TORONTO, Oct 21, 2002 (Canada NewsWire via COMTEX)—Fairmont Hotels & Resorts Inc. (“FHR” or the “Corporation”) (TSX/NYSE: FHR) today announced financial results for the third quarter ended September 30, 2002. All amounts are expressed in U.S. dollars.
FHR`s financial results for the three and nine months ended September 30, 2001 contain substantial non-recurring items related to the reorganization of Canadian Pacific Limited (“CPL”), including the operating results of CPL`s four discontinued businesses, reorganization expenses and CPL corporate expenses. CPL`s reorganization became effective October 1, 2001. Given the inclusion of these non-recurring charges, management does not consider prior period net income and earnings per share (“EPS”) to be comparable with the current period. Management has prepared a proforma 2001 quarterly EPS statement, which is available on FHR`s investor website, www.fairmont.com.
Revenues increased to $171.4 million, up 10.7% from revenues of $154.8 million in 2001. Third quarter EBITDA(1) improved 36.4% to $74.2 million, meeting management`s guidance of $70-$75 million. EBITDA benefited from a $2.1 million gain on the sale of land in downtown Toronto. Net cash proceeds from this disposal were $8.5 million. No gains on land sales were realized in the same period last year.
Income from continuing operations increased to $39.0 million compared to a loss from continuing operations of $99.4 million in 2001. For the quarter, EPS from continuing operations was $0.50, which met management`s guidance of $0.45 - $0.50. EPS for the quarter benefited from a $0.03 per share gain on the sale of land. In the same period of 2001, the Corporation incurred a loss from continuing operations of $1.27 per share. These year-over-year improvements in operating results are primarily attributable to non-recurring items related to the CPL reorganization in 2001.
“The third quarter is traditionally our strongest quarter and therefore an important indicator of the year`s results. We are pleased with our performance during the quarter which met our expectations,” said William R. Fatt, chief executive officer of FHR. “Revenue per available room, or RevPAR, at our owned properties increased 2.9%, while RevPAR at the Fairmont managed hotels was up 2.6%. Both increases were driven by improved occupancy levels and were ahead of published industry reports.”
“FHR`s hotel portfolio continues to benefit from its geographical diversity and balanced customer mix. Our third quarter results for the Canadian and international operations continued to reflect better trends than the U.S., specifically the U.S. city center segment where the Corporation currently generates about 5% of its EBITDA,” Mr. Fatt added.
FHR`s Canadian properties account for approximately half of the Corporation`s annual EBITDA. This contribution is even greater during the third quarter, when leisure travel is most prevalent in Canada. FHR`s strength in the leisure segment, which represents about half of its overall business, has helped mitigate the effect of prolonged weakness in corporate demand. In addition, extensive renovation investments made over the past few years are beginning to generate returns, notably at the two Bermuda properties. In the third quarter, RevPAR at The Fairmont Southampton Princess and The Fairmont Hamilton Princess increased 14.0% and 37.5%, respectively.
Added Mr. Fatt, “In recent weeks, FHR also delivered on its strategic growth initiative in the United States through the additions of management contracts at The Fairmont Sonoma Mission Inn & Spa and the Monarch Hotel in Washington, D.C. These unique properties reflect the luxury qualities that are inherent in any Fairmont asset. Washington, D.C. has been a top priority for expanding the brand. The Monarch Hotel will be an excellent compliment to Fairmont`s collection of properties. We look forward to strengthening their positions and overall performance within their respective markets.”
Revenues from hotel ownership improved 8.9% to $154.0 million compared to the third quarter of 2001. Despite a sluggish global economy, FHR`s significant exposure to the leisure segment, particularly at its owned hotels, has helped mitigate the effect of prolonged weakness in corporate travel.
RevPAR increased 2.9% compared to this quarter last year, resulting from a 2.3 point increase in occupancy offset by a slight drop in average daily rate (“ADR”) of 0.6%. The U.S. and International comparable statistics showed the greatest RevPAR increase at 5.0%, driven primarily by a 2.6 point improvement in occupancy. RevPAR increased 1.9% at FHR`s Canadian comparable portfolio, resulting from a 2.2 point improvement in occupancy and a 1.0% drop in ADR.
Revenues under management in the third quarter increased 9.4% to $360 million from $329 million in 2001. RevPAR improvement throughout the portfolio accounted for the increase over the prior period. Management fee revenues increased to $11.3 million from $10.2 million in 2001. Base management fees have improved consistently with the increase in revenues under management as well as the addition of the long-term management contract for the Sheraton Suites Calgary Eau Claire located in Calgary, Alberta. Incentive fee revenues were relatively unchanged from 2001, as incentive fee thresholds at many of our hotels have not yet been reached. FHR expects that incentive fee revenues will be higher in the fourth quarter as these thresholds are passed.
RevPAR improved 2.6% during the third quarter, driven by an increase in occupancy of 2.7 points despite a slight decline in ADR of 1.3%.
In the third quarter, eleven Fairmont and Delta labor contracts were successfully negotiated and since the end of the quarter, one more Delta hotel has settled a new labor contract, all without disruption. Labor negotiations are currently in progress at two Fairmont properties and one Delta hotel. In the fourth quarter, labor contracts at one Fairmont property and one Delta hotel expire. Although it is not possible to predict the outcome of labor negotiations, management is hopeful that reasonable settlements will be reached.
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