These are tough times in the hotel
industry, but tougher for some than others.
Host Hotels & Resorts, which
runs upscale hotels under brands like Marriott, Ritz-Carlton and Westin,
posted better-than-expected earnings Friday and offered a profit
forecast that indicated dour industry analysts were a touch too wary of
its prospects for the coming months.
Not that there was anything really good in the
third quarter report from the Bethesda, Md.-based lodging and
real estate investment trust,
other than they were above analysts' estimates. Profit was well below
last year's levels. Host Hotels & Resorts (nyse:
HST -
news -
people ) was
adversely affected by a sharp decline in guests at its two properties in
Hawaii.
The high cost of gasoline combined
with the rising airfares is keeping people at home, causing the
hospitality industry to expect the worst in the coming year.
Shares of the REIT were up after the
earnings beat, rising 18.2%, or $1.43, to close at $9.28. The stock
touched a five-year low of $7.29 early in the session. Host Hotels'
shares hit their 52-week high of $23.26 early last October.
Host Hotels' third-quarter profit fell
to $54.0 million, or 10 cents per share, from $97.0 million, or 18 cents
per share, a year earlier. Revenue dropped 2.4%, to $1.17 billion. The
company said third-quarter funds from operations, a key indicator for
real estate investment trusts, fell to 31 cents per share, from 38 cents
per share, in the year-ago period. Analysts surveyed by Reuters had
expected funds from operations of 28 cents per share.
Deutsche Bank analyst Chris
Woronka said in a note to investors that the small earnings beat would
be of little long-term solace as investors look to the bleak future
facing the hotel industry. Others in the hospitality industry, like
Wyndham Worldwide and Marriott, have expressed concerns about the coming
year and what the downtrodden economy will offer them. (See
"Hotel Execs Plead For Bailout Success.")
"We had expected that the third
quarter would reflect lower group demand," said Chief Executive Ed
Walter on a conference call with investors. "Unfortunately, we are
continuing to experience slower near-term bookings and the slight
increase in attrition rates, which suggest that group volume and revenue
will continue to decline in both the fourth quarter and at least the
first half of next year."
The REIT lowered it guidance for the
full year. It now expects earnings per share of 81 cents to 86 cents. In
July, it forecast 84 cents to 94 cents. Analysts expect 84 cents, on
average. The company now expects revenue per available room, the
industry standard measurement of hotel performance, to decline 3.0% to
5.0% for the fourth quarter and be flat to down 1.0% for the full year.
Host Hotels has 117 hotels with a
total of 64,000 rooms, and also holds a minority interest in a joint
venture that owns 11 hotels in Europe with approximately 3,500 rooms.
