Hilton Reports Fourth Quarter, Fiscal 2001 Results

Hilton Hotels Corporation (NYSE:HLT) today reported financial results for the fourth quarter and fiscal year ended December 31, 2001.
Occupancy and average daily rate (ADR) declines and group cancellations brought about by a severe slowdown in travel following the September 11 terrorist attacks resulted in significantly decreased net income; earnings before interest, taxes, depreciation, amortization and non-cash items (EBITDA), and EBITDA margins. Positive factors in the quarter were cross-selling revenue that contributed to increases in market share for all of Hilton`s brands, the continued strong performance of the Hilton Grand Vacations timeshare business and a decline in debt levels and interest rates.


The company reported fourth quarter net income of $4 million, versus $64 million in the comparable 2000 period. Diluted net income per share was $.01, compared with $.17 in fourth quarter 2000. For the full year, Hilton reported net income of $166 million, versus $272 million in 2000. Diluted net income per share was $.45 for the year compared to $.73 in 2000. The full year 2000 results included $.06 per share from gains on asset sales and from the termination of certain post-retirement benefit plans.


Comparable revenue per available room (RevPAR) at the company`s U.S. owned-or-operated hotels decreased 22.8 percent in the quarter on an occupancy decline of 8.7 points to 59.7 percent and an 11.5 percent decrease in ADR to $124.64. Within the Hilton full-service brand, comparable owned-or-operated RevPAR declined 27.2 percent; occupancy was down 11.3 points to 60.1 percent, and ADR decreased 13.5 percent to $150.20.


For the full year, comparable RevPAR for U.S. owned-or-operated hotels declined 10.5 percent, with occupancy down 5.4 points to 68.0 percent and ADR declining 3.5 percent to $131.98. Within the Hilton full-service brand, comparable owned-or-operated RevPAR for the full year declined 13.1 percent; occupancy was off 6.3 points to 69.6 percent and ADR decreased 5.2 percent to $156.56.


The company reported fourth quarter revenue of $662 million, down 24 percent from the corresponding 2000 period. Full year revenue declined 12 percent to $3.050 billion. Total company EBITDA was $194 million in the fourth quarter, a 38 percent decline from the 2000 period. EBITDA for the full year declined 16 percent to $1.072 billion. Along with the September 11 attacks, the impact of 2000 and 2001 property sales (primarily the sale of leases back to RFS Hotel Investors, the CNL transaction and the sale of several Homewood Suites by Hilton properties) contributed to the full year decline in revenue and EBITDA. Excluding the impact of asset sales and the recognition of previously deferred timeshare sales in Hawaii, revenue and EBITDA for the full year declined 5 percent and 14 percent, respectively. Total company EBITDA margin for the quarter was 29.3 percent, and for the full year, 35.1 percent.

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Across all brands, EBITDA from the company`s owned hotels totaled $122 million in the fourth quarter, with comparable EBITDA down 43 percent from the same period a year ago. RevPAR from comparable owned properties declined 27.4 percent for the quarter, with EBITDA margins at these hotels dropping 8.9 points to 25.6 percent. While the business interruptions caused by September 11 adversely affected virtually all of the company`s owned hotels, Hilton properties in several markets—including New York, Chicago, New Orleans and Boston—were able to report relatively solid occupancy levels of 65 percent or higher. The Washington, D.C., Honolulu and San Francisco markets showed especially prevalent business declines during the quarter. The margin decline was due to the aftermath of the September 11 attacks, resulting in an immediate and unforeseen decline in travel generally, and a significant decrease in high-margin food and beverage business due to group and convention cancellations.


For the full year, EBITDA from the company`s owned hotels (across all brands) totaled $654 million, with comparable EBITDA down 24.0 percent. RevPAR from comparable owned properties declined 13.6 percent for the year. Owned property EBITDA margins were 30.4 percent for the full year, a decline of 4.8 points.


The largest quarterly declines were in markets dependent on air travel. “Drive-to” markets—where the company`s Hampton Inn, Hilton Garden Inn and Homewood Suites by Hilton hotels are primarily located—were impacted to a significantly lesser degree. However, throughout the entire Hilton hotel system—including owned, managed and franchised properties—occupancy levels and ADR improved generally from the first few weeks following the attacks.


System-wide RevPAR in the fourth quarter declined at each of the Hilton brands (including franchised properties) by the following percentages: Hampton Inn, 4.2 percent; Homewood Suites by Hilton, 11.3 percent; Hilton Garden Inn, 12.0 percent; Embassy Suites, 16.3 percent; Doubletree, 18.0 percent; Hilton, 22.9 percent.


For the full year, Hampton Inn showed a system-wide RevPAR gain of 1.3 percent. Full year system-wide RevPAR declines were reported at the other brands as follows: Hilton Garden Inn, 2.5 percent; Homewood Suites by Hilton, 3.0 percent; Doubletree, 7.3 percent; Embassy Suites, 7.7 percent; Hilton, 10.3 percent.


Management and franchise fees for the quarter totaled $72 million, a 16 percent decline. For the full year, fees declined 2 percent to $342 million.


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