Interstate Hotels Delisted from New York Stock Exchange
- Mar 13, 2009
The deep recession that the United States is mired in has cut travel significantly, both on the leisure and business side, thus harming hotel performance. Many hotel company stocks have thus plummeted in value. Interstate Hotels & Resorts, a hotel investment and management firm, announced that it received notice from the New York Stock Exchange that its common stock would be suspended from trading prior to opening of trading on Thursday.The New York Stock Exchange is taking the action because Interstate did not meet the continued listing standard, requiring maintenance of a minimum $15 million market capitalization over a consecutive 30-day trading period.Interstate had announced last December that it had failed to maintain the continued listing standard, which requires a $1 minimum average closing price over a consecutive 30-day trading. Interstate said it will appeal the delisting determination. Until the appeal is heard, Interstate will remain listed, but will not trade, on the New York Stock Exchange.PKF Consulting predicts that RevPar at U.S. hotels will drop by 13.4 percent this year, with a 7.8 percent occupancy decline and a 6.4 percent decline in average daily rate.“We haven’t seen these kinds of declines in 20 years,” said Robert Mandelbaum (pictured), director of research information services for PKF Hospitality Research.This demand decline is occurring at the same time that room supply will increase by 2.6 percent this year, about the long-term industry average.PKF forecasts that the picture will not improve much for 2010, predicting a RevPar decline of 3.2 percent.The only good news is on the horizon. Hotel development, because of the credit crunch and poor industry performance, has declined dramatically. “Hotels are not breaking ground today,” Mandelbaum said. That means limited new supply, and a rebounding U.S. economy, will translate into RevPar growth of between 7 and 8 percent in 2011 and 2012, PKF predicts.The long-term prognosis may also be favorable for Interstate, which has ownership interests in 57 hotels and resorts, and manages 225 hospitality properties with approximately 46,000 rooms. The company’s immediate concern is that its senior secured credit facility agreement requires that the company be listed on the New York Stock Exchange. Interstate, in a statement, said it is in “active discussions” to receive a waiver through June 30, 2009, related to the covenant requiring listing on the Exchange.A report on Interstate from Robert W. Baird released today predicts that Interstate will amend the facility to prevent default and extend the term past its March, 2010 maturity.“The company’s history as thorough, bottoms-up, cost-conscious operator provides a viable alternative to management companies for hotel owners. We believe this is a niche that will exist over the long-term, despite short-term fluctuations in IHR’s management contract levels,” the report’s authors, David Loeb, Andrew Wittman and Eric Palm, wrote.