MeriStar Hospitality Corporation (NYSE: MHX), the nation`s third largest hotel real estate investment trust (REIT), today announced results for the first quarter ended March 31, 2001. On January 1, 2001, the company converted its 106 leases with MeriStar Hotels & Resorts (NYSE: MMH) to management contracts, and the company`s results now include the operations of these hotels rather than lease income.
For comparative purposes, the results for the first quarter ended March 31, 2000 are presented on a pro forma basis assuming these leases were converted to management contracts on January 1, 2000.
Recurring funds from operations (Recurring FFO) for the 2001 first quarter were $56.6 million. Recurring FFO represents funds from operations, as defined by the National Association of Real Estate Investment Trusts, adjusted for significant non-recurring items. Recurring FFO per diluted share increased 2.9 percent to $1.06. Recurring FFO results were in line with consensus analysts` expectations. Revenues increased 0.6 percent to $302.7 million. Recurring earnings before before interest expense, income taxes, depreciation and amortization (EBITDA) rose 0.3 percent to $87.0 million.
During the first quarter, the company recorded the following non-recurring charges:
* $9.3 million payment to terminate $300 million of interest rate swaps in conjunction with the sale of $500 million of senior unsecured notes and related repayment of term loans.
* $2.1 million charge to write off its investment in STS HotelNet.
Revenue per available room (RevPAR) for all hotels owned for the 2001 first quarter advanced 2.5 percent to $80.36. Average daily rate (ADR) increased 3.6 percent to $115.42 while occupancy declined 1.0 percent to 69.6 percent.
``We experienced mixed results during the period as consumer confidence continued to slide and travel demand weakened,`` said Paul Whetsell, chairman and chief executive officer. ``Following a strong January, operating results at our 113 hotels moderated in February and March as a softening economy began to impact occupancies and rate increases. We also experienced some margin pressure in the first quarter, particularly from rising energy costs.
``The conversion of leases to management contracts in January gives us greater control of our properties,`` Whetsell continued. ``We are actively asset managing our hotels, working closely with the operator to respond quickly to changing conditions on a market-by-market basis. We are confident in MeriStar Hotels & Resorts` management abilities in this phase of the economic cycle and believe we are well positioned to benefit from any upturn in the second half of the year.
``On the cost side, we remain focused on maintaining our operating margins and continue to look for ways to control costs. For example, in California where energy costs have risen sharply, we are passing on some of those added expenses in the form of an energy surcharge. We also have undertaken capital and operating programs to reduce energy consumption at all of our hotels.``