Room to raise the ceiling: management says its own prices, rates, or terms sit below what the market would currently bea
The model's full reasoning — Q1 2016 call → NOWe need to determine if management conveys that the company is currently charging less than the market would bear, and that they are actively closing that gap. In the transcript, Michael Weinstein discusses minimum wage increases in New York City. He says: "we are finding that we have price elasticity. Our managers are working really hard to try to limit overtime hours... So the impact on our tipped employee pay rolls has probably been 50% increase in wages that we pay to them... So this has been a dramatic amount of money for us. So again we've been rescheduling people, taking some chances, some service, coordination... But what we have found at the moment and we're certainly not going to price to the end of life [ph] is that the slight increases in menus, menu price items that we've implemented have been easily accepted and we probably have a little bit more elasticity to make up for these wage increase than we originally thought. So that prospect is heartening." This indicates that they have implemented price increases to offset wage increases, and they found that customers accepted them easily, and they have more room to raise prices. However, is this a gap between price and value? The context is that they are raising prices to cover cost increases (minimum wage). That is cost recovery, not a discovered gap. But they also say they have "price elasticity" and "a little bit more elasticity to make up for these wage increase" - meaning they can raise prices further without losing customers. But is that a claim that they were undercharging relative to value? They are saying that they have been able to raise prices and customers accept it, and they can raise more. But the reason for raising is cost increase. The question asks: "management conveys that the company is currently charging LESS for what it sells than the market would presently bear" - that is, they are leaving money on the table. They say they have "price elasticity" and "more elasticity" - that implies they could charge more. But is that a claim that they are undercharging? They are saying that they have room to raise prices further. However, the initial price increases were to cover costs. The fact that they were easily accepted suggests they could have raised more. But the statement is about making up for wage increases.
| Ticker | Company | Call | Date | Call grade |
|---|---|---|---|---|
| MEC | Mayville Engineering Company, Inc. | Q3 2022 | 2022-11-05 | B+ |
| CAG | Conagra Brands, Inc. | Q2 2017 | 2016-12-22 | C+ |
| SOHO | Sotherly Hotels Inc. | Q3 2016 | 2016-11-08 | D |
| RCL | Royal Caribbean Cruises Ltd. | Q1 2016 | 2016-04-29 | C+ |
| HPP | Hudson Pacific Properties, Inc. | Q4 2015 | 2016-02-25 | C |
HPP · Q4 2015 → YESThe question is: Does management convey that the company is currently charging LESS for what it sells than the market would presently bear — that its own prices, rates, fees, or terms sit meaningfully...YES The transcript shows management explicitly describing a gap between its current charges and what the market now supports, then confirming that the company is already closing it through mark-to-market resets and higher new/renewal rents. Victor Coleman states that the company has “rolled out 80% plus mark to market” on recent leases 2.5 years old, and that cash rent spreads on 1.6 million square feet executed since the acquisition were “north of 30%” with “20%, 25% mark-to-market for 2016 and 2017.
MEC · Q3 2022 → YESThe question is: Does management convey that the company is currently charging LESS for what it sells than the market would presently bear — that its own prices sit meaningfully below the value custom...YES Management explicitly states that they have taken pricing actions in 2022 and have "more room for margin expansion through continued value pricing even beyond the pricing actions taken during 2022." This conveys that their current prices sit below what the market would support, and they are actively beginning to close that gap with further value pricing.
SOHO · Q3 2016 → YESThe question is: Does management convey that the company is currently charging LESS for what it sells than the market would presently bear — that its own prices, rates, fees, or terms sit meaningfully...YES The transcript shows management explicitly identifying a rate gap at the Laurel hotel (and similar situations at other properties) where current charges sit below the competitive set/market, while describing active steps already underway to close that gap through continued ramp-up and occupancy/rate improvements.