Host Marriott earnings rise 42% Profit increases to $218 million in first quarter; Lodging


Host Marriott Corp., continuing to benefit from acquisitions and a robust lodging industry, yesterday reported its first-quarter earnings rose 42 percent from a year ago.

The Bethesda-based hotel owner generated earnings of $218 million before interest expense, taxes and noncash charges in the period ended March 27, largely on the strength of its upscale and luxury hotels.

"We are off to a great start in 1998," said Terence C. Golden, Host Marriott's president and chief executive officer. "Our first-quarter results remained strong compared to 1997. Our acquisition activity has been exceptional. We expect our lodging operations to maintain their strength throughout 1998."

Revenue in the quarter was $345 million, up 37 percent from the first quarter in 1997. At the same time, the company reported that comparable full-service hotel earnings before interest expense, taxes and noncash charges increased 14.4 percent, on a 9.0 percent increase in revenue per available room, a key lodging industry gauge of financial health.

At the end of the quarter, Host Marriott's average daily room rate was up 8.5 percent, to $148.30 per night, while its average occupancy rose slightly, to 78.4 percent.

Host Marriott also announced that its interest coverage in the first quarter of this year increased to almost 2.8 times, as compared with 2.6 times in the first quarter of 1997.

"They put up a pretty good quarter," said Bill Moore, a lodging industry analyst at Forum Capital Markets, a Connecticut brokerage firm. "They've been able to continue to generate earnings at 1.6 times their revenue available per room, which bodes well for them, because it shows they're able to take more of their earnings to the bottom line."

Host Marriott is planning other moves. Last month, the company JTC announced plans to convert to a real estate investment trust next year, and spin off its 31 senior living communities.

As part of the REIT conversion, Host Marriott hopes to refinance $1.55 billion of public debt, potentially refinance some of its $2 billion in mortgage debt and possibly issue perpetual preferred stock, according to a filing with the U.S. Securities & Exchange Commission.

Host Marriott expects to continue buying hotels. This year the company has completed or announced purchases totaling nearly billion, including an acquisition of 13 projects from the Blackstone Group for $1.78 billion. It expects to spend another $500 million before the end of the year.

Host Marriott owns 99 upscale and luxury hotels valued at $6.76 billion.

"The combination of this operating strength, our outstanding acquisition program, and our recently announced conversion to a REIT at the end of 1998 should position us to continue to deliver exceptional returns into 1999 and beyond," Golden said.

Host Marriott shares rose 62.5 cents yesterday to close at $20.0625 on the New York Stock Exchange.

Pub Date: 5/02/98

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