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MeriStar 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
ARLINGTON, Va. - Feb. 10, 2004 -- MeriStar Hospitality Corporation (NYSE: MHX), one of the nation's largest hotel real estate investment trusts (REIT), today announced that it has implemented an innovative renovation program that will dramatically reduce costs and accelerate the renovation process at its hotels. Called Velocity®, the new program is estimated to reduce guest room renovation costs by more than 15 percent. The REIT expects to spend approximately $225 million on hotel renovations at its core 73 hotel properties over the next two years.

Under the direction of Mark Linch, MeriStar senior vice president of design and construction, MeriStar's asset and project managers have worked with Boulder, Colo.-based Benjamin West to create the program. HVS Compass Interior Design was responsible for the custom product development and design.

"We wanted to take advantage of our size and scale to both accelerate our renovation program and reduce our costs," said Bruce Wiles, MeriStar chief operating officer. "This program, which focuses primarily on the guest room, guest bath and corridors, will apply to about 70 percent of our properties and have an effect on about 50 percent of renovation costs. Public spaces will be handled on a more traditional project-specific design process."

Wiles explained that the new program reverses the traditional design process to generate the best design at the most reasonable cost. Rather than starting with the interior designer, the company first focused on the end product and selected leading FF&E manufacturers with proven track records as potential suppliers. Then, HVS Compass Interior Design worked with vendor design and manufacturing teams to create a timeless look that will encompass the latest manufacturing equipment and efficiencies.

Three custom guest room designs have been developed, using clear maple, warm cherry and rich mahogany woods. Manufacturers have agreed to maintain sufficient inventories to deliver all furniture, fixtures and equipment in only six weeks, compared to traditional delivery times of 12 to 14 weeks. In addition, the manufacturers will guarantee their products for a minimum of five years.

"There is significant variety in the design concepts we have developed to enable us to create a unique hotel experience at each of our hotels without incurring the significant time and high product costs associated with the normal FF&E process," Wiles said. "The initial design concept and ordering period, typically 15 to 20 weeks, will be reduced to 4 to 5 weeks. The shortened delivery time will minimize disruption at our properties while the acceleration of the renovation process will allow us to achieve higher room rate and occupancy as the properties will complete renovations much faster than under the typical industry process. The five-year product guarantee also helps us better manage the life of our rooms and guarantees significantly lower capital expenditures during the life of the product."

"We evaluated the whole purchasing process and zeroed in on those aspects that cause the greatest number of cost and timing problems," said Alan Benjamin, president of Benjamin West. "Typically, vendors get pressured into making unrealistic promises that can't be met, which often causes significant production problems and delivery delays. Renovations must be carefully orchestrated to hold costs down and minimize the time rooms are out of service."

"For this program, we carefully qualified all the vendors to help ensure that we had top notch products and dependability in both the quality of construction and materials and the ability to meet delivery schedules," Benjamin said. "We worked closely with all the vendors to develop the best relationship of quality and cost."

"MeriStar's hotels are full-service, first-class properties that typically have somewhat similar room configurations," he added. "Our challenge was to create a customized, quality room using high-grade materials, such as granite vanity tops and high quality fixtures in the bathrooms, in addition to providing upscale furniture that would be distinctive and meet the standards of the major hotel brands. We have developed unique design documentation techniques that create value for MeriStar by allowing quick, accurate decisions for specific field conditions."

MeriStar intends to invest approximately $125 million in hotel renovations in 2004 and approximately $100 million in 2005. "By the end of the 2004 first quarter, we expect to have substantially completed our asset disposition program, at which time our process of upgrading our 73 core hotels will be well under way," Wiles said. "As of year-end, we had cash on hand of approximately $275 million and expect additional asset sale proceeds of $110 million to $130 million. These funds will be used to fund this renovation program, make selective acquisitions and pay down debt."

Arlington, Va.-based MeriStar Hospitality Corporation owns 89 principally upscale, full-service hotels in major markets and resort locations with 24,169 rooms in 23 states, the District of Columbia and Canada. The company owns hotels under such internationally known brands as Hilton, Sheraton, Marriott, Westin, Doubletree and Radisson. 

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
     Bruce Riggins

Also See: MeriStar Hospitality Completes Sale of Seven Hotels for Aggregate $31.5 Million; Year to date, 14 Hotels for Total Proceeds of $122.4 million / December 2003
Management Changes Take Place at MeriStar Hospitality and Interstate Hotels & Resorts / Nov 2002

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