MeriStar Hotels & Resorts (NYSE: MMH), the nation`s largest independent hotel management company, today announced results for the third quarter ended September 30, 2001.
For comparative purposes, the results for the three and nine months ended September 30, 2000 are presented on a pro forma basis as if the company`s 106 leases with MeriStar Hospitality Corporation (NYSE: MHX) that were converted to management contracts on January 1, 2001 had been converted on January 1, 2000.
Third-quarter revenues for 2001 decreased 9.2 percent to $77.6 million. Excluding non-recurring items, net loss for the quarter was $(1.6) million, or $(0.04) per share on a diluted basis, compared to net income of $2.8 million or $0.08 per share in the 2000 third quarter. Recurring earnings before interest, taxes, depreciation and amortization (EBITDA) were $3.0 million, compared to $9.7 million in the 2000 third quarter.
During the third quarter, the company recorded the following non-recurring charges:
* $0.8 million of costs related to the write-down of certain accounts receivable.
* $0.9 million of costs related to restructuring within the BridgeStreet Corporate Housing Worldwide subsidiary and the closing of operations in four secondary corporate housing markets.
* Same-store revenue per available room (RevPAR) for all full-service managed hotels in the 2001 third quarter declined 15.5 percent to $66.29. Occupancy declined 11.2 percent to 65.9 percent and average daily rate (ADR) fell 4.9 percent to $100.54. Same-store RevPAR for all limited-service, leased hotels in the 2001 third quarter declined 9.2 percent to $50.95. ADR rose 1.0 percent to $79.64, and occupancy decreased 10.1 percent to 64.0 percent.
``The terrible and unprecedented events of September 11 have had an immediate and far-reaching impact on the hospitality industry,`` said Paul W. Whetsell, chairman and chief executive officer of MeriStar. ``We were already in a difficult operating environment with the economy weakening steadily since the first quarter. We have been working closely with our owners to optimize revenues and profitability and protect margins while continuing to provide superior guest service.``
MeriStar`s BridgeStreet corporate housing operations accounted for approximately half of the earnings decline as the slowing U.S. economy and the terrorist attacks combined to sharply curtail corporate travel. ``The nature of the corporate housing business allows us to expand and contract our inventory as conditions warrant. We ceased operations in four smaller secondary markets in the third quarter and have reduced inventory in other U.S. markets,`` he said. ``On a positive note, we continue to see growth opportunities in Europe and opened our first office in Paris during the third quarter.``
The sluggish economy prior to and after the September 11 events also had a negative impact on earnings at managed hotels. MeriStar`s managed hotels` results were most negatively influenced by a sharp reduction in business travel, especially meetings and convention business.
``RevPAR declined dramatically immediately after the attacks as all travel came to a near halt,`` he said. ``Occupancy has improved from 47 percent at our full-service hotels the week after the terrorist attacks to 67 percent in the last week of October, but a return to more normal conditions continues to be hampered by fears of additional attacks and the condition of the economy.``
The rapid decline in demand in September impacted certain of the company`s technical debt covenants. The company has obtained a waiver of these covenants through February 2002. ``We are in the process of amending our debt facility through February 2003 to provide the flexibility to achieve maximum operating results,`` said John Emery, president and chief operating officer. ``Even under current conditions, we are generating cash flow substantially in excess of debt service, and as the recovery continues we anticipate a return to historical financial covenant ratios.``