ROYAL HOST ANNOUNCES SUBSTANTIAL INCREASE IN OPERATING RESULTS FOR FIRST SIX MONTHS
Press Release: Royal Host
August 27, 1999
CALGARY, ALBERTA --The Royal Host Real Estate Investment Trust (REIT) operating results reflect an increase in
hospitality revenues of 171 percent, improved operating income of 117 percent and an increase in cash available
for distribution of 45 percent for the six months ended June 30, 1999.
The Royal Host strategy has been to continue to drive average daily room rates resulting in a 7.5 percent increase year over year on a same store basis. ``While this strategy, along with the rebranding of certain properties has created a short-term decrease in occupancy of 2.9 percent, the net effect has been an 4.5 percent increase in revenue per available room to $51.57,'' says R.B. Royer, President and CEO of Royal Host. ``It is expected that the rebranding and capital expenditure program will result in improved occupancy over the longer term.''
Revenue increases are a reflection of the expansion of the portfolio to 36 properties and the additional revenues derived from the internalization of the hotel management business and the addition of the vacation ownership business.
On a per unit basis, the performance of cash available for distribution has trended upwards in the second quarter. This brings the year-to-date operating results ($0.34 per unit) more in line with the 1998 performance ($0.37 per unit).
Capital Expenditure Program
For the first half of 1999, Royal Host invested $21 million in expansions and renovations at selected properties in the portfolio in addition to the $15 million renovation investment in fiscal 1998.
``Hospitality revenues in the first six months have begun to marginally reflect the long-term investment in these capital assets. However, the incremental benefits will be more fully realized in the third and fourth quarters of 1999,'' says Royer.
The expansion of The Grand Okanagan Resort has been completed on time and on budget. New income-generating facilities, including the addition of 120 four-star, luxury rooms, a European-style spa, and leased facilities that officially opened as a 20,000 square foot licensed casino in July 1999, have recently begun to generate revenues.
``While the expansion and renovation programs have resulted in incremental costs, we now have better positioned hotels, and improved and expanded facilities which we expect will generate increased average daily room rates and occupancy,'' says Royer.
First Half Activities
Royal Host successfully extended the maturity date of $63 million of short-term debt to April 1, 2000 and subsequent to June 30, 1999, secured additional debt of $8 million to finance the continuation of the capital expenditure program.
"Since coming on stream in the second quarter, incremental benefits from new third-party management contracts in Oregon, Washington and Alaska have not been fully realized, but we expect these contracts will provide increasing and stable revenues over the next few quarters,'' says Royer.
Outlook
The hospitality industry is expected to grow in the second half of 1999 with average daily room rates and occupancy levels increasing. In addition, supply increases are projected to be minimal in Royal Host hotel markets. Royal Host properties are well positioned to take advantage of regional strength within the hospitality industry.
Royal Host will continue to review and evaluate growth opportunities
including the provision of management services, the acquisition of additional third-party management contracts
and vacation ownership programs and through the on-going management of the hotel portfolio.
ROYAL HOST REAL ESTATE INVESTMENT TRUST
Consolidated Statement of Net Earnings and Distributable Cash
For six months ended June 30, 1999 and 1998
$000 (unaudited)
1999 1998
HOSPITALITY REVENUES
Rooms 38,041 16,124
Food and beverage 10,538 4,068
Lease and other hospitality revenues 12,750 2,435
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61,329 22,627
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HOSPITALITY EXPENSES 45,954 15,556
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OPERATING INCOME 15,375 7,071
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OTHER (INCOME) AND EXPENSES
Interest income ( 370) (2,083)
Interest on installment receipts term loans -- 1,693
Interest on mortgages and other debt 6,020 1,017
Trust administration 1,332 881
Capital and other taxes 300 --
Depreciation and amortization 8,977 2,907
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16,259 4,415
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NET (LOSS) EARNINGS ( 884) 2,656
Add: Depreciation and amortization 8,977 2,907
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CASH AVAILABLE FOR DISTRIBUTION 8,093 5,563
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PER UNIT CASH AVAILABLE FOR DISTRIBUTION
- basic $0.34 $0.37
- fully diluted $0.34 $0.33
Royal Host is a closed-end real estate investment trust (REIT) with a national portfolio of 36 hotels with over 4,400 guest rooms primarily in the upper-mid-market and upscale segments. Royal Host owns the Travelodge Master Franchise in Canada; provides hotel and resort management services for the portfolio and to third party properties, markets vacation intervals in hotels, resorts and luxury houseboats, and operates a facility for customers to trade and bank prepaid vacation weeks.
Royal Host maximizes earnings while minimizing risk for its
unitholders through efficient operations, strong marketing and a focus on providing travelers with superior accommodations
and travel experiences. Royal Host units are traded on The Toronto Stock Exchange (RYL.UN).
Contact:
Royal Host Real Estate Investment Trust Ellen Walsh Director of Communications (403) 258-5601 (403) 292-0922 http://www.royalhost.com investorinfo.@royalhost.com