Feb. 7, 2003 - DALLAS -- Wyndham International has gone years without turning a profit, its stock trades for pennies, and it has $2.8 billion in debt. 

But Chief Executive Fred Kleisner is preaching the gospel that Wyndham will be ready when the recovery comes and that things may be better than the numbers show. 

The luxury hotel company has been trying to right its ship since it absorbed the Patriot American Group and went from a real estate investment trust to a traditional corporation in 1999. 

Wyndham has slashed debt by nearly $1 billion, thanks to the sales of more than 100 properties that didn't fit in Wyndham's upscale niche. The chain still has 34 sites on the block, which could reduce Wyndham's debt between $750 million and $900 million. Kleisner's goal is to have the debt down to $2 billion by the end of this year. 

Wyndham still has a number of obstacles to overcome, some of which are not unique to Wyndham. The economy is weak, business travel is lagging and there is the threat of war with Iraq. 

"Our 2003 projections assume that there is no measurable recovery in the economy until the end of 2003, there are no major terrorist attacks against the U.S., and we have not built in any impact of a potential war with Iraq," Kleisner said Thursday in disclosing the company's 2002 results. 

But, he added: "Wyndham will remain nimble to react to changes in our industry and make the necessary adjustments to our business operating plan to maintain a financially sound company." 

Wyndham lost $499.7 million for the year, largely because of a one-time writedown, accelerated depreciation connected to its asset sales, and interest expense. 

In the asset sales, Kleisner says, Wyndham pared "junk" properties and other hotels in a bid to refocus on its high-end hotels and resorts. 

The company wants to build a brand that's recognized on the same level as Hilton, Marriott, Hyatt and Sheraton. It has redesigned its all-suite Summerfield Suites chain into a midrise and high-rise product, in an effort to lure the transient business traveler and build interest in the hotels among developers in urban markets. 

Yet Wyndham's dirt-cheap stock price is fueling speculation that the company could be a takeover target. Such talk doesn't sit well with Kleisner. 

"Someone saying we're a takeover target, simply by virtue of our equity price, is not looking at the whole," he said. "Everyone in our industry is a takeover target." 

But not everyone is trading for less than a quarter a share; Wyndham stock closed Thursday at 22 cents on the American Stock Exchange. 

"Whenever you've got a company whose stock has been driven down as much as Wyndham's has, you're going to have the interest of groups who want to buy them," said Greg Crown, vice president with PKF Consulting in Addison. "They have a legitimate brand. They have some good assets. They have some good management and they're trading at a low, low, stock price. You've got to believe there are entities out there interested." 

The company is looking better. 

Wyndham lost $43.1 million in the fourth quarter, compared with a $61.7 million loss in the same period in 2001. Those results don't include the operations of the sold hotels, related interest expense from retiring debt, and revenue that Wyndham received from terminated hotel management contracts. 

On the same basis, Wyndham reported a $513.8 million loss for 2002, compared with a loss of $492.9 million for 2001. 

The company's net loss for the quarter, including results for the sold operations, the interest expense and contract revenue, was $36.9 million. That compared with a loss of $57.1 million for the previous year. 

For the year, the company had a net loss of $499.7 million. That compared with a loss of $138.9 million for the previous year. 

The 2002 loss includes $324.1 million in a goodwill write-off, $267.1 million of depreciation and amortization, and $227.8 million of interest expense. 

Wyndham's unit revenue -- measured in revenue per available room -- improved in each quarter of 2002. It increased 7.6 percent in the fourth quarter, exceeding company expectations. 

"We not only have a strong preference toward our brand with an occupancy factor that is currently over 70 percent, we're able to take immediate advantage of our situation," Kleisner said in an interview. "What's going to drive recovery? Not occupancy. Average daily rate will drive the recovery. As demand goes up, rates across the board, throughout the industry, will go up. That's 100 percent impact on the earnings level of any company that is well run." 

Analysts expect the industry to rebound, although not anytime soon. 

And the rebound is expected to be strong thanks to a limited amount of supply coming online. 

"When we finally started to get the good data after January 1, we just didn't see any rebound," said Bill Crow, a hotel industry analyst with the Raymond James & Associates investment firm in St. Petersburg, Fla. "It's turned us more cautious on the industry. In the longer term, the economy is going to rebound. It really does set the stage for a wonderful recovery." 

So Wyndham will continue to look to the leisure travelers and offer room deals that you can't find with a hotel discounter. It will also hold down its rate in an effort to drive occupancy. 

Wyndham dropped its rate about 5 percent in 2002 compared with 2001 in an effort to boost occupancy. On top of that, it added some incentives to its loyalty program, Wyndham by Request. The company offered free long distance, free 800 access, free high-speed Internet connections and free fax service to people who signed up with the program. That pushed enrollment from 400,000 on June 1, 2002 to more than 1.2 million. 

"The name of the game is market share," Kleisner said. "The pie has shrunk or stayed the same. The object is to take a bigger piece of that pie. Wyndham by Request is our answer to how we positioned our brand. We recognize that no two travelers are the same and that is why we have taken market share." 

The plan is to turn that market share into more revenue and to sell assets to pay down debt. 

"This is a cyclical business," Kleisner said. "When the return comes, our results go up and our leverage goes way down." 

WYNDHAM INTERNATIONAL 

Headquarters: Dallas 

CEO: Fred Kleisner 

2002 loss: $499.7 million 

-- Business: Operates 201 hotels and resorts in the United States, Canada, Mexico, the Caribbean and Europe 

-- Fourth-quarter loss: Narrowed to $37 million, from $57 million in the same period in 2001 

-- Performance: Fourth-quarter unit revenue rose 12 percent and occupancy increased 9 percentage points to 66.4 percent, but average daily rates dropped 3 percent to $110.50 

-- Strategy: The company has been shedding noncore assets since 1999 to refocus on its high-end hotels and resorts 

-- Properties sold in 2002: 20 hotels and a steakhouse investment for a total of $590 million 

-- Properties sold since 1999: 102, for $1.5 billion 

-- Properties on the block: 34, expected to generate $750 million to $900 million 

ONLINE: www.wyndham.com 

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