Sold 11 Hotels During First Quarter
|ARLINGTON, Va. - May 6, 2004 -- MeriStar Hospitality Corporation (NYSE:
MHX), one of the nation's largest hotel real estate investment trusts (REIT),
today announced financial results for the first quarter ended March 31,
First-quarter 2004 comparable revenue per available room (RevPAR) for the company's 73 core hotels rose 2.7 percent to $73.70. Occupancy increased 1.4 percent to 67.4 percent and average daily rate (ADR) increased 1.2 percent to $109.27.
"We gained solid momentum throughout the quarter, and we believe we are now in a period of sustained recovery," said Paul W. Whetsell, chairman and chief executive officer. "We were pleased with the RevPAR results we achieved in the quarter as we commenced a significant renovation program and completed brand conversions on three of our hotels. Although the conversions impacted our results in the first quarter, we expect to generate significant returns from these conversions and anticipate strong results from these hotels going forward. Excluding the converted hotels and two additional hotels planned for conversion, RevPAR increased 4.4 percent over the first quarter of 2003. Looking ahead, we see further operating improvements throughout our portfolio as the economic recovery gains a solid footing and the business transient traveler begins to return in force."
Whetsell noted that the company's hotel operating margins continued under pressure in the first quarter. "Margins were down due to unfavorable cost comparisons as a result of aggressive cost-cutting last year prior to the war in Iraq. Although operating margins will be somewhat affected by these difficult comparisons in the second quarter, we expect to see increases in margins in the second half of 2004 as RevPAR continues to improve."
In the 2004 first quarter, the company sold 11 hotels with 2,497 rooms for total gross proceeds of $74 million. Two additional hotels with 371 rooms were sold to date in the second quarter for gross proceeds of $18 million. Since the beginning of 2003, the company has sold 28 non-core assets aggregating 5,716 rooms for $220 million in total gross proceeds.
"Our asset disposition program has been very successful," Whetsell said. "Through it, we have been able to reposition our portfolio to a mix of higher yielding hotels and reduce our leverage. We have six assets remaining in our non-core disposition program with expected proceeds of $45 million to $50 million."
"We are exceptionally pleased to be active in the acquisition arena, recently announcing the purchase of the Ritz-Carlton Pentagon City, which is on target to close in May. We have an active pipeline of acquisition opportunities, but we will continue to be highly selective," Whetsell said. "This high quality hotel is very much in line with the type of assets we will look to acquire--larger properties that will be accretive to earnings, located in major urban markets or high-end resort destinations with high barriers to entry, strong brand affiliations and significant meeting space."
In the 2004 first quarter, the company invested approximately $24 million in capital expenditures. "Our plan to dramatically enhance the quality of our core properties is progressing smoothly," Whetsell noted. "Our new streamlined design and purchasing program is achieving expected savings of 10 to 15 percent for furniture, fixtures and equipment. The program is also dramatically reducing the time required to renovate hotels, allowing us to improve the quality of our hotels faster to take advantage of the rebound in the economy."
To date in 2004, the company has completed four of 10 planned brand conversions. "The new brand affiliations are better targeted to the customer profiles in their respective markets, and, we believe, will generate higher revenues or will produce a more beneficial cost structure."
Operating Performance in Significant Markets
The company reported positive year-over-year RevPAR gains in eight of
its 12 major markets in the 2004 first quarter. RevPAR increases in key
markets included a 12.7 percent gain in the Mid-Atlantic, a 10.5 percent
gain in Southern California and a 6.9 percent gain in Northern California,
markets which together account for 22 percent of total revenues. RevPAR
in Houston increased 17.0 percent due to the company's hotels benefiting
from Super Bowl activities. "We are seeing meaningful rebounds in key urban
markets as the economic recovery gains momentum," Whetsell said.
The company completed the following capital markets transactions during the 2004 first quarter:
"We raised an additional $73 million in April through an offering of 12.0 million common shares, and we expect to use the proceeds to complete additional hotel acquisitions. We anticipate financing a portion of our acquisitions with mortgage debt, which will allow us to benefit from the current low interest rate environment."
Long-term debt as of March 31, 2004 and December 31, 2003 consisted
of the following:
"We remain very optimistic about 2004, and are gaining confidence with each passing month," Whetsell said. "For the second quarter, we expect solid RevPAR gains to result from continued strength in the economy."
The company provides the following range of estimates for the second quarter and full-year 2004, based on a projected second-quarter 2004 RevPAR increase of 4.0 percent to 5.0 percent and full-year 2004 RevPAR increase of 4.0 percent to 5.0 percent. This guidance includes the effect of the Ritz-Carlton Pentagon City acquisition, one additional acquisition from the proceeds of the recent $73 million equity offering, $50 million of additional senior note repurchases, and $100 million of new mortgage debt financing for hotel acquisitions.
* Net loss of $(3) million to $(6) million for the
second quarter and $(80) million to $(87) million for the full year;
Arlington, Va.-based MeriStar Hospitality Corporation owns 79 principally upscale, full-service hotels in major markets and resort locations with 21,861 rooms in 23 states, the District of Columbia and Canada.
This press release contains forward-looking statements about MeriStar Hospitality Corporation, including those statements regarding future operating results, the timing and composition of revenues and expected proceeds from asset sales, among others.
MeriStar Hospitality Corporation
|Also See:||MeriStar Hospitality Completes Sale of Five Hotels for Aggregate $29.5 Million / March 2004|
|MeriStar, Which Owns 89 Hotels, Reports Full-Year 2003 Net Loss of $388 million Compared with a Loss of $161 million a Year Earlier; Full-year RevPAR Declines 3% / Hotel Operating Statistics / February 2004|
to Spend Approximately $225 million On Renovations At Its Core 73 Hotel
Properties Over the
Next Two Years; Taking Advantage of Size and Scale to Accelerate Renovations and Reduce Costs / February 2004