Question-and-Answer Session
Operator
(Operator Instructions). Your first question comes from David Katz – Oppenheimer.
David Katz – Oppenheimer & Co.
So I wanted to just go back to the – I guess one of the issues we're trying to figure out is on the cost cutting side. We've gone through the first portion of this year and sort of executed on some strategies to cut costs, and to the degree that we can look at next year and ask ourselves the question do we get to next year with a sort of more meaningful run rate or a more sort of a set cost base going into next year, irrespective of whatever happens to RevPAR?
Or are you still, do you think, in the middle innings of cost cutting and there's more to do that you'll execute on for the back half of this year also. And I know you've touched on some of these issues but I think you may see where I'm headed with this.
W. Edward Walter
I think reality is is that the cost cutting efforts went into high speed about this time last year as RevPAR went negative. We started in 2008 and I think most folks in the industry even in their fourth quarter 2007 conference call, talked about the fact that they were implementing cost cutting initiatives across their portfolios.
But the reality is is in the first half of last year, the occupancy decline was relatively modest, RevPAR was still positive, and you didn't have the reductions in business levels that permitted you to really implement widespread cost saving initiatives.
Obviously as we worked our way through the third quarter and certainly into the fourth quarter of last year, we started to see the occupancy declines and consequently the cost cutting initiatives became more severe. That effort continued through the first half of this year as is contemplated by our margin guidance.
While we still expect to be able to continue to cut costs and I would overall say that the flow-through that we're anticipating for the second half of the year is still pretty good given the RevPAR decline, the reality is that the comparisons get more difficult and certainly as you get into the fourth quarter, you're not going to be able to duplicate the performance that we had last year. As you carry that into 2010, I think I would agree with sort of what you were suggesting, which is while we still be able to cut costs to some degree based upon if demand is lower.
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