FelCor, La Quinta Cling to Optimism for Q3, Q4

Both North Texas-based hoteliers have set aside money to buy. FelCor did just that in mid-July while La Quinta is still sitting tight on its cash.

This time around, the conference calls didn't hold any great surprises. Both hoteliers ended the quarter within their adjusted guidance levels and both are saying it's still difficult to forecast where they are going.

FelCor's total RevPAR for the second quarter was 11.1% below last year's midpoint, with 56% of the decline related to the average daily room rate. The Q2 EBITDA was $94.6 million in comparison to $111.4 million at midyear 2001. Occupancy is 66%, three points above the industry average.

At La Quinta, RevPAR dropped 8.5% to $39.38 in the second quarter with occupancy also being reported at 66%. The average daily room rate fell 4.4% to $59.70 in response to reduced demand. EBITDA was $54.8 million, down 16.3% from 2001.

"The industry's recovery has not kept pace with previously anticipated levels, which is the result of the continued softness in corporate transient business," Thomas J. Corcoran Jr., FelCor's president and CEO, said in a press release.

La Quinta's Francis W. "Butch" Cash, president and CEO, told shareholders and analysts that he's "confident once the US gets back on its feet we are going to see a demand increase for hotel rooms." Still, he was openly dissatisfied with the chain's revenue performance.

Part of La Quinta's problem, and others in its class, is that it's being pressured by the full-service hotels. And that, says Cash, won't change until business travel returns and their rates go up. "The full-service guys are sitting right on top of us," he said in the conference call.

It does appear that cost-cutting measures, put in place over the past year, might end up permanent fixtures for both owners. At FelCor, the hiring freeze remains intact except for key positions.