Hospitality Properties Trust (HPT) Q1 2012 Earnings Call May 07, 2012 1:00 pm ET Executives Timothy A. Bonang - Director of Investor Relations
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In addition, this call may contain non-GAAP financial measures including normalized funds from operations or normalized FFO. A reconciliation of normalized FFO and EBITDA to net income, as well as components to calculate AFFO, CAD or FAD, are available in our supplemental package found in the Investor Relations section of the company's website.Actual results may differ materially from those projected in any forward-looking statements. Additional information concerning factors that could cause those differences is contained in our Form 10-Q to be filed with the SEC and in our Q1 supplemental operating and financial data package found on our website at www.hptreit.com. Investors are cautioned not to place undue reliance upon any forward-looking statements. Now I would like to turn the call over to John Murray. John G. Murray Thank you, Tim. Good afternoon, and welcome to our first quarter 2012 earnings call. Today, HPT reported first quarter normalized FFO of $0.78 per share. Focusing first on our travel center investments, first quarter performance of HPT's 185 travel centers included continued strong per gallon fuel margins on flat fuel volumes and increases in non-fuel sales and gross margin. Property level rent coverage for HPT's travel centers was approximately 1.3x for the quarter, up from approximately 1.2x in the 2011 quarter. In addition to its improved operating results, TA's financial position remains sound with approximately $95 million of cash on hand at quarter end. Turning to HPT's hotel investments. First quarter RevPAR decreased 0.5% for our comparable 288 hotels and increased 0.4% at our 290 hotels, including the 2 new Royal Sonesta Hotels, driven by a 3.5 percentage point decrease in average occupancy to 64.1% and a 5.9% increase in average daily rate to $100.88. During the quarter, we had 86 hotels under renovation for all or part of the period, including one hotel in our Marriott No. 1 portfolio, 25 hotels in our Marriott 234 portfolio, 52 hotels in our IHG portfolio, 7 Hyatt Place hotels and one Radisson. The impact of these renovations, primarily from reduced occupancies because rooms were out of service, was significant as RevPAR was up 5.6% quarter-over-quarter for the 204 non-renovation hotels but was down 14.6% at the comparable -- at the 86 comparable renovation properties. GOP margins at the 204 non-renovation hotels increased 160 basis points.
Average daily rate growth for our 290 hotels was 5.9% in the first quarter of 2012, an increase in each portfolio and for 14 of our 15 brands this quarter, compared to last year as our operators continued to manage guest mix and pushed rate during peak travel periods. Despite an unsteady macroeconomic environment and excluding renovation hotels, we have continued -- we have seen continued occupancy rate and RevPAR improvement in 2012 as we did in 2011, and we continue to press our managers to focus on revenue management and cost control. Our managers' 2012 RevPAR forecast for our hotels are in the range of 5% to 8%.There is optimism about the ongoing lodging recovery as a result of constrained supply growth, continued steady demand and increases in average daily rate in GOP margins. Although modest economic growth continues to create uncertainty about the sustainability of this recovery, we continue to see steady growth and a greater share of that growth from rate than occupancy, which helps margins. Our planned 2012 and 2013 capital program is extensive, with approximately 200 hotels expected to be renovated during that period. Our 2012 and 2013 results are likely to continue to be choppy due to these renovations and the timing of hotel brand conversions. We are pleased with the operating performance of the 36 hotels that completed renovations in 2011, with RevPAR up 14.3% and GOP margin up 580 basis points at these hotels in the first quarter of 2012 versus 2011. Read the rest of this transcript for free on seekingalpha.com