Royal Host Inc. Announces Fourth Quarter and Annual Results

Marketwired

HALIFAX, NOVA SCOTIA--(Marketwire - March 30, 2012) - Royal Host Inc. (TSX:RYL.TO - News) (TSX:RYL-DBB.TO - News) (TSX:RYL-DBC.TO - News) (TSX:RYL-DBD.TO - News) ("Royal Host" or the "Company") today announced results for the three months (the "Fourth Quarter") and year ended December 31, 2011.

FOURTH QUARTER HIGHLIGHTS

($000's except key performance indicators)

For the three months ended December 31, 2011, Royal Host:





--  Generated an increase in Comparable Hotel(1) revenue of $994 or 5.9% to

    $17,984 compared to $16,990 in the same period in 2010. 

--  Generated Comparable Hotel Revenue per Available Room of $50.01 (2010 -

    $46.42), an increase of 7.7% over the same period in 2010, Comparable

    Hotel Occupancy of 52.2% (2010 - 48.4%), and Comparable Hotel Average

    Daily Rate of $95.77 (2010 - $95.90). 

--  Hospitality gross margin on Comparable Hotels increased 56.6% to $3,338

    (18.6% of Comparable Hotel revenue) versus $2,131 in 2010 (12.5% of

    Comparable Hotel revenue). 

--  Recorded net income of $416 compared to a net loss of $3,657 for the

    same period in 2010. 

--  Achieved Funds From Operations of $4,252, up from negative $3,745 in

    2010 due mainly to increased net income and an unrealized gain on trust

    units and conversion options of $6,205 in the last quarter of 2010 which

    reduced FFO in that quarter and did not recur in 2011. 

--  Sold one select service and one full service hotel for gross proceeds of

    $25,300 yielding a pre-tax gain on disposition of properties of $1,682. 

--  Improved its credit profile with the repurchase of $26,878 in

    outstanding convertible debentures at a discount to par and the

    assumption of a $7,100 mortgage by the purchaser of one of the Company's

    full service properties.



John Carnella, Royal Host's President and CEO commented, "Our fourth quarter operating results were buoyed by strong revenue growth at our full service hotels and, for the first time in several years, growth in revenues at our select service hotels. In addition, we made significant progress in our on-going efforts to rationalize our portfolio and better align our capital structure with our business. Our $25.3 million of fourth quarter hotel sales were completed at a 7.1% premium to book value and our $26.9 million of fourth quarter debenture repurchases were completed at a weighted average 18.7% discount to par. While we remain optimistic about the underlying supply and demand dynamics across Canada, we are cautious with regard to the trajectory of certain of the markets in which our hotels operate and we do not expect our results for the first quarter of 2012 to match the pace of recovery which our portfolio experienced during the second half of 2011."

(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 and one hotel damaged by a fire during the year 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 and annual periods ending December 31:





                               Three months ended                Year ended 

                                      December 31               December 31 

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

($000's, except as                                                          

 otherwise noted)               2011         2010         2011         2010 

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

Hospitality Revenue           19,721       22,522       89,612       92,269 

Hospitality Expenses          16,169       19,168       71,195       74,679 

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

Gross Margin(2)                3,552        3,354       18,417       17,590 

Gross Margin %(2)               18.0%        14.9%        20.6%        19.1%

  Investment Income            3,915        4,124        4,542       21,522 

  Finance Costs               (3,050)      (3,574)     (13,637)     (21,190)

  Corporate and                                                             

   administrative               (817)        (862)      (3,533)      (3,894)

  Other (Expenses)                                                          

   Income                     (3,185)      (6,699)      (9,351)     (18,630)

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

Net Income (Loss)                415       (3,657)         (29)      (4,602)

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

                                                                            

Basic Income (Loss) per                                                     

 Share ($)               $      0.02  $     (0.21) $     (0.00) $     (0.25)

Diluted Income (Loss)                                                       

 per Share ($)           $     (0.11) $     (0.21) $     (0.00) $     (0.25)

FFO(2)                         4,252       (3,745)       7,609       (3,743)

Basic FFO per Share      $      0.22  $     (0.21) $      0.44  $     (0.21)

                                                                            

Number of Shares                                                            

 Outstanding (000's)          17,582       17,650       17,582       17,650 

Weighted Average Shares                                                     

 Outstanding (000's)          17,582       17,847       17,538       18,093 

Closing Share Trading                                                       

 Price ($)               $      1.48  $      2.10  $      1.48  $      2.10 

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As at March 30, 2012, Royal Host had 17,582,378                             

 common shares outstanding                                                  



HOSPITALITY REVENUE

The following table highlights the Company's hospitality revenue composition for the three month and annual periods ending December 31:





                               Three months ended                           

                                      December 31    Year ended December 31 

                                                                            

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

($000's)                    2011    2010 Variance     2011    2010 Variance 

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

Hotel revenue - full                                                        

 service                  13,269  12,439      830   51,971  48,183    3,788 

Hotel revenue - select                                                      

 service                   4,715   4,551      164   19,988  20,505     (517)

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

Comparable Hotel revenue  17,984  16,990      994   71,959  68,688    3,271 

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

Non-comparable hotel                                                        

 revenue (3)                 545   4,214   (3,669)  12,513  17,937   (5,424)

Franchise and management                                                    

revenue                      424     476      (52)   1,761   2,142     (381)

Tenant revenue               297     285       12    1,232   1,107      125 

Other revenue                470     557      (87)   2,147   2,395     (248)

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Hospitality Revenue       19,720  22,522   (2,802)  89,612  92,269   (2,657)

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Hotel revenue from our nine full service hotels increased $830, or 6.7%, to $13,269 for the three months ended December 31, 2011 from $12,439 for the same period in 2010.

(2) Items represent non-IFRS financial measures.

(3) Includes five select service hotels were sold during the year; four in the third quarter and one in the fourth quarter, and one full service hotel was sold in the fourth quarter of 2011 as well as one hotel damaged by fire in the fourth quarter.

Hotel revenue from our sixteen select service comparable hotels increased $164, or 3.6%, to $4,715 for the three months ended December 31, 2011 from $4,551 for the same period in 2010.

OPERATING STATISTICS

Key performance indicators for hotel revenue are summarized below for comparable full and select service hotels in the fourth quarter:





              Three months ended December 31,Three months ended December 31,

                                         2011                           2010

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

               Occupancy        ADR    RevPAR Occupancy        ADR    RevPAR

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

Full Service        56.4% $  105.87 $   59.75      51.4% $  106.16 $   54.53

Select Service      46.9% $   80.38 $   37.68      44.7% $   81.02 $   36.19

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



The Company's comparable full service hotels generated an increase in RevPAR of $5.22, or 9.6%, to $59.75 for the three months ended December 31, 2011 compared to $54.53 for the same period in 2010. This increase in RevPAR was driven by an increase in occupancy from 51.4% during the three months ended December 31, 2010 to 56.4% for the same period in 2011, a relative increase of 9.7%.

The Company's comparable select service hotels generated an increase in RevPAR of $1.49, or 4.1%, to $37.68 for the three months ended December 31, 2011 compared to $36.19 for the same period in 2010. The increase in RevPAR was due to an increase in occupancy from 44.7% during the three months ended December 31, 2010 to 46.9% for the same period in 2011, a relative increase of 4.9%.

In October, 2011, our 93 room select service hotel 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 expects to complete repairs and re-open the remaining rooms by the end of June 2012. As a result of the disruption to its business, this hotel has been removed from the comparable hotel data.





                 Year ended December 31, 2011   Year ended December 31, 2010

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

               Occupancy        ADR    RevPAR Occupancy        ADR    RevPAR

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

Full Service        60.1% $  103.96 $   62.48      54.3% $  105.00 $   56.98

Select Service      49.3% $   81.53 $   40.20      50.0% $   82.36 $   41.15

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The Company's comparable full service hotels generated an increase in RevPAR of $5.50, or 9.7%, to $62.48 for the year ended December 31, 2011 compared to $56.98 for the same period in 2010. This increase in RevPAR was due to an increase in occupancy from 54.3% during the year ended December 31, 2010 to 60.1% for the same period in 2011, a relative increase of 10.7%.

The Company's comparable select service hotels generated a decrease in RevPAR of $0.95, or 2.3%, to $40.20 for the year ended December 31, 2011 compared to $41.15 for the same period in 2010. This decrease in RevPAR was mostly due to a decrease in occupancy from 50.0% during the year ended December 31, 2010 to 49.3% for the same period in 2011, a relative decrease of 1.4% and a decrease in Average Daily from $82.36 to $81.53.

SUBSEQUENT EVENTS

In February 2012, the Company disposed of all of its marketable securities realizing net proceeds of $369.

In March 2012, the Company sold the Travelodge Lakeshore North Bay for $2,300 less costs to sell. The net book value of this hotel at December 31, 2011 was $1,967.

2012 OUTLOOK

PKF Consulting Inc., hotel industry specialists, have forecasted an increase in 2012 RevPAR of 3.8% over 2011 for major Canadian markets based on increased demand, limited additions to supply and ADR improvements of 2.5%.

The Company expects to achieve overall RevPAR growth of 2.5% to 4.0% in 2012. The increase in RevPAR is expected to be uneven and the Company forecasts stronger revenue growth in the second half than in the first half of 2012. The Company's full service properties are expected to continue to provide RevPAR growth above the Company's overall forecast while the Company's select service properties are expected to continue to lag the Company's overall forecast. We expect both our full service and our select service hotels to achieve higher RevPAR growth in the second half than in the first half of 2012 and, because of weakness in certain markets in Southern Ontario and Atlantic Canada, we expect our first quarter RevPAR to be down versus 2011.

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", "believe", "expect", "plan", or similar words 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. Such factors include, but are not limited to, economic, competitive, and lodging industry conditions. Royal Host disclaims any responsibility to update any such forward-looking statements except as 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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