Financial Information
Luxury includes The Ritz-Carlton, Bulgari Hotels & Resorts, and EDITION worldwide.
2013 Compared to 2012
In 2013, across our Luxury segment we added eight properties (2,380 rooms) and two properties (737 rooms) left the system. In 2013, we also added five residential products (301 units) and no residential products left the system.
For the twelve months ended December 31, 2013, compared to the twelve months ended December 31, 2012, RevPAR for comparable systemwide luxury properties increased by 7.7 percent to $235.94, occupancy increased by 1.6 percentage points to 68.5 percent, and average daily rates increased by 5.3 percent to $344.38.
The $6 million increase in segment results, compared to 2012, reflected $9 million of higher base management fees, $9 million of decreased joint venture equity losses, a $5 million increase in incentive management fees, and $1 million of higher owned, leased, and other revenue net of direct expenses, partially offset by a $19 million increase in general, administrative, and other expenses.
Higher base management fees stemmed from a favorable variance from $3 million of fee reversals in 2012 for two properties with contract revisions, increased RevPAR due to increased demand, and new unit growth.
The decrease in joint venture equity losses reflected a favorable variance from $8 million in losses in 2012 at a Luxury segment joint venture for the impairment of certain underlying residential properties.
The increase in incentive management fees was primarily driven by higher property-level revenue which resulted in higher property-level income and margins.
The increase in owned, leased, and other revenue net of direct expenses primarily reflected $7 million of termination fees for two properties, offset by $7 million of pre-opening expenses for the London and Miami EDITION hotels.
The increase in general, administrative, and other expenses reflected an unfavorable variance from $8 million in reversals of guarantee accruals in 2012 for three properties and the following 2013 items: (1) a $3 million impairment of deferred contract acquisition costs for a property that left our system; (2) a $2 million impairment of deferred contract acquisition costs for a property with cash flow shortfalls; (3) $4 million of higher expenses to support our growth; and (4) $2 million of other net miscellaneous cost increases.
Cost reimbursements revenue and expenses for our Luxury segment properties totaled $1,442 million in 2013, compared to $1,428 million in 2012.
2012 Compared to 2011
In 2012, across our Luxury segment we added four properties (499 rooms) and no properties left the system. In 2012, we also added three residential products (89 units). No residential products left the system.
In 2012, RevPAR for comparable systemwide luxury properties increased by 6.0 percent to $220.33, occupancy increased by 1.0 percentage points to 67.0 percent, and average daily rates increased by 4.4 percent to $328.68.
The $28 million increase in segment results, compared to 2011, reflected a $21 million decrease in general, administrative, and other expenses, $8 million of higher owned, leased, and other revenue net of direct expenses, and a $4 million increase in incentive management fees, partially offset by $3 million of increased joint venture equity losses and $3 million of decreased gains and other income.
The $21 million decrease in general, administrative, and other expenses primarily reflected a favorable variance from a $5 million impairment of deferred contract acquisition costs and a $5 million accounts receivable reserve, both recognized in 2011 and both for one property whose owner filed for bankruptcy, as well as $8 million of guarantee accrual reversals in 2012 for three properties for which we either satisfied the related guarantee requirements or were otherwise released.
The $8 million increase in owned, leased, and other revenue net of direct expenses primarily reflected a $9 million increase associated with our leased property in Japan (which experienced very low demand in 2011 as a result of the earthquake and tsunami and received a $2 million business interruption payment in 2012 from a utility company).
The $4 million increase in incentive management fees primarily reflected new unit growth. The $3 million increase in joint venture equity losses primarily reflected increased losses of $8 million, principally for the impairment of certain underlying residential properties in 2012, partially offset by $5 million of decreased losses after the impairment, as a result of decreased joint venture costs. The $3 million decrease in gains and other income primarily reflected the impairment of a cost method joint venture investment.
Cost reimbursements revenue and expenses for our Luxury segment properties totaled $1,428 million in 2012, compared to $1,350 million in 2011.