Host Marriott profit falls 51 percent for 2nd quarter

Corporate-travel decline leads to lower '02 forecast

July 18, 2002|By BLOOMBERG NEWS

Host Marriott Corp., an owner of Four Seasons, Marriott and Hyatt hotels, said yesterday that its second-quarter profit fell 51 percent and cut its forecast for the year because of a decline in corporate travel spending.

Net income at the largest hotel real estate investment trust fell to $24 million, or 6 cents a share, from $49 million, or 16 cents, a year ago. Revenue fell 7.4 percent to $920 million for the quarter that ended June 14, Chief Financial Officer Robert Parsons said in a conference call.

About 56 percent of corporate travel planners think it will be more than a year before spending returns to "healthy" levels, according to the National Business Travel Association. As a hotel owner, Host Marriott is more vulnerable than managers or franchisers to changes in hotel room demand, investors said.

Host Marriott's shares fell 31 cents to close at $10.10, their lowest since Feb. 19.

The Bethesda-based company said its funds from operations fell to $100 million, or 36 cents per share, from $142 million, or 55 cents a share, in the quarter. On that basis, which isn't in accordance with generally accepted accounting principles, the results were in line with Wall Street's expectation of 35 cents a share.

Host Marriott said demand won't recover this year and that funds from operations will be $1.05 a share to $1.15 a share, missing the Wall Street expectation of $1.18. In April, the company forecast funds from operations of as much as $1.22 a share this year.

Host Marriott owns 123 properties including the Marriott Marquis in New York. The company bought Boston Marriott Copley Place Hotel last month for $214 million in cash and assumed debt. Host Marriott was created in the split of the former Marriott Corp. in 1992. Marriott International Inc. manages and franchises hotels, and Host Marriott owns properties.

Revenue per available room, a measure of average occupancy and room rate, fell 9.8 percent from a year earlier at Host Marriott's hotels, the company said.

With the slump in travel, PricewaterhouseCoopers, the accounting and financial services firm, said it expects hotel revenue per room to fall 0.7 percent this year, reversing its earlier forecast of a 3 percent gain.

Host Marriott said its revenue per room will fall 2 percent to 4 percent this year.

The company said it will pay a "minimal" dividend in the fourth quarter. Host Marriott suspended its 26 cents a share dividend payment in December because of declining profits.

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