MeriStar Hospitality Corporation (NYSE: MHX), the nation`s third largest hotel real estate investment trust (REIT), today announced financial results for the second quarter ended June 30, 2002.
The results were impacted by a continued sluggish economy and a slower than expected rebound in travel, especially the transient business travel segment. Excluding the $3.1 million impact of non-hedging derivatives related to debt that was repaid in the first quarter, funds from operations (FFO) for the 2002 second quarter were $37.6 million, compared to $60.8 million for the 2001 second quarter. FFO per diluted share was $0.70, compared to $1.14 for the 2001 second quarter. FFO results were $0.01 ahead of the consensus analysts` estimate.
Revenues declined 8.4 percent to $281.3 million. Earnings before interest expense, income taxes, depreciation and amortization (EBITDA) fell 21.3 percent to $71.9 million. Diluted net income per share was $0.06, compared to $0.52 per share in the 2001 second quarter. Hotel operating profit margins declined 360 basis points to 33.7 percent.
Same-store revenue per available room (RevPAR) declined 11.3 percent to $70.60. Average daily rate (ADR) decreased 7.2 percent to $101.65, while occupancy fell 4.4 percent to 69.5 percent.
“The rebound in travel that was anticipated by the industry failed to materialize in the second quarter,” said Paul Whetsell, chairman and chief executive officer. “Our group and leisure business have held up well in most markets, but the transient business travel segment continues to lag. We are pleased that our operator has been able to maintain margins at relatively high levels despite the sharp decline in revenue. We believe many of the cost-saving measures that have been initiated in the past year will be permanent and will benefit us tremendously when business travel begins to rebound.”
Whetsell noted that its paper-clipped management company, MeriStar Hotels & Resorts, had successfully completed a merger with Interstate Hotels Corporation, effective July 31, and had taken on a new name, Interstate Hotels & Resorts (NYSE: IHR). “We expect to see our hotels gain greater economies of scale in marketing and purchasing with Interstate Hotels & Resorts and believe the merger will have a long-term positive effect on MeriStar Hospitality`s results.”
Following the close of the second quarter, MeriStar sold three hotels as part of its on-going program to sell non-strategic assets. “The hotels did not fit our long-term strategy of owning upscale, full-service hotels in major markets with high barriers to entry. We have several more hotels that fall into this category and will market them for sale as conditions warrant.”
Whetsell noted that MeriStar is seeing more hotels available for acquisition at more reasonable prices than in several years. “While we have no immediate plans to acquire assets, we intend to take full advantage of opportunities as they arise,” he said.
Operating Performance in Significant Markets