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Facebook Ad Spending Is Solid Despite Privacy Issues (Podcast) · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul swing you,
• 0:05
  Speaker 1: along with my co host Lisa Brahma wits. Each day
• 0:07
  Speaker 1: we bring you the most noteworthy and useful interviews for
• 0:10
  Speaker 1: you and your money. Whether at the grocery store or
• 0:12
  Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
• 0:15
  Speaker 1: podcast or wherever you listen to podcasts, as well as
• 0:17
  Speaker 1: at Bloomberg dot com. Well. According to Magna, global internet
• 0:25
  Speaker 1: ad spending globally in en was about two fifty billion dollars.
• 0:29
  Speaker 1: It's about forty five of global ad spending went to
• 0:33
  Speaker 1: the Internet. We're starting to see some of those big
• 0:35
  Speaker 1: internet companies report their first quarter earnings. We had some
• 0:38
  Speaker 1: good numbers out of Twitter, Stock ran up big time.
• 0:41
  Speaker 1: Snap had some pretty good numbers. And after the Clothes
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  Speaker 1: tonight we have Facebook help us talk about all things
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  Speaker 1: digital advertising. We welcome back Mark Douglas. Mark is a
• 0:49
  Speaker 1: CEO of Steelhouse based in Los Angeles, California. Mark, thanks
• 0:53
  Speaker 1: so much for joining us. Boy, business seems pretty good
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  Speaker 1: for these big digital media companies. What are you thinking
• 0:59
  Speaker 1: about Facebook after the close? Yeah? I think Facebook, Um,
• 1:04
  Speaker 1: what's going to be really confusing for a lot of
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  Speaker 1: people is Facebook faces and has face and continues to
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  Speaker 1: face all this turmoil about privacy and other issues. But
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  Speaker 1: the bottom line is they don't really have much competition.
• 1:18
  Speaker 1: They don't have much competition in terms of what other
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  Speaker 1: social networks consumers are going to use. Is not just Facebook,
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  Speaker 1: bails don't Instagram and WhatsApp. And on the advertising side,
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  Speaker 1: they have even less competition. So we're not seeing at
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  Speaker 1: field House, we're not seeing any kind of decline in
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  Speaker 1: spend on Facebook and Instagram. If anything, we're seeing an
• 1:37
  Speaker 1: increase in spend on Instagram in particular. Did Twitter kind
• 1:40
  Speaker 1: of show us that there is a shift though among
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  Speaker 1: advertisers that they're willing to pay for quality i e.
• 1:47
  Speaker 1: Human beings rather than thoughts, sort of encouraging Facebook to
• 1:51
  Speaker 1: possibly uh clear out take accounts or you know, ones
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  Speaker 1: that kind of come from dubious providence. Um, they're definitely.
• 2:02
  Speaker 1: Twitter definitely seems to be investing in making sure that
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  Speaker 1: all their accounts are valid, they're real humans, Um, things
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  Speaker 1: like that. The issue there is scale. So as an advertiser, Um,
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  Speaker 1: it's a lot of work to create ads, it's a
• 2:16
  Speaker 1: lot of work to create and manage these campaigns, and
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  Speaker 1: so Twitter just doesn't have anywhere close to scale as
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  Speaker 1: Facebook and Instagram. I mean, I think Facebook is eleven
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  Speaker 1: times bigger, and then when you add Instagram into that,
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  Speaker 1: then it's you know, you're probably approaching twenty times larger.
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  Speaker 1: And so they're doing a good job, I think Twitter,
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  Speaker 1: but they just don't have the scale to really capture
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  Speaker 1: the advertising dollars and the revenue that that Facebook can.
• 2:41
  Speaker 1: You know, speaking of Twitter, it's was reported that Jack Dorsey,
• 2:44
  Speaker 1: the CEO of Twitter, met with President Trump yesterday. Boy,
• 2:48
  Speaker 1: I would have love to been a fly on the
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  Speaker 1: wall for that one. What do you think was going
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  Speaker 1: on there? Um that? I, you know, it's an interesting
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  Speaker 1: meaning I read about that also, Um, I the strategy
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  Speaker 1: at Twitter seems to be, UM, don't get blamed for
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  Speaker 1: the election cycle. The election cycle, so UM seems to
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  Speaker 1: be part of the strategy. So I think, UM kind
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  Speaker 1: of being in front of that, UM, this seems like
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  Speaker 1: maybe it's a party of its strategy or maybe Jack Dorsey,
• 3:18
  Speaker 1: you know, just like going to Washington might show well. Ever,
• 3:21
  Speaker 1: right now, uh, we are getting some color around it,
• 3:24
  Speaker 1: saying that Jack Dorsy was explaining to President Trump that
• 3:27
  Speaker 1: some of his eliminated followers were bought, and that was
• 3:31
  Speaker 1: part of the issue. I am wondering, from your perspective,
• 3:34
  Speaker 1: what you're looking for. If Facebook is such the dominant
• 3:36
  Speaker 1: player in the advertising space and doesn't really have a
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  Speaker 1: whole deal of competition, what do you care? What are
• 3:41
  Speaker 1: you looking for in the earnings that will sort of
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  Speaker 1: indicate to you either the pricing power for advertising or
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  Speaker 1: whether there's any shift toward any of its competitors. Yeah,
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  Speaker 1: for years, Facebook's um CPM kind of the cost per
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  Speaker 1: thousand ads, which is what aver how you price ads
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  Speaker 1: in the digital ad stace. What has been going up
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  Speaker 1: for Facebook? I think in recent times it's been kind
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  Speaker 1: of floating down. Part of that is new markets with
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  Speaker 1: the pricing is not as strong, But I think part
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  Speaker 1: of that is Facebook itself, although they don't have a
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  Speaker 1: lot of competition, the platform itself just doesn't have the
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  Speaker 1: engagement that it wants at and so I think, you know,
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  Speaker 1: the general feeling is eventually Facebook as a property is
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  Speaker 1: just feels like it's on it's a downward slope, and
• 4:31
  Speaker 1: I think everyone's trying to look for, you know, kind
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  Speaker 1: of is that accelrating? When is that? You know, when
• 4:37
  Speaker 1: is that going to become a problem, and so that's
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  Speaker 1: what those kind of metrics would I'd be looking for.
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  Speaker 1: It's more the long term investment, not the near term.
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  Speaker 1: So that raises a good question mark if if you know,
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  Speaker 1: Facebook feels from an advertising perspective and uses perspective maybe
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  Speaker 1: a little bit mature. To what extent do you think, uh,
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  Speaker 1: Facebook and pull other levers, whether it's you know, increasingly
• 4:58
  Speaker 1: monetizing Instagram, maybe even WhatsApp and Messenger, how successful do
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  Speaker 1: you think they'll be on pulling those levers? Yeah, I
• 5:06
  Speaker 1: think on Instagram, the user growth on Instagram continue appears
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  Speaker 1: to continue to be strong. That's another metric I'd be
• 5:14
  Speaker 1: trying to get some insight into. UM engagement is strong.
• 5:18
  Speaker 1: You can just even feel it as an individual, just
• 5:21
  Speaker 1: like I know among my friends and yeah, I can
• 5:24
  Speaker 1: just just see, you know, kind of how often UM
• 5:27
  Speaker 1: Instagram is used. So I think that's you know, kind
• 5:31
  Speaker 1: of the saving grace of the company right now. I
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  Speaker 1: think the other thing is stories. So stories and in
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  Speaker 1: Instagram are not monetized nearly as effectively as the feed,
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  Speaker 1: and so one just kind of personal prediction. As someone
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  Speaker 1: in the ad business, I think stories some of those stories,
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  Speaker 1: some of the most popular ones will probably be moved
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  Speaker 1: into the news feed, and they will make them more
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  Speaker 1: monetize herble. That's not something Facebook has told me. I
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  Speaker 1: just think that it's a logical step and it's something
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  Speaker 1: I'd want to see as an appetizer. We're speaking with
• 6:00
  Speaker 1: Mark Douglas, chief executive of Steelhouse, who used to run
• 6:05
  Speaker 1: the engineering for e Harmony, and Steelhouse is focused on
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  Speaker 1: AI driven self service advertising sort of targeted ads, and
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  Speaker 1: I'm just wondering, you know, we are expecting these earnings,
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  Speaker 1: but just broadening out what's the latest in terms of
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  Speaker 1: artificial intelligence and targeted ads that you specialize in. Yeah,
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  Speaker 1: so what's happening in that space is that the ads
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  Speaker 1: business has traditionally been very human focus. You have media
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  Speaker 1: buyers and kind of a lot of people involved in
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  Speaker 1: the ad in the ad buying cycle. But with the
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  Speaker 1: scale you have now, and especially the movement to connected
• 6:37
  Speaker 1: television where people everyone is watching TV on demand, You're
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  Speaker 1: seeing that the ad buying is now becoming more and
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  Speaker 1: more automated. And so that's kind of technology we provide,
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  Speaker 1: I think where the industry is moving to pretty rapidly.
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  Speaker 1: So Mark, just you mentioned that, you know, there's not
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  Speaker 1: a lot of I guess it's pretty well known as well,
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  Speaker 1: that's not a lot of competition in the digital ad space.
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  Speaker 1: You kind of have Facebook, you have Alpha that to
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  Speaker 1: what extent do you think Amazon can become a viable
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  Speaker 1: third player in that space? Amazon is kind of in
• 7:08
  Speaker 1: a different place. So the what their ad business has grown,
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  Speaker 1: um obviously tremendously into multibillion dollar business. But really what
• 7:17
  Speaker 1: they did is they started monetizing what they were giving
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  Speaker 1: away for free. So you went to Amazon, you did
• 7:22
  Speaker 1: the search, and you've got the search results, and that
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  Speaker 1: you know, Amazon didn't charge anyone to be to have
• 7:28
  Speaker 1: a higher placement in those search results. And so Amazon
• 7:30
  Speaker 1: start a business where now if you want to be
• 7:33
  Speaker 1: at the top of the search results, just like on
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  Speaker 1: a Google search, UM, you can pay for that. UM,
• 7:38
  Speaker 1: you can bid on that, you can pay for that.
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  Speaker 1: I don't really consider that being in in you know,
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  Speaker 1: kind of like in roads into the app business. I
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  Speaker 1: just consider that attacks on their retailers essentially that they
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  Speaker 1: figured out they can charge. But they're starting mentor phase
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  Speaker 1: UM where they potentially are going to go beyond just
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  Speaker 1: kind of search results in Amazon and UM and start
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  Speaker 1: to really compete potentially with Google, and I think also
• 8:06
  Speaker 1: because of Amazon Prime connected television, the choices to what
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  Speaker 1: they start doing running UM selling ads based on Amazon
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  Speaker 1: Prime and other connected TV is kind of where the
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  Speaker 1: real competition potentially be. That's the massive shift in digital
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  Speaker 1: advertising is the shift from linear television to connected television.
• 8:25
  Speaker 1: Mark Douglas, chief executive officer of Steelhouse based in Los Angeles,
• 8:29
  Speaker 1: Thank you so much for your time. This year has
• 8:47
  Speaker 1: been a tremendously good year for US equities, including the
• 8:51
  Speaker 1: hospitality sector. I'm looking right now at the sub indext
• 8:54
  Speaker 1: for the SMP five hundred focused on hospitality and it's
• 8:57
  Speaker 1: returns nearly nine year today joining us to talk about
• 9:02
  Speaker 1: the latest and greatest in the industry. We're lucky to
• 9:04
  Speaker 1: have Guilda Perez Alvarado. She is chief executive officer of
• 9:08
  Speaker 1: j L L Hotels and Hospitalities. J L L Jones
• 9:13
  Speaker 1: lang Lassalle is actually one of the biggest in the
• 9:15
  Speaker 1: space operating in in the hotel and hospitality sector. I'm
• 9:20
  Speaker 1: just wondering, Guilda, what do you think is really behind
• 9:23
  Speaker 1: the incredible boom that we've seen, at least in the
• 9:25
  Speaker 1: share prices of the hospitality sector so far this year.
• 9:29
  Speaker 1: Thanks Lisa, Very happy to be here. Listen, fundamentals are
• 9:33
  Speaker 1: very very strong right now. So we're in the tenth
• 9:35
  Speaker 1: year of the recovery. We are expecting um for there
• 9:38
  Speaker 1: to be positive reugh park growth still. Uh, travel and
• 9:41
  Speaker 1: tourism patterns are also very positive. And you know, as
• 9:45
  Speaker 1: the economy goes so it dust hotels. We're very much
• 9:48
  Speaker 1: related to GDP growth. So what's going on in the
• 9:51
  Speaker 1: M and A space here? We see a lot oftentimes
• 9:53
  Speaker 1: when a big hotel trades uh, you know, it makes
• 9:55
  Speaker 1: front page news. How are the trends M and A
• 9:57
  Speaker 1: wise in the hospitality space. It's great question. Listen. We
• 10:01
  Speaker 1: are at record level of fundraising activity at the moment um.
• 10:05
  Speaker 1: There's more investors, not necessarily hotel investors, but more generalist
• 10:09
  Speaker 1: investors looking to make um entryway into our segue into
• 10:13
  Speaker 1: the space. I think, um, you know, from an M
• 10:16
  Speaker 1: and A activity, consolidation is extremely important. So bigger is better.
• 10:20
  Speaker 1: And let's say said, with the level of fundraising that
• 10:24
  Speaker 1: we've had right now, people are looking at mean uh
• 10:28
  Speaker 1: meaningful ways of the capital deployment at the stage. One
• 10:32
  Speaker 1: thing I'm struggling with is. On one hand, people seem
• 10:35
  Speaker 1: to be increasingly confident about the economy and the United
• 10:37
  Speaker 1: States anyway. I mean, other there seems to be sort
• 10:41
  Speaker 1: of a lack of faith in the ongoing strength that
• 10:44
  Speaker 1: we've seen in the economy. There are a lot of
• 10:45
  Speaker 1: people wondering when are we gonna see the extra session?
• 10:47
  Speaker 1: How are you seeing that playing out in the hotel sector?
• 10:50
  Speaker 1: Are people increasing their spending on vacations right now or
• 10:54
  Speaker 1: they kind of hanging in there, hanging steady, or even
• 10:57
  Speaker 1: reducing it in preparation for perhaps some kind of leaner times. Listen,
• 11:02
  Speaker 1: I think people are still a bit cautious, but there's
• 11:04
  Speaker 1: no you know, there's no indication right now that we're
• 11:06
  Speaker 1: heading into a recession, right, So totally agree, But you
• 11:09
  Speaker 1: still hear people talking about it. So I have to wonder,
• 11:11
  Speaker 1: you know, are you seeing it actually affect business sediment?
• 11:14
  Speaker 1: You know, from a business perspective, No, From a travel
• 11:17
  Speaker 1: demand pattern no. Um, And I would say from you know,
• 11:21
  Speaker 1: hotel I'm an activity, definitely not. What are some of
• 11:25
  Speaker 1: the areas you know, eminently you've talked about fresh capital
• 11:28
  Speaker 1: chasing hotel properties. Are there certain regions of the world
• 11:32
  Speaker 1: that are better hotter than others. Yea, So we just
• 11:35
  Speaker 1: wrapped up an investor road show in Asia last week.
• 11:38
  Speaker 1: Before that we were in Europe and prior to that
• 11:40
  Speaker 1: we were in the Middle East. I would say, um,
• 11:43
  Speaker 1: you know, the two most sought after geographies the United
• 11:47
  Speaker 1: States in the UK even with Brexit. So what tie
• 11:51
  Speaker 1: ups are you expecting or could you see happening in
• 11:54
  Speaker 1: terms of activity? Listen, what are people chasing right now?
• 11:58
  Speaker 1: So people love resorts, people love select service portfolios. I
• 12:02
  Speaker 1: think it's a flight to quality and the reason why
• 12:04
  Speaker 1: London and New York continued to be the first and
• 12:07
  Speaker 1: second most liquid markets is people want to go in
• 12:10
  Speaker 1: and then to your point, Lisa, what happens if they
• 12:12
  Speaker 1: have to sell. There's a ton of liquidity here, so
• 12:14
  Speaker 1: you can always sell. Okay, we just but I'm wondering
• 12:16
  Speaker 1: are their names in terms of what acquiring others are
• 12:22
  Speaker 1: we looking at? You know, Hilton? Then they're all very
• 12:26
  Speaker 1: active right now. I mean, let's look at what's happened,
• 12:29
  Speaker 1: um in the past several months. So you have I
• 12:32
  Speaker 1: acquiring six senses. That's a really interesting spotlight into what
• 12:36
  Speaker 1: people are focused on with wellness. That's going to be
• 12:38
  Speaker 1: really exciting. You have now the concept of the urban resort,
• 12:42
  Speaker 1: so they're playing into that. Uh Marryed buying Starwood, Um,
• 12:46
  Speaker 1: you know, not too long ago, and we're still seeing
• 12:48
  Speaker 1: the benefits of that consolidation. So I do expect more
• 12:50
  Speaker 1: to happen, and I think there should be. She's very
• 12:54
  Speaker 1: very impression experience. She just come off the road show.
• 12:58
  Speaker 1: She's verse. But one thing I want to when I
• 13:01
  Speaker 1: read you know about you know, looking at resorts and
• 13:03
  Speaker 1: things like that in the website, say, talk about experiential travel.
• 13:07
  Speaker 1: What is that isn't traveled by definition and experience? I
• 13:10
  Speaker 1: think you're absolutely right. That's a very fancy, um fancy name.
• 13:14
  Speaker 1: Right now. It's anything and everything memorable. I think the
• 13:17
  Speaker 1: traveler right now it doesn't want a cookie cutter experience.
• 13:20
  Speaker 1: And if you look at where people are focused on,
• 13:22
  Speaker 1: it's all about you know, experiences, right. That's Airbnb's angle
• 13:26
  Speaker 1: into the hotel space, Live like a local, right, it's experience,
• 13:30
  Speaker 1: live like a local. I'm just thinking, I mean, you
• 13:33
  Speaker 1: show up to the hotel, it isn't there, You're giving
• 13:36
  Speaker 1: a tent. I mean that's an experience that's memorable. I mean,
• 13:38
  Speaker 1: what's the bar here I'm just wondering. I don't know,
• 13:41
  Speaker 1: go figure one real quick question for you. I'm interested
• 13:44
  Speaker 1: in some of the areas where there's been a lot
• 13:46
  Speaker 1: of hotels built, and thinking of New York City, for example,
• 13:49
  Speaker 1: is there evidence that you are seeing some weakening there
• 13:52
  Speaker 1: and that that's going to kind of be captain and
• 13:55
  Speaker 1: decline the huge wave of supply. I think it's behind us, right.
• 13:58
  Speaker 1: There's still more rooms being to of heard in New York,
• 14:00
  Speaker 1: but the pace at which those are being delivered is
• 14:02
  Speaker 1: definitely way down. UM I would say, yes, investors are
• 14:06
  Speaker 1: very much focused on supply growth, but there's markets like
• 14:09
  Speaker 1: New York, Boston, San Francisco, London that are going through
• 14:11
  Speaker 1: huge transformations in the city from an infrastructure perspective. So
• 14:16
  Speaker 1: maybe hotel US get a little bit ahead of themselves.
• 14:19
  Speaker 1: But now you have office and you know, all of
• 14:21
  Speaker 1: these real estate investment and infrastructure investments supporting more demand.
• 14:26
  Speaker 1: Gilda Press Avarado, thank you so much for joining US.
• 14:28
  Speaker 1: Guild does A CEO America's Hotel and Hospitality Group for
• 14:32
  Speaker 1: j L L joined us on our Bloomberg Interactive Broker studio.
• 14:50
  Speaker 1: Twalls Fitzpatrick joining US now Managing director if we're e
• 14:54
  Speaker 1: NP a research at sun Trust. Robinson Humphrey coming to
• 14:57
  Speaker 1: us from Houston, Texas. Well, thank you so much for
• 14:59
  Speaker 1: being with us. So it does appear that Occidental Petroleum
• 15:03
  Speaker 1: is starting a bidding war for Anadarko Chevron. Of course,
• 15:06
  Speaker 1: the other suitor here, bitter. Who do you think is
• 15:09
  Speaker 1: a better potential winner of this fight? Hey, good morning. Yeah,
• 15:15
  Speaker 1: it's back to exciting times in the in the oil patch,
• 15:18
  Speaker 1: I think, and I think the market is telling us
• 15:21
  Speaker 1: it would agree that Chevron is a little bit better
• 15:24
  Speaker 1: as a natural fit here. Uh, the acreage overlaps are
• 15:29
  Speaker 1: really pretty pretty rock solid. I mean they fit like
• 15:32
  Speaker 1: a puzzle. Oxy you know, a fine company of course,
• 15:36
  Speaker 1: good permian overlap, but you know, they'd be newer to Colorado,
• 15:39
  Speaker 1: they'd be newer to the l n G game, they'd
• 15:41
  Speaker 1: be newer to the Gulf of Mexico. So I think
• 15:44
  Speaker 1: I think Chevron is a little bit better of of
• 15:47
  Speaker 1: a fit. And I think that the market is telling
• 15:49
  Speaker 1: us that with with Oxy down call it seven per
• 15:53
  Speaker 1: cent since since the news came out, and uh, the
• 15:58
  Speaker 1: the e M P Index up about the same, up
• 16:00
  Speaker 1: about seven percent as well. So well, what do you
• 16:02
  Speaker 1: think Chevron is going to do here, what's the response
• 16:04
  Speaker 1: is going to be. I think they have to come
• 16:07
  Speaker 1: back at it. I mean, you know, uh Mr Worth
• 16:10
  Speaker 1: was was on TV and he pretty pretty definitively said that,
• 16:14
  Speaker 1: you know, when we step into a deal, we intend
• 16:17
  Speaker 1: to close that deal. Uh, So you know, he laid
• 16:20
  Speaker 1: it out there. I think that they have to come
• 16:21
  Speaker 1: back with something that being said, you know, looking through
• 16:24
  Speaker 1: uh through the finally material, it's clear that that that
• 16:28
  Speaker 1: uh Anadarko prefers the Chevron bid UM. So you know,
• 16:33
  Speaker 1: do they really have to come back and top seventies
• 16:36
  Speaker 1: six uh significantly or can can they match it? And
• 16:41
  Speaker 1: uh and maybe the board will go with them. I
• 16:43
  Speaker 1: think that they can. I think that they can match it.
• 16:45
  Speaker 1: I think that they're in the advantage position again, both
• 16:49
  Speaker 1: from a balance sheet perspective obviously, and from a market
• 16:53
  Speaker 1: reaction perspective. It's just it's tough for a management team
• 16:56
  Speaker 1: when you've underperformed by almost fifteen percent since this new
• 17:00
  Speaker 1: is to be able to really dig in your heels.
• 17:03
  Speaker 1: So here's what I'm struggling with right now. The fact
• 17:05
  Speaker 1: is that most people in the market think that Chevron
• 17:08
  Speaker 1: is gonna win this bidding war if it turns into
• 17:10
  Speaker 1: a bidding war, So is occidental basically just saying, all right,
• 17:13
  Speaker 1: we're gonna punch a hole in our competition by forcing
• 17:17
  Speaker 1: them to overpay for this deal. I mean, is that
• 17:19
  Speaker 1: basically what's going on here? Um? You know, I think
• 17:25
  Speaker 1: they really want it. I really do. UM. You know,
• 17:28
  Speaker 1: OXY is they're in a position. They do have great
• 17:31
  Speaker 1: acreage in the permium, but they're gonna be thrown off
• 17:33
  Speaker 1: a lot of cash going forward, especially from some of
• 17:35
  Speaker 1: these international projects that they have, and they want to
• 17:38
  Speaker 1: plow it back into something. Uh. So I don't think
• 17:41
  Speaker 1: that they're necessarily doing anything to to harm Chevron. I
• 17:44
  Speaker 1: think that they want the acreage because they want to
• 17:47
  Speaker 1: be able to, uh to feed the free cash flow
• 17:50
  Speaker 1: that's coming to them into an asset that's going to
• 17:52
  Speaker 1: be able to give them solid or turns Anadarko clearly
• 17:55
  Speaker 1: fits that bill. Now you know, I would agree with you.
• 17:58
  Speaker 1: I'm a little bit surprised. There's there's plenty of other
• 18:00
  Speaker 1: companies that fit that bill for for a similar price tag. So, uh,
• 18:04
  Speaker 1: you know, to come back in and to basically you know,
• 18:07
  Speaker 1: to be uh call it a bantam weight and you
• 18:10
  Speaker 1: decide to to to pop a heavy weight in the
• 18:13
  Speaker 1: nose and go for a bidding more. I mean, that
• 18:15
  Speaker 1: does seem a little bit aggressive, especially when when the
• 18:19
  Speaker 1: e MP space in general is selling at the bottom
• 18:22
  Speaker 1: end of its multiple range. So there's there is a
• 18:25
  Speaker 1: decent amount of opportunities, a decent amount of folks you
• 18:27
  Speaker 1: could go after. So well, let's talk about that a
• 18:30
  Speaker 1: little bit. I mean, I'm sure energy bankers are picking
• 18:34
  Speaker 1: up the phone this morning and you know, dialing up
• 18:36
  Speaker 1: all their clients, trying to get some deals on the table,
• 18:39
  Speaker 1: trying to shake the trees a little bit. Do you
• 18:41
  Speaker 1: expect a pick up an M and eight or maybe
• 18:44
  Speaker 1: this will spark a pick up an M and A
• 18:46
  Speaker 1: in the space. Yeah, I think it will. I mean,
• 18:50
  Speaker 1: you know, you have a couple of things that are
• 18:51
  Speaker 1: happening for the first time in a while. Scale really matters.
• 18:54
  Speaker 1: You don't want to be running one or two rigs.
• 18:57
  Speaker 1: It's really just not that efficient. But more importantly, for
• 19:00
  Speaker 1: evaluation perspective, there's about a two term multiple discrepancy between
• 19:05
  Speaker 1: the mid and large cats That obviously makes it a
• 19:07
  Speaker 1: little bit easier to pay the premium. Uh, it makes
• 19:10
  Speaker 1: a little bit easier to get these deals done because
• 19:12
  Speaker 1: you have a little bit of a natural arbitrage, but
• 19:15
  Speaker 1: also you your incentives are lining up uh better, you
• 19:19
  Speaker 1: have more activists coming into the space and um and
• 19:23
  Speaker 1: I know this is a little bit a bracer to some,
• 19:25
  Speaker 1: but but the managements are getting pretty big payouts on
• 19:28
  Speaker 1: the way out, and honestly, when I talk to investors,
• 19:31
  Speaker 1: that's something that they're really encouraged by, somewhat counterintuitively, because
• 19:35
  Speaker 1: there's been a feeling that the pay packages are better
• 19:38
  Speaker 1: for the management teams than anything they might get on
• 19:41
  Speaker 1: the way out, even with the twenty premium. UM. So, actually,
• 19:44
  Speaker 1: these investors seem pretty happy to see, uh, these golden
• 19:48
  Speaker 1: parachutes coming back because I think it will lubricate the
• 19:50
  Speaker 1: M and A just real quickly at twenty seconds. Well,
• 19:53
  Speaker 1: give me a couple of names you think could be
• 19:55
  Speaker 1: pop up on the screen in terms of M and
• 19:57
  Speaker 1: A targets. Yeah, absolutely, I say. If you're looking for
• 20:01
  Speaker 1: asset overlap, Noble and PDC are almost perfect overlaps. If
• 20:06
  Speaker 1: you're looking for the blessing on the Colorado regulated regulatory stuff,
• 20:11
  Speaker 1: it's going to be s r C extraction. And of course,
• 20:13
  Speaker 1: if you want to go after the Permian, which is
• 20:15
  Speaker 1: where most of the speculation has been. Uh, you'd want
• 20:18
  Speaker 1: to look at Pioneer and Parsley. Excellent good names. Thank you.
• 20:23
  Speaker 1: I think you know, I think there's going to be
• 20:25
  Speaker 1: more M and A is what while we're here in
• 20:26
  Speaker 1: this space and interesting to get some names there. Well. Fitzpatrick,
• 20:29
  Speaker 1: Managing director for EMP Research at Untrust, Robinson humphreca Well,
• 20:47
  Speaker 1: the time has finally come for the market to find
• 20:49
  Speaker 1: out just how ugly Tesla's first quarter was. Expectations for
• 20:52
  Speaker 1: the period have been lowered sharply in recent weeks, especially
• 20:55
  Speaker 1: after disappointing delivery numbers renounced order this month. To get
• 20:59
  Speaker 1: the low down, we turned to Liam Denning Energy, Mining
• 21:02
  Speaker 1: and commodities columns for Bloomberg Opinion. He joins us here
• 21:05
  Speaker 1: in a Bloomberg Interactive Broker studio. Liam, thanks so much
• 21:08
  Speaker 1: for joining us. I want to start with the event
• 21:11
  Speaker 1: that the company held. Um, I guess yesterday about the
• 21:14
  Speaker 1: autonomous vehicle Any news out of that? What was that?
• 21:20
  Speaker 1: What was it? Good question? So? UM, I think some
• 21:24
  Speaker 1: people are calling it a smoke screen. Don't look at
• 21:26
  Speaker 1: my production problems, look at my vehicles. Something something shiny. Well,
• 21:32
  Speaker 1: I think, I think any any investor day like that
• 21:34
  Speaker 1: with any company is usually geared towards saying, hey, we're
• 21:38
  Speaker 1: doing something here that you guys aren't fully appreciating, and therefore,
• 21:43
  Speaker 1: you know, you should be valuing our stock higher and
• 21:46
  Speaker 1: embed the value of this in the stock, etcetera, etcetera.
• 21:48
  Speaker 1: I mean this really matters for for Tesla because remember,
• 21:53
  Speaker 1: as these these numbers coming out tonight quite likely to
• 21:57
  Speaker 1: show the value of Tesla is all in the multiple,
• 22:00
  Speaker 1: it's not really in the earnings. And so if Tesla
• 22:04
  Speaker 1: can demonstrate hey, we're actually you know, better at autonomy
• 22:09
  Speaker 1: than people give us credit for, that's one way of
• 22:13
  Speaker 1: boosting that multiple. Now, the reaction to the actual day
• 22:17
  Speaker 1: was pretty lackluster. It didn't really do anything. Um. It
• 22:21
  Speaker 1: reminded me a little of what happened when they unveiled
• 22:24
  Speaker 1: the model why last month, which again should have been,
• 22:27
  Speaker 1: you know, based on past form a big deal but
• 22:30
  Speaker 1: actually was met with some skepticism. Um. And you know,
• 22:33
  Speaker 1: for me, one of the important things here. People have
• 22:36
  Speaker 1: focused on the share price, obviously, as as they should
• 22:38
  Speaker 1: be with Tesla. Um. But last night the spread on
• 22:42
  Speaker 1: on Tesla's bonds its highest level yet just over you know,
• 22:47
  Speaker 1: six D basis points. Um. So Tesla's coming into these
• 22:51
  Speaker 1: results tonight, um having you know, whether people call a
• 22:55
  Speaker 1: smoke screen or or whatever. But but it definitely tried
• 22:59
  Speaker 1: to move the narrow tip and it doesn't seem to
• 23:01
  Speaker 1: have done much. Just to give some perspective here, Tesla
• 23:03
  Speaker 1: shares are down about so far you're to date. One
• 23:06
  Speaker 1: thing that I find interesting is it's been relatively controlled
• 23:10
  Speaker 1: in terms of decline based on your lazing your eyebrows.
• 23:13
  Speaker 1: It's not a big it's not very controlled its decline
• 23:16
  Speaker 1: in you know, let's say less than four months. But
• 23:19
  Speaker 1: I will say, yes, you can be skeptical. I see
• 23:22
  Speaker 1: your skepticism in your eyes. Um, but but I do
• 23:25
  Speaker 1: think you know, it's not sort of the massive plunge
• 23:27
  Speaker 1: with a lot of short sellers have been expecting. It's
• 23:29
  Speaker 1: been sort of a steady decline throughout the year now. Yeah,
• 23:34
  Speaker 1: I mean it's it's been reasonably steady. And obviously short
• 23:36
  Speaker 1: sellers always always hope for more and actually around that
• 23:40
  Speaker 1: around that to sixty level, which is where it is now.
• 23:43
  Speaker 1: That's kind of been a flaw for the stock over
• 23:45
  Speaker 1: the past, um a couple of years. You look at
• 23:47
  Speaker 1: the share price Chartum, it generally bounces from that level.
• 23:51
  Speaker 1: What's going to be interesting to watch is what happens
• 23:54
  Speaker 1: after these results. Now, to a certain extent, skepticisms already
• 24:00
  Speaker 1: priced in. People are expecting these results to be bad.
• 24:03
  Speaker 1: After the sales numbers came out, you look at what's
• 24:06
  Speaker 1: happened to consensus estimates, which you know, frankly with Tesla,
• 24:10
  Speaker 1: you know you might as well lick your finger and
• 24:11
  Speaker 1: put it in the air anyway on on any quarterly numbers.
• 24:15
  Speaker 1: But um uh, those have certainly been you know, coming
• 24:19
  Speaker 1: down quite sharply heading in. So you know, the number
• 24:24
  Speaker 1: I'll be watching probably most closely tonight is the level
• 24:28
  Speaker 1: of cash on the balance sheet. They had this big
• 24:30
  Speaker 1: bondary payment. Um, clearly sales were not that great. Calls
• 24:36
  Speaker 1: for them to raise equity, which never really go away,
• 24:39
  Speaker 1: have been ramping up again. Um So for me, that
• 24:42
  Speaker 1: will be the key number to watch. So give us
• 24:45
  Speaker 1: just an update on and I'm sure obviously get a
• 24:47
  Speaker 1: big updated for the close tonight when the report, But
• 24:49
  Speaker 1: just the status of the production issues at the company.
• 24:52
  Speaker 1: I mean, we know that the car, the cars are
• 24:54
  Speaker 1: really cool, the technology is called but building these things
• 24:56
  Speaker 1: is tough. What's the latest on kind of where they
• 24:58
  Speaker 1: are with their production capability. That's an interesting question because, um,
• 25:03
  Speaker 1: you know, various targets have been thrown out by Tesla
• 25:07
  Speaker 1: over time as to where particularly production of the Model
• 25:10
  Speaker 1: three was gonna go. You know, originally the target was
• 25:14
  Speaker 1: to get to ten thousand of these a week. UM.
• 25:18
  Speaker 1: You know, I think a while ago. Actually, UM, what
• 25:22
  Speaker 1: we saw in the first quarter was weekly production was
• 25:26
  Speaker 1: still not at five thousand on average. UM, it went
• 25:30
  Speaker 1: up about three percent I think versus the fourth quarter,
• 25:34
  Speaker 1: the fourth quarter average UM. Elon Musk clearly keeps talking about,
• 25:41
  Speaker 1: you know, raising that target quite considerably, and you know,
• 25:45
  Speaker 1: by tweeting about it, has has got back into trouble
• 25:47
  Speaker 1: with the with the sec UM. I think, you know,
• 25:52
  Speaker 1: for me, one of the things about the production number
• 25:55
  Speaker 1: is and just coming back to the autonomy day the
• 25:59
  Speaker 1: other day, you know, muskmates some very bold claims about
• 26:03
  Speaker 1: the company's autonomy capabilities. UM. Some of them are quite interesting,
• 26:09
  Speaker 1: although the way he framed in, particularly criticizing some other strategies,
• 26:13
  Speaker 1: did make me wonder how credible can that be if
• 26:17
  Speaker 1: investors are also looking at the fact that you're struggling
• 26:19
  Speaker 1: to build and deliver these cars. Tesla the gift that
• 26:22
  Speaker 1: keeps on giving. Liam. I'm sure you are excited to
• 26:24
  Speaker 1: write your next column. Yeah, he looks thrilled. Liam Denning
• 26:28
  Speaker 1: is Energy Mining and Commodities Calmness for Bloomberg Opinion, joining
• 26:31
  Speaker 1: us here in our interactive broker's studios. Always love speaking
• 26:35
  Speaker 1: with him. Thanks for listening to the Bloomberg P and
• 26:37
  Speaker 1: L podcast. You can subscribe and listen to interviews at
• 26:39
  Speaker 1: Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney,
• 26:43
  Speaker 1: I'm on Twitter at pt Sweeney. I'm Lisa abram Woyds.
• 26:46
  Speaker 1: I'm on Twitter at Lisa A. Bramoit's one before the podcast.
• 26:49
  Speaker 1: You can always catch us worldwide. I'm Bloomberg Radio