ResortQuest International, Inc. (NYSE: RZT), the world`s largest vacation rental property management company, announced today it has begun the first phase of its previously announced cost savings initiatives designed to reduce overhead and better align expenses with projected revenues. As a result of the downturn in the vacation and travel market, and in response to the severe decline in national travel due to the tragic terrorist attack of September 11th, the company plans additional measures to address the changing business climate.
Phase one will include a company-wide wage and hiring freeze, and ResortQuest will cut approximately 5% of company payroll through a combination of over 100 immediate job eliminations and layoffs spread across its 50 vacation destinations in the U.S. and Canada. The company expects to achieve approximately $5 million in annual cost reductions through this first phase of restructuring.
The company also stated that the tragic events of September 11th will have a negative effect on the company`s operations through the spring of 2002. As a result, the company`s financial results will be lower than previous guidance. The third and fourth quarter results will include non-recurring charges primarily related to certain software development costs related to previous versions of the software (approximately half of the overall charges), deferred acquisition costs, and certain employee-related charges. We anticipate these non-recurring charges to be approximately $4 million, of which approximately 65% is non-cash. At this point due to overall market uncertainties, the company cannot provide accurate guidance for the remainder of the year or 2002.
“All of us at ResortQuest mourn the tragic loss of life in New York, Washington and Pennsylvania last week. The effect of these national tragedies on the leisure and vacation industry has been very severe. While we are uniquely positioned to lead and attract new customers to our premium properties across the country, the next two quarters will be very challenging for the company. Traditionally, nearly 70% of our revenues in the fourth and first quarters are derived from customers who fly to ResortQuest destinations. The immediate and rapid decline in air travel and advance airline bookings will impact our occupancy, RevPAU, and revenues in the upcoming quarters. Listings in our real estate business continue to grow, but we have seen the public defer any purchases in the near term due to the overall soft market. As a result we are lowering guidance for the remainder of this year and expect a difficult first quarter of 2002”, stated David Levine, chairman, president and chief executive officer of ResortQuest International.
Mr. Levine continued, “At the same time, we believe that we are well prepared to sustain and increase our leadership position in the industry, with the strongest offering of products, the ability to market to a wide number of customers and the largest collection of properties in key destination locations across the country. ResortQuest has dedicated significant resources to its brand-building efforts, internal growth at existing companies and expansion into new and complementary areas, along with its investment in industry-leading technology and software programs. We feel these unique attributes will serve the company well when the overall economy and the vacation and leisure industry rebounds. We believe the American people will follow President Bush`s directive to help overcome this tragedy, and attempt to resume their everyday business and leisure habits in the coming months. We are especially optimistic about our summer market and feel that ResortQuest will be well positioned due to the fact that 70% of our second and third quarter revenues are primarily derived from our drive-to destinations.
“These cost-cutting initiatives will in no way affect the unique features and service that ResortQuest homeowners have come to expect, and are commensurate with the expected level of travel and business due to this tragedy. Our rental program is still the strongest in the industry and we are well positioned to weather the current economic conditions”, continued Levine.
Levine said the job reductions announced today are the first phase in the company`s program of expense rationalization and expense savings, with additional initiatives to be executed in the near future. The company was also forced to delay the debut of its new First Resort Software product due to this week`s cancellation of its Annual User Forum in Aspen, and is now scheduled to unveil the new product in conjunction with the Atlanta Vacation Rental Manager`s Association meeting in late October.
About ResortQuest International
ResortQuest International, the first brand name and “real-time” online booking service (www.resortquest.com / AOL Keyword: ResortQuest) in vacation condominium and home rentals and sales, provides a one-stop resource in 50 premier resort destinations in the U.S. and Canada. ResortQuest is the world`s largest vacation rental property management company, based on a portfolio of over 20,000 vacation rental properties with a combined real estate value estimated in excess of $7.0 billion.