PRNewswire-FirstCall TORONTO Oct. 21 :
Fairmont Hotels & Resorts Inc. (“FHR” or the “Company”) (TSX/NYSE: FHR)
today announced its unaudited financial results for the third quarter
ended September 30, 2003. All amounts are expressed in U.S. dollars.
“While demand continues to improve as a result of improving U.S. and
global economies, a challenging operating environment persisted throughout
the third quarter. As anticipated, the lingering impact of severe acute
respiratory syndrome (“SARS”) had a significant effect on our Canadian
business,” said William R. Fatt, Chief Executive Officer of FHR. “Our
Canadian properties continued to suffer from the considerable decline in
international travelers during what is traditionally the strongest quarter
for these hotels.”
As previously announced, FHR`s two owned properties in Bermuda suffered
extensive damage from Hurricane Fabian in early September. The Fairmont
Southampton was more seriously affected and will be closed for repairs
until spring 2004. The Fairmont Hamilton Princess will operate at reduced
capacity for the balance of the year. FHR has extensive insurance coverage
for both property damage and business interruption. This insurance is
subject to deductible amounts and uninsured items estimated at $10 - $12
million. Of this amount, the Company recorded a $7.4 million provision in
the third quarter and the balance will be recorded by year-end.
On a comparable basis, revenue per available room (“RevPAR”) for
Fairmont`s managed hotels was flat and RevPAR at FHR`s owned portfolio
increased 2.9%. Both the owned and managed portfolios have experienced a
trend of improving monthly RevPAR for the past few months. The Fairmont
Southampton has been removed from the comparable portfolios as it has been
closed for extensive repairs since early September. Favorable foreign
exchange movements contributed to an improvement in overall operating
Operating revenues(1) increased 4.1% to $179.4 million in 2003. This
improvement relates primarily to increased revenues from the recent
acquisitions of The Fairmont Copley Plaza Boston and The Fairmont Orchid,
Hawaii. The appreciation in the Canadian dollar offset the decline in
Canadian operating revenues in the quarter. EBITDA(2) was down $27.3
million or 36.8% to $46.9 million in the third quarter. This decline was
driven by weaker results at our Canadian hotels as a result of SARS and a
$7.4 million provision relating to hurricane repairs.
Third Quarter Ownership Operations
Revenues from hotel ownership improved 12.2% to $168.6 million compared to
$150.3 million in 2002. This increase relates primarily to the
acquisitions of The Fairmont Orchid, Hawaii and the remaining 50% interest
in The Fairmont Copley Plaza Boston, which was previously accounted for
using the equity method. The Fairmont Kea Lani Maui continued to produce
strong operating results, while the Canadian resorts continue to be
negatively affected by SARS.
RevPAR of $132.68 was up 2.9% in the third quarter of 2003, driven by a
7.8% improvement in average daily rate (“ADR”) that offset a 3.1 point
drop in occupancy. The Canadian owned hotels had RevPAR growth of 4.0%,
driven by the appreciation in the Canadian dollar but offset by a
considerable decline in occupancy, most notably from the international
tour segment. Both The Fairmont Kea Lani Maui and The Fairmont Scottsdale
Princess posted strong rate growth in the quarter contributing to a 1.4%
RevPAR improvement at the U.S. and International comparable portfolio.
Equity income generated from FHR`s investment in Legacy Hotels Real Estate
Investment Trust (“Legacy”) was $2.6 million compared to income of $7.2
million in 2002. The impact of SARS on Legacy`s portfolio during its
historically strongest quarter was considerable given its significant
exposure to Toronto and other major Canadian cities.
FHR did not dispose of any real estate during the third quarter. EBITDA
generated by real estate operations was down $3.1 million from the $2.1
million earned in 2002, when the Company sold a portion of its Toronto
lands. FHR does not expect any further significant disposals in 2003.
Revenues under management of $394 million increased 9.0% over 2002, mainly
from the addition of five new management contracts since the summer of
2002. Management fee revenues increased to $12.5 million from $11.3
million in 2002, with base fees increasing proportionately with revenues
under management and minimal incentive fees. Due to the impact of SARS on
the operations of the Canadian Fairmont hotels, targets that are typically
achieved during the third quarter were not reached. Management expects
that incentive fees earned in the fourth quarter will be significantly
lower than last year.
For the Fairmont portfolio, RevPAR was virtually unchanged at $119.27. The
Canadian comparable portfolio reported a 1.5% decrease in RevPAR resulting
from the significant effects of SARS, which were offset by the
considerable appreciation in the Canadian dollar. Improving results at the
U.S. city center properties resulted in a 2.2% RevPAR increase at the U.S.
and International properties.
In the third quarter, revenues under management of $91 million were
relatively unchanged from $90 million in 2002. This exclusively Canadian
hotel portfolio continued to be impacted by the lingering effects of SARS.
Delta earned management fee revenues of $3.0 million down from $3.6
million in 2002. In 2002, Delta received a one-time payout from a managed
property, which accounts for the higher fee income in the prior period. On
July 1, 2003, Delta entered the Quebec City market with the addition of a
franchise agreement at the Delta Quebec (formerly the Radisson). Also in
July, Delta announced the addition of another new franchise in
Fredericton, New Brunswick. The hotel will be re-flagged the Delta
Fredericton upon commencement of the franchise agreement in December 2003.
For the nine months ended September 30, 2003, operating revenues increased
12.2% to $521.7 million from $465.0 million. Recent acquisition activity
and foreign currency fluctuations generated the majority of this increase.
EBITDA of $132.5 million was down 19.9% from last year and included $14.9
million from real estate activities in 2003 versus $5.7 million in the
nine months ended September 30, 2002. EBITDA also included a $7.4 million
provision related to the hurricane damage in Bermuda.
Equity losses generated from FHR`s investment in Legacy were $4.2 million
compared to equity income of $6.9 million in 2002. The impact of SARS on
Legacy`s portfolio in the second and third quarters was considerable given
its significant exposure to Toronto and other major Canadian cities.
Net income of $64.2 million was down 21.2% compared to the prior year
while basic EPS was $0.81 in 2003 compared to $1.04 in 2002. Net income
included a one-time $24.4 million income tax recovery from a favorable tax
reassessment recorded in June 2003 and the $7.4 million provision related
to the hurricane damage.
To date in 2003, FHR has disposed of two blocks of the Coal Harbour lands
in Vancouver and one block of the Southtown lands in Toronto. These sales
generated cash proceeds of $30.8 million and resulted in EBITDA from real
estate activities totaling $14.9 million. FHR does not expect any further
significant disposals in 2003.
Full details at http://www.fairmont.com