Hersha Q1 Consolidated RevPar Up

PHILADELPHIA-Despite a challenging economy, Hersha Hospitality Trust's RevPar for its consolidated hotels was up 4% to $73.01, compared to $70.20 in Q1 2009. The company's occupancy also increased from 57.13% to 61.34%. But on a same-store basis, RevPAR for the quarter was effectively unchanged at $70, a decrease of 0.2%, from the same quarter in 2009. The decline was a result of an ADR decrease of 5.6% to $116.06 as well as an increase in occupancy from 57.08% to 60.31%.

The locally based REIT--which owns interests in 76 hotels, totaling 9,838 rooms, primarily along the Northeast Corridor from Boston to Washington DC--also revealed its first-quarter financial results during a conference call yesterday. The Trust posted a first-quarter net loss of $15.8 million, or 16 cents per share, compared to a net loss of $9.8 million, or 21 cents per share, in Q1 2009.

Hotel EBITDA for Hersha's consolidated hotels was $13.1 million for the quarter, compared to $11.0 million for the same period in 2009. Hotel EBITDA margins improved 78 basis points year-over-year during Q1 from approximately 25.8% to 26.6%, due primarily to the company’s ongoing cost-cutting initiatives and the stabilization of its newest acquisitions.

According to Hersha, the company is significantly impacted by the seasonality of corporate and leisure travel in the Northeast US, and the first quarter historically accounts for less than 15% of the company’s annual consolidated EBITDA. “In the first quarter, our consolidated portfolio delivered positive RevPAR growth for the first time in five quarters," said Hersha Hospitality’s CEO Jay H. Shah. "This growth was primarily attributable to our high-quality, well-located portfolio of assets combined with increasing demand from the corporate and leisure traveler. In addition, our revenue management strategies have allowed us to maintain high levels of occupancy throughout this downturn and to increase EBITDA margins in the latest quarter."

As demand returns to the hotel markets, Shah expects to begin to recapture rate. "This rate growth, combined with increasing market share of our newer assets and the benefits of our cost containment initiatives will lead to RevPAR improvements.” He added, "During the recent economic cycle, we have taken advantage of the dislocation in the capital and real estate markets to better position our portfolio, including a number of accretive acquisitions that have increased our New York City portfolio by two-thirds over the past two years and have simultaneously reduced the average age of our New York City portfolio to two years." He also noted that Hersha will be selective in its acquisitions going forward, seeking assets with growth prospects at or above the company’s existing growth rate.

Including the acquisitions completed in the first quarter, the New York City portfolio now consists of 12 consolidated hotels, accounting for 21.7% of the company’s keys. For the first quarter of 2010, the New York City portfolio upped its occupancy by 4.8% to 77.33% and a 5.7% increase in RevPAR to $116.38. During the same period, Hotel EBITDA margins for this portfolio improved 670 basis points to 30.3% as a result of accretive acquisitions, aggressive cost containment programs and continued stabilization of newer assets.

Hersha’s New York City portfolio includes a number of relatively new properties that are still ramping up their operations, including three hotels acquired in February 2010 for $165.0 million--the 184-room Hampton Inn, the 188-room Candlewood Suites and the 210-room Holiday Inn Express, all of which opened in July 2009 and were purchased unencumbered of debt. The basis for the three hotels is approximately $284,000 per key, and the acquisitions further Hersha's strategy of expanding its presence in New York City.

Looking ahead to the second quarter, Shah said that the company's performance will likely be strongest in New York City and Boston and it will be on par with national averages in Central PA, Connecticut, Rhode Island and Philadelphia. Underperforming regions look to be Washington, DC, California and Arizona.