CapStar Hotel Company (NYSE: CHO), a leading hotel investment and management corporation, today announced record results for the first quarter ended March 31, 1998.
Net income for the quarter rose to $4.5 million, or 18 cents per share on a diluted basis compared to $1.9 million, or 14 cents per share in the first quarter of 1997. Per share results were 6 percent higher than the consensus earnings estimate for the quarter. Earnings before interest, income taxes, depreciation and amortization (EBITDA) increased significantly to $27.3 million, compared to $11.0 million in the first quarter of last year. Revenue for the first quarter reached $144 million, a 200 percent increase over $48 million last year.
“The most notable event of the quarter was our announced agreement with American General Hospitality Corporation to merge as equals, which is proceeding on schedule and is expected to close in June, subject to customary conditions, regulatory approvals and approval of the merger by shareholders of both companies. Otherwise, our positive results were impacted by excellent hotel operations and significant acquisition activity.
“During the first quarter, we closed or put under contract nine hotels, including the six-hotel Medallion portfolio and the Sheraton Fisherman`s Wharf in San Francisco, for a total investment of $268 million so far in 1998,” Whetsell added. “In addition, we completed approximately $22 million of capital improvements during the quarter to reposition our hotels to realize their full operating potential. We expect to complete another $44 million in renovations in the second quarter. This timing allows our properties to take advantage of these capital improvements during the third quarter, traditionally a very strong operating period. In addition, we added 18 new management contracts during the quarter, 13 through the acquisition of Metro Hotels and four through our strategic alliance with Winston Hotels.”
Operating results for the first quarter were up substantially on a same-store basis. On a pro forma basis for the 47 hotels CapStar owned as of December 31, 1997, revenue per available room (RevPAR) increased 9.1 percent to $63.53, compared to $58.22 for the same period last year. Same-store average daily rate (ADR) rose 7.5 percent from $86.56 to $93.06, and occupancy increased to 68.3 percent, compared to 67.3 percent in the same period of 1997.
“Operationally, we remained focused and realized strong ADR and RevPAR gains, while at the same time renovating a substantial number of hotels,” Whetsell noted. “We are particularly pleased with the significant improvement in same-store RevPAR at the 47 hotels we owned as of December 31, 1997. This RevPAR increase reflects solid gains throughout our portfolio, from our original 12 hotels from the time of our IPO through our most recent acquisitions. As a premier operator of upscale, full-service hotels, we have consistently exceeded the industry average for RevPAR improvements.”
Whetsell concluded, “Our acquisition pipeline remains full with the same kind of deals we have been executing over the past year. Our core hotels continue to achieve excellent results, and our operations team is successfully integrating our new properties into the CapStar system. In short, we plan to continue buying attractively priced hotels, individual properties and portfolios, in growth markets with high barriers to entry. We will remain focused on enhancing profitability through our proven management and marketing programs.”
Washington, D.C.-based CapStar Hotel Company owns and manages upscale, full-service hotels and resorts throughout the U.S. and Canada under such internationally known brands as Hilton, Sheraton, Marriott, Embassy Suites, Westin and Doubletree. CapStar`s hotel portfolio, including eight properties under contract, comprises 64 owned hotels with 16,673 rooms and 87 leased or managed hotels with 13,705 rooms for a total of 151 properties with 30,378 rooms. The company continues to actively seek acquisitions and management contracts in major markets and resort locations throughout North America. CapStar has announced an agreement to merge with American General Hospitality Corporation and spin off its hotel management operations, creating two new companies—MeriStar Hotel and Resorts, Inc. and MeriStar Hospitality Corporation.