Holloway Lodging Corporation reports Q3 2015 results and declares quarterly dividend


HALIFAX, NS, Nov. 12, 2015 /CNW Telbec/ - Holloway Lodging Corporation (TSX: HLC, HLC.DB, HLC.DB.A) ("Holloway") today announced financial results for the three months ended September 30, 2015. All amounts are in Canadian dollars unless otherwise indicated. Readers should refer to Holloway's unaudited interim consolidated condensed financial statements as at September 30, 2015 and its management discussion and analysis which are available on Holloway's website at www.hlcorp.ca and on SEDAR at www.sedar.com.

An investor conference call will take place on Monday, November 16, 2015 at 10:30 a.m. EST, with Holloway's senior management.

Investors and analysts are invited to access the call by dialing 1-416-764-8688 or 1-888-390-0546 depending on your area code. You will be required to identify yourself and indicate if you represent an organization or if you are a private investor. A recording of this call will be available from 12:00 p.m. EST on November 16, 2015 through November 23, 2015 at 4:00 p.m. EST. To access the recording, please dial 1-416-764-8677 or 1-888-390-0541 and enter the playback passcode 417441#.

Third Quarter Overview and Outlook

Three Months Ended September 30










Operating income(1)




Operating income margin



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Net income (loss) attributable to shareholders




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Funds from operations




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(1) Before depreciation and amortization.


Hotel Performance

Holloway's third quarter results were below those achieved last year and were generally affected by two factors. First, our two largest hotels (representing 14% of total rooms) were either partially or fully closed for renovations during the quarter. Second, our hotels in Western Canada have been impacted by the lower energy prices that have persisted throughout 2015. To date, the weaker performance in Western Canada has been driven more by lower occupancy than lower rates which is better for us than the converse. Partially offsetting these factors was the performance of our hotels in Atlantic Canada which exceeded internal expectations.

Notwithstanding the above, there are many positive developments at Holloway, including the following:

  • Our operating margins remained steady despite lower revenues. This is being accomplished through a rigorous focus on reducing fixed costs and constantly adjusting variable costs to our day-to-day revenue fluctuations. We have also closed or reduced the operating hours of several hotel food and beverage outlets which do not generate meaningful, if any, cash flow.
  • We are a more diversified company now than during previous oil downturns with the majority of our NOI coming from markets other than Alberta and British Columbia.
  • Our balance sheet is in excellent condition with 40% of our debt in the form of covenant-light debentures that mature between 2018 and 2020 and nine unencumbered properties available to be financed if needed or desired. Holloway currently has the lowest leverage level of any publicly-traded hotel company in Canada.
  • Our two hotel renovations are nearing completion with full operations expected to resume by the second week of January 2016. This benefits us in two ways: our capital spending will decline beginning in 2016 and our cash flows will increase. To date, advance bookings at both hotels are being completed at substantially higher rates than the rates we obtained prior to the renovations, in some cases 50% higher.
  • We continue to generate meaningful cash flow (especially in relation to our valuation), which we can deploy to various attractive uses, as described below. In recent months, we have seen many companies with operations in Western Canada cut their dividends, sometimes multiple times. We always preferred to deploy our capital to more accretive endeavours than dividends so that it may compound for the benefit of shareholders and, therefore, our dividend has been, and remains, modest and secure. In the third quarter our payout ratio was 29% based on net income and 10% based on funds from operations.

Balance Sheet

Holloway's debt level was $261.5 million immediately following the acquisition of Royal Host. This was reduced to $250.8 million at December 31, 2014 and has since been reduced further to $230.5 million at September 30, 2015.

Capital Allocation

We continue to generate meaningful cash flow, which has been used in part on the following initiatives:

During the quarter, work progressed on our two hotel rebrandings and renovations, the DoubleTree by Hilton® in London, ON and the Holiday Inn® in Ottawa, ON. As discussed above, we expect the renovations to be completed by year-end and for the hotels to fully reopen within the first two weeks of 2016. These renovations represent a significant capital outlay for Holloway, equivalent to acquiring multiple hotels; we believe the renovations will significantly improve the performance and value of the properties in the coming years.

In September, we completed foreclosure proceedings and obtained ownership of the Days Inn® in Sydney, NS. We closed the property in mid-October following the completion of the summer travel season and expect to rebrand and renovate the property during the winter off-season. At present, we expect the total cost of the property (acquisition, foreclosure and renovation costs) to be approximately $3.3 million and we believe the hotel is capable of generating NOI in excess of $500 thousand annually.

Between July 1 and October 31, we repurchased 322,600 shares or 1.7% of our outstanding shares at an average price of $4.92 per share. During this time frame, we also repurchased $84 thousand of our 6.25% convertible debentures at an average cost of $90.34 per $100 of face value.

Finally, we paid our quarterly dividend of $0.035 per share in September. While we are capable of increasing our dividend given our low payout ratio, we believe our capital is better deployed by reinvesting in our core business or in our own shares.


There continues to be considerable uncertainty regarding oil and gas activity in Western Canada as a result of lower energy prices and changes in the Alberta and Canadian governments. This will continue to impact our Western Canada hotels. However, we will continue to take all actions in our control to maximize revenues, including diversifying our sources of occupancy and actively managing our rates, and reducing our costs. We expect our Ontario and Atlantic Canada hotels to continue to perform well.

Dividend Declaration

On November 11, 2015, the Board of Directors declared a quarterly dividend of $0.035 per share, representing an annual dividend of $0.14 per share. The dividend is payable on December 15, 2015 to shareholders of record on November 30, 2015.


Holloway is a real estate corporation focused on acquiring, owning and operating select and limited service lodging properties and a small complement of full service hotels primarily in secondary, tertiary and suburban markets. Holloway owns 36 hotels with 4,132 rooms. Holloway's shares and debentures trade on the TSX under the symbols HLC, HLC.DB and HLC.DB.A.

This press release contains forward-looking information within the meaning of applicable securities laws. Forward-looking information may relate to Holloway's future outlook and anticipated events or results and may include statements regarding Holloway's future financial position, business strategy, financial results, plans and objectives. In some cases, forward-looking information can be identified by terms such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "potential", "continue" or other similar expressions concerning matters that are not historical facts. Forward-looking information is subject to certain factors, including risks and uncertainties, that could cause actual results to differ materially from what Holloway currently expects and there can be no assurance that such statements will prove to be accurate.  Some of these risks and uncertainties are described under "Risk Factors" in Holloway's annual information form for the year ended December 31, 2014 which is available on Holloway's profile on the SEDAR website at www.sedar.com. Holloway does not intend to update or revise any such forward-looking information should its assumptions and estimates change.


SOURCE Holloway Lodging Corporation

For further information: Michael Rapps, Chairman, at (416) 855-1925 or Jane Rafuse, Chief Financial Officer, at (902) 443-5101.


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