Royal Host Inc.
TSX : RYL
TSX : RYL.DB.B
TSX : RYL.DB.C
TSX : RYL.DB.D

Royal Host Inc.

March 30, 2012 09:04 ET

Royal Host Inc. Announces Fourth Quarter and Annual Results

HALIFAX, NOVA SCOTIA--(Marketwire - March 30, 2012) - Royal Host Inc. (TSX:RYL) (TSX:RYL.DB.B) (TSX:RYL.DB.C) (TSX:RYL.DB.D) ("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 Hotel1 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
($000's, except as otherwise noted) 2011 2010 2011 2010
Hospitality Revenue 19,721 22,522 89,612 92,269
Hospitality Expenses 16,169 19,168 71,195 74,679
Gross Margin2 3,552 3,354 18,417 17,590
Gross Margin %2 18.0 % 14.9 % 20.6 % 19.1 %
Investment Income 3,915 4,124 4,542 21,522
Finance Costs (3,050 ) (3,574 ) (13,637 ) (21,190 )
Corporate and administrative (817 ) (862 ) (3,533 ) (3,894 )
Other (Expenses) Income (3,185 ) (6,699 ) (9,351 ) (18,630 )
Net Income (Loss) 415 (3,657 ) (29 ) (4,602 )
Basic Income (Loss) per Share ($) $ 0.02 $ (0.21 ) $ (0.00 ) $ (0.25 )
Diluted Income (Loss) per Share ($) $ (0.11 ) $ (0.21 ) $ (0.00 ) $ (0.25 )
FFO2 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
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 )
Hospitality Revenue 19,720 22,522 (2,802 ) 89,612 92,269 (2,657 )

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, 2011 Three months ended December 31, 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

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®, Super 8®, Holiday Inn®, Hilton® and Country Inns & Suites®. 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 Information

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

    Royal Host Inc.
    Michael McFeters
    Chief Financial Officer
    902.470.4515