Wyndham International, Inc. (NYSE:WYN) today reported strong results for the first quarter ended March 31, 2000, reflecting its focus on becoming a branded hotel operating company.
Wyndham reported that earnings before interest, taxes, depreciation and amortization (EBITDA), as adjusted, increased 7.7% to $191.4 million from $177.8 million on a pro forma basis for first quarter of 1999. Revenue in the first quarter increased 5.9% to $653.6 million, from $617.0 million on a pro forma basis in 1999. The pro forma results reflect the spin-off of Interstate Hotels and other completed asset dispositions.
Wyndham reported that net income in the first quarter increased to $11.6 million, from $6.2 million on a pro forma basis a year ago. On a fully diluted per share basis, the company narrowed its loss to $0.08 for the first quarter, from a loss of $0.11 on a pro forma basis a year ago.
“These results demonstrate the power of the platform we`re creating as we integrate our operations, systems and support into a single operating company,” Fred J. Kleisner, president and chief executive officer, said. “We`ve improved our cost structure and increased revenues in our core branded owned and leased portfolio. As a result, we continue to achieve EBITDA growth well ahead of our revenue growth pace.”
Solid Operating Performance: On a brand basis, the company said its first quarter was paced by the solid performance of its core Wyndham Hotels & Resorts brand despite slow travel demand during the first two weeks of January due to Y2K-related travel fears. Excluding the two-week period, the portfolio posted a 3.1% RevPAR increase. On the same basis, Wyndham Luxury Resorts and Summerfield Suites by Wyndham posted RevPAR gains of 1.5% and 3.9%, respectively.
“The plan we implemented last year to improve revenue and margins, reduce corporate overhead, and simplify our business focus helped drive EBITDA and revenue growth in the quarter. These efforts will contribute to stronger sequential RevPAR gains in future quarters,” Kleisner said.
Among comparable owned and leased hotels, EBITDA for the total portfolio increased 2.3% and actual RevPAR grew 1.4% to $87.52. Core proprietary branded hotels registered a 4.5% EBITDA gain on a 0.8% RevPAR increase, reflecting a gross operating profit margin improvement of 60 basis points to 43.1%. Non-proprietary branded hotels posted a 2.4% RevPAR gain, but EBITDA remained flat. Within this portfolio, properties managed by Wyndham registered a 15.8% EBITDA gain on a 3.1% RevPAR increase, while properties managed by third parties had a 6.6% EBITDA decline on a 2.3% RevPAR increase.
During the first quarter, Wyndham reduced its ongoing corporate expenses to $19.0 million compared with $27.1 million on a pro forma basis in the first quarter 1999.
Asset Sales: In the first quarter, Wyndham completed the sale of its mid-priced Sierra Suites hotel brand and other non-core assets totaling approximately $100 million in asset sales. The company said it was on track to exceed $300 million in asset sales this year. Proceeds will be used primarily to reduce debt and enhance the core proprietary branded products.
Interest Rate Management: In March 2000, the company completed its hedging strategy in order to protect against the current trend of rising interest rates. The company hedged a total notional amount of $1.5 billion. Wyndham`s debt is now approximately 77% effectively fixed, with the hedging instruments having a weighted average rate of 5.7% compared to one-month LIBOR, which is currently 6.46%.