Press Release: MeriStar Hospitality Corporation
August 9, 2001
WASHINGTON, DC -- MeriStar Hospitality Corporation (NYSE: MHX), the nation's third largest hotel real estate investment
trust (REIT), yesterday announced results for the second quarter ended June 30, 2001.
For comparative purposes, the results for the three months ended and six months ended June 30, 2000 are presented
on a pro forma basis as if the 106 leases with MeriStar Hotels & Resorts (NYSE: MMH) that were converted to
management contracts on January 1, 2001 had been converted on January 1, 2000.
Recurring funds from operations (Recurring FFO) for the 2001 second quarter were $60.8 million compared to $70.9
million for the 2000 second quarter. 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 decreased 11.6 percent to $1.14. Revenues declined 4.6 percent to $307.2 million. Recurring earnings before
interest expense, income taxes, depreciation and amortization (EBITDA) decreased 9.2 percent to $91.3 million.
Operating profit margins for the owned hotels declined to 37.3 percent from 38.9 percent in the 2000 second quarter.
During the second quarter, the company recorded the following non-recurring charges:
Revenue per available room (RevPAR) for all hotels owned for the full 2001 second quarter declined 6.0 percent
to $78.97. Average daily rate (ADR) decreased 0.1 percent to $109.30, while occupancy fell 5.9 percent to 72.3
percent.
``Softness in the economy negatively impacted demand at our hotels, as declines in both business and leisure travel
persisted in the second quarter,'' said Paul W. Whetsell, MeriStar chairman and chief executive officer. ``However,
our RevPAR index improved relative to our competitive set. Gains in our group business partially offset the weakness
in business travel, as our operators proactively shifted our sales and marketing focus to groups early in the cycle.
``Reduced business travel impacted occupancies and rates dramatically in the Northern California high-tech corridor,
where RevPAR fell 20 percent in the second quarter. Reduced leisure travel impacted occupancies primarily at our
Orlando properties, where RevPAR was down an average of 10 percent during the second quarter. Other markets affected
by the lackluster economy include Chicago and Dallas, where results were down 18 percent and 16 percent, respectively,
compared to the second quarter last year.''
Operating Performance in Significant Markets
RevPAR and EBITDA contributions in significant markets for the second quarter are as follows:
Three Months Ended June 30, 2001
EBITDA
RevPAR Contribution % of Total
Change in (000's) EBITDA
New Jersey -3.7% 12,113 12.9%
Mid-Atlantic -0.8% 10,456 11.1%
Southwest Florida 0.2% 8,054 8.6%
Northern California -19.6% 7,482 8.0%
Southern California -5.6% 6,266 6.7%
Tampa/Clearwater -4.0% 4,451 4.7%
Orlando -9.8% 4,081 4.4%
Chicago -17.9% 3,532 3.8%
Houston 2.4% 3,018 3.2%
Atlanta -4.2% 2,332 2.5%
Connecticut -4.9% 2,246 2.4%
Colorado -6.4% 1,900 2.0%
Dallas -15.9% 1,699 1.8%
Key Financial Information
Merger Update
Whetsell commented that the previously announced merger with FelCor is proceeding smoothly and that the companies
expect to close on schedule in late September.
Outlook
Whetsell noted that MeriStar's properties are in excellent physical condition and that the company is well positioned
to participate when business and leisure travel rebound. ``However, if the slowdown in business and leisure demand
continues as expected in the second half of 2001, we anticipate RevPAR declines to be in the 6 to 7 percent range
in the third quarter and 4 to 5 percent in the fourth quarter.''
Washington, D.C.-based MeriStar Hospitality Corporation owns 113 principally upscale, full-service hotels in major
markets and resort locations with 28,897 rooms in 27 states, the District of Columbia and Canada. The company owns
hotels under such internationally known brands as Hilton, Sheraton, Marriott, Westin, Radisson and Doubletree.
For more information about MeriStar Hospitality Corporation, visit the company's Web site: www.meristar.com.
This press release contains forward-looking statements about MeriStar Hospitality Corporation, including those
statements regarding future operating results and the timing and composition of revenues, among others. Except
for historical information, the matters discussed in this press release are forward-looking statements that are
subject to certain risks and uncertainties that could cause the actual results to differ materially, including
the following: the ability of the company to successfully implement its acquisition strategy and operating strategy;
risks associated with the company's merger with FelCor; the company's ability to manage rapid expansion; changes
in economic cycles; competition from other hospitality companies; and changes in the laws and government regulations
applicable to the company. For a more detailed description of some of those risks and uncertainties, please read
the sections titled ``Risk Factors'' and ``Special Note Regarding Forward-Looking Statements'' in the annual report
on Form 10-K of MeriStar Hospitality Corporation for the year ended December 31, 2000.
MeriStar Hospitality Corporation
Statements of Operations
(Unaudited, in thousands except per
share amounts and operating statistics)
Three Months Ended Six Months Ended
June 30, June 30,
2001 2000(1) 2001 2000(1)
Revenue
Hotel operations:
Rooms $ 202,380 $ 213,439 $ 402,760 $ 412,896
Food and
beverage 74,092 76,751 145,383 148,053
Other operating
departments 23,534 22,776 46,005 45,006
Participating lease
revenue 5,352 6,639 10,736 11,569
Office rental and
other revenue 1,809 2,418 4,967 5,473
Total revenue 307,167 322,023 609,851 622,997
Hotel operating
expenses
by department:
Rooms 46,565 48,185 92,287 93,460
Food and
beverage 52,486 54,023 103,890 105,575
Other operating
departments 12,046 12,817 23,616 25,124
Office rental, parking
and other operating
expenses 688 737 1,625 1,451
Undistributed
operating expenses:
Administrative
and general 43,138 45,322 88,055 89,951
Property operating
costs 42,278 41,128 84,977 80,810
Property taxes,
insurance and
other 18,654 19,199 37,041 39,235
Depreciation and
amortization 28,708 28,113 58,405 54,743
Interest expense,
net 30,032 29,657 60,261 58,417
Write down of
investment in
STS Hotel Net - - 2,112 -
Swap termination
costs - - 9,297 -
Felcor merger
costs 3,789 3,789
Costs to terminate
leases with Prime
Hospitality
Corporation 1,315 - 1,315 -
Total expenses 279,699 279,181 566,670 548,766
Income before minority
interests, income
taxes, (loss)/gain
on sale of asset and
extraordinary
(loss)/gain 27,468 42,842 43,181 74,231
Minority interests 2,017 3,929 3,121 6,808
Income taxes 891 778 1,402 1,348
Income before
(loss)/gain on sale
of asset and
extraordinary
(loss)/gain 24,560 38,135 38,658 66,075
(Loss)/gain on sale
of asset, net of
taxes - 3,425 (1,059) 3,425
Extraordinary
(loss)/gain,
net of taxes - - (1,224) 3,054
Net income $ 24,560 $ 41,560 $ 36,375 $ 72,554
Recurring funds from
operations (2),
diluted
Income before
(loss)/gain on sale
of asset and
extraordinary
(loss)/gain $ 24,560 $ 38,135 $ 38,658 $ 66,075
Minority interest to
common OP unit
holders 1,876 3,788 2,839 6,526
Interest on
convertible debt 1,833 1,832 3,665 3,823
Hotel depreciation
and amortization 27,613 27,106 56,232 52,804
Non-recurring items
(net of taxes):
Swap termination
costs - - 8,998 -
Write down of
investment in STS
Hotel Net - - 2,046 -
Costs to terminate
leases with Prime
Hospitality
Corporation 1,272 1,272
Felcor merger
costs 3,667 - 3,667 -
$ 60,821 $ 70,861 $ 117,377 $ 129,228
Weighted average number
of diluted shares of
common stock
outstanding 53,517 54,887 53,396 55,673
Recurring funds from
operations per diluted
share $ 1.14 $ 1.29 $ 2.20 $ 2.32
Operating Information
Recurring EBITDA $ 91,312 $ 100,612 $ 178,360 $ 187,391
Occupancy 72.3% 76.8% 70.9% 73.5%
ADR $ 109.30 $ 109.41 $ 112.28 $ 110.38
RevPAR $ 78.97 $ 83.99 $ 79.66 $ 81.18
RevPAR Decrease -5.98% -1.87%
(1) For comparative purposes, the results for the three and six months
ended June 30, 2000 are presented on a proforma basis assuming the
leases with MeriStar Hotels & Resorts were converted to management
contracts on January 1, 2000.
(2) Recurring funds from operations represents funds from operations,
as defined by the National Association of Real Estate Investment
Trusts, adjusted for significant non-recurring items.
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Contact:
MeriStar Hospitality Corporation
Bruce Riggins, 202/295-2276
Melissa Thompson, 202/295-2228
or
Daly Gray Public Relations (Media)
Jerry Daly or Carol McCune, 703/435-6293