Royal Host Inc. Announces First Quarter Results

Marketwired

HALIFAX, NOVA SCOTIA--(Marketwire - May 11, 2012) - Royal Host Inc. (RYL.TO - News)(RYL-DBB.TO - News)(RYL-DBC.TO - News)(RYL-DBD.TO - News) ("Royal Host" or the "Company") today announced results for the three months (the "First Quarter") ended March 31, 2012.

FIRST QUARTER HIGHLIGHTS

($000's except key performance indicators)

For the three months ended March 31, 2012, Royal Host:





--  Recorded a decrease in Comparable Hotel(1) revenue of $296 or 1.8% to

    $16,029 compared to $16,325 in the same period in 2011. 

--  Generated Comparable Hotel Revenue per Available Room of $48.09 (2011 -

    $49.48), a decrease of 2.8% over the same period in 2011, Comparable

    Hotel Occupancy of 49.7% (2011 - 51.4%), and Comparable Hotel Average

    Daily Rate of $96.80 (2011 - $96.26). 

--  Achieved a 7.2% increase in Gross Margin on Comparable Hotels to $1,830

    (11.4% of Comparable Hotel revenue) from $1,706 in the same period in

    2011 (10.5% of Comparable Hotel revenue), an increase of 0.90 percentage

    points. 

--  Recorded a reduction in its net loss to $2,145 from a net loss of $4,595

    for the same period in 2011. 

--  Funds From Operations improved to negative $395 for the period from

    negative $1,485 for the same period in 2011, despite a $924 decline in

    gross margin as the result of the sale of six hotels in the second half

    of 2011. The improvement is primarily the result of a $945 reduction in

    debt service costs due to the debt repayments completed in the second

    half of 2011 and the first quarter of 2012 and a non-recurring insurance

    recovery of $785 recorded in the three months ended March 31, 2012. 

--  Sold (i) one select service hotel for gross proceeds of $2,300 yielding

    a pre-tax gain on disposition of properties of $129 and (ii) its entire

    investment of trust units in a lodging REIT for $369. 

--  Subsequent to quarter end, improved its credit profile by (i) securing a

    commitment to re-finance a mortgage of $20,147 and extend its maturity

    from 2013 to 2017. The commitment also provides the Company with

    additional capacity to fund a major renovation at one of the two full

    service properties secured by the loan and (ii) finalizing an agreement

    to sell one of its two remaining parcels of vacant land, the proceeds

    from which will be utilized to further reduce the Company's

    indebtedness. 



John Carnella, Royal Host's President and CEO commented, "As we had anticipated, our top line growth in the first quarter was negative for both our full service and our limited service hotels. The revenue decline was driven purely by lower occupancies and it was offset by growth in full service and limited service ADR. Because the revenue reduction was tied to lower occupancy and not lower ADR and because we and our hotel managers were effective in controlling costs, our Gross Margin on Comparable Hotels increased on a year-over-year basis as did our bottom line. Moving forward, we expect our top line growth to be positive for the remainder of the year." He added, "We continue to make progress in terms of shedding non-strategic assets and deploying the sale proceeds to right-size our balance sheet and invest in our core hotels."

(1) Comparable Hotels are hotels owned by the Company for the entire current period as well as the comparable period from the prior year. The six hotels sold by the Company during the year ended December 31, 2011, one hotel sold in the three months ended March 31, 2012 and one hotel damaged by a fire during 2011 are not included in Comparable Hotel information throughout this press release (both financial information and operational Key Performance Indicators).

SELECTED FINANCIAL INFORMATION

The following table highlights the Company's financial results for the three month periods ending March 31:





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                                                       Three months ended 

                                                            March 31      

                                                       -------------------

($000's, except as otherwise noted)                        2012      2011 

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Hospitality Revenue                                      17,568    21,702 

Hospitality Expenses                                     15,342    18,552 

                                                       -------------------

Gross Margin(2)                                           2,226     3,150 

Gross Margin %(2)                                          12.7%     14.5%

  Investment Income (Loss)                                 (178)        2 

  Finance Costs                                          (2,613)   (3,558)

  Corporate and administrative                             (869)     (894)

  Other (Expenses) Income                                  (711)   (3,295)

                                                       -------------------

Net Income (Loss)                                        (2,145)   (4,595)

                                                       -------------------

                                                       -------------------

                                                                          

                                                                          

Basic Income (Loss) per Share ($)                      $  (0.12)$   (0.26)

Diluted Income (Loss) per Share ($)                    $  (0.12)$   (0.26)

                                                                          

FFO(2)                                                     (395)   (1,485)

Basic FFO per Share                                    $  (0.02)$   (0.09)

                                                                          

Number of Shares Outstanding (000's)                     17,582    17,427 

Weighted Average Shares Outstanding (000's)              17,582    17,505 

Closing Share Trading Price ($)                        $   1.55 $    1.65 

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As at May 11, 2012, Royal Host had 17,582,378 common shares outstanding     



HOSPITALITY REVENUE

The following table highlights the composition of the Company's hospitality revenue for the three month periods ending March 31:





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                                                Three months ended March 31 

                                               -----------------------------

($000's)                                           2012     2011   Variance 

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Hotel revenue - full service                     12,015   12,172       (157)

Hotel revenue - select service                    4,014    4,153       (139)

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Comparable Hotel revenue                         16,029   16,325       (296)

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Non-comparable hotel revenue (3)                    432    4,237     (3,805)

Franchise revenue                                   370      335         35 

Tenant revenue                                      292      305        (13)

Other revenue                                       445      500        (55)

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Hospitality Revenue                              17,568   21,702     (4,134)

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(2) Items represent non-IFRS financial measures.

(3) Includes five select service hotels sold during 2011, one full service hotel sold during 2011, one select service hotel sold during the three months ended March 31, 2012 as well as one select service hotel damaged by fire in 2011.

Hotel revenue from our nine full service hotels decreased $157, or 1.3%, to $12,015 for the three months ended March 31, 2012 from $12,172 for the same period in 2011.

Hotel revenue from our fourteen select service comparable hotels decreased $139, or 3.3%, to $4,014 for the three months ended March 31, 2012 from $4,153 for the same period in 2011.

GROSS MARGIN

The following table details the composition of the Company's gross margin for the three months ended March 31, 2012 and 2011:





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                                   Three months ended March 31              

                      ------------------------------------------------------

Gross Margin                     % of             % of                   %  

($000's)                2012  Revenue    2011  Revenue $ Variance   Change  

                      ------------------------------------------------------

Full Service           1,415     11.8   1,262     10.4        153     12.1% 

Select Service           415     10.3     444     10.7        (29)    (6.5%)

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Total - Comparable                                                          

 Hotels                1,830     11.4   1,706     10.5        124      7.2% 

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Non-comparable                                                              

 hotels(3)               (96)   (22.2)  1,216     28.7     (1,312)  (107.9%)

Other                    492              228                 264    115.8% 

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Gross Margin           2,226     12.7   3,150     14.5       (924)   (29.3%)

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Gross margin from our nine full service hotels increased $153, or 12.1%, to $1,415 compared to $1,262 for the same period in 2011.

Gross margin from our fourteen select service hotels decreased $29, or 6.5%, to $415 compared to $444 for the same period in 2011.

OPERATING STATISTICS

The following table highlights key performance indicators for hotel revenue for the Company's comparable full and select service hotels in the three month periods ending March 31:





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                   Three months ended March 31, Three months ended March 31,

                               2012                         2011            

----------------------------------------------------------------------------

                   Occupancy       ADR   RevPAR Occupancy       ADR   RevPAR

----------------------------------------------------------------------------

Full Service            55.7% $ 104.77 $  58.39      57.1% $ 104.56 $  59.74

Select Service          41.6% $  82.48 $  34.29      43.7% $  81.76 $  35.77

Total                   49.7% $  96.80 $  48.09      51.4% $  96.26 $  49.48

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The Company's comparable full service hotels experienced a decrease in RevPAR of $1.35, or 2.3%, to $58.39 for the three months ended March 31, 2012 compared to $59.74 for the same period in 2011. This decrease in RevPAR was driven by a decrease in occupancy from 57.1% during the three months ended March 31, 2011 to 55.7% for the same period in 2012, a relative decrease of 2.5%.

The Company's comparable select service hotels experienced a decrease in RevPAR of $1.48, or 4.1%, to $34.29 for the three months ended March 31, 2012 compared to $35.77 for the same period in 2011. The decrease in RevPAR was due to a decrease in occupancy from 43.7% during the three months ended March 31, 2011 to 41.6% for the same period in 2012, a relative increase of 4.8%.

In October 2011, our 93 room select service hotel on Memorial Drive in Thunder Bay, Ontario was damaged as the result of a fire in its leased restaurant facility. The hotel re-opened with a portion of its room inventory in November 2011. The Company is in the process of finalizing an insurance settlement and we expect to complete repairs and re-open the remaining rooms early in the third quarter of 2012. As a result of the disruption to its business, this hotel has been removed from the comparable hotel data.

SUBSEQUENT EVENTS

On April 13, 2012 the Company issued a total of 225,580 incentive stock options to officers and employees of the Company pursuant to the Company's Stock Option Plan.

On May 4, 2012, the Company closed the sale of vacant land in Fort Nelson, British Columbia for $363 less costs to sell. The net book value of this property at March 31, 2012 was $356.

On May 10, 2012, the Company completed the refinancing of the $20,147 mortgage secured by the London Hilton and the Ottawa Chimo properties. The refinancing extends the mortgage maturity to 2017 and provides for additional capacity to fund a planned renovation of the Ottawa Chimo property.

2012 OUTLOOK

We remain optimistic about growth in the Canadian hospitality industry given its correlation to the broader Canadian economy. As such, we continue to expect to achieve RevPAR growth of 2.5% to 4.0% for 2012 and we anticipate that the increase in RevPAR will be uneven with more growth in the second half of 2012. We also expect that the RevPAR growth at our full service hotels will continue to exceed the RevPAR growth at our select service hotels.

ROYAL HOST INC.

Royal Host is a diversified hospitality company that delivers shareholder value through hotel ownership, investment and franchising. The Company's hotels, which contain 3,092 rooms, are located in five Provinces and Territories across Canada. Twenty-two of the Company's hotels operate under internationally recognized brands such as Travelodge(R), Super 8(R), Holiday Inn(R), Hilton(R) and Country Inns & Suites(R). Two of the Company's hotels are unbranded. In addition to its real estate holdings, the Company owns and operates the Travelodge Canada franchise business which is currently comprised of over 90 hotels across nine Provinces and Territories.

Royal Host's common shares and convertible debentures are traded on the Toronto Stock Exchange under the trading symbols "RYL", "RYL.DB.B", "RYL.DB.C" and "RYL.DB.D" respectively.

This press release may contain certain forward-looking statements relating, but not limited to, Royal Host's operations, anticipated financial performance, business prospects, and strategies. Forward-looking information typically contains statements with words such as "anticipate", "does not anticipate", "believe", "estimate", "forecast", "intend", "expect", "does not expect", "could", "may", "would", "will", "should", "budgeted", "plan" or other similar terms and expressions suggesting future outcomes. Such forward-looking statements are subject to risks, uncertainties, and other factors, which could cause actual results to differ materially from future results expressed, projected, or implied by such forward-looking statements. Readers are therefore cautioned that Royal Host's expectations, estimates and assumptions, although considered reasonable, may prove to be incorrect and readers should not place undue reliance on forward-looking statements.

Forward-looking statements contained herein are not guarantees of future performance and involve certain risks, uncertainties, and other factors that are difficult to predict, and could result in the outcome of such events being materially different from those intended, planned, anticipated, believed, estimated, or expected in this news release. Such factors and assumptions include, but are not limited to, general economic conditions, levels of travel in Royal Host's key market areas, political conditions and events, competitive pressures, changes in government policy or regulations, and lodging industry conditions. Royal Host does not undertake any obligation to update or release any revisions to these forward-looking statements to reflect events or circumstances, unanticipated events or circumstances, or should its estimates or assumptions change, after the date hereof, except as expressly required by law.

This press release contains registered trademarks that are the exclusive property of their respective owners. None of the owners of these trademarks has any responsibility or liability for any information contained in this press release.

Contact:
John A. Carnella
Royal Host Inc.
President and Chief Executive Officer
902.470.4550

Michael McFeters
Royal Host Inc.
Chief Financial Officer
902.470.4515

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