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 — Q3 2022 call → NOWe need to determine if management conveys that the company is currently charging less than what the market would bear, and that they are actively closing that gap while customers stay. From the transcript: Steve Hislop mentions implementing a 3.5% price increase in Q3, and they believe the value gap relative to peers remains strong. They also mention they have room to raise prices if needed. But is this about cost recovery or a discovered gap? They say "we believe the value gap relative to our peers remains strong" - that suggests they think they are underpriced relative to peers. Also, they say "we definitely feel we have some room if we needed to" regarding pricing. But are they actively closing the gap? They took a 3.5% increase in Q3, and they plan another in February. But is that just passing through costs? They mention commodity inflation of 21% and labor inflation of 10%, so the price increase is likely to offset costs. The question is whether they claim they are undercharging relative to value, not just cost recovery. They say: "we believe that our philosophy of offering fresh, made from scratch food and drinks at an incredible value continues to resonate with our guests" - that's about value, but not necessarily that they are undercharging. They also say "we believe the value gap relative to our peers remains strong" - that implies they are cheaper than peers, but does that mean they are leaving money on the table? They also say "we definitely feel we have some room if we needed to" - that suggests they could raise prices more, but they haven't necessarily done so beyond cost recovery. The key is: does management explicitly say they are charging below what the market would bear and are now moving to close that gap? They took a price increase, but it's tied to inflation. They also plan another in February. But they don't say "we are undercharging and now we are raising prices to capture more value." They say they have room, but they are not necessarily acting on it beyond cost recovery. Also, they mention that the price increase was 3.5% and they believe the value gap remains strong, meaning they still think they are cheaper than peers. But they don't say they are actively closing that gap beyond the cost-driven increase.
| 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.