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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
May 25,1999
PROMUS HOTEL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 001-13719 62-1716020
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification
incorporation or Number)
organization)
755 CROSSOVER LANE
MEMPHIS, TENNESSEE 38117-4900
(Address of principal executive (Zip Code)
offices)
(901) 374-5000
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
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ITEM 5. Other Events
On May 25, 1999, Promus Hotel Corporation issued the press release attached
to this 8-K as Exhibit 99.1.
ITEM 7. Financial Statements and Exhibits.
(c) Exhibits
99.1 Press Release dated May 25, 1999
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PROMUS HOTEL CORPORATION
/s/ J. Kendall Huber
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J. KENDALL HUBER
Executive Vice President, General
Counsel and Secretary
Date: May 25, 1999
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EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
99.1 Press Release dated May 25, 1999
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Exhibit 99.1
[PROMUS(R) HOTEL CORPORATION LOGO]
May 25, 1999
FOR IMMEDIATE RELEASE http://www.promus.com
Contact: Gregg Swearingen, Vice President, Investor Relations
(901) 374-5468
PROMUS REDUCES EARNINGS OUTLOOK AND
ANNOUNCES AGREEMENT TO SELL $124 MILLION OF REAL ESTATE
MEMPHIS, TENN. - MAY 25, 1999 -- Promus Hotel Corporation (NYSE: PRH)
announced today that it has lowered its earnings expectation for 1999 as a
result of softening market conditions, repositioning actions of the Doubletree
brand and deteriorating performance of Red Lion related hotels. The Company
remains committed to the implementation of aggressive repositioning actions
which are expected to improve the overall product quality and consistency of the
Doubletree hotel brand, re-establish the Red Lion Inns brand as a more
competitive brand in the Northwest and reposition INNCO (its purchasing
subsidiary) for accelerated growth. The Company also indicated that its
previously announced efforts to dispose of a portion of its real estate
portfolio have been advanced by a preliminary agreement to sell $124 million of
Homewood Suites hotels.
Promus now anticipates its 1999 EPS growth rate to be in the mid-single
digits. Previously, Promus had expected EPS growth to be in the mid-teens
range for 1999.
Norm Blake, Promus Hotel Corporation's Chairman, President and CEO
said, "In the current softening market conditions, we are seeing slower revenue
growth than had been anticipated for this year. Growth in revenue per available
room (RevPAR) has slowed in the key industry segments in which all of our brands
compete and we now anticipate that 1999 growth rates will probably be only one
to three percentage points. This represents one to two percentage points below
our previous expectations for 1999. In addition, delayed openings of hotels in
1998 and 1999 and the associated delay in reaching stabilization have
contributed to slower revenue growth."
Norm Blake continued, "The new senior management team is moving forward
with the recently initiated strategy to narrow the focus and raise the bar on
the Doubletree brand's overall product quality. As a result, at least 29
Doubletree hotels are expected to be re-flagged over the balance of 1999 and
2000. Those hotels either are not in appropriate markets or do not have the
acceptable product quality to measure up to Doubletree standards. An estimated
ten to fifteen hotels may leave the Promus system as a result of the Doubletree
repositioning strategy, with the remainder expected to be converted to Red Lion
Inns."
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The Red Lion Inns brand was not aggressively marketed following the
Doubletree acquisition as the Company focused on converting Red Lion Inns to
Doubletree hotels. Promus is now investing to reposition Red Lion Inns as the
dominant regional brand in the Northwest. Performance is anticipated to improve
for these hotels as quality is improved and additional Red Lion hotels are added
to the system. New franchising programs are being established to promote future
earnings growth.
Doubletree repositioning actions have also contributed to slower growth
of this management contract oriented brand. In the past, Doubletree had grown
rapidly from corporate mergers and acquisitions and conversions of individual
hotels into the Doubletree system. With the advent of the capital markets
tightening, the growth in the Doubletree brand has been slower than anticipated.
Until such time as Doubletree's market positioning can be clearly defined, fewer
Doubletree conversions are anticipated.
INNCO's purchasing and service fees have not realized the growth
anticipated due to lower project management fees associated with Doubletree
conversions. As the number of conversions have decreased, so have purchasing and
service fees. In addition, while preferred vendor business continues to grow,
the rate of growth has slowed following last year's rapid expansion as a result
of the merger.
Norm Blake said, "1998 was a difficult year for Promus. As a result of
the distraction created by integration activities following the merger, focus on
growth initiatives suffered in 1998. It has now become more apparent that this
unfortunate distraction has impeded our short-term growth. The new management
team is going to accelerate the tempo in regaining lost momentum and making
disciplined decisions about new growth opportunities. As we go about this
repositioning, we will see slightly higher G&A for the remainder of 1999 and
2000. We will honor the past and build upon Promus' past successes, but will
strive to make the new Promus even better. The fruits of the initiatives that we
are now undertaking will give Promus greater long term growth potential. 1999
and 2000 will be challenging for Promus as we attack some tough issues in a
softening market and position the Company for much stronger and reliable growth.
I am very excited about our brands, our people and the quality of our balance
sheet. I personally look forward to this opportunity to make a great company and
its brands even better."
Consistent with the previously announced real estate disposition
strategy, Promus has entered into a letter of intent to sell thirteen of its
Homewood Suites hotels to a Mid-Atlantic based real estate investment concern
that is expanding its product base into the upscale extended-stay hotel market.
The sale will anchor the beginning of a strategic partnership between the two
groups that could grow to a $600 million level over the next five year period.
It is anticipated that the initial thirteen properties, with an estimated value
of approximately $124 million, will close by the end of the third quarter 1999.
As part of the strategic partnership, Promus is expected to sell newly developed
and stabilized Homewood Suites hotels to the real estate concern. Promus will
enter into long term management and franchise agreements as the hotels are sold
to its newest business partner.
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The expected growth rate, number of hotel additions or losses, impact
of repositioning actions, purchasing and service fees, RevPAR growth rates and
other matters discussed in this press release may constitute forward-looking
statements within the meaning of the federal securities laws. Such statements
are based on management's beliefs, assumptions and expectations, which in turn
are based on information currently available to management. Actual performance
and results could differ from those expressed in, or contemplated by, the
forward-looking statements due to a number of risks, uncertainties and other
factors, many of which are beyond Promus' ability to predict or control,
including changes in the general economy, customer demand, interest rates and
competition. Promus disclaims any obligation to update any such forward-looking
statements or underlying assumptions. For further information on factors which
could impact Promus and the statements contained herein, we refer you to the
filings made by Promus with the Securities and Exchange Commission, including
current reports on Form 8-K, quarterly reports on Form 10-Q and annual reports
on Form 10-K.
Promus Hotel Corporation is the franchisor/operator of the Doubletree
Hotels, Doubletree Guest Suites, Embassy Suites, Hampton Inn, Homewood Suites,
Hampton Inn & Suites, Club Hotel by Doubletree, Red Lion, Embassy Vacation
Resort and Hampton Vacation Resort brands. The Company also manages non-Promus
branded hotels and facilities in its University Hotel & Conference Center
division. The Company operates, franchises or owns hotels throughout the United
States and in Canada, Mexico and Latin America. Promus is headquartered in
Memphis, Tennessee and has approximately 40,000 employees.
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