed by our asset management team. As you may recall from our Investor Day presentation, deep dives our productivity studies performed at our hotels to implement best practices found throughout our portfolio by examining daily routines and procedures to drive savings.
For example the deep dive analysis of the food and beverage operations at our Sheraton Warsaw resulted in the restructuring of food and beverage labor model which drove profitability at this hotel. The food and beverage margins improved 850 basis points at this property.
This hotel had negative RevPAR in the quarter posted a 90 basis point increase in its EBITDA margins. Another deep dive at our Sheraton Rome property led to over 1.4 million in annual savings also from restructuring, staffing mainly in the food and beverage operation.
We intend to continue to conduct additional deep dives at both our international and domestic properties to further improve the margins at our hotels. Speaking of margins, our comparable hotel adjusted operating profit margins increased an impressive 305 basis points in the third quarter as over 80% of the RevPAR increase was driven by strong ADR growth resulting in excellent rooms flow through of over 81%.
As described in our last quarter, RevPAR growth driven by strong ADR growth, combined with increases in our insurance and utility expenses have resulted in achievement of impressive operating profits margins. A full year margin guidance of 120 basis points to 135 basis points anticipates that the third quarter adjusted margin will be stronger than our fourth quarter margin.
However, on a half year basis, margin growth in the second half of the year will significantly outperform margin growth in the first half of the year. As you may recall first half margins grew 80 basis points.
We expect margins in the second half of the year to grow approximately 170 basis points. We're committed to sustaining a meaningful dividend given our strong extended operating outlook and significant amount of free cash flow.
We increased the dividend to $0.20 in the third quarter and intend to maintain that over the course of the next several quarters. If we are unable to identify appropriate acquisition candidates with which to execute a tax free exchange for the Tampa Marriott Waterside Hotel, we will likely pay a modest special dividend for the fourth quarter.
In summary, we are very excited about the strong RevPAR and EBITDA performance driven primarily by group business, which enabled significant rate increases in many of our markets. This dynamic boosted our margins and resulted in outperformance this quarter.
This concludes our prepared remarks and we're now interested in answering any questions you may have.
Operator
Thank you. (Operator Instructions) And we'll now take our first question from Andrew Didora from Bank of America Merrill Lynch.
Andrew Didora - Bank of America Merrill Lynch
Hi. Good morning, everyone.
Ed, maybe digging into your commentary a bit on the independent hotels, I guess why the shift right now in direction? Is this the right point in the cycle to do this?
And my second question around that is, I know you see some conversions within your current portfolio. But do you see the ability to maybe acquire and roll up more of these assets over the next 12 months or so?
Thanks.
W. Edward Walter
As it relates to the shift to -- to look to purchase more of these, I think that sort of it ties in with our notion that we're trying to focus on a more limited number of markets, but then penetrate those markets more deeply. As we look to execute on that strategy in many of those markets we already owned some of the best convention oriented hotels, or larger group hotels, so it's sort of a natural consequence of expanding our presence in those markets to look for hotels that might be in different segments of the business whether that be the urban select service or lifestyle boutique type hotel.
So I think that's really what's driving that. From a standpoint of future acquisitions and I think there is certainly given that as you can tell based on our recent history we're investing more in this area.
We would certainly hope that we would be able to complete more acquisitions of this nature. It's not the easiest market to buy in right now.
So we'll have to see what actually happens.
Andrew Didora - Bank of America Merrill Lynch
Understood. That's helpful.
And then, maybe my second question for Greg, after the strong group results thus far, this year, where does your group currently stand as a percentage of your revenue mix? And how does that compare to last cycle?
Greg Larson
Andrew, if you look at our group business over a long period of time, it's usually right around 40%. At the peak of the last cycle, it was closer to 43% of our overall business and today it's closer to 37% of our business.
Andrew Didora - Bank of America Merrill Lynch
Okay. Great.
Thanks a lot guys.
Operator
And we'll now take our next question from Jeff Donnelly from Wells Fargo.
Jeff Donnelly - Wells Fargo
Good morning, guys. Actually, just building on that brand manager strategy, comment, I'd like to broader focus on independent brand and managed hotels.
The first part is, where do you see that going as a percentage of your overall platform down the road? And do you think you get there predominantly through conversions of existing hotels or is it through acquisition?
W. Edward Walter
While I am pleased that we've got a few candidates internally we should be able to convert I suspect that the growth will come more from acquisitions then it will from conversions within the portfolio. Yes, it's hard to put a number on that and I think we would certainly be comfortable in the long run with that becoming 10% plus of the portfolio in some ways, but a lot of that's going to be driven by the ability to execute acquisitions and what we're able to get done in the near term in the market.
Jeff Donnelly - Wells Fargo
And just a follow-up on maybe capital allocation is Host hasn't been necessarily a big acquirer, if you will, this cycle. Is it too late to undertake acquisitions of maybe sort of a large-scale institutional hotel, in your view?
And how do you weigh acquisitions at this juncture versus using your balance sheet capacity to instead return capital to shareholders versus -- via dividends or share repurchases?
W. Edward Walter
That's a great question. We feel good enough about the length of the cycle that I think we would be -- we certainly are evaluating and pursuing transactions whether they're of a boutique type nature, the independent type nature or our more traditional branded type of a hotel.
I think one of the challenges that we face though in going after those in each instance is the fact that we tend to look at things as we evaluate an acquisition over a 10-year timeframe and that has to -- when you're looking over that long of a period, you have to assume some period of time where operating results are a bit softer. And so I think because we're taking that into account and that how we do that will vary by market, but how we take that into account, that I think put us maybe a bit of a competitive pricing disadvantage to folks you might be looking at more buying now and selling in their minds before the cycle turns.
And so that group which tends to use higher leverage and has a shorter holding period, I think is ending up being able to push pricing more aggressively than we would. So I think my shorter answer to your question is we would feel comfortable in buying.
It would be based upon our conservative and disciplined underwriting criteria. To the extent that we are not able to complete acquisitions like that, I think we've been pretty consistently saying for a while that we've been looking to invest outside the portfolio or inside the portfolio first on theory that drives better returns, but as we complete sales, those will naturally result in higher dividends because of the taxable income associated with those sales.
And to the extent there is not opportunities to otherwise invest in either in new -- existing or new hotels, we will be returning capital to shareholder either through a more dividend or by repurchasing stock.
Jeff Donnelly - Wells Fargo
That's great. Thank you.
Operator
And we'll now take our next question from Michael Bilerman from Citigbank.
Kevin Barron - Citigroup
Hi. This is Kevin Barron with Michael.
I just wanted to better quantify the renovation disruption in 4Q. Could you just give us a sense of what the RevPAR would be, backing out those hotels under renovation in the comparable portfolio?
W. Edward Walter
I don't know that we have a precise number for how it would hit that. I can tell you that just in terms of the disruption it creates in our group business for the fourth quarter though, our group business would probably be roughly 4% stronger if we didn't have the renovation disruption.
Kevin Barron - Citigroup
Okay. And then if you think about the group business momentum leading to more favorable mix shift, and then also in your opening comments you talked about the potential for better demand in 2015, we just wanted to get your thoughts on the potential for RevPAR accelerating next year from 2014 levels.
Greg Larson
I don't know I see it as a ability, the conditions that would require RevPAR to accelerate next year from the strong levels that we've experienced in the last couple of years I think tie to what are the two primary drivers of our business right now. The two things that I think, the one would be the overall economic growth in the U.S.
and secondly would be world-wide economic growth that helps generate international travel. So as I highlighted in my comments, we've been very happy, very pleased with the overall level of international arrivals into the U.S.
over the last several years and we believe that's been a primary driver and why demand over the course of the last several years has outpaced historical levels kind of on a relative basis to GDP. So as we think about next year, we certainly are encouraged by the fact that once again most of the major forecasters are expecting stronger economic growth in '15 than what we've seen in '14.
I would caution that we probably said that for the last three years in a row, so hopefully '15 is the year that that materializes and then if we also see continued growth on the international front comparable with better than what we've seen, that creates a condition for overall stronger demand growth. Supply does go up a bit next year not a lot.
So we don't view supply as the near-term problem rather than a few markets, but overall I am not certain we would be sitting here expecting RevPAR acceleration for next year, but we certainly feel that we should see another strong year in the industry.
Michael Bilerman - Citigroup
And it's Michael Bilerman, I just wanted to follow-up on your comment about 4% in terms of the renovation, are you effectively saying, if group is call it 37% of the business which Greg did sort of said, that didn't have seasonal that wasn’t in the fourth quarter that effectively there is a 1.5% drag on RevPAR just 4% behind what it normally would be? Is that effectively the math you want us to make?
I just didn't know how to quantify what the 4% meant.
Greg Larson
Yes I think that's -- what I was trying to highlight is that our group bookings would be about 4% higher if we didn't end the fourth quarter if we didn't have the renovation. So that it may not be too far off Michael.
It's just that you got a trade off there that we will sell in some of that shortfall with Transient and so it's probably not quite as direct to what you have there, but that's probably directionally correct.
W. Edward Walter
I think that's right. As you know Michael, if we could, if group business was stronger that would also help us on the Transient side as well because really not except some of the weaker Transient and really push the Transient also.
Michael Bilerman - Citigroup
Yes, and that would also all F&B and all the other…
W. Edward Walter
That is correct.
Michael Bilerman - Citigroup
All right. So I just didn't know if you actually had an EBITDA number that we could sort of isolate for the fourth quarter where if he market disappointed with the fourth quarter guidance trying to put together the pieces that sort of get you from where the street was or where they were relative to where you think you're going to be?
I think that's what we are trying to isolate?
Greg Larson
We don't have that number right now.
Michael Bilerman - Citigroup
Okay. All right.
Thank you.
Greg Larson
Thanks.
Operator
And we'll now take our next question from Rich Hightower from ISI Group.
Rich Hightower - ISI Group
Good morning, guys. A question on the disposition side -- I am wondering if you can tell us within the portfolio, what portion of the hotels are either unencumbered by brand entirely, or are so far along in the contract such as the breakage costs might be minimal to a potential buyer that might be interested in converting those to something else.
W. Edward Walter
Roughly about 40% of our domestic portfolio, we have either absolute contract flexibility or put it along the lines which you were describing very near term contract flexibility. And I would tell you that we in most instances the reason we have that is because we've negotiated for it over the years, but nor surprisingly the bulk of that flexibility fits within the assets that are in non-core markets entirely or non-core sub markets within our target markets.
So I think roughly 75% of the assets that we have flexibility on are assets that we could -- we would be open to selling over the next few years. And we're well situated in part because over the years we've targeted to accomplish that to have contract flexibility for assets we would like to sell.
Rich Hightower - ISI Group
Okay. That's very helpful.
Thanks for the specifics there. And my second question concerns New York and D.C.
Your revenue and EBITDA concentration in those two markets combined, I think it is still above 20%, maybe not as high as it was about a year ago. But just over time, with the puts in takes in the portfolio that you’ve talked about, where do you see the ideal concentration in those two markets in the future?
W. Edward Walter
I think over time we would be expecting to reduce our presence in New York. I don't think that as we look at these either some of our suburban assets in DC that we would be intending on selling, but we're not uncomfortable with the overall waiting in DC with using a long-term perspective, but I do think there is some reduction happening there.
Over time I would like to see some reduction in New York too.
Rich Hightower - ISI Group
Okay. That's all for me.
Operator
And we'll now take our next question from Thomas Allen from Morgan Stanley.
Thomas Allen - Morgan Stanley
Hey, good morning. You talked a few times high level about the setup for the U.S.
lodging industry heading into 2015. Given you also have international exposure, can you just give us some initial thoughts there, too?
Thank you.
W. Edward Walter
Yes, I would say if you look at where we have our biggest international presence, it's Europe and I think generally Europe has been difficult to predict frankly because there are fits and starts to their economic recovery has been challenging. I would point out though that one of the things that makes Europe a bit different than the U.S.
is the importance of international travel throughout our European portfolio. Where in the U.S.
we probably would think that plus or minus 20% of our demand comes from international travel. In Europe our portfolio probably gets 40% to 45% of its demand from international.
So that helps pushing Europe from some of the weakness that we've seen in the economy. Overall I think so far this year we're running around 3.5% or so in Europe on RevPAR growth.
I would like to think that next year we will reach that level, but I think we're going to need to see a little bit more -- we will be interested to see what develops as we go through the budget process, try to have some better insight in the back. Outside of that, I think in Latin America we probably will not see the same strength that we've seen this year for two reasons.
One the World Cup will not be repeating in Rio De Janeiro -- in Brazil, which is going to probably drive those markets to be slightly down for next year and we've had extraordinary performance in Mexico City, but some of that's been construction delay meaning that we had construction the prior year. So I would expect that Mexico we will see growth that's roughly comparable with folks are expecting in the U.S.
And then in our assets in Australia and New Zealand we don't -- I would say there we're probably looking at may be single digit RevPAR growth.
Thomas Allen - Morgan Stanley
Helpful. Thank you.
And then, just one more question, playing devil's advocate here a little bit. Your RevPAR was up 8%, which is obviously very good and an acceleration from the trends we are seeing, but your peers saw it closer to 9%.
Anything driving the slight underperformance for you guys versus them? Thank you.
W. Edward Walter
Again if you look at how our entire portfolio performed in the year and you include all of the assets in our portfolio and don't exclude some that we would typically exclude because of the way we approach issues around comparability, our portfolio ran at 9% in the third quarter also. So I don't know that there was a big of a difference it may seem when you look at the numbers in a little bit more detail.
I would say though maybe a little bit more broadly is that we're up against -- we're at this point now enjoying practically forever peak occupancy level and so one of the things that we're very focused on with our operators is looking drive rate. And so a big part of our success next year is going to come down to our ability to drive rate in all forms of our business.
We're quite encouraged by the improvements we were seeing in our bookings in our group business in 2014 and especially more lately I highlighted some statistics that overall rate in our bookings in 2014, 2015 was up 5% late in the third quarter, bookings in 2015 was up 10%. As those trends -- if those trends continue and we certainly hope and expect that they will, that will certainly help us in pushing rate next year and that obviously is very beneficial on what it will do for the bottom line.
Thomas Allen - Morgan Stanley
So can one imply by those comments that you gave up a bit of occupancy index to drive rate index, which obviously benefited your EBITDA and drove the strong beat in the quarter?
W. Edward Walter
I suspect -- yes, I think if you -- compared to the broader market, not compared to our individual comp set, but compared to the broader market, I think the broader market had slightly more occupancy improvement because it starts at a far lower base than us, but we had better rate growth. And at the end of the day, if I had a choice between the two, I would rather see higher rates.
Greg Larson
Yes, as you said Thomas, that's certainly powerful on the margin front and that's one of the reasons why our margins were up 305 basis points, which frankly probably I think that's our best margin growth in over a decade.
Thomas Allen - Morgan Stanley
Yes congratulations. Okay.
Thanks, bye.
Operator
And we'll now take our next question from Joe Greff from JPMorgan.
Joe Greff - JPMorgan
Good morning, all. I have two questions, one on acquisitions and then one renovations.
Ed, with the stuff you are looking to buy, single assets or portfolios, whether they are small or large, with what you are looking at right now would you characterize that as more fine-tuning your market and brand mix? Or is there anything in there that you would characterize as EBITDA needle movement?
W. Edward Walter
It's probably more the former than the latter. Obviously the real issue there comes down to scale and size of the acquisition and we certainly have the capability to do something larger, but I stand on what we've said for a number of years, which is we don't need to be bigger just to be bigger, it's really just about improving overall levels of growth and improving earnings per share.
So I think in the near term, it's always hard to predict the big deal is going to happen. We're certainly interested in looking, but I suspect that the more likely activity would be more along the lines of fine-tuning.
Joe Greff - JPMorgan
Got it. And then, with renovations, I know you are not providing anything on next year.
But just given what you know about next year and the project CapEx and work that you are thinking about for next year, when you think about next year, do you think the renovation disruption in '15 is the same or less than what you have experienced in full year '14?
W. Edward Walter
I think we're going to have to wait until February to answer that. We obviously are having some disruption now.
There are a couple of projects like what we will end up doing with the Philadelphia Four Seasons in converting that to a new -- a different brand or a soft brand and so things we're looking after some other projects that the actual way we proceed and whether or not there is an absolute closure of that hotel or not, will dictate to either whether the renovation effect next year is larger than this year or not. So it's certainly something we're focused on and obviously the benefits of any projects like that to the extent that they do hit '15 we should start to see some good benefit of that in '16.
Joe Greff - JPMorgan
Thank you.
Operator
And we'll now take our next question from Steven Kent, Goldman Sachs. Mr.
Kent, your line is open.
Steven Kent - Goldman Sachs
Can you hear me?
W. Edward Walter
Now we can.
Steven Kent - Goldman Sachs
Okay. Sorry about that.
Can you talk a little bit about your renovation schedule? I still don't completely understand how different it is versus the years before.
And, also, and how it's going to affect you? And then, the second is, you mentioned urban select service a couple of times.
How do you see the portfolio mix between that full and select service over the next few years for Host?
W. Edward Walter
See I think there are a couple of points we were trying to make about the renovation activity. In general, the way this year is playing out, is that about 35% of our CapEx is happening in the fourth quarter.
So obviously on a weighted basis, that's a little bit higher, but more importantly as we step back and looked at which projects were being affected, we had a number of larger hotels and I had detailed them in my comments that we are undergoing either room renovations or somewhat disruptive meeting room renovations and those were happening in the fourth quarter. When we look more broadly at the activity that was happening in the fourth quarter and we had noticed this and we were aware that last quarter as I highlighted in my comments that we expected some renovation disruption in Q4, which is one of the reasons we were saying Q3 would be stronger than Q4 as we were finishing out moving at the end of the year there.
We were saying that roughly half of the renovation CapEx that would be disruptive to our numbers EBITDA generation that's happening in the fourth quarter, I can't exactly compare that to prior years on the slide. But it's certainly higher then where we were last year because last year we just had lighter construction activity weeks of a disruptive nature in the fourth quarter.
So I think that's really why we were highlighting that here and it's highlighted in the prior quarter. In terms of the growth of select service within our portfolio, it's still a very small percentage.
I think the rate of growth will probably be meaningful in the sense that small numbers can easily be grown, but the reality is that in the near term, I don't think that it's going to rise to a significant part of our portfolio in part because these tend to be smaller properties too. So when you are a $20 billion company, obviously you got to buy a fair amount of something just to move it up to a 1% or 2% of the size of the company.
So absent a portfolio transaction, which I would generally say it's unlikely in this arena, it will grow 1% or 2% at a time.
Greg Larson
Yes, I agree with you Ed on the percentage because even if we are successful on acquiring several of these select service properties, at the same time, we could also invest in one or more upper upscale properties. So the percentages may not actually move much.
Steven Kent - Goldman Sachs
W. Edward Walter
W. Edward Walter
Thanks.
Operator
And we'll now take our next question from Anthony Powell form Barclays.
Anthony Powell - Barclays
Hi. Good morning.
On the stats you gave 2015, were they pace stats for overall or for group? And if they are for overall revenue, could you provide some color on how the group pace is trending for next year?
W. Edward Walter
Those stats that we gave on the call were relative to group
Anthony Powell - Barclays
Got it. Great.
Thank you. And just on the Orlando asset, it seems like that's ramping up pretty well.
Could you give us an update on where you are in that ramp up, after the renovation, and how much incremental growth that could drive maybe next year?
W. Edward Walter
At this point we have finished all of the construction work at the Orlando asset. I think that some of the side work that we had -- that was so disruptive to operations was completed in the first quarter this year, but the remaining -- my sense in general is that the remaining three quarters of the year for that asset is generally not affected by construction.
So I would say that we've had very big lift this year from that asset in out of its construction site and had its work done. I suspect we will get some minor lift in the first quarter of last year and after that it should be more normalized.
Greg Larson
Yes, I think that hotel, it will have a good year next year and because of that, when we think about our hotels in Florida next year, those hotels should outperform our portfolio.
Anthony Powell - Barclays
And, one final one on the Marriott Marquis in New York. How is the retail and the signage construction going?
And how much incremental EBITDA could that generate next year? Thank you.
Greg Larson
Again it's early to speculate on the actual impact of EBITDA next year because we're not exactly the marketing process has gone extremely well, but having said that Vornado has not announced any signed leases yet. But from a construction perspective we've talked previously about a $10 million to $12 million benefit rolling from the completion of that improvement.
We'll see some of that next year, but it's more likely the full benefit of that is more likely to hit '16. From a construction perspective, my understanding is the sign is virtually complete and I think that there is probably going to be more noise and more press around that in the middle of next month, but we couldn’t be happier with how that whole process has gone.
We couldn’t have been happier with having Vornado as a partner here and we're very excited to get the sign operational, get the retail space leased and open and a lot of the hotels have started taking advantages of those new outside observatory jacks that will sit on top of the sign.
Anthony Powell - Barclays
All right. Great.
Thank you.
Operator
And we'll now take our next question from Ryan Meliker from MLV & Company.
Ryan Meliker - MLV & Company
Hi. Good morning, guys.
I just had a quick question. Most of mine have been answered.
But I was hoping you could give us some color on the acquisition market and types of things you are looking for. Obviously, you guys have done a good job being particularly disciplined this year and last year as well, with regards to acquisitions, given where cap rates are and values have really grown.
But, what you have bought and what it seemed to indicate in your press release, is that you might be a little more focused today on some smaller independent assets in gateway markets. I am just trying to figure out how you balance acquisitions of those types of assets with a like-kind exchange for a $200 million Tampa asset.
Are you guys are going to be stretching valuations to try to find a like-kind exchange so that things work out from a taxation standpoint, or are you less likely to do that? Just help me think about the implications of that like-kind dynamic.
Thanks.
W. Edward Walter
Sure. I think as I suggested earlier, the market is competitive.
I say that we have an active pipeline of deals that we're reviewing, but compared to that I might have looked at the well four years ago. My assessment of the probability that we actually complete those transactions would suggest that we will -- our hit rate is going to be a lot lower now than it was earlier in the cycle.
I don't think there is anything about that that's unexpected that's what you would naturally expect as you work your way into the cycle that a lot of capital plays to the party and then tends to pay bigger prices, that's one of the reasons why we're active seller right now and we tend to be an active seller. As you think about the right king of exchange element of this, I think that your question is a great question and the short answer is that we're not going to stretch on purchases, jut to complete the right kind of exchange.
Now I think we're not uncomfortable in paying a higher dividend. We're not uncomfortable in generating proceeds from deals and using that to either pay more of a dividend or buyback stock if that's the right answer.
And so the reality is that I mentioned before, we're comfortable with the scale of the company. We're trying to refine the markets that we operate in.
If the deal fits our parameters or presents a unique opportunity, then we're going to -- we would be happy to be an investor, but on the other hand to the extent that we don't, we're fine looking for ways to return capital or looking for other ways to return capital.
Ryan Meliker - MLV & Company
Got you. It is good to hear that the like-kind dynamic isn't a driver of acquisitions.
That's all for me. Nice quarter.
Thanks a lot.
W. Edward Walter
Thank you.
Operator
And we'll now take our next question with Chris Woronka from Deutsche Bank.
Chris Woronka - Deutsche Bank
Hey. Good morning, guys.
Just want to ask you, as you look up and down your portfolio, and certainly you have a number of kind of the large battleship and group hotels, but as you look at some of the smaller ones in nonunion markets, are you guys kind of evaluating any opportunities to almost convert those to limited service? That seems to be kind of where we are trending as an industry and just wanted your sense as to what is possible within your portfolio.
W. Edward Walter
Yes, it's an interesting question Chris. You know what I would say is that I don't know that we would think about converting them to limited service in the sense of down branding them because I doubt that the risk on the rate would be worth that, but what we are trying to do and certainly this is something we've been trying to do for a while is try to pick up some of the best elements of limited service operation and apply them to our hotel.
So in another words where we have hotels that in-house managed or operator managed food and beverage we're looking at opportunities to outsource that food and beverage platform or consolidate that food and beverage platform. So it doesn’t make it a select service or limited service hotel, but what it does is to the extent that we can outsource that or reduce the importance of that to the hotel, we're at least looking at a way or trying to identify ways to improve our margins and reduce our risk on the food and beverage side, so that more and more of our hotel is based on the rooms operations, which is we all know tends to generate higher levels of profitability.
So there are a few specific instances in our portfolio over the years where we have made the decision that best thing to do was to covert a Marriott to a courtyard and I think that's happened a couple of times. But generally I don't think that's going to be the preferred route, but looking for ways to modify the operating model to make the hotel more efficient to king of capturing the best of the limited service operating platform, while maintaining the full service rate.
That's the strategy we would like to push wherever it makes sense.
Chris Woronka - Deutsche Bank
Sure. Great.
Understood. And then, just as we think about the New York market, from where we sit, we probably think that the supply maybe is having more of an impact on the Marquis, given the number of rooms.
Is that a fair assessment? And is it a very significant impact if we looked at New York RevPAR ex-Marquis?
W. Edward Walter
No I wouldn’t say that the Marquis is really struggling at all because of flex servicing let's say. The level of supply in New York has been high and I would say the entire New York market has felt some impact from the supply and I think most folks would describe that less about a occupancy problem and more about a challenge in being able to raise rate.
But to be honest, the hotels like the Marquis that can accommodate larger groups and plus have that kind of a ground zero location within Times Square, we're still running comfortably north of 90% at the Marquis, which is where we've been running for the last several years. So I don't think I actually think that our in a lot of ways that you look at our performance was in New York.
We've been doing slightly better than the market for the last two years and I think we're less affected by a lot of our select service supply that has come into New York then some other hotels might be and partly because we have the customer base for our key hotels is far more diversified than what a flex service hotel typically attracts.
Greg Larson
And you can that even in the third quarter Chris, where our RevPAR in New York was up 4.1%, which obviously outperformed the star data for New York.
Chris Woronka - Deutsche Bank
Okay. Very good.
Thanks guys.
Operator
And we'll now take our next question with Jim Sullivan with Cowen and Group.
Jim Sullivan - Cowen and Company
Okay. And forgive me if this question relates to something you may be addressed in your prepared comments, Ed, but on the four seasons in Philadelphia, I am not sure if you’ve finalized your budget or your plans there, so whatever you can give us in terms of an update on timing and cost for that conversion.
W. Edward Walter
Jim we don't have that completely finalize right now. I would broadly say that the direction we're leaning there is going to be an independent hotel, but likely soft branded.
It will be affiliated with one of the major brands and the exact timing for when we will start construction is not yet set, but I suspect that some of that work will start sometime in the middle of next year.
Jim Sullivan - Cowen and Company
And do you have some preliminary budget or some range that you could share with us?
W. Edward Walter
Not at this point in time. We're still working through that with the operator that we're working with.
Jim Sullivan - Cowen and Company
Okay. The second question, just a minor question on the management fee.
That line item group grew more than hotel revenues. Is that attributable to IMS in the period and can you give us an outlook for IMS as we go forward in what's a fairly robust topline environment?
Greg Larson
Hey Jim, this is Greg. I think if you look at our management fees this year, I think in general obviously base fees have been increasing.
I think that this year in particular incentive management fee year-to-date the increase has been fairly minimal and there are several reason for that. And Ed mentioned earlier in this call, we've had several negotiations with certain managers where we've been successful in sort of minimizing incentive management fees for this year.
So I think when you look at it, our incentive management fees in the first half of the year were actually down on a year-over-year basis and in the second half of the year, our incentive management fees will be up around 4%.
Jim Sullivan - Cowen and Company
And when you look out to next year, I know obviously you're not giving guidance for next year in this call, but the environment is very positive. Supply in most markets, while it is increasing, remains below demand growth.
Should we be assuming that IMS will increase for the full year next year, too early to say?
Greg Larson
I think next year as you said, I think a lot of people including us were expecting very good results for next year on the topline and with EBITDA growth and I think with great EBITDA growth, we'll have sort of what I would consider normal incentive management fee growth next year.
Jim Sullivan - Cowen and Company
Okay. And a follow-up question on the earlier question about Europe.
I wonder if you could talk to us about acquisition pricing in Europe, how it's moved this year versus acquisition pricing in the U.S. And, as you think about the comparative growth rates over the next one to two years, how strong your appetite is?
I know you just announced an acquisition in Europe, but how strong your appetite is to do more acquisitions over the next -- over the coming quarters?
W. Edward Walter
Pricing in Europe is probably one way to think about it might be the cap rates there are 100 to 150 basis points higher in at least in the markets that we've been focused which would be Germany relative to what we're seeing in the U.S. pricing in London and in Paris is probably comparable to pricing in the best markets in the U.S.
and so very aggressive. Now I think you're looking at sort of in the 4% to 5% range as it relates to cap rates for either in those markets.
Given that our outlook for Europe would be for slower growth than what we would be expecting in the U.S. there is -- one of the reason why we are buying in Germany is we generally think that Germany will have better growth that the rest of Europe and we think the pricing levels make more sense relative to opportunities we might see elsewhere.
I think that both Paris and London while they are spectacular long-term markets, but right now their capital is aggressively seeking assets in those markets is one of the reason why we sold the Sheraton Skyline and the pricing levels there are such that we would not view that as a good allocation of capital in the near term absent an unusual situation to be able to meaningfully create value at the hotel. I think our we're in the process of marketing some other hotels in Europe, but we're actually trying to take advantage of some of the optimism that the broader world has in terms of investing in European hotels to see if we can reduce the size of our portfolio.
We're still interested in acquiring more, but it will be fairly selective in terms of the markets that we will enter.
Jim Sullivan - Cowen and Company
Okay. Just to kind of follow up in terms of what you just said, obviously, the long-term debt markets are very favorable in Europe.
How do you balance the appeal of that with the desire to sell assets? We tend to think that assets that are not encumbered by debt are easier to sell.
How do you balance those two contradictory factors?
W. Edward Walter
That's a good question. Now as we stand currently, in Europe we tend to approach our financings on an asset by asset basis, but to some degree we're not forced to confront that issue in part because we've dealt with all the financings that we need to address over the course of the last couple of years.
We've also built in the flexibility and most of those financings to be able to sell some of the assets earlier. Financing that offer tends to be shorter term than what we will typically see in the U.S.
and what we would typically employ in the U.S. So I think that we're looking at the not unlike the way we're thinking about some of the assets we would like to in the U.S.
but back in the financial markets have gotten a bit more aggressive and certainly I would say that the delta in Europe is even larger than what we've seen here not that they’ve gotten that much cheaper than where we are in the U.S., but the delta compared to last year they’ve got a lot cheaper. We're sort of a mind this is a good time to try to take advantage of that which is why we're marketing some of our properties there.
We're not looking to sell our best assets, but I would say we're looking to sell some of the middle of the pack.
Jim Sullivan - Cowen and Company
Okay. And then finally for me and I think this is a Greg question, Greg, I wonder if you could walk us through the reasons for the difference between the $69 million positive impact of the litigation reserve reversal and the $59 million add back to get to the adjusted EBITDA?
Greg Larson
Yes, so Jim as you know we're fortunate enough to win the San Antonio case. So we're in a great -- because of that we're not going to have to put out $70 million, which is a good thing.
We had $25 million in the restricted cash account that was now back in our hands. So we're pretty happy to say the least.
The other thing that happens as you pointed out is that there is a GAAP impact of $69 million, so you'll see that when you look at our GAAP earnings, but from an EBITDA perspective the impact is really, really just the interest that we've been accruing on this year. So we've reversed out the interest from this year and then we have some interest accruals from last year that also will flow through EBITDA and so as you correctly point out in total for San Antonio the $10 million EBITDA benefit, but the flip side to that is we have an increase in other litigation expense and so net, net when you take into account that benefit and the increase in the accrual on other litigation expense it's approximately a $4 million EBITDA benefit.
And as you know, that's not -- that's not hotel EBITDA right and so obviously $4 million helps our entire EBITDA for the company, but had no impact on our margin growth -- hotel margin growth of 305 basis points.
Jim Sullivan - Cowen and Company
Okay. Very good.
Thank you.
Operator
And we'll now take our next question from Wes Golladay, RBC.
Wes Golladay - RBC Capital Markets
Hey everyone. Can you give us an update on the supply and demand picture for group on the prime nights for group?
Are you seeing the ability to push some of the group business to the softer nights?
W. Edward Walter
Yes, that one of the interesting challenges that we have as we get into this part of the cycle is that given how robust transient demand has been in a number of markets and given the fact that so many of our hotels are running very high occupancies in the middle of the week and on Saturday. And part of what's happening on the group side now is trying to -- try to push that business to what we would describe as a shoulder night.
So it's hard -- we actually had an extensive discussion about that when we were going through our quarterly review with our asset management team and I wish I had a statistic to be able to describe how successful we're being with that, but the reality is that clearly for business being booked now for '15 and '16.
Greg Larson
Yes, it's a great situation to put the group in a weaker time because you know what, when you do that, sometimes it could skew the rate growth that we are talking about for next year because if you're booking during the weaker time, that's a great outcome and allows us to book transient business in a stronger times, but if you looking at year-over-year rate growth in group, that obviously will impact and lower than number.
Wes Golladay - RBC Capital Markets
Okay. And can we go back to the Marquis asset?
When will you guys be able to discuss the numbers more and the opportunity to dispose of the asset for the signage in retail? Is there a time we can get more color on that?
Greg Larson
You mean as it relates to our options around exercising some ability to be able to sell the retail itself.
Wes Golladay - RBC Capital Markets
Yes.
W. Edward Walter
To be honest, there is no reason for us to do anything there until we're comfortable that we have Vorando because they're in control of this and so Vorando has maximized the benefit of the retail space in this signage. So the retail space I would assume will get leased over the first part of next year, the signage part of this, the retail will not be taking all of the signage.
So I think there is going to be some period of time where they continue to market the signage and users get comfortable with the fact that we've now created -- or they’ve created that they get TV screen in one of the best market in the world from a publicity perspective. So I don't think that this is anything that we're going to be moving forward aggressively on in the near term in part because I think there is a big opportunity here and we would love to see that maximize it before we try to exercise any right.
Wes Golladay - RBC Capital Markets
Okay. As we get to the opening of that, though, can you talk more about the value creation as maybe where you see it value at once it is opened?
Or, it seems to be an ignored asset for you guys right now.
W. Edward Walter
Well, it's not an ignored asset from a perspective of what it does for EBITDA, but I think it's a good question we could try to provide more color on that in the future.
Wes Golladay - RBC Capital Markets
Okay. Thanks a lot everyone.
W. Edward Walter
Thank you.
Operator
Thank you. There are no further questions at this time and I would now like to hand the call back to Mr.
Ed Walter for any closing remarks. Please go ahead sir.
W. Edward Walter
Great. Well thank you for joining us on the call today.
We appreciate the opportunity to discuss our third quarter results and outlook with you and we look forward to talking with you in February to discuss our yearend results and provide much more detailed insight into 2015. Have a great day everybody.
Operator
This does conclude our conference. Thank you for your participation.