Arlington Announces Third Quarter

ARLINGTON HEIGHTS, Ill.—(BUSINESS WIRE)—Nov. 17, 2003—Arlington Hospitality, Inc. (Nasdaq:HOST), a hotel development and management company, today announced results for the third quarter and nine months ended September 30, 2003. Arlington is the nation`s largest owner and operator of AmeriHost Inn hotels, a mid-market, limited service hotel brand with 103 properties located in 22 states and Canada. Arlington Hospitality owns and operates 57 AmeriHost Inn hotels. Cendant Corporation (NYSE:CD) is the franchisor of the AmeriHost Inn brand.


Revenues increased 49.7 percent and 14.2 percent to $23.8 million and $57.4 million, respectively, during the three and nine months ended September 30, 2003, compared to $15.9 million and $50.3 million during the same periods a year earlier, due primarily to increases in hotel sales and commissions and incentive and royalty-sharing fees. Revenues from consolidated AmeriHost Inn hotels decreased during the three and nine months ended September 30, 2003, due primarily to the sale of hotels and a 1.5 percent and 1.2 percent decrease in same room revenue for these hotels for the three and nine months ended September 30, 2003, respectively.
Net income for the third quarter was $1.1 million, compared to net income of $746,000 during the third quarter of 2002. Net loss for the nine months ended September 30, 2003, was ($3.8) million, compared to net income of approximately $222,000 for the same period in 2002. These results include non-cash hotel impairment provisions in 2003 and discontinued operations related to non-AmeriHost Inn hotels, which have been recorded in connection with the company`s previously announced plan for hotel disposition and hotel development/repositioning.
Following the July 2003 announcement of a plan to dispose of 25 to 30 hotels over the next two years, the company recorded hotel impairment charges based on the difference between the carrying value of the hotels identified for sale and their anticipated net realizable values. Discontinued operations relates to the operations of the non-AmeriHost Inn hotels sold, or expected to be sold within the next 12 months, which have been reclassified from continuing operations and includes a non-cash impairment charge related to these hotels taken during the three and nine months ended September 30, 2003.
“The third quarter marks the beginning of a significant shift in the company`s strategy,” said Jerry Herman, president and chief executive officer. “We now are focusing our attention on both development, primarily through joint ventures, which we refer to as Operation Growth, and our hotel disposition plan, which we refer to as Operation Sell. The sale of 25 to 30 hotels will allow us to pay down more than 50 percent of our debt, increase our operating cash flow, accelerate the benefits of sales and royalty-sharing fees related to our agreements with Cendant and provide capital for future hotel development or other strategic alternatives.”
Herman noted that the company concurrently implemented a restructuring plan, reducing corporate and regional operations staff by approximately 20 percent, resulting in an expected annual savings of approximately $580,000. Some of these savings will be partially offset by the addition of key personnel, primarily in the development and finance areas.
In accordance with SFAS No. 144, “Accounting for Long-Lived Assets,” the company`s hotel assets earmarked for sale within the next 12 months have been classified as “held for sale” on the accompanying balance sheet as of September 30, 2003.
The operations of the non-AmeriHost Inn hotels that have been determined to be discontinued operations have been reclassified from the company`s continuing operations and presented as “discontinued operations” on the consolidated statements of operations. In addition, the “discontinued operations” include $517,000 of after tax, non-cash impairment charges related to these hotels recorded in the second quarter of 2003, plus $19,000, after tax, recorded in the third quarter of 2003. These hotels are considered to be “discontinued operations” since they have been sold, or are expected to be sold within the next 12 months, and the company will have no continuing involvement after their disposition.
Although certain AmeriHost Inn hotels have been classified as “held for sale” on the accompanying consolidated balance sheet, the operations of these hotels has not been treated as “discontinued operations” in the consolidated statement of operations due to the company`s long-term royalty-sharing agreement with Cendant for all AmeriHost Inn hotels, which provides for a revenue stream to the company after the properties are sold to a new or existing AmeriHost Inn franchisee.
Third quarter 2003 same-room revenue per available room (RevPAR) for the company`s AmeriHost Inn hotels was essentially flat at $37.91, compared to the 2002 third quarter, and compared to a 2.2 percent estimated increase in 2003 third quarter RevPAR for the midscale without food and beverage segment of the hotel industry, according to Smith Travel Research. Occupancy and average daily rate (ADR) at the company`s AmeriHost Inn hotels were unchanged at 64.3 percent and $58.91, respectively.
For the first nine months of 2003, same-room RevPAR for the company`s AmeriHost Inn hotels decreased 0.7 percent to $33.46, compared to the same period in 2002, and compared to a 0.5 percent estimated RevPAR decrease for the midscale without food and beverage segment of the hotel industry for the first nine months of 2003, according to Smith Travel Research. Occupancy at the company`s AmeriHost Inn hotels declined 0.3 percent to 58.3 percent, while ADR decreased 0.4 percent to $57.34.
On a trailing 12-month basis, RevPAR decreased 0.8 percent, based on a 0.5 percent decrease in occupancy and a 0.2 percent decrease in ADR, compared to an estimated 0.2 percent RevPAR increase for the midscale without food and beverage segment for the trailing 12 months, according to Smith Travel Research.
“Leisure travel held up well during the quarter but business travel continues to be sluggish,” Herman said. “We also were impacted in certain markets by the addition of new competitive hotels.”
During the quarter, Arlington launched a number of new national, regional and local sales and marketing initiatives. “We are placing particular emphasis on revenue management and achieving higher market penetration. We are implementing significant training programs at the property level and new technological/Internet initiatives, and we continue to add strength to our team. Last week, Bill Hobbs joined the company as our new vice president of sales and marketing and will be working closely with our operational and sales teams.”
Hobbs previously was director of marketing for AmericInns International and is the former director of national sales for Baymont Inns & Suites. “For the past dozen years, Bill has concentrated on the limited-service segment in secondary and tertiary markets. He knows our customer and the strengths of our locations. We are excited to have him on board and look forward to his adding value to our sales and marketing efforts,” Herman added.
“We have become much more aggressive in our marketing efforts and in taking command of our electronic distribution channels to better control our rooms inventory and pricing. We believe these programs will have a long-term positive impact on the company`s operations.”
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