SPOKANE, WA, March 2, 2011 - Red Lion Hotels Corporation (NYSE: RLH), a western U.S.-based owner of midscale hotels, today announced its results from continuing operations for the fourth quarter and full year ended December 31, 2010.
Fourth quarter RevPAR for owned and leased hotels increased 11.4 percent year over year; RevPAR was up 5.4 percent for the full year
Fourth quarter occupancy of 50.4 percent increased 350 basis points; contributing to a 160 basis point increase for the full year
Fourth quarter ADR at owned and leased hotels increased 3.5 percent year over year to $79.41; ADR was up 2.5 percent for the full year
2010 EBITDA was $22.4 million before special items, down $5.0 million year over year
During the fourth quarter, the company recognized an impairment charge of $5.7 million on its Red Lion Hotel Sacramento at Arden Village
The company listed two properties for sale as part of a strategy to increase financial flexibility
Red Lion Hotels earns the top customer satisfaction score in the 2010 Market Metrix Hospitality Index for the midscale with food and beverage hotel segment
Total revenue during the fourth quarter was $36.9 million, up 2.5 percent from $36.0 million in the prior year period. Revenue from hotels was $33.1 million, up 3.9 percent from $31.8 million in the fourth quarter of 2009. EBITDA before special items for the fourth quarter of 2010 was $0.6 million, compared to $3.3 million for the fourth quarter of 2009. Net loss before special items was $4.5 million in the quarter, or $0.24 per share, compared to a net loss of $2.7 million, or $0.14 per share, for the prior year period. Reported net loss including special items was $7.2 million in the quarter, compared to $8.2 million in the prior year period.
"We posted top line growth during the fourth quarter due to continued momentum in RevPAR performance driven by both occupancy and rate increases," said President and Chief Executive Officer Jon E. Eliassen. "This revenue contribution did not, however, result in improved profitability for the company during the fourth quarter and full year, as our investments in sales, marketing and franchising continue to have longer payback periods. Looking forward, we believe these investments will benefit Red Lion as the industry rebounds, positioning the company for long term profitability. While we remain confident in the initiatives we have put in place, our performance in 2011 will be primarily dependent on the scale and the pace of economic recovery in the markets in which we operate. Unfortunately, similar to many midscale hotels across the country, hotels in many of our key markets are experiencing a softening of demand in the first quarter that the company anticipates will reverse in the second half of the year."
Summary results for the three month and full year periods follow:
In addition, key hotel operating metrics on a comparable basis, and reported hotel operating margins for the fourth quarter and full year periods ended December 31, 2010 and December 31, 2009 are highlighted below for owned and leased hotels from continuing operations:
Fourth Quarter 2010 Results
Comparing the fourth quarter 2010 to 2009, RevPAR for owned and leased hotels increased 11.4 percent driven by a 350 basis point improvement in occupancy and a 3.5 percent increase in ADR. Systemwide RevPAR (which includes franchised hotels) on a comparable basis for the quarter increased 7.9 percent as a result of a 310 basis point increase in occupancy and a 1.2 percent increase in ADR.
Compared to the prior-year period, revenue from hotels was up 3.9 percent to $33.1 million primarily as a result of an 11.4 percent, or $2.3 million increase in room revenue, which was driven by occupancy gains from transient and group business, combined with rate growth from a continued emphasis on the previously announced modifications to food and beverage offerings. These offerings consequently drove a $1.1 million decline in food and beverage revenue.
Hotel direct operating margin declined to 10.2 percent during the fourth quarter 2010 compared to 12.4 percent in 2009. The margin decrease in the quarter resulted from continued investments in sales and marketing, technology and personnel resources designed to position the company for revenue and profitability growth. An additional driver of the decrease was an insurance adjustment for past claims. Year over year margin would have been 11.4 percent, excluding the insurance adjustment.
Franchise revenue was relatively flat at $0.8 million year over year, and entertainment revenue decreased to $0.4 million largely because the fourth quarter of 2009 included Disney's The Lion King, one of the company's most successful "Best of Broadway" productions.
Full Year Ended December 31, 2010 Results
Total revenue for the full year ended December 31, 2010 was $163.5 million, down 1.3 percent from $165.7 million in 2009. As mentioned above, the change was primarily driven by a $2.5 million decline in the entertainment segment. Reported revenue from hotels was $148.6 million, up 0.5 percent from $147.8 million in the prior year.
RevPAR for owned and leased hotels on a comparable basis for 2010 increased 5.4 percent. The increase was principally driven by strategic revenue management, group sales and the aforementioned modifications to food and beverage offerings. Systemwide RevPAR on a comparable basis increased 3.5 percent year over year.
Hotel direct operating margin declined to 21.5 percent from 23.4 percent in the prior year. The decline was primarily a result of investment in sales and marketing, technology and personnel resources designed to position the company for future growth.
Franchise revenue declined $0.4 million to $3.2 million. Entertainment revenue decreased 21.0 percent to $9.2 million, which resulted in a $0.8 million margin decline. This decline was again primarily due to the previous year including results from the successful production of Disney's The Lion King.
EBITDA before special items for the full year ended December 31, 2010 was $22.4 million, compared to $27.4 million in the prior year. Net loss in 2010 before special items totaled $4.7 million, or $0.25 per share, compared to net loss before special items of $1.0 million, or $0.06 per share, in the prior year.
The company announced on December 2, 2010, a new franchise agreement in Concord, CA. The company announced the opening of the full service Red Lion Hotel Concord - Walnut Creek on December 21, 2010.
Also as previously announced, the company has agreements for franchises in place for two additional properties in Northern California. The full service Red Lion Hotel Oakland International Airport opened on February 16, 2011. The Red Lion Inn Rancho Cordova, a limited service hotel, is expected to open in April 2011.
During the fourth quarter, the company agreed to terminate the sublease and franchise agreement with the operator of the Red Lion Hotel Sacramento at Arden Village. The company subsequently subleased and franchised the property to a new operator who already has two hotels in the Sacramento area. As a result of the termination of the previous operator's sublease, the company recognized an impairment charge of $5.7 million. This charge is reflected as a special item for 2010 and separately identified in the company's operating results.
Liquidity and Balance Sheet
As of December 31, 2010, the company had approximately $4.0 million in cash and cash equivalents, and outstanding debt of $126.0 million.
Capital expenditures during the full year ended December 31, 2010 totaled $10.6 million. Capital expenditures were made for core investments in technology and necessary hotel improvement projects, which reflects the company's continued focus on investing as appropriate to maintain competitive guest services.
On January 10, 2011, the company amended its syndicated credit agreement to modify the total leverage ratio and senior leverage ratio covenants for the remaining term of the facility. As consideration for the amendment, the company paid additional fees and agreed to an increase in rates. Additionally, the capacity under the line of credit was reduced to $30.0 million from $37.5 million. Management does not expect the reduction in capacity under the line of credit to impact its liquidity or operating plans.
On January 18, 2011, the company announced the listing for sale of two hotels, Red Lion Hotel Fifth Avenue Seattle and Red Lion Hotel Denver Southeast. The sale of the properties will enable the company to unlock real estate value through selective reduction of asset ownership. Proceeds will be used to restructure the company's balance sheet, including the reduction of debt. This will create the financial flexibility necessary to refinance and reposition other hotel properties as the market rebounds while better positioning the company for growth through franchising. Last week, the company received numerous offers to purchase the Red Lion Hotel Fifth Avenue and is in the process of evaluating the offers.
On February 14, 2011, the company announced that its Board of Directors named Jon E. Eliassen to the position of President and Chief Executive Officer, removing his previous interim status.
On February 23, 2011, the company was awarded the top customer satisfaction score in the 2010 Market Metrix Hospitality Index for the midscale with food and beverage hotel segment.
Outlook for 2011
Due to the listing of two hotels for sale and the potential financial effect of these expected transactions, the company will only provide RevPAR guidance for 2011 at this time. Based on the outlook for the markets in which the company operates and information available today, the company is providing the following RevPAR guidance for 2011:
Full year 2011 RevPAR for company owned and leased hotels is expected to increase 3to 5 percent compared to 2010 on an annual basis.
Because of softness in many of the company's markets to date in the first quarter, the company expects to see more of the anticipated increase in RevPAR in the second half of the year.
The company expects to invest $10.6 million in capital improvements in 2011.
Conference Call Information
The company will conduct a conference call on March 2, 2011 at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time), to discuss the results for interested investors, analysts and portfolio managers. Hosting the call will be President and Chief Executive Officer Jon E. Eliassen and Senior Vice President and Chief Financial Officer Dan Jackson. Executive Vice President and Chief Operating Officer George Schweitzer will also be available to answer questions.
To participate in the conference call, please dial the following number ten minutes prior to the scheduled time: (800) 230-1092. International callers should dial (612) 332-0637.
This conference call will also be webcast live at http://www.redlion.com in the Investor Relations section of the website. To listen to the live call, please go to the Red Lion website at least fifteen minutes prior to the start of the call to register and to download and install any necessary audio software. For those unable to participate during the live broadcast, a replay will be available at 4:00 p.m. Pacific Time on March 2, 2011, through April 2, 2011 at (800) 475-6701 or (320) 365-3844 (International) access code - 192820. The replay will also be available shortly after the call on the Red Lion website.
About Red Lion Hotels Corporation:
Red Lion Hotels Corporation is a hospitality and leisure company primarily engaged in the ownership, operation and franchising of midscale hotels under its Red Lion® brand. As of December 31, 2010, the RLH hotel network was comprised of 44 hotels located in eight states and one Canadian province, with 8,557 rooms and 425,397 square feet of meeting space. The company also owns and operates an entertainment and event ticket distribution business. For more information, please visit the company's website at www.redlion.com.
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; 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 year ended December 31, 2010 and in other documents filed by the company with the Securities and Exchange Commission.
Stacy Feit, Vice President
Financial Relations Board
Director of Corporate Communications