American Hotels reports loss and braces for COVID-19

• American Hotels Income Properties’ (TSX:HOY) full-year revenue was down 1 per cent to C$335.2 million in 2019
• The company reported a net loss of $7 million, compared to a net profit of $8.4 million in 2018
• The lower figures were caused by non-cash losses connected to the company’s discontinued operations
• The company is reducing its monthly cash distribution by 29.6 per cent to combat the market effects of COVID-19
• American Hotel Income Properties (HOT) is down 16.59 per cent, with shares currently trading for $3.57

American Hotels (TSX:HOT) has released a tepid 2019 report and admits their first quarter will be further marred by COVID-19’s economic impact.

In 2019, full-year revenue was down 1 per cent to C$335.2 million and the company reported a net loss of $7 million.

In 2018, the company was profitable, reporting a net income of $8.4 million. The change in income was the result of an asset sale which negatively impacted revenue.

American Hotels sold Economy Lodging Hotels late last year and, as a result, wrote down a non-cash loss.

Ignoring the discontinued operations, revenue and net income were marginally up, 5.4 per cent and 2.5 per cent respectively.

Looking forward, the company expects to be impacted by COVID-19. Slowed tourism and general economic downturn is likely to affect hotel capacity in the coming quarters.

Unlike hotels in so-called “gateway cities”, AHI’s properties are situated in smaller and more rural settings. This means that global travel bans will affect the company less than hoteliers in major cities.

Consequently, AHI was quick to point out that they have not yet been significantly affected by the outbreak. However, to combat a likely reduction in bookings, the company has chosen to reduce its monthly cash distribution by 29.6 per cent.

This will allow the company to retain around $15 million throughout the year. The company will use these for general operating and investment purposes and to reduce leverage, if required.

John O’Neill, CEO of American Hotels, believes these measures are necessary given the unpredictability of the current market.

“These continue to be evolving circumstances, and we believe the actions we’re implementing today will better situate our business to perform in this period of disruption and best position our platform of Premium Branded hotels for future long-term accretive growth,” he said.

American Hotel Income Properties (HOT) is down 16.59 per cent, with shares trading for $3.57 at 3:42pm EST.