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Lodging REITs Cut Dividends, Reshape Forecasts

Worsening conditions have put crimps in plans for hotel trusts, as the companies scramble for survival, including shortening dividends.

By Maria Wood | Updated on December 18, 2008

As the year draws to a close, a slew of lodging REITs are cutting dividends to preserve their cash coffers. In addition, they are reassessing their guidance for 2008 and beyond due to worsening economic conditions.

Earlier this week, Host Hotels & Resorts Inc. announced a quarterly cash dividend of five cents a share on the Bethesda, MD’s common stock, a cut of 15 cents from its previous quarterly cash dividend. In a statement, Host clarified that, “the reduction in the dividend reflects the weak fourth quarter operating environment, which the company expects will continue into 2009, and the desire to conserve cash in the midst of an uncertain and challenging economic climate.” In that vein, the company revised its 2008 outlook to a comparable property RevPAR decline of between 9% and 11% in the fourth quarter and approximately 3% for the full year. In its Q3 financial report, Host anticipated a RevPAR drop of 3% to 5% in the final three months of ’08 and a flat to 1% drop for the entire year.

Also this week, FelCor Lodging Trust Inc. suspended its common dividend, but elected to pay dividends on its preferred stock of around 50 cents per share. By not paying a common dividend, FelCor anticipates that it will preserve about $48 million in liquidity through 2009. Based on preliminary budgets for next year, the Irving, TX-based REIT estimates that RevPAR will shrink by roughly 6% to 8%.

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