SPOKANE, Wash. - WestCoast Hospitality Corporation (NYSE: WEH) today announced financial results for the fourth quarter and year ended December 31, 2004.
During the fourth quarter of 2004, system-wide RevPAR (revenue per available room) for comparable hotels (hotels owned, leased, managed and franchised for at least one year) increased 10.1% over the 2003 fourth quarter levels to $35.45. This increase was due to a 2.2% increase in average daily rate to $68.23, and a 3.7 point increase in occupancy, to 52.0%.
For the full year 2004, system-wide RevPAR for comparable hotels increased 7.2% over the 2003 level to $41.75. The increase resulted from a 1.0% increase in average daily rate, to $71.28, and a 3.4 point increase in occupancy, to 58.6%. Additional statistics are set forth in the attached financial statements.
During the fourth quarter, the company announced its plan to invest $40 million to improve comfort, freshen décor and upgrade technology at its hotels. The company also announced its plan to sell 11 non-strategic hotels and other non-core properties and use the proceeds from the sales to support its $40 million hotel investment. In connection with the company's announcement, it reclassified 11 hotels and one office building as discontinued operations. It also reclassified these properties as held for sale, which resulted in the company recording an impairment on four hotels during the fourth quarter in the aggregate amount of $5.8 million, as adjusted for the tax benefit.
For the fourth quarter, the company's loss applicable to common shareholders was $0.63 per share, compared to $0.20 in the fourth quarter of 2003. For the full year 2004, the company's loss applicable to common shareholders was $0.51 per share, compared to $0.10 in 2003. The impairment recorded by the company in the fourth quarter accounted for $0.44 of the 2004 per share losses. Without the impairment, the loss for 2004 would have been $0.07 per share, an improvement of $0.03 per share over the prior year. Upon closing of the sales of the properties to be divested, which is expected to occur during 2005, the company anticipates that it will recognize aggregate post-tax gains on seven hotels and non-core properties in the range of $6.6 million to $9.3 million. In the fourth quarter, the company had total revenue from continuing operations of $38.4 million, up 7.0% from the comparable period in 2003. EBITDA (earnings before interest, taxes, depreciation and amortization) from continuing operations was $3.0 million, up 24.1% from the prior year quarter. For the full year 2004, the company achieved a 3.6% increase in revenues from continuing operations, to $163.1 million. Full year EBITDA for 2004 from continuing operations was up 4.5%, to $22.6 million.
Arthur Coffey, President and Chief Executive Officer, said, "The growth in RevPAR we experienced during the fourth quarter substantially improved our margins, validating the hotel improvement plan we implemented in 2004. Our planned acceleration of this plan, along with the momentum continuing to build in market demand, should combine to make 2005 a very positive year for the company. We believe that our Red Lion brand is well-situated for expansion into new markets. As a result of the improvements we are making to our owned hotels and the consistency of high brand standards we are achieving, prospective partners and franchisees are expressing strong interest in new transactions. In addition, we expect our divestment of non-core properties in 2005 will result in recognition of gains that exceed the impairment we recorded in the fourth quarter.
During the quarter, the company also announced the hiring of well-known industry executive Anupam Narayan. Mr. Narayan joined the company in November as Executive Vice President, Chief Investment Officer. On January 15, 2005, Mr. Narayan was appointed to the additional position of Chief Financial Officer. Mr. Narayan said, "I am excited to join the team at WestCoast Hospitality Corporation at a time when the company is expanding the Red Lion brand from its long-established western U.S. base and building it into a strong North American competitor in the full-service, upper mid-scale market. I am looking forward to working with the team to attain this goal." The company also recently obtained a new $20 million credit facility with Wells Fargo Bank which will allow it to further accelerate the improvements to its hotels. Mr. Narayan noted, "Wells Fargo clearly understands our strategy and has been very attentive to our desire to fund strategic improvements to our hotels prior to the increased seasonal demand the lodging industry typically experiences in the spring and summer."
In December, 2004, the company engaged Colliers International as its listing broker for the sale of the 11 hotel properties. Colliers reports significant market interest in the hotels being held for sale.
Hotel Division Performance
For the fourth quarter, the company reported hotel and restaurant revenue from continuing operations of $32.9 million, up $0.9 million from the previous comparable quarter. Operating margins improved substantially during the quarter, with expenses increasing only $0.4 million. For full-year 2004, hotel and restaurant revenue from continuing operations increased $2.8 million while expenses increased $3.0 million. John Taffin, Executive Vice President, Hotel Operations, said, "Our investment in new brand initiatives during the past year yielded great returns in the form of significant RevPAR growth during the third and fourth quarters. As a result, we have achieved substantial increases in operating margins during the second half of the year in hotels we own and operate. Guests have embraced our Stay Comfortable beds and room amenities package, our Net4Guests free wireless internet access and our 'We Promise or We Pay' lowest rate website guarantee. We believe these initiatives have played a large role in our increased occupancy year on year for each of the last 13 months, and our increased ADR year on year for each of the last six months." During the second quarter of 2005, the company expects to complete the upgrade of all beds and bedding in its owned hotels to Stay Comfortable standards and begin renovations on the balance of the guestrooms, guest bathrooms and public spaces.
Franchise, central services and development revenue was $0.6 million in the fourth quarter of 2004, versus $0.7 million in the comparable period of 2003. On February 1, 2005, the company announced the execution of a franchise license agreement for conversion to the Red Lion brand of a full-service, 318 room hotel at Jantzen Beach along the Columbia River in Portland, Oregon. Mr. Taffin commented, "The property will be opening as the 'Red Lion Hotel on the River' by the beginning of April. Our focus on new brand standards and our hub and spoke strategy have boosted interest from prospective franchisees and we expect to announce the execution of other new franchise license agreements in key markets this year."
Entertainment Division Performance
Entertainment division revenue was $3.7 million in the fourth quarter of 2004, compared to $2.0 million in the fourth quarter of 2003. The division's increase in revenues was primarily due to an increase in the number of events presented during the quarter, compared to the same quarter of 2003. The division experienced a small decrease in operating margins due to the costs associated with the event presentations. Year on year, entertainment division revenues increased $3.6 million to $11.6 million. Associated expenses increased $3.5 million to $10.5 million. Jack Lucas, Vice President, TicketsWest, said, "Our entertainment division continues to experience excellent revenue growth from period to period. We expect increased ticketing activity this year and are also looking forward to announcing our exciting Broadway Series lineup for the 2005-2006 season, which will include a 5 ½ week engagement of The Lion King, an excellent event for combined hotel and entertainment packaging."
Real Estate Division Performance
Real Estate division revenue from continuing operations in the fourth quarter was steady at $1.2 million. At the same time, the division was able to decrease its expenses by $0.1 million in the fourth quarter, to $0.7 million. For all of 2004, real estate division revenue from continuing operations increased $0.2 million while expenses were flat. In January, 2005, the company engaged CB Richard Ellis as its listing broker for the national marketing and sale of the Crescent Building in downtown Spokane, Washington. CB Richard Ellis has begun actively marketing this property for sale.
WestCoast Hospitality Corporation is a hospitality and leisure company primarily engaged in the ownership, management, development and franchising of mid-scale, full service hotels under its Red Lion® and WestCoast® brands. In addition, through its entertainment division, which includes its TicketsWest.com, Inc. subsidiary, it engages in event ticket distribution and promotes and presents a variety of entertainment productions. G&B Real Estate Services, its real estate division, engages in traditional real estate-related services, including developing, managing and brokering sales and leases of commercial and multi-unit residential properties.
This press release contains forward-looking statements within the meaning of federal securities law, including statements concerning plans, objectives, goals, strategies, projections of future events or performance and underlying assumptions (many of which are based, in turn upon further assumptions). The forward-looking statements in this press release are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those expressed. Such risks and uncertainties include, among others, economic cycles; international conflicts; changes in future demand and supply for hotel rooms; competitive conditions in the lodging industry; relationships with franchisees and properties; impact of government regulations; ability to obtain financing; changes in energy, healthcare, insurance and other operating expenses; ability to sell non-core assets; ability to locate lessees for rental property and managing and leasing properties owned by third parties; dependency upon the ability and experience of executive officers and ability to retain or replace such officers as well as other matters discussed in the Company's annual report on Form 10-K for the 2003 fiscal year and in other documents filed by the Company with the Securities and Exchange Commission.
Date: February 10, 2005
Contact: Anupam Narayan
Title: Executive Vice President, Chief Financial Officer