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 — Q2 2018 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. Look for statements about pricing being below value, and actions to raise prices. In the transcript, John Brooks discusses pricing: "renewal pricing was strong and we have seen those trends certainly continue and flow through into our same-store price this quarter. Same-store price came in at the high end of our 3% to 4% targeted range." He also mentions "renewal pricing, I fully expect to remain healthy and should help act to offset the regulated grain." Also, "our renewals in the quarter were pretty solid. So, we were more sort of north of that 4% on renewals, and certainly then, the looking back to same store kind of carried along with it and it caught that tailwind." He says "there's an opportunity to keep a fair amount of that momentum." Also, "we're pricing for the value that we provide in the marketplace." But does he say they are undercharging? He says "renewal pricing was strong" and "same-store price came in at the high end of our targeted range." That suggests they are getting good pricing, but not necessarily that they were below market. He also mentions "the new regulated grain pricing effective August 1 will be 2.8%. That’s going to put some pressure on our same store in Q3. However, renewal pricing, I fully expect to remain healthy and should help act to offset the regulated grain." That is about a regulatory price increase, not a gap. The question asks: does management convey that the company is currently charging LESS than the market would bear? That is, they are leaving money on the table. The transcript does not explicitly say that. They talk about strong pricing, but not that they are below value. They mention "pricing for the value that we provide" but that is generic. They also mention "renewal pricing" being strong, but that is about renewals, not necessarily that they were undercharging. They also mention "we're pricing for the value that we provide in the marketplace." That is a claim of value, but not that they are below. Also, they mention "renewal pricing, I fully expect to remain healthy" which is future expectation, not current action. They also mention "there's an opportunity to keep a fair amount of that momentum" which is about maintaining, not closing a gap.
| 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.