Hotel chains may be eyeing a recovery in the coming quarters, but
shareholders will have to wait until 2004, with the company announcing a wider-than-expected third-quarter loss while lowering guidance for the rest of 2003, possibly shelving its fourth-quarter dividend as a result.
The nation's largest real estate investment trust announced a third-quarter net loss of $88 million, or 35 cents a share, wider than the year-ago loss of $38 million, or 18 cents a share. The results missed the company's estimates, announced in July, which called for a net loss between $63 million and $68 million, or 27 cents to 29 cents a share.
On a funds-from-operation basis, Host Marriott matched Wall Street expectations. The company said funds from operations, a metric used to measure the operating performance at REITs, came in at 3 cents a share, lower than the 18 cents a share a year ago, but a penny higher than Wall Street estimates.
Revenue per available room, a metric of hotel performance called revpar, continued to fall at Host Marriott, sliding 2.5% from year-ago levels. The company cited high supply and weak demand as reasons for the drop, with occupancy down 0.7% and room rates off 1.5% from last year. While revpar has improved from the anemic levels seen over the last three years, it comes as other hotel chains, like
, have been talking up the recovery.
"Our results for the third quarter were generally in line with expectations, with revpar at the higher end of the range and margins at the lower end," said Christopher Nassetta, president and CEO, in a statement. "Our revpar results have clearly improved over the first half of the year. Further improvement should occur in 2004."
But the rest of 2003 will be worse than previously expected. Host Marriott said that revpar for fiscal 2003 would fall between 4% and 5%, with revpar flat to down 2.5% in the fourth quarter. The company guided fourth-quarter expectations below previous estimates as a result, telling investors losses would come in between $160 million and $174 million, or 71 cents to 75 cents a share. Earlier, the company said losses would be between $124 million to $148 million, or 60 cents to 69 cents a share.
Host Marriott will also miss fiscal 2003 analyst expectations on an funds-from-operation basis, handicapping funds from operation per diluted share between 62 cents and 66 cents a share. Analysts expect the company to show 67 cents a share for the full year.
With losses coming in deeper than expected for 2003, Host Marriott said it might not be able to pay out its fourth-quarter dividend because of facilities in its credit agreements. The company said its ability to pay out a dividend is restricted when the ratio of EBIDTA to interest coverage, a measure of the company's ability to pay off debt, is below 2.0.
Hotel stocks, which have been rallying along with the airline sector in hopes of a cyclical travel recovery, were softer on Wednesday. The Dow Jones Lodging Index was off 0.6%, led lower by Host Marriott, off 32 cents, or 2.7%, at $11.48.