Host Marriott


reported a lower fourth-quarter profit Thursday, as year-earlier results were boosted by one-time items. But the nation's largest lodging real estate investment trust beat Wall Street expectations.

Host Marriott said net income was $61 million, or 15 cents a share, down 59.3% from $150 million, or 46 cents a share, in the fourth quarter of 2003. In the year-ago period, EPS received a boost of about 48 cents from one-time items including debt prepayments and an insurance settlement for a World Trade Center hotel.

Funds from operations, or FFO, which measures the cash flow generated by the company and is closely watched by Wall Street, came in at 35 cents a share, down from 53 cents a share a year before, but better than the 31 cent-a-share consensus estimate from Thomson First Call. In the fourth quarter of 2003, FFO benefited by about 29 cents a share from the one-time items.

Revenue came in at $1.18 billion, up 13.3% from $1.04 billion a year earlier and slightly higher than the Thomson First Call consensus for $1.17 billion. Revenue per available room, a key metric of industry performance also known as revpar, increased 8.6% in the fourth quarter at comparable hotels, driven by a 5.4% rise in average room rates and a 2.0-percentage-point increase in occupancy.

As cyclical lodging recoveries mature, rising room rates become the key revpar driver. Because hotel expenses don't rise in tandem, rising room rates flow through to the bottom line and bolster margins.

Adjusted operating profit margins at Host Marriott's comparable hotels increased by 2.0 percentage points from a year before.

"We had a strong fourth quarter, with significant revpar growth and margin improvement," said Christopher J. Nassetta, Host Marriott's chief executive. "We expect the momentum we built in 2004 to carry into 2005."

Looking ahead, Host Marriott said it expects comparable hotel revpar to increase between 6% and 8% in the first quarter and between 6.5% and 8.5% for all of 2005. The company also expects adjusted operating margins at comparable hotels to increase by 100 basis points to 150 basis points.

Based on those forecasts, the company expects first-quarter EPS of 10 cents to 12 cents and full-year EPS of 18 cents to 28 cents. It forecasts first-quarter FFO of 20 cents a share to 22 cents a share, below the average Wall Street forecast for 25 cents a share. For the full year, Host Marriott's FFO forecast is 98 cents a share to $1.07 a share, topping the Thomson First Call consensus for 89 cents a share.

The REIT owns more than 100 hotels operating under a variety of brands, including Marriott, Ritz-Carlton, Hyatt, Four Seasons, Fairmont, Hilton and Westin.