U.S. Markets closed

Edited Transcript of FIHO12.MX earnings conference call or presentation 23-Apr-19 5:00pm GMT

Q1 2019 Concentradora Fibra Hotelera Mexicana SA de CV Earnings Call

Cuajimalpa Apr 27, 2019 (Thomson StreetEvents) -- Edited Transcript of Concentradora Fibra Hotelera Mexicana SA de CV earnings conference call or presentation Tuesday, April 23, 2019 at 5:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Edouard Boudrant

FibraHotel - CFO of Fibrahotelera S.C.

* Guillermo Bravo Escobosa

FibraHotel - Head of Corporate Development & IR

* Simón Galante Zaga

FibraHotel - Technical Committee Member

================================================================================

Conference Call Participants

================================================================================

* Fernando Froylan Mendez Solther

JP Morgan Chase & Co, Research Division - Analyst

* Francisco Chávez Martínez

BBVA Research SA - Research Analyst

* Marimar Torreblanca

UBS Investment Bank, Research Division - Director & Product Mngr for LatAm

* Sheila Kathleen McGrath

Evercore ISI Institutional Equities, Research Division - Senior MD

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good morning. My name is Matt, and I will be your conference operator today. At this time, I would like to welcome everyone to FibraHotel's 2019 First Quarter Earnings Conference Call. FibraHotel issued its quarterly report on Monday. If you did not receive a copy via e-mail, you can find it on the website, www.fibrahotel.com or e-mail gbravo@fibrahotel.com.

Additionally, I would like to remind you that FibraHotel will host its General CBFI Holders Assembly on April 30, 2019. All materials for the meeting are available on FibraHotel's website and we hope that you can participate.

Before we begin the call today, I'd like to remind you that forward-looking statements made during today's conference call do not account for future economic circumstances, industry conditions, company performance and financial results. These statements are subject to a number of risks and uncertainties. All figures included herein were prepared in accordance with International Financial Reporting Standards and are stated in nominal Mexican pesos, unless otherwise noted.

Joining us from FibraHotel are Mr. Simón Galante, CEO; Mr. Eduardo Lopez, General Manager; Mr. Edouard Boudrant, CFO; and Mr. Guillermo Bravo, CIO.

With that, I'd like to turn the conference over to Mr. Simón Galante. Sir, please go ahead.

--------------------------------------------------------------------------------

Simón Galante Zaga, FibraHotel - Technical Committee Member [2]

--------------------------------------------------------------------------------

Thank you and good morning, everyone. I'm going to begin today's call by providing an overview of the first quarter of 2019 results. And we'll then turn over the call to Edouard Boudrant, our CFO, who will discuss our financial results in more detail, and we will open the call for questions and answers.

In the first quarter of 2019, we continued operating in a difficult and volatile market environment with lower hotel demand both in business and beach (inaudible) hotels. On the business side, RevPAR of the comparable portfolio of 81 hotels increased 0.8% year-over-year driven by an increase in ADR of 1.9% and a decrease of 71 basis points in occupancy. Overall, RevPAR growth continues to be lower than what we have seen in the previous years as demand has slowed.

These results were partially affected by the gasoline shortage in January. We also continued to face headwinds from the government and government-related problems, which has especially impacted the Mexico City market, which, according to STR, had a demand decrease of 233 point -- basis points during the first 2 months of the year.

On the other hand, manufacturing and retails especially near the U.S. border have continued to post strong results, and we have started to see partial recovery in the growth in those regions.

The non-stabilized portfolio continued its ramp-up process as expected and now includes a Courtyard Toreo, Fiesta Americana Satelite and Live Aqua San Miguel de Allende hotels. Even though the 2 larger hotels have only been operating for a few months, the results are partially supported by a minimum return threshold negotiated with the operators. This was offset by an increase in interest expense related to the properties, but we believe that hotels still have substantial embedded growth in the future.

We saw better business dynamics as the quarter advanced, but we continued to perceive demand uncertainty going forward as company continued to defer large investments and look to control costs. On the beach side, we continued to see difficult market conditions. Cancun continues to be highly competitive and rates have been pressured given the slowing in arrivals of U.S. groups and travelers. This was partially due to security concerns, including negative headlines as well as competitive pressure in a new supply in other Caribbean destinations. As an example, of these impacts in the Fiesta Americana Condesa Cancun hotel in the first quarter of 2019, rooms sold to international groups were 65% less than what was sold in the first quarter of 2018. These groups generally provide the occupancy rate to maximum RevPAR and the hotels had 232 rooms sold for around $300 a night last year, with more price-sensitive customers such as tour operators and domestic travelers.

The super performance of the beach hotels during the quarter and the lease structure of the Fiesta Americana Condesa Cancun Hotel, especially keep our margins and bottom line for the first quarter. As you know, the first quarter of the year is cyclically the strongest for beach hotels as it is a high season for international travelers.

Even though the long-term fundamentals of the market and the customer value proposition remain solid, we expect further headwinds in the short term from additional supply coming in line as well as sargassum, which is expected to be significant again this year. As you know, we are partially protected from the impact as we have a minimum return guarantee for the hotel in dollars and still expect the hotel to perform above that minimum return level.

Overall, the hotel market in Mexico has a combined supply and demand decrease of around 500 basis points for the first 2 months of 2019 compared to the same period in 2018. This was due to a demand decrease of 154 basis points and the supply increase of 349 basis points according to figures from STR.

It is worth mentioning that even under the current adverse market conditions, our portfolio continued to gain market share from its competitors as measured by RevPAR penetration. The average penetration of our hotel portfolio was 112% of their fair share of the market in the first quarter of 2019 versus 105% for the year ended 2018.

Additionally, our asset management team is focused on improving the profitability of each hotel, and are currently working on cost-control programs as well as operating improvements to partially offset this impact.

On the inorganic side, we continue to see good progress on time and project of the Fiesta Americana Viaducto Hotel, which we expect to open during this year. We also continued to see additional opportunities in the market. We are currently preferred to focus on organic growth, improving operational performance and internal opportunity -- opportunities such as balance sheet enhancement and CBFI buybacks. We continued to have a controllable balance sheet position with 22% loan to value and recently refinanced a revolving credit facility pushing back the amortization from 2019 to 2021.

The quarter performance was below our expectations, and we will continue to work through the current market conditions to be the leader in each hotel market. Finally, we announced the distribution of MXN 0.2108 per CBFI.

With that, I will now pass the call over to Edouard Boudrant, the CFO of FibraHotel, to discuss the financial and operating results of the quarter.

--------------------------------------------------------------------------------

Edouard Boudrant, FibraHotel - CFO of Fibrahotelera S.C. [3]

--------------------------------------------------------------------------------

Thank you, Simón, and good morning, everyone. As you know, FibraHotel started and closed the first quarter with 85 hotels in operations.

On the comparable property basis of 81 hotels for the 2019 stabilized portfolio, which were fully operational during the first quarter of last year. ADR increased by 1.9% at MXN 1,199, and occupancy rate decreased by 71 basis points at 62.4%.

Overall, RevPAR increased 0.8% at MXN 748. The Fiesta Americana Condesa Cancun hotel had a net package ADR of MXN 4,839. Occupancy was 84.3%, and net package RevPAR was MXN 4,077, representing a 7.5% decrease against the first quarter of 2018.

The ramp-up portfolio comprised with 3 hotels shows occupancy rate of 27.6% during the quarter, ADR of MXN 2,611 and RevPAR of MXN 721.

Total revenues for the quarter were MXN 1,042 million, of which 73% was room revenues, 16% was food and beverage revenues and 11% was leases and other revenues.

During the quarter, the rent of Fiesta Americana Condesa Cancun stood at MXN 69 million. Compared with the same quarter of last year, revenues increased by 3%, while lodging contribution for the quarter stood at approximately MXN 360 million, and our EBITDA reached MXN 284 million, decreasing, respectively, by 6% and 9% versus the same quarter last year. The lodging contribution margin for managed hotels reached 26.9% versus 28.8% the same quarter last year. The EBITDA margin reached 27.3% decreasing 382 basis points versus the first quarter of last year. We closed the quarter with a net debt of MXN 3.2 billion. Gross debt amounted to MXN 3.9 billion. We finished the quarter with a very conservative loan-to-value ratio of 22%. Please note that at the end of the quarter, almost all indebtedness is covered with derivative instruments.

During the quarter, the debt position generated a financing cost of MXN 92 million. In accordance with IFRS, financing costs related to the development projects are capitalized as part of the investment in each project. Only MXN 6 million of interest were capitalized during the quarter. The net financial income was minus MXN 70 million for the quarter.

We continued the development of our cash position during the quarter with MXN 172 million invested. The development portfolio was MXN 133 million and MXN 38 million for the repositioning and maintenance CapEx.

Maintenance CapEx reserve amounted to MXN 53 million, representing approximately 5% of the total revenues. Same quarter last year, it amounted to MXN 49 million.

In order to give more details on the portfolio, 71% of our assets were stabilized MXN 12.7 billion and contributed 75% of the total lodging contribution, MXN 271 million.

Fiesta Americana Condesa Cancun represented 17% of our assets, MXN 3.1 billion and contributed 19% of the total lodging contribution, MXN 77 million. And 12% of our assets were in ramp-up or development, MXN 2 billion and contributed only 6% of the total lodging contribution, MXN 20 million. Please note that FibraHotel will pay a distribution of MXN 166 million, equivalent to MXN 0.218 per certificate.

At this point, I would like to open the floor for the Q&A session. Operator, we're ready to take any questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Our first question is from Sheila McGrath from Evercore.

--------------------------------------------------------------------------------

Sheila Kathleen McGrath, Evercore ISI Institutional Equities, Research Division - Senior MD [2]

--------------------------------------------------------------------------------

I was wondering, when I looked at the full-service occupancy level in the portfolio, that was up and -- fairly meaningful compared to limited service and select service. Just wondered if there's 1 or 2 assets driving the better performance of the full service, or if you have any comments on why full service might be performing better in this market?

--------------------------------------------------------------------------------

Guillermo Bravo Escobosa, FibraHotel - Head of Corporate Development & IR [3]

--------------------------------------------------------------------------------

This is Guillermo. (inaudible) complement but the reality is that several of the assets that we developed through the past cycle have been outperformance, especially in the recent markets. And the very specific hotels we're talking about here are the hotels in Monterrey. So both the Fiesta Americana Grand, the Live Aqua and the Fiesta Americana Pabellón (inaudible) hotels in Monterrey are 3 assets that have performed spectacularly well and the buyer advantage that they have in the Monterrey market has been very good. And so if you see how the markets in Monterrey specifically have performed and the penetration that beach hotels have, they've done very well. And these have overall supported our portfolio. So more than specific reading about the segment that you should be seeing is the composition within the sector, in which we are exposed to more of these regions in this portfolio. And so I think those 3 assets drive a lot of the outperformance in the category.

--------------------------------------------------------------------------------

Edouard Boudrant, FibraHotel - CFO of Fibrahotelera S.C. [4]

--------------------------------------------------------------------------------

(inaudible) . If I may have some elements. And so we have some very positive operating indicator in some hotels, for example, in Fiesta Americana Galindo, where the hotel now is fully operational after the strong remodelation that we ended last year. And also some recovery in Puebla on Guadalajara is still an interest market. So basically, that's right that if we analyze the KPIs per segment, we see that the full service is the best segment so far as of today both in terms of occupancy trend and the ADR trend.

--------------------------------------------------------------------------------

Sheila Kathleen McGrath, Evercore ISI Institutional Equities, Research Division - Senior MD [5]

--------------------------------------------------------------------------------

Okay. Just as a follow-up, it looks like you were focused asset management-wise on controlling expenses. I just wondered if you could give us any insights on kind of programs you're looking at? And any update on what you're doing to address the higher electricity costs? I know that was something you were exploring.

--------------------------------------------------------------------------------

Edouard Boudrant, FibraHotel - CFO of Fibrahotelera S.C. [6]

--------------------------------------------------------------------------------

Yes. So basically the program that we are doing to lower the electricity costs, first of all, is that we are moving all the facilities in the hotel into LED electricity bulbs. So it's something that is ongoing currently and I think by the middle of this year, we should have moved all the facilities into new LED facilities that will help us to lower the consumption in terms of electricity. And on the other side, was working together with the operator in the negotiation in order to have enough takeup that will sell us electricity with high discount. It takes time to set up, to implement such a program. And we think that by the end of the year, we should have some benefits of this program on the cost issue. But -- so what we saw during the past few months, electricity has declined. We have peaked during the third quarter of last year where electricity represented almost 8% of the revenues of managed hotels. It declined below 7% during this quarter. It's still higher than the first quarter of last year, but we saw like a trend in decrease in electricity price over the past few months. And [other than that], in terms of cost control, we tried to limit maximum the consumption of amenities in the USD and to make more sourcing in Mexico and to pay in Mexican pesos. And then so we are -- we -- in Fiesta Americana Condesa Cancun, we're driving a program in order to manage the cost in reference with the revenue that we have as of today. Unfortunately, the ADR in Cancun is not the ADR that we would like to have. So we were working with the operator in order to make the hotel more efficient in terms of variable costs in the hotel.

--------------------------------------------------------------------------------

Operator [7]

--------------------------------------------------------------------------------

Our next question is from Marimar Torreblanca from UBS.

--------------------------------------------------------------------------------

Marimar Torreblanca, UBS Investment Bank, Research Division - Director & Product Mngr for LatAm [8]

--------------------------------------------------------------------------------

My question is regarding your maintenance CapEx. We've seen some volatility in this measure quarter-on-quarter. And I wanted to see if you guys could give us a bit more guidance so we can understand what were the next few quarters on these metrics?

--------------------------------------------------------------------------------

Edouard Boudrant, FibraHotel - CFO of Fibrahotelera S.C. [9]

--------------------------------------------------------------------------------

Marimar, thank you very much for the question. Basically, the maximum CapEx is 5% of the revenues, of the managed hotels. And we have just a little variation in the Fiesta Americana Condesa Cancun. As you know, it has been fully remodeled in 2016. So basically, last year, when we acquired the hotel, we started with a lower CapEx reserve. It was roughly 1%. And it will increase on a yearly basis in order to reach 4% CapEx on a net income basis. So basically, on all the hotels, we're talking about 5% of the revenues. On just Fiesta Americana Condesa Cancun, it was lower at the beginning on a yearly basis. It would increase 1% per year in order to reach in 2, 3 years 4% CapEx reserves basically. It was the input that maybe we didn't explain well in the past in Fiesta Americana Condesa Cancun.

--------------------------------------------------------------------------------

Marimar Torreblanca, UBS Investment Bank, Research Division - Director & Product Mngr for LatAm [10]

--------------------------------------------------------------------------------

So in other words, what you're saying is that the increase that we saw from 4Q to first Q this year comes mostly from Cancun because it was a pretty material increase. Not sure if there's anything else being accounted for there?

--------------------------------------------------------------------------------

Edouard Boudrant, FibraHotel - CFO of Fibrahotelera S.C. [11]

--------------------------------------------------------------------------------

Last year, in the -- actually, we have a decrease in the CapEx reserve in the fourth quarter of last year, we said MXN 54 million, and in the first quarter, MXN 53 million. So basically, it's roughly the same. And on a yearly basis, I think, we should be talking about a little bit more than MXN 200 million CapEx reserve budget.

--------------------------------------------------------------------------------

Marimar Torreblanca, UBS Investment Bank, Research Division - Director & Product Mngr for LatAm [12]

--------------------------------------------------------------------------------

Yes, maybe the number I'm seeing is the one you're using for your AFFO calculation?

--------------------------------------------------------------------------------

Edouard Boudrant, FibraHotel - CFO of Fibrahotelera S.C. [13]

--------------------------------------------------------------------------------

Okay. It was -- last year, in the AFFO calculation, we were talking about MXN 204 million. I think we should be on this same kind of level this year.

--------------------------------------------------------------------------------

Simón Galante Zaga, FibraHotel - Technical Committee Member [14]

--------------------------------------------------------------------------------

Excuse me, Marimar. Just to shed some light, as you know, the policy of FibraHotel is to have a percentage of the CapEx that's for the majority of the portfolio about 5% of input. So we believe that, as Edouard said, that it has from -- it has to go from the income side of it. So it should maintain fairly steady as income stays with only the growth that we have. So we shouldn't be a lot maybe what -- is maybe an issue Edouard is that both Live Aqua San Miguel de Allende and the Fiesta Americana Satelite came in with income but not with a lot of profit because they're on the ramp-up period, and that's 2 substantial hotels of about MXN 1.2 billion that already are creating CapEx but are not creating profit. Is maybe that is, Edouard?

--------------------------------------------------------------------------------

Edouard Boudrant, FibraHotel - CFO of Fibrahotelera S.C. [15]

--------------------------------------------------------------------------------

Yes, that's true. Since day 1, we are reserving CapEx in both hotels, which are the Satellite Hotel and the Live Aqua San Miguel de Allende of course due to the fact that it's full-service hotel in ramp-up. It takes a little bit time, and we already achieved the breakeven point in this hotel. But we're broadening the CapEx of this hotel, but soon we should have positive effect of the ramp-up of this hotel.

--------------------------------------------------------------------------------

Operator [16]

--------------------------------------------------------------------------------

Our next question is from [Andrea Lara] from Signum Research.

--------------------------------------------------------------------------------

Unidentified Analyst, [17]

--------------------------------------------------------------------------------

I have 2 questions. The first one is do you think that the lower arrival of travelers to Cancun will persist in the short, medium term and can we expect a better scenario for the current quarter? And second question is what do you mean by average penetration of your hotel portfolio on your comments, Simón.

--------------------------------------------------------------------------------

Guillermo Bravo Escobosa, FibraHotel - Head of Corporate Development & IR [18]

--------------------------------------------------------------------------------

[Andrea], thank you for your questions. So let me explain the penetration side first. Generally, the way we look at how hotel is performing is that we look at the hotels versus its competitive set. And what that means is that each hotel is defined with a set of hotels that it shares certain characteristics. So let's say that you're in the same region and in the same category, and so you defined a hotel that generally content for the same market or the same customers. And so each hotel generally has a competitive set of a -- of around 5 hotels. If the results of the hotel are compared, and we receive market figures for the market or for that competitive set up as whole. And so let's say that if there is a hotel where you have 100 travelers going to the same market, the first share that each of the 5 hotels should get is 20 room nights. Or if you do it on RevPAR, that amount is times the ADR that was paid. But basically, the 100% means that you are getting the fair market share that each hotel should be getting. So if each hotel would be getting a -- the same amount of nights, if your penetration is 110% let's say, you're getting 10% better results from a RevPAR perspective than the rest of your competitive set. So it basically measures how each hotel is doing versus its own competition in its own market and the number that we mentioned is the average for FibraHotel. So generally, we expect to have a penetration of between 5% and 10% because of the location of the assets and the brands and operators we have. But the important part was that on a comparable basis, the penetration improves. So what we are saying is our hotels perform better in each of their segments versus the hotels in the competition. And the second part of the question, I'll let Simon complement on his views on Cancun as a whole. But we do believe there are some issues in Cancun that are temporary and some issues which will take some more time to clear up. We do believe that the new offer in the Caribbean and even in some hotels -- in some parts of the Riviera Maya is something that will take some time to clear up. And there is also some regular rotations from -- for yearly groups and conferences, which will return to Cancun next year or in 2 years as these conventions and groups generally rotate through different destinations. And on the other hand, we do see some more customers that given the headline news have just stopped coming or prefer other destination. So it's a combination of the 2. In the short term, what we can see, it's still volatile. It's still very uncertain in terms of the outlook that we will see. But we do expect to have slightly better results just from what we have on the books right now for the rest of the year from what we had last year, which also, as you know, the second half of the year is where the most of the impact in this hotel was. The comparison versus the first quarter of last year for beach hotels, in general, is difficult because of the Easter effect, which last year the vacation fell in March and this year it fell in April. And last year, we had an outstanding year overall for beaches in the first quarter. But we do see some of the traveler impact being temporary. And some of it just being the additional supply that came in line that needs to be cleared out of the system.

--------------------------------------------------------------------------------

Simón Galante Zaga, FibraHotel - Technical Committee Member [19]

--------------------------------------------------------------------------------

Just to add on Guillermo's point on Cancun. I think it's important to mention that the asset is -- as we mentioned in many calls, the asset is fully renovated. It's a fantastic long-term asset. And I believe that we are faring quite better both in penetration and RevPAR against our actual different hotels that are in Cancun with us. So we're doing great occupancy, but what -- the issue is the rate because as I described earlier, the group business has been down internationally. We believe that the sargassum is an issue as well in Cancun. But with the Fiesta Americana brand and the power of distribution they have, we have seen national groups coming in and national sales coming in. And that's one of the advantages that we believe that we're going to have in the coming months. So we're achieving the occupancy, but we are lacking the rate. So it's going to be a hard work on looking at our base group business that we will try to grow. And we hope as well that security with the new government and the new -- both municipal and state and all of the efforts that can be made for security to go up. So we hope and we are working hard for a good second half of the year. And obviously, for the winter of next year to have strong business as well. But we will continue doing our asset management effort, and we are looking forward for the changes in order to have a better rate, as I described earlier.

--------------------------------------------------------------------------------

Operator [20]

--------------------------------------------------------------------------------

Our next question is from Francisco Chávez from BBVA.

--------------------------------------------------------------------------------

Francisco Chávez Martínez, BBVA Research SA - Research Analyst [21]

--------------------------------------------------------------------------------

Just if you can elaborate on the minimum return that you negotiated with hotel operators? And in which assets minimum return applies?

--------------------------------------------------------------------------------

Guillermo Bravo Escobosa, FibraHotel - Head of Corporate Development & IR [22]

--------------------------------------------------------------------------------

[Hi Paco], thank you for your questions. So basically, this is a component that we negotiated with operators typically for the recent full-service hotels, so this includes the Fiesta Americana Satelite Hotel, the Live Aqua San Miguel de Allende Hotel. It will also include the Fiesta Americana Viaducto Hotel once it opens. It's basically a return of between 5% and 6%, and it's for the full year of operations. So at the end of the year, the hotels should at least turn that or it will -- or that threshold will be money that FibraHotel received. So it's basically for those 3 hotels, and it's around that level of return.

--------------------------------------------------------------------------------

Francisco Chávez Martínez, BBVA Research SA - Research Analyst [23]

--------------------------------------------------------------------------------

And in -- just in the case of the San Miguel de Allende and Satelite hotels, do you expect this minimum return to apply during this year, or do you expect the ramp-up will give you returns above this threshold?

--------------------------------------------------------------------------------

Guillermo Bravo Escobosa, FibraHotel - Head of Corporate Development & IR [24]

--------------------------------------------------------------------------------

We expect the hotels to earn above the threshold by the end of the year, but as they begin the ramp-up process, their return should basically be in line for the first couple of quarters. And then we expect to see some performance above those levels of return for these hotels by the second half of the year.

--------------------------------------------------------------------------------

Operator [25]

--------------------------------------------------------------------------------

Our next question is from Froylan Mendez from JPMorgan.

--------------------------------------------------------------------------------

Fernando Froylan Mendez Solther, JP Morgan Chase & Co, Research Division - Analyst [26]

--------------------------------------------------------------------------------

Regarding your RevPAR expectations this year, given the weak dynamics we have seen in the first quarter and not only on your side but overall the lodging industry. Can we see a RevPAR growth below inflation for this year? That is my first question. And secondly, just to follow up on the hotel Aqua, could you give us an update how is it performing versus your initial expectations? And how is the group portion of the occupancy doing in this market that you are trying to tap?

--------------------------------------------------------------------------------

Edouard Boudrant, FibraHotel - CFO of Fibrahotelera S.C. [27]

--------------------------------------------------------------------------------

Hi Froylan, thank you very much for your questions. So basically, regarding the RevPAR expectation that we have for this year, the number that we have in the budget as of today on that (inaudible) is a little bit higher than inflation, mainly driven -- we're talking about all the hotels, stabilized hotels excluding Fiesta Americana Condesa Cancun, and it is a little bit above inflation driven by ADR more than occupancy. So basically, that's the target that we have. Regarding the hotel, in Live Aqua -- in San Miguel de Allende Live Aqua. So basically, we are fifth, sixth months of operations. It's quite satisfactory, quite in line with the budget, the initial budget that we had. We have very strong occupancy rate in the -- during the weekend with very high ADR in the week. It's -- the occupancy is lower. We're currently working hard with the operator in order to bring some groups in the hotels. And I think (inaudible) they are paying we are seeing on a weekly basis more groups that are coming into the hotels, but we have to take into account that such hotels with such higher rate, the positioning takes a little bit more time than the other hotels that we have opened. But as of today, we're very satisfied with the performance of the hotel in terms of commercialization, in terms of rate. And given the first month of preparation, we have the benefit of the minimum guarantee that has been negotiated with the operator.

--------------------------------------------------------------------------------

Operator [28]

--------------------------------------------------------------------------------

(Operator Instructions) Our next question here is from Sheila McGrath from Evercore ISI.

--------------------------------------------------------------------------------

Sheila Kathleen McGrath, Evercore ISI Institutional Equities, Research Division - Senior MD [29]

--------------------------------------------------------------------------------

Yes, I know we're only 3 weeks into second quarter, but I was just wondering if you could comment if the challenging conditions from first quarter are similar, or do you see any signs of improvement?

--------------------------------------------------------------------------------

Guillermo Bravo Escobosa, FibraHotel - Head of Corporate Development & IR [30]

--------------------------------------------------------------------------------

Thank you for your follow-up, Sheila. The first part of that question is that we did see improvement as the quarter progressed. So clearly, January was a terrible month. In January, we had -- it's both a bad month for business hotel travel, and it was even worse with all the gasoline impact. February was not that bad as January, but it was still bad. In March, we actually saw a good recovery in our market. For April, what we see to date is a little bit difficult because now we have the Easter effect and the holy week effect. So given the expectations it's throwing some of the comparisons and some of the budget numbers out of whack just because of this week. So it's still a little bit too early to tell. We're going to have to wait to see the numbers in May to really be able to see if the dynamics have recovered. But what we can tell you is that even just in the first quarter, we did see a little bit of an improvement as the quarter progressed, but at this point even though we do have some days of the quarter, it's too early to tell because of the impact of holy week. So we'll have to wait until we get better outlook from the month of May.

--------------------------------------------------------------------------------

Sheila Kathleen McGrath, Evercore ISI Institutional Equities, Research Division - Senior MD [31]

--------------------------------------------------------------------------------

Okay. And one more question. Your leverage remains very low, just over 20%. I just wonder if we should expect you to continue to navigate conservatively and preserve dry powder and refrain from share repurchase or CBFI repurchase? Just your thought process on balancing leverage and stock buyback.

--------------------------------------------------------------------------------

Guillermo Bravo Escobosa, FibraHotel - Head of Corporate Development & IR [32]

--------------------------------------------------------------------------------

So that's correct. And as you know, we have that position. What we feel right now is that we're in a very good position in terms of being able to take on opportunities as they arise in the future. And that could include just maintaining the status quo of where we are or buying back CBFIs or doing something inorganic, which as Simón mentioned, there have been a little bit more of a buyers' market. But what we see right now is we're very comfortable where we stand. And we prefer to end the investment we have in the Fiesta Americana Viaducto Hotel. And have a little bit more clarity in terms of where the market is going before we make a specific commitment in what we're going to do with that capital. So we like where we stand, we like the optionality we have. We certainly think that the share price, even with these weaker results and even with this outlook it's still at very, very attractive prices. If you just look at valuation multiples, we're trading anywhere between 8 and 9x versus historical figures, which is a lot higher. So we still think it's an attractive opportunity. But at this point in the market, we prefer to keep our options open and to have low leverage in the company.

--------------------------------------------------------------------------------

Operator [33]

--------------------------------------------------------------------------------

This concludes the question-and-answer session. I'd like to turn the floor back to management for any closing comments.

--------------------------------------------------------------------------------

Simón Galante Zaga, FibraHotel - Technical Committee Member [34]

--------------------------------------------------------------------------------

Thank you for participating in FibraHotel's 2019 First Quarter Results Conference Call. If you have any further questions, please do not hesitate to contact FibraHotel Investor Relations Department. It concludes today's call. Thank you, and have a wonderful day.

--------------------------------------------------------------------------------

Operator [35]

--------------------------------------------------------------------------------

This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.