Marcus Corp (MCS) 2011 Q3 法說會逐字稿

Good morning, everyone, and welcome to The Marcus Corporation third-quarter earnings conference call. My name is Derek and I'll be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session toward the end of the conference. (Operator Instructions) As a reminder, this conference is being recorded.

Joining us today are Greg Marcus, President and Chief Executive Officer, and Doug Neis, Chief Financial Officer of The Marcus Corporation. At this time, I'd like to turn the program over to Mr. Neis for his opening remarks. Please go ahead, sir.

Thank you and welcome, everybody, to our fiscal 2011 third-quarter conference call. As usual, I need to begin by stating that we plan on making a number of forward-looking statements in our call today. Our forward-looking statements could include, but not be limited to, statements about our future revenues and earnings expectations; our future RevPAR, occupancy rates, and room rate expectations for our hotel and resorts division; expectations about the quality, quantity, and audience appeal of film product expected to be made available to us in the future; expectations about the future trends in the business group and leisure travel industry and in our markets; expectations and plans regarding growth in the number and type of our properties and facilities; expectations regarding various non-operating line items on our earning statements; and expectations regarding future capital expenditures. Of course, our actual results could differ materially from those suggested or projected by our forward-looking statements. Factors, risks, and uncertainties which can impact our ability to achieve our expectations are included in the risk factor section of our 10-K and 10-Q filings, which can be obtained from the SEC or the Company. We'll post all Regulation G disclosures when applicable on our website at www.marcuscorp.com.

So, with that behind us let's talk about our fiscal 2011 third quarter results this. This obviously was a tough quarter for our largest division, Marcus Theatres, significantly impacting our reported results. Comparisons to last year's results were further negatively impacted by several unusual items, both this year and last year. I'll provide you with some additional background on the operating results of our two divisions as well as explain those aforementioned unusual items. Before I get into the operating results, let me first briefly address any variations in the line items below operating income versus last year; and right off the bat, the first unusual item is reflected in our investment income line which shows a $643,000 loss this quarter compared to $149,000 of income last year. The negative swing in this line is attributable almost entirely to an approximately $700,000 adjustment to investment income during the fiscal 2011 third quarter. This adjustment represents a change in estimate of interest income earned to date on the funds we advanced several years ago in conjunction with the public portion of the Hilton Milwaukee parking garage. We continue to project full repayment of all funds advanced, albeit though, at an interest rate and interest earned at a lower rate than originally anticipated, thus the adjustment that we had to make. We do not expect any significant additional revisions to this estimate in the future.

Moving further down the P&L, another unusual item that occurred during the fiscal 2011 third quarter resulted in a negative comparison on our gains and losses on dispositions line this quarter and for the first three quarters this year compared to the same periods during fiscal 2010. As our press release noted, an adverse legal judgment was rendered against us during the quarter related to architectural services rendered during the construction of the condominium units at our Platinum Hotel and Spa in Las Vegas. Although accounting guidance required to us accrue a contingent liability for this judgment, we are vigorously appealing the ruling and believe there's a reasonable possibility that the judgment may be overturned. We believe not only that the judge inappropriately applied applicable law in rendering his decision, but that the plaintiff's own billing records indicate that the plaintiff's attorney may have had inappropriate ex parte communications with the judge. A motion for a new trial based on the ex parte communications is scheduled to be heard later this month. In addition, we file an appeal based on the judge's application of the relevant laws and interpretation of the contract.

That being said again given that the accounting guidance requires us to record something, we did, in fact, record nearly $750,000. The largest portion of this judgment was recorded on this gain or loss on disposition line because the majority of the construction costs associated with the platinum project were deducted from proceeds from the sale of the condominium units resulting in gains reported in prior years. The remaining portion of the contingent liability accrued this quarter as a result of this judgment relates to legal fees and has reduced our hotel division operating income during the fiscal 2011 periods reported. As our press release notes, the combined impact of the two unusual items I just described totaled approximately $1.8 million on a pre-tax basis, negatively impacting our fiscal 2011 third-quarter results by approximately $0.04 per share.

Conversely, our interest expense was down nearly $200,000 during our fiscal 2011 third quarter and is down approximately $600,000 year to date, compared to the prior year same periods due primarily to reduced borrowings, and our overall a debt to capitalization ratio at the end of quarter was a very strong 39.8%, down from 41% at our May fiscal 2010 year end. Also in the good news category, the last line in our other income and expense section equity gains and losses on investments and joint ventures, benefited this quarter from the fact that one of the two hotels that we have a 15% interest in reported a sizable gain from recently refinancing its debt, accounting for the majority of the increase on that line compared to the prior year. And finally, our effective income tax rate during first three quarters of fiscal 2011 was 38%, compared to 37.1% last year, resulting in a small negative comparison of this year's results to prior years. I currently don't expect any significant change to our tax rate for the final quarter of the year, pending any further changes in assumptions, lapses in statutes of limitations or potential changes in federal or state tax rates.

Shifting gears our total capital expenditures, including acquisitions, during the first three quarters of fiscal 2011 totaled approximately $20 million, compared to just under $15 million last year. The largest component of this year's expenditures, of course, was the previously announced Appleton, Wisconsin theatre acquisition. The remainder of the fiscal 2011 capital expenditures were again spread almost equally between our two divisions and represent a typical renovation and maintenance capital at our existing properties. With only a quarter to go in our fiscal year, borrowing and unforeseen growth opportunity that could rise in the remaining two-plus months of our fiscal year, I'm currently estimating our 2011 capital expenditures may end up in the $25 million to $30 million range, which would be fairly consistent with the last two fiscal years. Of course, the actual timing of the various projects currently underway or proposed will certainly impact our final CapEx number, as will any currently unidentified projects that could develop during the remainder of the fiscal year.

Now before I turn the call over to Greg let me provide a few additional financial comments on our operations for the third quarter beginning with Theatres. As you saw in our press release, our box office revenues were down 21.4% during third quarter and concession revenues were down 17.2%. Year-to-date box office revenues are now down 9.6% while our concession revenues are down 9.8%. Unlike our last two quarters, where essentially one week during the quarter accounted for the entire decline in box office receipts during each of the quarters, we experienced box office declines in 12 out of the 13 weeks during our fiscal 2011 third quarter, with the only week with positive results being the very last week of the quarter. As we note in our release, comparisons to the record revenues we reported last year were too much to overcome and we're exasperated by the disappointing performance of this year's winter film slate. The overall decrease in theatre revenues was entirely attributable to a decrease in attendance at our comparable theatres of 23.3% for the third quarter, now, which then, in turn, results in our overall attendance decline for the full year now being down 12.7% on a year-to-date basis.

The impact of our overall attendance decrease was partially offset by an increase in our average admission price for these theatres of 0.7% for the third quarter and 2.5% year to date. The fact that last year's top film during the quarter was Avatar with an associated premium pricing for digital 3-D showings of the film resulted in a smaller increase in our average ticket price this quarter than we've been reporting in prior periods. Conversely, our average concession in food and beverage revenues per person jumped by 6.3% during the third quarter and is now up 2.7% year to date. Comparisons to last year's third quarter results in our Theatre division were significantly impacted on a negative basis by the change in estimate in deferred gift card revenues we reported last year during our third quarter. Our fiscal 2010 third quarter operating results from the Theatre division were favorably impacted by approximately $2.2 million related to gift card income. After adjusting for last year's gift card income, the fact is this year's third quarter operating income was still down over $5 million or approximately 41% lower than last year's results.

Now, shifting to our Hotel and Resort division, as we note in our release, our overall Hotel revenues were up 6.7% and total RevPAR was up 9.8% for the quarter, compared to the same period last year, and year to date our RevPAR is now running 13.9% higher than it was last year at this time. According to data received from Smith Travel Research and compiled by us in order to match our fiscal year comparable upper upscale hotels throughout the United States experienced an increase in RevPAR of 6.4% during our fiscal 2011 third quarter and 7.8% during the first three quarters of our fiscal year, so for the fourth quarter in a row we've outperformed the national average. Our fiscal 2011 third quarter overall RevPAR increase was a result of an overall occupancy rate increase of 3.2 percentage points and an average daily rate increase of 3.1%. For the first three quarters of the year, so far, the fiscal year, our occupancy is now running approximately 8.7 percentage points ahead of last year and our average daily rate has decreased 0.3%.

As I noted earlier, our comparison to last year in this division were also unfavorably impacted by the legal fee portion of that contingent liability, which we reported this year, as well as approximately $500,000 of gift card income reported last year in conjunction with the previously described change in estimate. To exclude these items from this year's and last year's results as well as the impairment charge that we took last year during the second quarter, our operating income rose over 7% during third quarter and 159% during the first three quarters of fiscal 2011 compared to the same periods last year, and our year-to-date operating margin of 4.6% compares very favorably to an adjusted margin of 2% last year. Our fiscal 2011 third quarter and first three quarters operating income and operating margins would have, in fact, been even better than that if not for the legal expenses related to our Platinum Hotel. We continue to incur significant legal expenses related to various Platinum lawsuits and those costs, including the legal expenses in the adverse judgment that I've previously mentioned, total nearly $1.4 million so far this year. That's nearly $700,000 higher than our net legal expenses on this project as of this same time last year.

And finally, since our next conference call is not until July, there is one more item I wanted to bring up. As we near the end of our fiscal year and our thoughts turn to next year, I do want to remind you that our next fiscal year, fiscal 2012, will be a 53 week year for our Company ending on May 31st, 2012. For those of you who followed us for some time know that extra week in May is no ordinary week, but rather includes the Memorial Day weekend. Since the 2011 Memorial Day weekend falls in the first -- the 2011, this upcoming Memorial Day weekend, falls in the first week of our new fiscal year, that means that we're going to have two of these traditionally strong movie going weekends during the upcoming fiscal year. To put this in perspective, while the Company has certainly changed since the last time we a 53 week year in fiscal 2007, the extra week that year contributed approximately $9.5 million in revenues and $2.9 million in operating income to our fourth quarter and fiscal 2007 results. I share those numbers for illustrative purposes only as the projections of the impact the extra week would have on fiscal 2012 would be purely speculative at this time.

So, with that I now turn the call over to Greg.

Thanks, Doug.

I'll begin my remarks today with our Theatre division. You know, as a public Company we're pretty used to the various statements we are required to make about our businesses and the risk factors associated with them. In fact, we make these statements so often it is easy to take them for granted. For years now, we've been making the following statement in our public documents. "Revenues for the theatre business and the motion picture industry in general are heavily dependent on the general audience appeal of available films together with studio marketing, advertising and support campaigns and the maintenance of the current windows between the date the film is released in theatres and the date a motion picture is released to other channels including video on demand and DVD. These are factors over which we have no control."

Well, those words have certainly become real for us again this quarter. Just a year after experiencing the highs of a record quarter spurred on by the largest grossing movie of all time, as well as a three other top performing blockbusters, we have just completed one of the more disappointing fiscal third quarters we've had in recent memory with film product once again the primary driver of our results. As our press release notes, all four of our top pictures last year performed better than our single best third quarter film this year, and while you could argue that the holiday and early winter film season featured several critically acclaimed specialty films such as True Grit, Black Swan, the King's Speech, and The Fighter, clearly we were missing the big mass appeal blockbusters that often are associated with this second most important season of the year for us. Some of the other featured films for the season such as The Tourist, TRON, Chronicles of Narnia, Yogi Bear, Gulliver's Travels, and even Little Fockers, were no match for the strong lineup of films last year. Certainly, we're not happy about a 23% decrease in attendance during our very important third quarter, but having been in the theatre business for over 75 years, it is important to remember that this is not a business that can be judged quarter to quarter or even year to year, for that matter, because while over time the positive trendline of exhibition is clear, the path along that trendline can vacillate, sometimes severely.

We believe it is now more important than ever to maintain a long term perspective. It is our view that the sudden and precipitous decline in attendance points more to a lack of good product rather than a long term trend in movie going. The theatre business is, by its very nature, a business that exudes optimism about the future. I think you can see why and I suspect we will hear some of that same optimism at the Gabelli Movie And Entertainment Conference we are presenting at tomorrow, as well as the industry's annual Cinemacon Convention in Las Vegas at the end of the month. We are already looking forward, and summer looks good on paper.Our press release listed some of the films currently scheduled for the all important May through August season and as you saw there are quite a few sequels of franchise pictures scheduled for release. In fact, by our count there are a record 27 sequels slated for release in calendar 2011. Whether this will ensure higher box office remains to be seen, but the obvious advantage of a strong sequel is the built-in audience that the majority of these films have. We also certainly hope that Hollywood continues to produce strong original films as well, and the list in our press release includes some of those potential hits as well, and I will tell you, anecdotally, I saw 20 minutes of Super 8 a number of weeks ago in California when visiting Paramount and if the rest of the movie is as good as the 20 minutes, I saw we should be excited.

Returning to the public Company statement I quoted earlier, the second half of the statement addresses another topic that I'm sure will be much discussed at these industry meetings this month; that is the topic of windows. There continues to be a lot said about the possibility of some of the major film studios testing a new shorter premium video-on-demand window during calendar 2011. While currently being described as a limited test for select films only, we have nevertheless expressed our concerns about this new potential window with our distribution partners, and we suspect others in the industry have done so as well. The studios have generally downplayed the expectations regarding the impact a new window like this would have on our business, but the fact is that no one really knows right now. Needless to say, we are monitoring this industry development closely and time will tell whether this is much ado about nothing or not. I will say this, our current film costs are directly related to the exclusivity of the product we display and any change in the distribution model would likely impact our view of what we would pay for that product. Never a dull moment in the theatre business. Which brings me back to the closing sentence in the statement I read at the outset which noted that film product quality and windows are factors over which we have no control, so in the meantime our team continues to focus on the factors that we can control. This includes executing on the strategies we have communicated to you in the past. We continue to focus on significantly expanding our digital footprint in the very near future, seeking additional revenue sources through alternate food and beverage outlets, alternate program and ancillary revenues, and continue to pursue growth opportunities, such as theatre acquisitions and new theatre sites.

With that let's move on to our other division, Hotels & Resorts. You've seen the segment numbers and Doug gave you some additional detail. With our Company-owned hotels predominantly located in the Midwest, we have never made money in our fiscal third quarter in this division and this year was no exception. Despite the overall improvement in operating trends, we had another nice quarter of revenue improvement and as Doug pointed out, would have reported our fourth consecutive quarter of year-over-year improvement in operating income if not for the one time gift card income last year and the adverse legal judgment this year. Particularly encouraging in the detail behind our numbers was the fact that we reported an overall increase in our average daily rate of just over 3% this quarter, the first time we have reported an increase in 80 hours since our second quarter fiscal 2009, 2 years ago. We still have a long ways to go, but over half of our owned properties reported at least some increase in rate this quarter compared to the same quarter last year.

That is not to say that we aren't still experiencing a lot of pressure on our rates in this current environment. Our fiscal 2011 third quarter RevPAR was still nearly 9% lower than our pre-recession fiscal 2008 third quarter RevPAR, with ADR being a major contributor to the decline; thus in order for this current strategy to be complete and in order for operating margins to be max -- I'm sorry the current recovery to be complete and in order for operating margins to be maximized, we still need average rates to improve. This continues to be the biggest challenge we are facing right now and the fix to this is not as simple as just raising our rates. The fact is that in the midst of the economic downturn our mix of business has changed. Historically, the overall percentage of the occupancy in our hotels has been approximately 50% group business, 50% non-group business. Right now our overall mix is probably closer to 40/60. In other words, with group business in decline during the recession, we along with others in our industry have had to replace that higher rate of business with occupancy predominantly from the price sensitive leisure market. Any substantial growth in our ADR and future periods will have to come about by successfully migrating back to our 50/50 group to non-group customer mix.

As group business improves, it should provide the an opportunity for to us reduce our usage of the various discount Internet channels that the leisure guest relies heavily upon, so the good news is that our group bookings, while not back to where they were, continue to improve. The vast majority of our individual hotels are ahead of their booking pace for next year compared to where we were last year at this time and overall we are ahead of pace in every month of our next fiscal year except the one right now. The rate on these booked rooms is up slightly over the prior year as well. In the near term, we still don't expect significant increases in the group business ADR, but as we've pointed out in the past the group business customer tends to provide more opportunities for ancillary spending once they are on-site, making the group customer a very desirable customer. Over time, with supply growth in our market segment limited in the short term, it should be reasonable to expect that we will continue to gain pricing power as the economy improves.

Looking ahead we generally expect our favorable revenue trends to continue in future periods with one notable exception which will unfortunately impact our fourth quarter results. Last year during the fourth quarter, one of our largest hotels benefited from some very strong group business that we know we won't be able to completely replace, so our comparisons to last year will be very difficult. It is certainly possible that despite operating improvements at the majority of our other properties that produced projected results at this one hotel may result in a small decrease in operating income from this division for this one quarter. Beyond that, right now, the summer looks good for our hotels, and as I indicated earlier the booking pace for all of fiscal 2012 is ahead of last year. Finally, we continue to look for opportunities to grow our hotels under management through a variety of different ways. We are currently exploring multiple opportunities and with a strong balance sheet, credit availability, hope that one or more of these potential growth opportunities will come to fruition in the months ahead.

Now, before we take questions let me address one additional topic for you. Those of you who follow us on a regular basis know that owned real estate is an important strength of The Marcus Corporation. It has often been referred to as the hidden asset of our Company. In addition to the real estate associated with our two operating businesses, we also own various other land parcels, often related to future sites for our businesses or past locations of some of our businesses. Those of you in the Milwaukee area have seen news reports recently about an exciting new retail development anchored by the Von Maur department store that is being planned on the west side on the site of our former West Point Cinema as well as an adjacent land in the Town of Brookfield. If you recall, this is a theatre that we closed when we built our flagship Majestic Theatre a few years ago, and we indicated that the time that the real estate could provide opportunities for future value creation because of its prime location in the marketplace. At the time, we anticipated selling this land parcel, but as we studied it, the opportunity to get involved in a high quality project, such as the one currently under discussion, became very attractive to us. We are very excited about this project and currently anticipate fulfilling the developer's role in making this project a reality. There are still several hurdles ahead and many details to finalize, so it is still premature to discuss the financial elements of the development, but we will certainly provide more clarity on the project as the details come together.

With that, at this time, Doug and I would be happy to open the call up for any questions you may have.

Thank you, ladies and gentlemen.

(Operator Instructions)

And our first question is coming from the line of David Loeb from Baird. Please proceed.

Good morning.

Greg, on the last topic, what kind of capital investment would you anticipate, and what do you expect the return would be on that?

I'm sorry, David. You cut off at the end. Can you say that again?

Are you sure you just don't want to dodge my question?

Not about theatres; I'm not happy not to dodge it.

No. It was about the development project in Brookfield. Can you give us an idea about what kind of capital investment might be involved and what kind of return expectations or hurdle you would require for that?

Well, I don't want to give you the details. I can tell you the investment is in the $100 million range, a little over that. But in terms of investment hurdles, it meets our general criteria, but I don't want to get into that just yet, because we still are working out all the details of the project. It's still a work in progress.

David, as soon as we have it more fine tuned and have a better understanding of how the financing is going to all come together, then we'll by all means get that information to you, but right now we just don't have it yet.

It just does seem like a big chunk of change to invest directly on your balance sheet. I'm just wondering how you look at that relative to other investment opportunities. And clearly, you have the balance sheet capacity for this and more, but I'm wondering how you're looking at the capital allocation decision. Can you give a little more color?

Yes. You know, David, my feeling on it is this, as you pointed out, our balance sheet is under-levered, and you know we've been searching long and hard for investments to make, and even doing this we're not going to constrain our capital ability. We'll be cognizant of that. We're still going to be able to grow our businesses. Even organic growth is, as you know, very challenging. And hotels, I'm hoping one day the banks will lighten up.

The good thing about this project is that it's such an exciting project, and such a -- I mean, this is the premier tenant in the Midwest everybody is looking for coming to Milwaukee in terms of Von Maur, although they are not predicted to be our tenant as part of the project. They'll have their own pad. But we feel that if we saw other opportunities in our core businesses, we'll have the ability to move this and sell this or find a partner and take some of it off our balance sheet and then reinvest in stuff we want to, but we felt it was important to make investments that meet our criteria when had the ability to right now.

That makes perfect sense, and it does seem like you're creating a fairly liquid asset, so that also makes sense.

So, on the theatre business, aside from Super 8, which sounds like to me at least like a movie about the economy motels, with the number of sequels coming does it concern you that new franchises are not being created or about the lack of creativity, or does it actually bode pretty well for attendance?

Man, your guess is as good as mine on that one. I think it's -- I think you'll -- it's not like there's not going to be any new stuff. Super 8's there. There's a new one call Cowboys and Aliens, which looks really interesting.

Filmed in New Mexico.

Yes, exactly. So -- there's this movie Paul which is coming out. There is lots of new product. We play over 160 films in our theatres. Over a year they release close to 500; obviously, not all make it to the movie theatre business. So, 27, while it's a lot for the number of sequels and -- but there's still a lot of original product, and you never know where they come from. That's the good thing about the business.

That makes perfect sense. And then, finally, just one quick question about hotels. It sounds like you're finally able to get rate growth. It doesn't surprise me. Every time I come to Milwaukee, you seem to be on the verge of selling out or sold out. What do you think it takes to get the kind of group business back that you're seeing? Is it Milwaukee winning conventions? Is it you taking share from others in town and in your markets, or is it really just macro, the economy coming back?

Yes. It really is all three of those things. I mean now look at. Probably the most minimal is the share from others, because, as you know, in Milwaukee, sometimes we have to be careful not to take it from one pocket, then move it to the other. But as the economy gets better and people start -- it's always that -- as much as we have technology in the world, there's nothing like shaking somebody's hand and closing a deal. And when your competitors are out, you start hearing, oh, wait, my competitor is out making a sale. Now I got to get out, and so that starts to build on itself.

And there's lots of things that travel can't just replace and have to occur in terms of -- you can't -- when I say travel can't replace, I meant technology can't replace. You know, you can't have a conference with -- without being together. It's hard to do that over a video chat. So, as the economy gets better and companies start to have more money in their pockets and they're comfortable spending it, instead of sending one person to the conference, maybe they'll send two. Maybe they'll stay in a little nicer hotel. So, all those things really will -- and we'll continue to be aggressive in our markets and making sure that we're getting our share, if not more, and delivering a great product and great service. And you put all those things together, that should be a very good formula.

Makes perfect sense, great. Thank you very much.

Thank you, David.

(Operator Instructions)

I do have a follow-up question coming from the line of David Loeb. Please proceed.

Well, if nobody else is going to, I have one more.

Any comments, Greg, on the potential for an additional full-service hotel development in downtown Milwaukee? If the Marriott does -- what do you think are the chances of the Marriott getting built? And if it does, what impact might that have on the Pfister across the street or on your hotels in downtown, generally?

Well, you're really going for the hornet's nest question, aren't you?

Sorry.

That's okay. I'm happy to take it on.

I have no idea about what their ability to build it is. It is a subsidized hotel, and it's -- and that is not good. If you're familiar with it, I don't know if you are, it's being -- it's really interesting. They're using a program called ED5 to finance the hotel, and the -- as a chunk of the financing. That is, essentially, money that is gained from the sale of green cards, and if you're -- it's a foreign investors. Foreign investors put up a certain amount of money, and they have to create 10 jobs. Now, the interesting thing about the formula when they look to see whether they're creating 10 jobs, they don't look to see if they're taking 10 jobs or eight jobs away from somebody else. All they have to do is create 10 jobs in the deal they're putting their money into.

Well, in the hotel business that's not looking -- that's not a great idea because hotels are simply supply, and by the way, what kind of -- let's go back to EB5 for a minute.What kind of return is someone looking for when they're buying a green card? They're buying a green card so their kids can go to school in the United States. They're buying a green card so they can travel outside the United States more freely because their passport may not have the ability to be as flexible as a US passport. And then they may be, thirdly, maybe even want to come here, but in most cases that's not even their main motivation. So they're putting this money in expecting certainly a low level of return, if anything.

I couldn't tell you exactly what they expect, but I know it's not much. So, in essence, it becomes a subsidy, yet the government says we're not subsidizing it because we're not putting government money in. We're just selling green cards, but whether the government is subsidizing it or foreign investors are subsidizing it, it is a -- it creates subsidies improperly -- by the way, we're fine with subsidies. Subsidies, when they are used to create demand, bring new bodies to a market, generate new spending, are great, but when they simply are for things like hotels where it's just a regular -- I'm sure it's a nice Marriott, but a regular Marriott -- all that it does is increase the supply. And if the pie doesn't get any bigger, we're just going to cut it into smaller slices. So, we have to be able to get more people to come to Milwaukee.

Simply, I will pay good money to the first person I hear say, I heard there was a great Marriott in Milwaukee. I really want to go there and check it out. It's not like people come here. I would say the same thing about our Hilton. They come here because they've got family here. They come here because they have business here. They come here because there's a convention here. And until we get more people to come for those reasons, building a Marriott is not going to solve the problems of downtown. It sounds great. It feels great. We're starved for development, so it feels like something's happening. But it's very short sighted without the increase in demand.

Now, the truth is, it's the only Marriott core brand in downtown Milwaukee now. We've got a Residence Inn and a Courtyard, and those properties over perform based on their market share, where they are, how they do, because somebody calling it a Marriott system, a very strong system, will default to those if they want their Marriott rewards points. So, I think they're probably the most vulnerable, but it will take from other properties. It will take from the Pfister. It will take from the Hilton. It will take from the Intercom. I don't know how much. Being right across from the Pfister, it will -- we will feel it. I have no doubt.Unless, of course, our community can get more demand [generators].

And I've challenged the community, and I've challenged our mayor and said, please, tell us how are we going to get more bodies down here. Tell us what your game plan is. The mayor was very supportive of the Marriott, as is his prerogative, but I said, okay, if you're going to be supportive of that hotel being built with a subsidy, then please tell me how are we going to get more people here. Because if not, the 10 jobs you create there are going to leave the Residence and the Courtyard and the Pfister and all the other hotels, because we won't have beds to clean. We won't have people to feed, because they'll be at the Marriott.

So, it's a long-winded question -- a long-winded answer to your question, I'm sorry, but you got me on my soapbox. And it's something that bothers me because I get concerned, obviously, when we just subsidize product. And people don't really understand EB5. It's sort of a new tool in the developer's toolkit, and I'm not against the use of subsidy, as I said, but it needs to be properly used, not just to build something for the sake of building it.

Is there a scenario where having a Marriott across the street would make you look to put a brand on the Pfister just as a way to attract guests, for example, who are looking for a Starwood product in downtown?

Well, we always -- you know us, David. We're always looking at ways to improve our businesses, whether it's putting a flag on something or taking a flag off something or changing the flag. You know what we do, so, of course, we consider that. We have no -- we've come to no conclusion on it. And whether the Marriott was there, we think about it sometimes, too. Brands are very strong, but right now we have no intention of doing anything.

Okay, great. Thank you very much for your help.

Want to ask Doug a question?I like putting you on the hot seat.

Thanks.

At this time, it appears there are no other questions. I'd like it turn the call back over to Mr. Neis for any additional or closing remarks.

Well, thank you. I certainly want to thank everyone for joining us again today. We look forward to talking to you once again in July when we release our fourth quarter and year-end fiscal 2011 results.

Thanks, and have a great day.

Ladies and gentlemen, that concludes today's call. You may disconnect your line at any time.