|By Christopher Carey, St. Louis Post-Dispatch|
Knight Ridder/Tribune Business News
June 26, 2004 - Moody's Investors Service said Friday that it might cut its rating on $98 million in bonds for the Renaissance hotels in downtown St. Louis because of continued losses.
The credit-rating agency noted that combined occupancy and average daily room rates for the Renaissance Grand Hotel and the Renaissance St. Louis Suites have fallen from last year's levels.
"The watch-list action reflects our view that break-even cash flows are unreasonable to expect this year or next year, given weak demand and anticipated slow return to historic occupancy and room rates in downtown St. Louis," Moody's said in a report.
The bonds, issued by the St. Louis Industrial Development Authority, are part of the financing package used for the $265 million hotel project.
The 918-room Renaissance Grand opened last year as the long-awaited "headquarters hotel" across from the convention facilities at America's Center.
Occupancy at the hotel has lagged behind projections, in part because of the residual effects of the terrorist attacks of Sept. 11, 2001, a spotty economy and intense competition for convention business.
Moody's downgraded the bonds once before, in December, cutting its rating to Ba3 from Baa3.
Operating losses have forced the hotel partners to tap into two backup loan funds provided by Marriott International Inc., which manages the properties, and Kimberly-Clark Corp., one of the owners.
The $11.3 million remaining in those funds should be sufficient to subsidize operations and cover debt service for the next 12 months, said Moody's analyst Anne Van Praagh.
Representatives for Marriott, Kimberly-Clark and another partner, Historic Restoration Inc., didn't respond Friday to messages requesting comment.
The Renaissance Grand had an occupancy rate of 48 percent last year, and an average nightly room rate of $110, Moody's said. The occupancy rate fell to 36 percent for the first quarter of this year.
The 165-room Renaissance St. Louis Suites had an occupancy rate of 53 percent and an average rate of $107 last year, Moody's said. Its occupancy rate was 59 percent in the first quarter of this year.
The combined occupancy rate for the two properties was 40 percent in the first quarter.
"While these results reflect in part the seasonal nature of the hotel industry, they also point to very weak demand for convention center space and hotel rooms in St. Louis," Moody's said.
The occupancy rate for all hotels in the St. Louis market was 58.6 percent in the first five months of the year, up from 55.1 percent a year earlier, according to Smith Travel Research in Hendersonville, Tenn. The average room rate was $88.74, up 0.3 percent.
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