La Quinta executives on a fourth-quarter earnings call detailed performance declines due to hurricanes, and mentioned that Wyndham’s acquisition of the company’s franchise and management businesses is expected to close in the second quarter of 2018.
IRVING, Texas—La Quinta Holdings executives declined a question-and-answer session with analysts on the company’s fourth-quarter and full-year earnings call due to Wyndham Worldwide’s pending acquisition of the company’s franchise and management businesses, but they did give details on how hurricanes hurt fourth-quarter performance in 2017.
“We are on track to complete the planned spinoff of our owned real-estate assets as CorePoint Lodging and execute the planned sale of La Quinta’s franchise and management businesses to Wyndham Hotel Group,” La Quinta President and CEO Keith Cline said. “While we do not have much more detail to share at this point, I can say that the transaction is expected to close in the second quarter of 2018, subject to the approval of our stockholders, regulatory approvals and satisfaction of customary closing conditions.”
During the fourth quarter, 7% to 8% of La Quinta’s hotels were out of service because of damage caused by Hurricane Harvey and Hurricane Irma, Cline said.
“Hurricanes Harvey and Irma have had a significant impact on our business, lifting the performance of our franchise hotels, but creating significant challenges for (some) of our owned hotels, particularly those in Florida affected by Hurricane Irma,” he said.
On the company’s third-quarter earnings call, La Quinta officials said they anticipated hurricane damage to its portfolio would result in an impact of $5 million to adjusted earnings before interest, taxes, depreciation and amortization, which Cline said led the company to reduce its full-year adjusted EBITDA guidance by a similar amount.
“We now estimate that the impact of the hurricanes on fourth-quarter results was a reduction of approximately $6 million in adjusted EBITDA,” he said. “Our teams continue to work closely with insurance adjusters, contractors and general managers to put the affected rooms back online as quickly as possible, but the damage caused by Hurricane Irma continues to have a significant impact on our business in Florida.”
Cline said 5% of La Quinta’s owned rooms remain out of service today, and hotels in Florida will unfortunately miss out on the benefits of peak season.
“As a result of this ongoing challenge, we currently estimate that the revenue loss due to damage caused by the hurricanes could be in the range of $40 to $50 million, translating to an adjusted EBITDA loss of $28 (million) to $35 million for the full-year 2018,” he said.
Cline added that he believes this disruption in performance will be limited to 2018 results.
Systemwide comparable revenue per available room increased 2.9% for full-year 2017, according to the company’s earnings release. “Excluding the owned hotels significantly impacted by Hurricanes Irma and Harvey, and the owned hotels undergoing significant renovation, systemwide RevPAR grew 4.4%,” the release states.
The company grew the number of rooms in the development pipeline by 6% and opened 36 franchise hotels with 3,100 rooms.
During the call, Cline mentioned that comparable systemwide RevPAR for the fourth quarter was 5.6% excluding hotels affected by the hurricanes. Comparable systemwide RevPAR grew 3.4% in the fourth quarter.
As of press time, La Quinta’s stocks were up 2.3% year to date. The Baird/STR Hotel Stock Index was down 0.1% for the same time period.