WASHINGTON–(BUSINESS WIRE)–Nov. 6, 2000–
Completes Agreement to Convert MeriStar Hospitality REIT Leases to Management Contracts
MeriStar Hotels & Resorts (NYSE: MMH), the nation's largest independent hotel management company, today announced results for the third quarter ended September 30, 2000. Additionally, the company reported that it had completed an agreement with MeriStar Hospitality (NYSE: MHX), a hotel real estate investment trust (REIT), to convert all 106 hotel leases with the REIT to management contracts on January 1, 2001.
MeriStar Hotels & Resorts' 2000 third-quarter revenues rose 13.2 percent to $356.4 million. The company's net loss was $(0.4) million, or $(0.01) per share on a diluted basis, equal to the prior year's third-quarter net loss per share. Earnings before interest, taxes, depreciation and amortization (EBITDA) were $4.0 million, compared to $1.7 million in the third quarter of 1999.
Same-store average daily rate (ADR) for full-service, leased hotels increased 7.0 percent to $103.68, and occupancy declined 0.9 percent to 73.8 percent. Revenue per available room (RevPAR) for these hotels improved 6.0 percent to $76.48, compared to the 1999 third quarter.
For all leased hotels, RevPAR increased 5.2 percent to $72.69, ADR rose 6.7 percent to $99.09, and occupancy declined 1.4 percent to 73.4 percent.
We had strong RevPAR growth across our portfolio, and although operating margins improved, they were lower than expected due to certain cost pressures. This, coupled with higher lease payments, led to lower operating results than originally anticipated, said Paul W. Whetsell, chairman and chief executive officer. We do not expect expenses to increase at current rates for the long term and therefore, we don't foresee a long-term impact on operating margins. We continue to work toward additional growth avenues, including the formation of a new joint venture to acquire upscale hotels and the expansion of our Doral brand in the resort, conference center and golf business lines.
Revenue by Segment
Three Months Ended
Full-service, leased $ 278,732 $ 266,873
Limited-service, leased 41,976 45,840
Management and other fees 6,287 2,075
$ 326,995 $ 314,788
Corporate Housing (1)
North America 22,329 22,645
Europe 7,040 2,488
$ 29,369 $ 25,133
(1) Results for 1999 are pro-forma results and assume BridgeStreet was acquired on January 1, 1999.
Conversion of Leases to Management Contracts
In conjunction with the REIT Modernization Act (RMA), MeriStar Hotels & Resorts has entered into an agreement to convert all 106 leases with MeriStar Hospitality to management contracts beginning January 1, 2001. The management agreements have been structured to mirror the current economics and terms of the existing leases. The conversion does not result in any cash consideration to be exchanged between the parties. Under the new management agreements, the base management fee is 2.5 percent of total hotel revenue with incentives up to an additional 1.5 percent of total revenue if certain operating thresholds are achieved.
Whetsell commented, Both MeriStar Hotels & Resorts and MeriStar Hospitality will benefit from this new structure. The management contracts have a base fee that provides more stable and predictable cash flows to the company and eliminates the operating risk inherent under the lease structure. Additionally, the incentives in the management agreements provide significant upside potential.
At this time, the company expects fourth-quarter 2000 RevPAR growth over 1999 to be in the range of 4.5 to 5.5 percent. The company anticipates cost pressures will continue to impact earnings in the fourth quarter.
MeriStar Hotels & Resorts operates 233 hospitality and leisure properties with more than 48,000 rooms in 34 states, the District of Columbia, Canada, Puerto Rico and the U.S. Virgin Islands. MeriStar develops and operates timeshare resorts and condominiums through its Doral Vacation Ownership division. Through its Doral Golf brand, MeriStar manages 11 golf courses. BridgeStreet Accommodations, a MeriStar subsidiary, is one of the world's largest corporate housing providers, offering upscale, fully furnished corporate housing throughout the U.S., Canada, the United Kingdom and 28 additional destinations worldwide. For more information about MeriStar Hotels & Resorts, visit the company's Web site: www.meristar.com.
This press release contains forward-looking statements about MeriStar Hotels & Resorts, Inc., including those statements regarding future operating results and the timing and composition of revenues, among others. Except for historical information, the matters discussed in this press release are forward-looking statements that are subject to certain risks and uncertainties that could cause the actual results to differ materially, including the following: the ability of the company to successfully implement its acquisition strategy and operating strategy; the company's ability to manage rapid expansion; changes in economic cycles; competition from other hospitality companies; and changes in the laws and government regulations applicable to the company.
MeriStar Hotels & Resorts, Inc.
Statements of Operations (1)
(Unaudited, in thousands except per share
amounts and operating statistics)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Rooms $ 231,497 $ 226,310 $ 721,045 $ 697,221
Food and beverage 67,618 64,852 222,197 214,053
Corporate housing 29,369 – 38,761 –
departments 21,593 21,551 71,187 67,212
other fees 6,287 2,075 16,358 7,363
Total revenue 356,364 314,788 1,069,548 985,849
Operating expenses by
Rooms 55,956 55,146 166,824 163,754
Food and beverage 51,451 50,316 162,094 159,068
Corporate housing 18,744 – 24,781 –
Other 12,693 10,245 40,246 32,484
Undistributed operating expenses:
general 58,270 49,257 173,894 157,971
costs 48,678 47,259 145,427 140,162
expense 106,576 100,841 330,014 312,354
amortization 2,778 1,418 6,540 4,454
expenses 355,146 314,482 1,049,820 970,247
Net operating income 1,218 306 19,728 15,602
Interest expense, net 1,986 1,037 4,530 3,543
Income before minority interests
and income taxes (768) (731) 15,198 12,059
Minority interests (57) (205) 1,266 1,864
Income taxes (291) (195) 5,236 3,772
Net income $ (420) $ (331) $ 8,696 $ 6,423
Diluted income from operations:
Net income $ (420) $ (331) $ 8,696 $ 6,423
net of tax (34) (123) 733 –
Diluted net income $ (454) $ (454) $ 9,429 $ 6,423
Weighted average number of
diluted shares of common stock:
Outstanding 35,882 29,043 33,547 27,298
Common Stock Equivalents 3,355 3,496 3,403 553 — — —
39,237 32,539 36,950 27,851
Net income per diluted common
share $ (0.01) $ (0.01) $ 0.26 $ 0.23
(1)Excludes the effect of EITF 98-9.
Pro forma operating statistics for hotels leased: Full-service
Occupancy 73.8% 74.5% 73.9% 74.1%
ADR $ 103.68 $ 96.88 $ 108.74 $ 102.60
RevPAR $ 76.48 $ 72.13 $ 80.34 $ 76.05
Occupancy 73.4% 74.4% 73.5% 74.0%
ADR $ 99.09 $ 92.85 $ 102.99 $ 97.49
RevPAR $ 72.69 $ 69.09 $ 75.66 $ 72.14
CONTACT: MeriStar Hotels & Resorts
Bruce Riggins, Director of Finance, 202/295-2276
Melissa Thompson, Director of Corporate Communications,
Daly Gray Public Relations (Media)
Jerry Daly or Carol McCune, 703/435-6293