GENERAL
The following discussion should be read in conjunction with our unaudited
condensed consolidated financial statements and notes thereto appearing
elsewhere in this Form 10-Q and our Form 10-K for the fiscal year ended
FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-Q, including statements containing the
phrases "believes," "intends," "expects," "anticipates," "predicts," "projects,"
"will be," "should be," "looking ahead," "may" or similar words, constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. We intend that such forward-looking statements be subject to the
safe harbors created by such Acts. These forward-looking statements include
statements regarding our intent, belief or current expectations in respect of
(i) the declaration or payment of dividends; (ii) the leasing, management or
operation of the Hotels; (iii) the adequacy of reserves for renovation and
refurbishment; (iv) our financing plans; (v) our position regarding investments,
acquisitions, developments, financings, conflicts of interest and other matters;
(vi) expansion of
These forward-looking statements reflect our current views in respect of future events and financial performance, but are subject to many uncertainties and factors relating to the operations and business environment of the Hotels that may cause our actual results to differ materially from any future results expressed or implied by such forward-looking statements. Examples of such uncertainties include, but are not limited to:
? Covid-19 Virus Pandemic and its effect on the Economic and Travel Industry slowdown; ? local, national or international, political economic and business conditions, including, without limitation, conditions that may, or may continue to, affect public securities markets generally, the hospitality industry or the markets in which we operate or will operate; ? fluctuations in hotel occupancy rates; ? changes in room rental rates that may be charged byInnSuites Hotels in response to market rental rate changes or otherwise; ? seasonality of our hotel operations business; ? our ability to sell any of our Hotels at market value, listed sale price or at all; ? interest rate fluctuations; ? changes in, or reinterpretations of, governmental regulations, including, but not limited to, environmental and other regulations, the Americans with Disability Act and federal income tax laws and regulations; ? competition including supply and demand for hotel rooms and hotel properties; ? availability of credit or other financing; ? our ability to meet present and future debt service obligations; ? our ability to refinance or extend the maturity of indebtedness at, prior to, or after the time it matures; ? any changes in our financial condition or operating results due to acquisitions or dispositions of hotel properties; ? insufficient resources to pursue our current strategy; ? concentration of our investments in the InnSuites Hotels® brand; ? loss of membership contracts; ? the financial condition of franchises, brand membership companies and travel related companies; ? ability to develop and maintain positive relations with "Best Western Plus" or "Best Western" and potential future franchises or brands; ? real estate and hospitality market conditions; 27 ? hospitality industry factors; ? our ability to carry out our strategy, including our strategy regarding diversification and investments; ? the Trust's ability to remain listed on the NYSE American; ? effectiveness of the Trust's software program; ? the need to periodically repair and renovate our Hotels at a cost at or in excess of our standard 4% reserve; ? tariffs may affect trade and travel; ? our ability to cost effectively integrate any acquisitions with the Trust in a timely manner; ? increases in the cost of labor, energy, healthcare, insurance and other operating expenses as a result of changed or increased regulation or otherwise; ? terrorist attacks or other acts of war; ? outbreaks of communicable diseases attributed to our hotels or impacting the hotel industry in general; ? natural disasters, including adverse climate changes in the areas where we have or serve hotels; ? airline strikes; ? transportation and fuel price increases; ? adequacy of insurance coverage and increases in cost for health care coverage for employees and potential government regulation with respect to health care coverage; ? data breaches or cybersecurity attacks, including breaches impacting the integrity and security of employee and guest data; and ? loss of key personnel and uncertainties in the interpretation and application of the 2017 Tax Cuts and Jobs Act.
We do not undertake any obligation to update publicly or revise any forward-looking statements whether as a result of new information, future events or otherwise except as may be required by law. Pursuant to Section 21E(b)(2)(E) of the Securities Exchange Act of 1934, as amended, the qualifications set forth hereinabove are inapplicable to any forward-looking statements in this Form 10-K relating to the operations of the Partnership.
OVERVIEW
We are engaged in the ownership and operation of hotel properties. On
At
Our operations consist of one reportable segment -
Over time, we expect our
28
Our results are significantly affected by occupancy and room rates at the Hotels, our ability to manage costs, changes in room rates, and changes in the number of available suites caused by the Trust's disposition activities. Results are also significantly impacted by overall economic conditions and conditions in the travel industry including Covid-19 Virus economic and travel slow down. Unfavorable changes in these factors could negatively impact hotel room demand and pricing, which would reduce our profit margins on rented suites. Additionally, our ability to manage costs could be adversely impacted by significant increases in operating expenses, resulting in lower operating margins and higher hourly labor costs. Either a further increase in supply or a further decline in demand could result in increased competition, which could have an adverse effect on the rates and revenue of the Hotels in their respective markets.
We experienced weaker economic conditions during the first nine months of fiscal
year 2021
Our strategic plan is to obtain the full benefit of our real estate equity, by
marketing the Hotels at competitive prices over the next 24 months, and
benefiting from our
HOTEL OPERATIONS
Our expenses consist primarily of property taxes, insurance, corporate overhead, interest on mortgage debt, professional fees, depreciation of the Hotels and hotel operating expenses. Hotel operating expenses consist primarily of payroll, guest and maintenance supplies, marketing and utilities expenses. Under the terms of its Partnership Agreement, the Partnership is required to reimburse us for all such expenses. Accordingly, management believes that a review of the historical performance of the operations of the Hotels, particularly with respect to occupancy, which is calculated as rooms sold divided by total rooms available, average daily rate ("ADR"), calculated as total room revenue divided by number of rooms sold, and revenue per available room ("REVPAR"), calculated as total room revenue divided by number of rooms available, is appropriate for understanding revenue from the Hotels.
The following tables show historical financial and other information for the periods indicated: For the Nine Months Ended Albuquerque October 31, 2020 2019 Change %- Incr/Decr Occupancy 53.85 % 95.32 % (41.47 )% (43.51 )% Average Daily Rate (ADR)$ 66.21 $ 75.22 $ (9.01 ) (11.98 )% Revenue Per Available Room (REVPAR)$ 35.65 $ 71.70 $ (36.05 ) (50.28 )% For the Nine Months Ended Tucson October 31, 2020 2019 Change %- Incr/Decr Occupancy 57.06 % 69.23 % (12.17 )% (17.58 )% Average Daily Rate (ADR)$ 79.42 $ 67.71 $ 11.71 17.29 % Revenue Per Available Room (REVPAR)$ 45.32 $ 46.88 $ (1.56 ) (3.33 )%
No assurance can be given that occupancy, ADR and REVPAR will not increase or decrease as a result of changes in national or local economic, or economic travel, and/or hospitality industry conditions.
We enter transactions with certain related parties from time to time. For information relating to such related party transactions see the following:
? For a discussion of management and licensing agreements with certain related parties, see "Note 2 to our Condensed Consolidated Financial Statements - Summary of Significant Policies - Revenue Recognition -Hotel Operations " ? For a discussion of guarantees of our mortgage notes payable by certain related parties, see Note 6 to our Condensed Consolidated Financial Statements - "Mortgage Notes Payable." ? For a discussion of our equity sales and restructuring agreements involving certain related parties, see Notes 3 to our Condensed Consolidated Financial Statements - "Sale of Ownership Interests in Subsidiaries". ? For a discussion of other related party transactions, see Note 11 to our Condensed Consolidated Financial Statements - "Related Party Transactions." 29
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