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

Royal Host Inc.

November 11, 2011 16:01 ET

Royal Host Inc. Announces Third Quarter Results

HALIFAX, NOVA SCOTIA--(Marketwire - Nov. 11, 2011) - 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 and nine months ended September 30, 2011 (the "Third Quarter").

John Carnella, Royal Host's President and CEO commented, "After pausing in the second quarter, the recovery in our operations resumed last quarter. We experienced healthy gains in comparable hotel occupancy, revenue and margins, particularly in our full service portfolio."

He added, "We also completed a number of important strategic transactions in the quarter which have the result of sharpening our focus, improving our credit profile and positioning us to invest aggressively in our core holdings."

THIRD QUARTER HIGHLIGHTS

For the three months ended September 30, 2011, Royal Host:

  • Generated an increase in Comparable Hotel1 revenue of $1,339 or 6.4% to $22,422 compared to $21,083 in the same period in 2010.
  • Generated Comparable Hotel Occupancy of 63.0% (2010 – 59.9%), Average Daily Rate of $94.94 (2010 - $94.39) and Revenue per Available Room of $59.85 (2010 - $56.56), an increase in RevPAR of 5.8% over the same period in 2010.
  • Hospitality gross margin on Comparable Hotels increased 26.8% to $5,103 (22.8% of Comparable Hotel revenue) versus $4,023 in 2010 (19.1% of Comparable Hotel revenue).
  • Recorded net income of $5,828 compared to a net loss of $1,224 for the same period in 2010.
  • Achieved Funds From Operations of $3,960, up from $1,580 in 2010 due to increased gross margin, gains on repurchases of convertible debentures and an insurance recovery received in the current period.
  • Sold four select service hotels for gross proceeds of $31,000 yielding a pre-tax gain on disposition of properties of $4,847.
  • Improved its credit profile with full repayment of all borrowings on the Company's credit facility of $18,100, repayment of a maturing mortgage of $11,411 and the repurchases of $4,838 in outstanding convertible debentures at a discount to par.
  • Extended it's $25 million credit facility from a one-year demand facility to a three-year committed facility.

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 four hotels sold by the Company during the three months ended September 30, 2011 are not included in Comparable Hotel information throughout this MD&A (both financial information and operational Key Performance Indicators).

SELECTED FINANCIAL INFORMATION

The following table highlights the Company's financial results for the three and nine month periods ending September 30, 2011:

Three months ended Nine months ended
September 30 September 30
($000's, except as otherwise noted) 2011 2010 2011 2010
Hospitality Revenue 24,169 24,635 69,891 69,747
Hospitality Expenses 17,996 18,838 55,027 55,512
Gross Margin2 6,173 5,797 14,864 14,235
Gross Margin %2 25.5 % 23.5 % 21.3 % 20.4 %
Investment Income 5,469 2,729 5,475 16,092
Finance Costs (3,494 ) (5,053 ) (10,585 ) (16,285 )
Depreciation and Amortization (3,082 ) (4,163 ) (10,316 ) (12,739 )
Other (Expenses) Income 95 (903 ) (2,114 ) (3,697 )
Income Tax Recovery 667 369 2,232 1,445
Net Income (Loss) 5,828 (1,224 ) (444 ) (949 )
Basic Income (Loss) per Share ($) $0.33 ($0.07 ) ($0.03 ) ($0.05 )
Diluted Income (Loss) per Share ($) $0.16 ($0.07 ) ($0.03 ) ($0.05 )
FFO2 3,960 1,580 3,357 $26
Basic FFO per Share $0.22 $0.09 $0.19 -
Number of Shares Outstanding (000's) 17,582 18,044 17,582 18,044
Weighted Average Shares Outstanding (000's) 17,582 18,142 17,479 18,187
Closing Share Trading Price ($) $1.20 $2.35 $1.20 $2.35

As at November 10, 2011, Royal Host had 17,582,378 common shares outstanding

HOSPITALITY REVENUE COMPOSITION

Three months ended Nine months ended
September 30 September 30
($000's) 2011 2010 Variance 2011 2010 Variance
Hotel revenue - full service 15,446 13,720 1,726 44,527 41,562 2,965
Hotel revenue - select service 6,976 7,363 (387 ) 17,744 18,475 (731 )
Comparable Hotel revenue 22,422 21,083 1,339 62,271 60,037 2,234
Hotel revenue – select service
hotels sold in period 3 810 2,523 (1,713 ) 5,296 7,117 (1,821 )
Franchise and management 591 768 (177 ) 1,337 1,666 (330 )
revenue
Tenant revenue 328 229 99 935 823 112
Other revenue 18 32 (14 ) 52 105 (52 )
Hospitality Revenue 24,169 24,635 (466 ) 69,891 69,748 143
  1. Items represent non-IFRS financial measures.
  2. Select service hotels sold in the period consists of four hotels with a combined 118 days of operations included in the financial results for the three months ended September 30, 2011 compared to 368 days for the same period in 2010.

Hotel revenue from our 10 full service hotels increased $1,726, or 12.6%, to $15,446 for the three months ended September 30, 2011 from $13,720 for the same period in 2010.

Hotel revenue from our 17 select service comparable hotels decreased $387, or 5.3%, to $6,976 for the three months ended September 30, 2011 from $7,363 for the same period in 2010.

OPERATING STATISTICS

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

Three months ended September 30, 2011 Three months ended September 30, 2010
Occupancy ADR RevPAR Occupancy ADR RevPAR
Full Service 67.3 % $ 103.16 $ 69.45 59.1 % $ 103.68 $ 61.28
Select Service 57.8 % $ 83.28 $ 48.15 60.9 % $ 83.22 $ 50.69

The Company's full service hotels generated an increase in RevPAR of $8.17, or 13.3%, to $69.45 for the three months ended September 30, 2011 compared to $61.28 for the same period in 2010. This increase in RevPAR was driven by an increase in occupancy from 59.1% during the three months ended September 30, 2010 to 67.3% for the same period in 2011, a relative increase of 13.9%.

The Company's comparable select service hotels generated a decrease in RevPAR of $2.53, or 5.0%, to $48.15 for the three months ended September 30, 2011 compared to $50.69 for the same period in 2010. The drop in RevPAR was due to a decrease in occupancy from 60.9% during the three months ended September 30, 2010 to 57.8% for the same period in 2011, a relative decrease of 5.1%.

Nine months ended September 30, 2011 Nine months ended September 30, 2010
Occupancy ADR RevPAR Occupancy ADR RevPAR
Full Service 62.5 % $ 104.11 $ 65.08 56.9 % $ 105.20 $ 59.89
Select Service 50.5 % $ 81.36 $ 41.07 51.9 % $ 82.23 $ 42.65

The Company's full service hotels generated an increase in RevPAR of $5.19, or 8.7%, to $65.08 for the nine months ended September 30, 2011 compared to $59.89 for the same period in 2010. This increase in RevPAR was due to an increase in occupancy from 56.9% during the three months ended September 30, 2010 to 62.5% for the same period in 2011, a relative increase of 9.8%.

The Company's comparable select service hotels generated a decrease in RevPAR of $1.58, or 3.7%, to $41.07 for the nine months ended September 30, 2011 compared to $42.65 for the same period in 2010. This decrease in RevPAR was mostly due to a decrease in occupancy from 51.9% during the nine months ended September 30, 2010 to 50.5% for the same period in 2011, a relative decrease of 2.7%.

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 3,167 rooms, are located in five Provinces and Territories across Canada. Twenty-three of the Company's hotels operate under internationally recognized brands such as Travelodge®, Super 8®, Holiday Inn®, Hilton®, Ramada® 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" a nd "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.

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