Innkeepers' RevPAR Rises 7% Despite Trouble Spots

PALM BEACH, FL-Revenue per available room rose 7.1% to $81.99 in the 65-property portfolio of locally based Innkeepers USA Trust during the second quarter of this year, compared with the same quarter a year ago. The increase was led by a 6.5%-improvement in average daily rate to $104.01.

The ADR-driven increase was expected, said Jeffrey H. Fisher, president and CEO, during a conference call. "We make money in the hotel business by making sure ADR floats to the bottom line," he said, "and we experienced a 70% flow-through from the top line to the bottom line." Fisher also said that 2006 budgeting is under way, and "we're looking to put in rate increases."

The RevPAR increase occurred despite an average RevPAR increase of just 3.2% in the company's eight Silicon Valley, CA properties and a 22% decline in RevPAR at Four Points by Sheraton in Fort Walton Beach, which was damaged by Hurricane Ivan in third-quarter 2004. Excluding only the Fort Walton Beach property, RevPAR in the portfolio would have risen 8.3% for the quarter, Fisher said.

The top floor containing 25 rooms in one building of the Florida property is out of service, "perhaps forever," Fisher said, "as we explore all redevelopment options. I wouldn't be surprised to hear us talk about redevelopment options," adding, "it's a great condo market." As for Silicon Valley, despite the "moderately weak quarter, overall, we don't see the Valley being a drag, and we see long-term upside."

Net income for the company reached just over $64 million this second quarter, an 18% increase over the same quarter a year ago. Six-month revenue reached to almost $119.2 million, a 25% increase over the first half of 2004. Fisher noted that rising business, "particularly among business travelers, our primary customer," notable in this year's first quarter, continued into the second.