Prime Hospitality Corp. (NYSE: PDQ), a leading hotel owner, operator and franchisor, reported its results for the fourth quarter and year ended December 31, 2002.
Prime reported a net loss before asset transactions for the fourth quarter of $2.9 million, or $.06 per share, compared to income of $0.8 million, or $.02 per share, for the fourth quarter of 2001.
“Our results were affected by the continued weakness in business travel,” said A.F. Petrocelli, Chairman and CEO of Prime. “Despite the difficult operating environment, we had several positive accomplishments in the quarter. We opened our new proprietary reservation center in New Jersey, purchased interests in two full-service hotels and started a new full-service brand, Prime Hotels and Resorts, with the conversion of our hotel in Saratoga Springs, NY.”
For the year ended December 31, 2002, net income before asset transactions and other charges was $5.8 million, or $.13 per share, compared to $26.6 million, or $.58 per share, for 2001. Income before extraordinary items was $7.9 million, or $.17 per share, for 2002. For 2002, the Company also recorded an extraordinary loss of $.25 per share related to the retirement of debt.
Operating Results: For the quarter, total revenues decreased by $11.8 million to $89.8 million due to lower revenues at comparable hotels and the impact of asset divestitures. Revenue per available room (“REVPAR”) at Prime`s comparable owned and leased hotels decreased by 5.0% as compared to the fourth quarter of 2001. The decrease was driven primarily by lower occupancies. For the quarter, occupancy decreased by 3.0 percentage points to 55.2% and average daily rate (“ADR”) was stable at $69.64.
Earnings before interest, taxes, depreciation and amortization (“EBITDA”) decreased by $8.7 million to $9.9 million in the fourth quarter of 2002.
Interest expense declined by 31.4%, or $2.5 million, to $5.5 million for the quarter ended December 31, 2002 primarily due to debt reductions, the refinancing of the Senior Subordinated Notes in April 2002 and the retirement of the First Mortgage Notes in August 2002 primarily with borrowings under the Company`s new revolving credit facility.
System-Wide Performance: For the quarter, Prime reported a 4.3% REVPAR decrease at its comparable AmeriSuites hotels, as occupancy decreased by 2.3 percentage points to 56.7% and ADR decreased by 0.4% to $71.52. The major markets affected were Atlanta, Chicago, Dallas and the Northeast.
For the quarter, Prime reported a 5.3% REVPAR decrease at its comparable Wellesley Inns & Suites hotels, as occupancy decreased by 4.4 percentage points to 51.9% and ADR increased by 2.7% to $56.23. The decrease was principally attributable to weakness in demand in the Austin, Dallas, Phoenix and South Florida markets.
Prime`s comparable non-proprietary brand hotels, which consist primarily of upscale full-service hotels in the Northeast, reported a 3.2% REVPAR decrease for the quarter as ADR decreased by 3.6% to $101.85 offset by an occupancy increase of 0.3 percentage points to 64.1%. The non-proprietary brands were impacted by the softness in the greater New York City market.
Brand Development: Prime currently has 149 AmeriSuites and 73 Wellesley Inns & Suites hotels in operation. Prime intends to expand its brands primarily through franchising. In the fourth quarter, two franchised AmeriSuites and one owned AmeriSuites opened. The hotels are located in Lithonia, GA, Grand Rapids, MI and Fremont, CA. There are also currently two AmeriSuites hotels under construction. In addition, Prime has a pipeline of another 20 executed franchise agreements for new AmeriSuites to be built. Prime intends to grow its Wellesley Inns & Suites brand primarily through conversions from other brands. During the quarter, Prime converted a hotel in Orlando, FL to its Wellesley brand and currently has four additional hotels under conversion.
In September 2001, Prime implemented a new expanded rewards program offering both points toward a free hotel stay and airline miles. During the quarter, Prime added America West as an airline partner joining Continental, American and Southwest. Prime has more than doubled its membership since the new program commenced and now has approximately 260,000 members. This has resulted in an increased revenue contribution from the rewards program with frequent guests accounting for approximately 15% of revenues at Prime`s brands in the fourth quarter of 2002, up from approximately 10% for the fourth quarter of 2001. During the quarter, Prime opened a new reservation system in New Jersey for its proprietary brands. Prime believes the new reservation system will provide it with improved service quality and response time, real time inventory synchronization between the reservation system and the hotels, and enhanced customer data. In January 2003, Prime announced the conversion of the former Saratoga Springs Sheraton Hotel to a new brand formed by the Company, Prime Hotels and Resorts. The conversion will enable Prime to reduce its franchise costs and to add a high quality hotel to its Prime Rewards program. Prime will seek to convert other full-service hotels to its brand where appropriate.
Acquisitions: In December 2002, Prime announced the acquisition of a 50% interest in the Sheraton Meadowlands Hotel and Conference Center in East Rutherford, NJ. The hotel, located adjacent to the Meadowlands Sports Complex and five miles outside Manhattan, is managed by Prime and will continue to operate under the Sheraton brand name. In January 2003, Prime announced the acquisition of a 50% interest in the Quebec City Holiday Inn Select. Located in the Lower Town district of Quebec City, the hotel is managed by Prime and will continue to operate under the Holiday Inn brand name.
Prime`s partner in both acquisitions is United Capital Corp., an entity in which A.F. Petrocelli is chairman and chief executive officer and has a controlling ownership interest.
Financial Condition/Asset Sales: During the quarter, Prime sold one land parcel for $1.3 million bringing gross proceeds from asset sales to approximately $63 million in 2002. As of December 31, 2002, Prime had $285.1 million in debt and $24.5 million in cash and cash equivalents. Prime`s ratio of debt to the prior twelve months EBITDA is 3.8 times, and its debt to book capitalization percentage is 28.7%. Prime Hospitality Corp., one of the nation`s premiere lodging companies, currently owns, manages and franchises 247 hotels throughout the United States. The Company owns and operates three proprietary brands that compete in different segments: AmeriSuites(R) (all-suites), and Wellesley Inns & Suites(R) (limited-service) and Prime Hotels & Resorts (full-service). Also within its portfolio are owned and/or managed hotels operated under franchise agreements with national hotel chains including Hilton, Radisson, Sheraton, Holiday Inn and Ramada. Prime can be accessed over the internet at www.primehospitality.com.
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