SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A-1
[x] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the fiscal year ended December 31, 1996
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File No. 0-15291
AMERIHOST PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3312434
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2400 East Devon Ave., Suite 280, Des Plaines, Illinois 60018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 298-4500
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of Each Class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.005 per share
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Sec. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. _
While it is difficult to determine the number of shares owned by non-affiliates
(within the meaning of the term under the applicable regulations of the
Securities and Exchange Commission), the registrant estimates that the aggregate
market value of the registrant's Common Stock held by non-affiliates on March
24, 1997 (based upon an estimate that 86% of the shares are so owned by non-
affiliates and upon the closing price of the Common Stock of $7.8) was
$39,981,752.
As of March 24, 1997, 6,292,197 shares of the Registrant's Common Stock were
outstanding.
The following documents are incorporated into this Form 10-K by reference: None
PART I
Item 1. Business.
General
Amerihost Properties, Inc. and its subsidiaries (collectively, where
appropriate, "Amerihost," or the "Company") is engaged in the development and
construction of AmeriHost Inn hotels, its proprietary hotel brand, and the
ownership, operation and management of both AmeriHost Inn hotels and other
hotels. The AmeriHost Inn brand was created by the Company to provide for the
consistent, cost-effective development and operation of mid-price hotels in
various markets. All AmeriHost Inn hotels are designed and developed using the
Company's 60 to 80 room, interior corridor and indoor pool prototype design and
are located in tertiary and secondary markets.
As of December 31, 1996, the Company owned, operated or managed 72 hotels
located in 16 states. Of these hotels, 38 hotels are operated or managed under
the Company's proprietary brand, the AmeriHost Inn. Of the 72 hotels, the
Company owns a 100% or controlling ownership interest in 28 hotels and a
participating equity interest, ranging from 5% to 50%, in 33 hotels. Of the 61
owned hotels, 36 are AmeriHost Inn hotels and 25 are other brands, which in most
cases were acquired, renovated and repositioned in their respective marketplaces
between 1987 and 1993. The majority of the other brand hotels are franchised
through Days Inn, Hampton Inn, Holiday Inn and Ramada Inn. The Company also
managed 11 hotels at December 31, 1996, for unaffiliated third parties whereby
the Company has no ownership interest. Two of the 11 managed hotels operate as
AmeriHost Inn hotels. As of December 31, 1996, an additional 19 AmeriHost Inn
hotels were under construction. The Company has 100% ownership in 12 of these
hotels, a minority ownership interest in six of these hotels, and is
constructing one for an unaffiliated third party.
The table below sets forth information regarding the hotels at December 31,
1996.
<TABLE>
<CAPTION>
Open Under
Hotels Construction Total
Hotels Rooms Hotels Rooms Hotels Rooms
<S> <C> <C> <C> <C> <C> <C>
100% or controlling ownership:
AmeriHost Inn hotels 14 896 12 732 26 1,628
Other brands 14 1,807 - - 14 1,807
28 2,703 12 732 40 3,435
Minority ownership interest:
AmeriHost Inn hotels 22 1,430 6 366 28 1,796
Other brands 11 932 - - 11 932
33 2,362 6 366 39 2,728
Managed only hotels:
AmeriHost Inn hotels 2 121 1 61 3 182
Other brands 9 1,262 - - 9 1,262
11 1,383 1 61 12 1,444
Total 72 6,448 19 1,159 91 7,607
</TABLE>
Since 1993, the Company's growth strategy has focused on the expansion and
increased ownership of the AmeriHost Inn hotel brand through new development and
construction. The AmeriHost Inn hotels have achieved occupancy and average
daily rates which are higher than those realized by the Company's other owned
hotels, including those operated under national franchise affiliations. These
favorable operating results experienced by the AmeriHost Inn hotels led to the
Company's decision to focus on expanding this brand rather than acquiring or
developing hotels under other brand affiliations. The Company intends to
continue this growth strategy and to aggressively expand its development,
ownership and operation of AmeriHost Inn hotels. Implementing this strategy
will allow the Company to rely less on the one-time transactional fees
associated with hotel development and construction while generating long-term
revenues and potential profits from hotel operations.
In addition to the development, construction and operation of hotels in which
the Company has a controlling ownership interest, the Company provides
development, construction and renovation services to hotels in which the Company
has a minority ownership interest and to unaffiliated third parties. For new
construction projects, the Company offers "turn-key" development services,
having the in-house expertise to manage a project from inception through
completion, including market research, site selection, architectural services,
the securing of financing and construction management. The construction
contracts entered into between the Company and the entities owning the hotels
have generally been one of two types, providing either for the Company to
receive costs plus developer's and construction overhead fees or a fixed fee.
The Company also provides management services to minority owned hotels and other
hotels owned by unaffiliated third parties. Under its management contracts with
such hotels, the Company typically provides complete operational and financial
management services, including sales, marketing, quality control, training,
purchasing and accounting. However, under certain management contracts, the
Company's joint venture partners are responsible for the day-to-day operational
management, while the Company provides full financial management and operational
consulting and assistance. The Company is currently managing or co-managing all
of the hotels in which it has a minority ownership interest, and is also
managing 11 hotels for unaffiliated third parties. These hotels are managed
under contracts ranging from 1 to 10 years, with optional renewal periods of
equal length, and contain provisions under which the Company is paid fees equal
to a percentage of total gross revenues for its services and, in some instances,
additional incentive fees based upon hotel performance. The Company has
developed centralized systems and procedures which it believes allow it to
manage the hotels effectively and efficiently. While the Company does not
intend to actively pursue management contracts with third parties, it does
intend to continue managing hotels for third parties under its current
management contracts and may manage additional hotels for third parties if the
terms are favorable.
The Company also provides employee leasing services to hotels in which the
Company has a minority ownership interest and to hotels owned by unaffiliated
third parties which are managed by the Company. Under its employee leasing
program, the Company employs all of the personnel working at the participating
hotels and leases them to the hotels pursuant to written agreements. Employee
leasing affords the Company greater control over payroll costs and allows the
participating hotels to benefit from economies of scale on personnel-related
costs. The Company's employee leasing agreements typically provide for one year
terms, with automatic one year renewals. The Company generally receives fees
from each participating hotel in an amount equal to the gross payroll costs for
the leased employees, including all related taxes and benefits, plus a
percentage of the gross payroll.
All revenues attributable to development, construction, management and employee
leasing services with respect to hotels in which the Company has a 100% or
controlling ownership interest have been eliminated in consolidation.
AmeriHost Inn Hotels
AmeriHost Inn hotels, the Company's proprietary brand, are designed and
constructed using the Company's 60 to 80 room, interior corridor and indoor pool
prototype design. The AmeriHost Inn hotel's amenities and services include 24-
hour front desk and message service, facsimile machines, whirlpool and sauna
area, exercise room, meeting room, a covered entrance and extensive exterior
lighting for added security. The standard AmeriHost Inn guest room features an
electronic card-key lock, in-room safe, in-room coffee maker, telephone with
data port for personal computer, a work area and color television with premium
cable service or movies on demand. In addition, each Amerihost Inn hotel
typically includes 2 to 6 whirlpool suites which, in addition to the standard
amenities, include in-room whirlpools, microwave ovens, compact refrigerators
and an expanded sitting area. AmeriHost Inn hotels do not contain food and
beverage facilities normally associated with full-service hotels. Food service
for hotel guests is generally available from adjacent or nearby free-standing
restaurants which are independently owned and operated.
All AmeriHost Inn hotels are operated or managed by the Company in accordance
with strict guidelines designed to provide guests with a consistent lodging
experience. The Company believes the quality and consistency of the amenities
and services provided by its AmeriHost Inn hotels increase guest satisfaction
and repeat business. Further, through its use of the AmeriHost Inn prototype
design, the Company believes that it is able to operate profitable hotels while
offering an excellent value to its guests.
The Company targets smaller communities in tertiary and secondary markets with
established demand generators such as major traffic arteries, office complexes,
industrial parks, shopping malls, colleges and universities or tourist
attractions, as the principal location for the development and construction of
AmeriHost Inn hotels. Generally, these markets have minimal competition or a
lack of recent hotel development. An AmeriHost Inn hotel is typically
positioned to attract both business and leisure travelers seeking consistent
amenities and quality rooms at reasonable rates, generally ranging from $40 to
$65 per night.
The Company's in-house design staff, centralized purchasing program, strict cost
controls, and low average land costs all contribute to a favorable cost
structure in developing and constructing new AmeriHost Inn hotels. Furthermore,
due to the centralization of all accounting, purchasing, payroll and other
administrative functions, each hotel is operated efficiently and effectively
with a minimal on-site staff. AmeriHost Inn hotels are not subject to
franchise, royalty and marketing fees, which generally range from 8% to 10% of a
hotel's gross room revenues. These factors assist the Company in maximizing its
return on invested capital.
Other Owned Hotels
The Company's non-AmeriHost Inn hotels were primarily acquired by the Company
through joint ventures prior to 1993, in most instances at prices below
estimated replacement costs. The other hotels have been owned, operated and
managed by the Company independently, or as part of a national franchise system
such as Days Inn, Hampton Inn, Holiday Inn, and Ramada Inn. The Company
believes that franchises in certain locations are important in maintaining
occupancy levels, which are supported by the Franchisor's national reservation
systems and marketing efforts and brand name recognition.
The Company's non-AmeriHost Inn hotels typically are also located in secondary
and tertiary markets, with nearby demand generators such as airports, major
traffic arteries, office complexes, industrial parks, shopping malls, colleges
and universities or tourist attractions. The non-AmeriHost Inn hotels contain
53 to 209 rooms, generate average daily rates ranging from $35 to $65 per night,
offer a variety of amenities and services and generally do not contain food and
beverage facilities.
As part of the Company's strategy to focus its ownership primarily on AmeriHost
Inn hotels, the Company intends to pursue selective sales of certain of these
other hotels, if and when attractive terms are available. During 1996, four
hotel partnerships in which the Company was a general partner sold their hotels,
resulting in cash distributions to the Company upon their sale. Two additional
hotels have been sold in 1997. These proceeds were, and any proceeds from
future sales, if and when completed, are expected to be used by the Company to
develop additional AmeriHost Inn hotels.
Hotel Properties
At December 31, 1996, the Company owned and/or managed 72 hotels in 16 states,
concentrated in the midwestern and southern United States. The Company had an
additional 19 hotels under construction located generally in the same
geographical areas.
Because the hotel industry is seasonal, the revenues generated by the hotels
managed by the Company will increase or decrease depending upon the time of
year. Since the Company's management fees are based upon a percentage of the
hotels' total gross revenues, the Company is further susceptible to these
seasonal variations. Given the location of the properties the Company manages,
the revenues are typically lower in the first and fourth quarters of each year.
The following is a list of hotel properties under the Company's management at
December 31, 1996 by state:
<TABLE>
<CAPTION>
DATE COMPANY
OPERATIONS
STATE HOTEL ROOMS BEGAN
<S> <C> <C> <C>
Florida Hampton Inn Ft. Myers (1) 123 09/30/92
Georgia AmeriHost Inn Eagles Landing, Stockbridge (1) 60 08/08/95
AmeriHost Inn LaGrange (1) 59 03/01/95
AmeriHost Inn Smyrna (1) 60 01/08/96
Days Inn Northwest, Atlanta 107 11/01/91
Days Inn Peachtree, Atlanta 142 11/01/91
Days Inn Dalton 152 11/01/91
Days Inn Jekyll Island 162 11/01/91
Jekyll Estates Inn, Jekyll Island 37 11/01/91
779
Illinois AmeriHost Inn Harvard (1) 60 07/01/96
AmeriHost Inn Jacksonville (1) 60 06/14/96
AmeriHost Inn Macomb (1) 60 05/19/98
AmeriHost Inn Players Riverboat Hotel, Metropolis (1) 120 02/25/94
AmeriHost Inn Sycamore (1) 60 05/31/96
AmeriHost Inn Tuscola (1) 59 08/17/94
Days Inn Elgin (1)(3) 96 12/16/93
Days Inn Melrose Park (1) 123 07/01/88
Days Inn Niles (1) 153 01/01/90
Days Inn O'Hare South, Schiller Park (1) 145 04/01/89
Days Inn Shorewood (1) 182 10/01/89
Palwaukee Motor Inn, Wheeling 138 04/21/95
1,256
Indiana AmeriHost Inn Hammond (1) 86 03/29/96
AmeriHost Inn Muncie 60 04/07/95
AmeriHost Inn Plainfield (1)(2) 60 09/01/92
Days Inn Cloverdale (1)(2) 60 11/04/88
Days Inn Crawfordsville (1)(2) 60 01/30/89
Days Inn Plainfield (1)(2) 64 05/01/90
Days Inn Portage (1) 120 04/01/91
Days Inn Sullivan (1) 60 08/14/87
Ramada Inn Lafayette (1) 145 02/02/94
715
Iowa AmeriHost Inn Waverly (1) 60 08/28/96
Kentucky AmeriHost Inn Murray (1) 60 11/01/96
Louisiana Days Inn Kenner, New Orleans 324 11/01/91
Michigan AmeriHost Inn Coopersville (1) 60 01/09/96
AmeriHost Inn Grand Blanc (1) 60 07/17/96
AmeriHost Inn Grand Rapids North, Walker (1) 60 07/05/96
AmeriHost Inn Muskegon, Norton Shores (1) 61 11/04/96
241
Mississippi AmeriHost Inn Batesville (1) 60 04/26/96
Days Inn Vicksburg Landing (1)(2) 89 05/13/95
149
Ohio AmeriHost Inn Ashland (1) 62 08/09/96
AmeriHost Inn Athens (1)(2) 102 11/04/89
AmeriHost Inn Jeffersonville North (1)(2) 60 07/20/96
AmeriHost Inn Jeffersonville South (1)(2) 60 10/14/94
AmeriHost Inn Kenton (1)(2) 60 08/02/96
AmeriHost Inn Lancaster (1)(2) 60 09/04/92
AmeriHost Inn Logan (1)(2) 60 04/16/93
AmeriHost Inn Mansfield (1) 60 11/19/94
AmeriHost Inn Marysville (1)(2) 79 06/01/90
AmeriHost Inn Oxford 61 02/01/91
AmeriHost Inn Upper Sandusky (1) 60 04/12/95
AmeriHost Inn Wooster East (1) 58 01/18/94
AmeriHost Inn Wooster North (1) 60 10/21/95
AmeriHost Inn Zanesville (1)(2) 60 07/30/96
Days Inn Athens (1)(2) 60 01/16/88
Days Inn Akron/Kent, Brimfield (1)(2) 67 08/04/89
Days Inn Dayton South (1) 209 01/20/92
Days Inn Findlay (1)(3) 115 05/06/91
Days Inn New Philadelphia (1)(2) 102 06/04/92
Oakbrook Inn Middletown (1) 120 07/03/92
1,575
Oregon Wildhorse Resort Hotel, Pendleton (4) 100 03/23/96
Pennsylvania AmeriHost Inn Shippensburg (1) 60 08/09/96
Holiday Inn Altoona (1) 143 08/31/92
Holiday Inn Oil City (1) 106 12/02/92
309
Texas AmeriHost Inn Allen (1) 60 07/25/96
Vermont Holiday Inn White River Junction (1)(2) 140 06/24/93
West Virginia AmeriHost Inn New Martinsville (1)(2) 60 05/03/96
AmeriHost Inn Mineral Wells (1)(2) 61 12/30/96
AmeriHost Inn Parkersburg (1)(2) 79 06/26/95
200
Wisconsin AmeriHost Inn Green Bay (1) 60 10/12/96
AmeriHost Inn Mosinee (1) 53 04/30/93
Menominee Casino-Bingo-Hotel, Keshena 100 09/14/94
Oakbrook Inn Menomonee Falls (1)(3) 144 08/07/92
357
Total Rooms 6,448
Total Properties 72
(1) Indicates properties in which the Company owns a direct or indirect equity or leasehold interest.
(2) Indicates properties which are co-managed with partners.
(3) Property was sold, or lease was terminated, in 1997.
(4) Management contract was terminated in 1997.
</TABLE>
The table below shows the average occupancy, average daily rate ("ADR") and
revenue per available room ("REVPAR") experienced by the Company in 1996 in
various locations. These statistics include all hotels open as of December 31,
1996.
<TABLE>
<CAPTION>
Average Occupancy ADR REVPAR
<S> <C> <C> <C>
Ohio (20 hotels) 58.7% $49.18 $28.88
Illinois, Iowa and Wisconsin (17 hotels) 59.1% $45.97 $27.15
Georgia (8 hotels) 58.6% $52.20 $30.59
Indiana and Kentucky (10 hotels) 63.1% $47.25 $29.83
Michigan (4 hotels) 53.5% $51.90 $27.69
Pennsylvania (3 hotels) 62.2% $50.09 $31.16
West Virginia (3 hotels) 61.6% $53.39 $32.91
Mississippi (2 hotels) 69.8% $54.02 $37.70
Other hotels (located in Florida,
Louisiana, Oregon, Texas and Vermont) 57.7% $46.88 $27.04
All hotels 59.5% $48.56 $28.92
</TABLE>
Lodging Industry
The United States lodging industry's performance is strongly correlated to
economic activity, with changes in gross national product growth affecting both
room supply and demand, resulting in cyclical changes in average occupancy
rates, average daily rates, and revenue per available room. The general
downturn in the economy and the oversupply of rooms during the late 1980's and
early 1990's resulted in decreased economic performance in the lodging industry.
Since the early 1990's, the United States lodging industry has shown significant
improvement. The primary element contributing to the industry's improved
performance has been increased economic activity, which has resulted in growth
in the demand for hotel rooms exceeding the growth in the available supply of
hotel rooms. The more rapid growth in hotel room demand, compared to growth in
hotel room supply, has resulted in positive trends industry-wide for occupancy
and average daily rates. According to Coopers & Lybrand L.L.P., the overall
United States hotel room occupancy growth was 0.9% in 1996, while average daily
rates increased 6.4%, resulting in a 7.4% increase in revenue per available room
("RevPAR").
Growth Strategy
The Company's growth strategy is to increase revenues, EBITDA and net income per
share by: (i) developing, operating and owning additional AmeriHost Inn hotels;
(ii) maintaining or enhancing occupancy and average daily rate results at all of
its hotels; and (iii) controlling operating and corporate overhead expenses.
EBITDA is used by the Company as a supplemental performance measure along with
net income to report its operating results. EBITDA is defined as net income,
adjusted to eliminate the impact of (i) interest expense; (ii) interest and
other income; (iii) leasehold rents for hotels, which the Company considers to
be financing costs similar to interest; (iv) income tax expense; (v)
depreciation and amortization; (vi) gains or losses from property transactions;
and (vii) non-recurring charges.
The Company's primary growth strategy is to focus on the expansion of its
proprietary brand, the AmeriHost Inn, through continued development,
construction and operation of 100% owned AmeriHost Inn hotels. During 1996, the
Company opened three wholly-owned AmeriHost Inn hotels and had another 12 under
construction at December 31, 1996. The Company may also continue the
development of AmeriHost Inn hotels through joint ventures with partners.
During 1996, such joint ventures opened 15 AmeriHost Inn hotels. The Company
may seek to increase its ownership interest in existing AmeriHost Inn hotels in
which the Company has less than a 100% ownership interest, if available on
favorable economic terms. The Company acquired additional ownership interests
during 1996 in two hotels in which the Company already held a minority ownership
interest, resulting in majority ownership positions. In addition, the Company
and certain joint ventures converted five hotels from other brands to the
AmeriHost Inn brand during 1996. These conversions were hotels which had been
built by the Company as wholly-owned hotels or through joint ventures in prior
years using the AmeriHost Inn standard prototype. From time to time, the
Company may also continue to provide development, construction and, to a lesser
extent, management services to unaffiliated third parties on a fee-for-service
basis.
During 1996, the Company began construction on a record 21 AmeriHost Inn hotels,
and completed construction of 19 hotels, 18 of which were AmeriHost Inn hotels.
The Company intends to continue developing and constructing AmeriHost Inn hotels
in communities located in tertiary and secondary markets which already have
established demand generators, such as major traffic arteries, office complexes,
industrial parks, shopping malls, colleges and universities or tourist
attractions. Typically, the Company seeks communities where an active economic
development program is in place, which suggests long-term growth potential for
additional lodging demand. In most cases, the local community is interested in
a new hotel because existing facilities are dated or inconvenient. The Company
provides comfortable, professionally managed accommodations which are typically
not available in that community.
The Company has an in-house development staff dedicated to identifying and
evaluating new development opportunities. Once a market has been identified and
a site has been selected, the Company initiates its due diligence process prior
to the construction of one of its hotels. Such due diligence typically consists
of environmental surveys, feasibility and engineering studies and the securing
of zoning and building permits. The Company also maintains an in-house
construction and design department, which enables it to manage all phases of
construction. The Company's in-house architects and design personnel prepare
the blueprints for each AmeriHost Inn hotel through the use of computer assisted
drafting equipment, thereby reducing architectural fees. In most cases, the
Company hires a general contractor to construct the hotel for a fixed price,
eliminating much of the risk typically associated with construction. The
Company's project managers oversee the general contractor through each phase of
construction in order to assure the quality and timing of the construction.
With few exceptions, such as the interior color scheme, each AmeriHost Inn hotel
is the same in every detail, including the overall layout, the room sizes and
the indoor pool area. The replication of its prototype design allows accurate
budgeting of its construction and overhead costs.
Historically, the Company has financed its hotel development and construction
through a combination of equity and debt financing, with the equity financing
typically provided by the Company and/or its joint venture partners, and the
debt financing typically provided by local or regional banks. All of the
AmeriHost Inn hotels currently under construction are being financed in this
manner, except for one joint venture which intends to lease the land.
The Company intends to increase its revenue, EBITDA and net income per share
through the continued development of its AmeriHost Inn brand hotel and the
continued implementation of its operating and marketing strategies. The Company
believes that it can develop and operate additional AmeriHost Inn hotels having
occupancies and average daily rates similar to those the Company has achieved at
its existing AmeriHost Inn hotels. Moreover, the Company believes that the
development of additional AmeriHost Inn hotels and expanded geographic diversity
will continue to enhance the awareness of the AmeriHost Inn brand and thus
improve revenues at existing, as well as future, AmeriHost Inn hotels.
Operating Strategy
The Company's operating strategy is to provide its customers with a consistent
lodging experience by offering a package of amenities and services which meet or
exceed the customer's expectations during each stay. The Company has developed
uniform standards and procedures for each aspect of the development,
construction, operation and marketing of its AmeriHost Inn hotels, from site
selection to operational management.
The Company's operational management activities are overseen by a Senior Vice
President of Operations who supervises regional and area managers, who in turn
oversee the general managers of the hotels. Each regional manager is
responsible for 6 to 10 hotels, depending on each hotel's size and location. In
addition to having responsibilities as the general manager of a specific hotel,
each area manager is responsible for overseeing the general managers at 1 to 2
additional hotels. In addition to these managers, the Company has centralized
sales and marketing personnel who assist and direct the general managers and
other on-site personnel in their marketing efforts. The Company also has
internal auditors who perform audits of each hotel at least two times each year,
including tests of financial items such as cash and receivables, as well as
operational, security and ADA (Americans with Disabilities Act) compliance
matters, and who are also responsible for developing and conducting a variety of
educational and training seminars for general managers and other on-site
personnel.
The Company has designed a financial management system whereby all accounting
and operating information is processed in the Company's centralized accounting
office at its headquarters. The system includes cash management, accounts
payable and the generation of daily financial and operating information and
monthly financial statements which allow senior management and the regional,
area and general managers to closely monitor performance and to quickly react to
changes in operational conditions. The Company provides each hotel with
standardized forms and procedures to ensure uniform and efficient financial
reporting. The Company's financial management system relieves certain
management and reporting burdens from the individual hotel managers, enabling
them to focus on the operation and marketing of the hotel. The centralized
financial management system also enhances the quality and timing of internal
financial reports. All payroll functions are also centralized at the Company's
headquarters through its employee leasing subsidiary, allowing the Company to
have greater control over payroll costs. In addition, since all of the
approximately 1,400 hotel personnel are employed by the same company, the costs
of certain payroll related expenses are lower than if each hotel maintained its
own employees, and the Company is able to offer a more attractive health
insurance program to its employees.
Marketing Strategy
The Company believes it has a unique marketing strategy which is to actively
seek involvement in and ties to the local communities in which its hotels are
located. The local businesses and residential communities are each hotel's best
referral source. When staying in smaller communities where the Company's hotels
are located, visitors typically seek recommendations from family, friends and
business associates. The general managers of the hotels are expected to devote
a majority of their time toward marketing activities with local businesses and
the community. In an effort to promote community awareness and build strong
relationships with business leaders and local residents, general managers are
very active in local civic groups and frequently sponsor special events. In
addition, the hotels typically sponsor various local social and community events
and permit the use of their facilities by local clubs and civic organizations.
This community involvement, combined with a professional marketing program,
allows the hotel to showcase its facilities for both business and leisure
purposes. By focusing on the local community as its primary referral source,
the Company believes that each hotel can build a strong sales force of local
residents.
With respect to AmeriHost Inn hotels, the Company's primary marketing strategy
is to consistently develop and operate AmeriHost Inn hotels using its prototype
design under the trademarked AmeriHost Inn diamond-shaped logo. The Company
believes that a consistent product offering, including the same design features,
amenities and quality guest services, will promote guest loyalty, referrals and
repeat business. The amenities and services featured in the AmeriHost Inn
prototype design are not consistently found in the hotels of competitors in the
markets which the Company targets. By providing amenities and services on a
consistent basis, along with centralized administrative and financial reporting
systems, the Company believes it is able to operate profitable hotels while
offering an excellent value to its guests.
Joint Ventures
The Company continued to develop new hotels through joint ventures in 1996,
whereby the Company and other investors agree to jointly undertake the
development, construction, acquisition or renovation of a hotel property. As of
December 31, 1996, the Company had 47 projects with joint venture partners,
including multiple projects with certain joint venture partners.
The Company's joint ventures have taken various forms, including general
partnerships, limited partnerships, and limited liability companies. Each joint
venture has been formed with respect to a particular hotel project and reflects
the characteristics of that project, including the relative contributions, in
cash, property or services, of its partners. In most instances, the joint
venture has taken the form of a limited partnership, with a wholly-owned
subsidiary of the Company as a general partner with sole or joint management
authority. The Company's subsidiary, as general partner, has typically received
a partnership interest ranging from 15% to 30% for contributing the Company's
expertise. In certain cases, the subsidiary has also contributed a minimal
amount of cash. The limited partners (which may include the Company or its
affiliates in some instances) have typically contributed the cash equity
required to fund the project and have received interests proportionate to their
contributions. A typical joint venture agreement provides that the profits and
losses of the entity will be allocated among the partners in proportion to their
respective interests. However, the distribution of operating cash flow and
asset sale proceeds to the Company in proportion to its ownership interest is
often subordinate to the prior return of capital and other distributions payable
to the other joint venture partners. In addition, in five recent joint venture
arrangements, the equity interests held by the joint venture partners are
exchangeable into shares of the Company's common stock and the Company has
guaranteed minimum annual distributions to the joint venture partners.
As the general partner, the Company's subsidiary generally has the sole or
primary management authority with respect to the joint venture. However, in
some instances, the joint venture agreement or applicable law may provide to the
other joint venture partners the right to amend the joint venture agreement,
approve a transfer of the general partner's partnership interest, remove the
general partner for cause, or dissolve the joint venture. The joint venture
agreements do not typically restrict the right of the Company or its affiliates
to engage in related or competitive business activities.
Competition
There is significant competition in the mid-price lodging industry. There are
numerous hotel chains that operate on a national or regional basis, as well as
other hotels, motor inns and other independent lodging establishments throughout
the United States. Competition is primarily in the areas of price, location,
quality, services and amenities. Many of the Company's competitors have
recognized trade names, national reservation systems, greater resources and
longer operating histories than the Company. However, the Company believes that
its management is sufficiently experienced, and the markets which the Company
targets for development typically contain minimal competition, enabling the
Company to compete successfully.
There are a number of companies which develop, construct and renovate hotels.
Some of these companies perform these services only for their own account, while
others actively pursue contracts for these services with third party owners.
The Company believes that it can develop, construct and renovate hotels at costs
which are competitive. The Company believes that its use of a well developed
prototype, significant experience (the Company has managed the development and
construction of more than 50 hotels) and volume purchasing of furniture and
amenities result in development costs which are lower than those experienced by
many competitors building comparable hotels. The Company also believes that its
ability to offer additional services, such as hotel management, provides some
competitive advantages.
There are many hotel management companies which provide management services to
hotels similar to the services provided by the Company. While the quantity of
competition may be high, the Company believes that the quality of its services,
including its information and management systems and employee leasing
operations, will enable the Company to compete successfully. The Company
believes that its focus on secondary and tertiary markets also lessens
competition for the types of services provided by the Company.
The Company believes that the relationship between the development and
construction costs and the average daily rates achieved by the AmeriHost Inn
hotels is more favorable than that experienced by many of the Company's
competitors. In addition, a significant portion of the purchasing and
accounting functions related to the hotels is handled in the Company's
headquarters, thus enabling the local general managers and their staffs to focus
their efforts on marketing and sales. The centralization of many functions also
assists in keeping costs lower due to certain economies of scale. This allows
the AmeriHost Inn hotels to operate efficiently and compete effectively.
Franchise Agreements
At December 31, 1996, the Company had franchise agreements (collectively, the
"Franchise Agreements") with Days Inn of America, Inc., Promus Hotels, Inc.
(regarding Hampton Inns), Holiday Inns, Inc., Holiday Inns Franchising, Inc. and
Ramada Franchise Systems, Inc. Although the terms of the various Franchise
Agreements differ, each requires the Company to pay a monthly royalty fee for
the right to operate the hotel under the "flag" of that Franchisor and to have
access to the other benefits provided by such Franchisor, including access to
reservation systems, marketing plans and use of trademarks. The royalty fees
are typically based on gross revenues attributable to room rentals, plus
marketing and reservation contributions, and typically range between 8% and 10%
of gross room revenues. In addition, the Company and/or the joint venture which
owns a hotel operated pursuant to a Franchise Agreement will have ongoing
obligations to maintain the quality and condition of the hotel to the standards
required by the Franchisor. The term of a Franchise Agreement typically is
between 10 and 20 years, with a substantial penalty for early termination by the
Company with either party typically having the right to terminate after five
years. The Company believes that it is generally in compliance with its
Franchise Agreements, and the loss of any one of the Franchise Agreements would
not have a material impact on the Company.
Employees
As of December 31, 1996, the Company and its subsidiaries had approximately
1,500 full and part-time employees:
<TABLE>
<CAPTION>
<S> <C>
Hotel Management:
Operations 25
Accounting and finance 17
Property general managers 73
Hotel Development: 16
Hotel Operations: 549
Corporate:
General and administrative 10
Officers 4
Employee Leasing:
General and administrative 5
Operations(1) 806
1,505
(1) Does not include 622 employees who are employed by ASI and leased to other subsidiaries of the Company. These
employees are reflected in the table under hotel management and hotel operations.
</TABLE>
At December 31, 1996 approximately 20 of the Company s housekeeping employees
(at the Company s Days Inn Melrose Park and Days Inn O Hare South, Schiller
Park) were members of the Hotel, Motel, Club, Cafeteria, Restaurant Employees
and Bartenders Union, Local 450 AFL-CIO, and were covered by collective
bargaining agreements which were in place with such union until November 30,
1997. The Company sold its interests in the Days Inn O Hare South, Schiller
Park in July 1997. The Company expects to renew the collective bargaining
agreement with regard to its approximately 10 housekeeping employees at its Days
Inn Melrose Park when such agreement expires. To date, the Company has not
experienced any work stoppages or significant employee-related problems. The
Company believes that its relationship with its union and other employees is
good.
Item 14. Exhibits, Financial Statements and Reports on Form 8-K.
Financial Statements:
The following consolidated financial statements are filed as part of this Report
on Form 10-K for the fiscal year ended December 31, 1996.
(a)(1) Financial Statements:
Report of Independent Certified Public Accountants F-1
Consolidated Balance Sheets at December 31, 1996
and 1995 F-2
Consolidated Statements of Income for the years
ended December 31, 1996, 1995 and 1994 F-4
Consolidated Statements of Shareholders' Equity
for the years ended December 31, 1996, 1995 and 1994 F-5
Consolidated Statements of Cash Flows for the years
ended December 31, 1996, 1995 and 1994 F-6
Notes to Consolidated Financial Statements F-8
(a)(2) Financial Statement Schedules:
No financial statement schedules are submitted as part of this report because
they are not applicable or are not required under regulation S-X or because they
required information is included in the financial statements or notes thereto.
(a)(3) Exhibits:
The following exhibits were included in the Registrant's Report on Form 10-K
filed on March 26, 1993, and are incorporated by reference herein:
Exhibit No. Description
3.1 Amended and Restated Certificate of Incorporation of Amerihost
Properties, Inc.
3.2 By-laws of Amerihost Properties, Inc.
4.2 Specimen Common Stock Purchase Warrant for Employees
4.3 Specimen 7% Subordinated Note
4.4 Specimen Common Stock Purchase Warrant for 7% Subordinated
Noteholders
4.5 Form of Registration Rights Agreement for 7% Subordinated
Noteholders
The following exhibits were included in the Registrant's Amendment No. 1 to Form
S-2 filed on July 3, 1996, and are incorporated by reference herein:
Exhibit No. Description
10.4 Employment Agreement between Amerihost Properties, Inc. and Michael
P. Holtz
10.6 Employment Agreement between Amerihost Properties, Inc. and Russell
J. Cerqua
The following exhibits were included in the Registrant's Proxy Statement for
Annual Meeting of Shareholders filed on July 25, 1996, and are incorporated by
reference herein:
Exhibit No. Description
10.2 1996 Omnibus Incentive Stock Plan (Annex A)
10.3 1996 Stock Option Plan for Nonemployee Directors (Annex B)
The following exhibits were included in the Registrant s Report on Form 10-K
dated March 24, 1997, and are incorporated by reference herein:
Exhibit No. Description
10.7 Urban 2000 Corp. Termination Agreement
10.8 Richard A. D'Onofrio Termination Agreement
10.9 Amendment of Employment Agreement between Amerihost Properties, Inc.
and Michael P. Holtz
10.10 Amendment of Employment Agreement between Amerihost Properties, Inc.
and Russell J. Cerqua
21.1 Subsidiaries of the Registrant
23.1 Consent of BDO Seidman, LLP
27.0 Financial Data Schedule
The following exhibits were included in the Registrant s Report on Form 10-K/A
dated September 19, 1997:
Exhibit No. Description
23.1 Consent of BDO Seidman, LLP
The following exhibits are included in this Report on Form 10-K/A-1 dated
November 12, 1997:
Exhibit No. Description
23.1 Consent of BDO Seidman, LLP
Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter ended December 31,
1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AMERIHOST PROPERTIES, INC.
By: /s/ Michael Holtz
Michael P. Holtz
Chief Executive Officer
By: /s/ Russell J. Cerqua
Russell J. Cerqua
Chief Financial Officer
By: /s/ James B. Dale
James B. Dale
Corporate Controller
November 12, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
/s/ H. Andrew Torchia /s/ Michael P. Holtz
H. Andrew Torchia, Director Michael P. Holtz, Director
November 12, 1997 November 12, 1997
/s/ Russell J. Cerqua /s/ Reno J. Bernardo
Russell J. Cerqua, Director Reno J. Bernardo, Director
November 12, 1997 November 12, 1997
/s/ Salomon J. Dayan /s/ Richard A. Chaifetz
Salomon J. Dayan, Director Richard A. Chaifetz
November 12, 1997 November 12, 1997
Exhibit 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Amerihost Properties, Inc.
Des Plaines, Illinois
We hereby consent to the incorporation by reference in the Company's previously
filed Registration Statement (file no. 33-72742) of our report dated March 20,
1997 relating to the consolidated financial statements of Amerihost Properties,
Inc. appearing in the Company's Annual Report on Form 10-K/A-1 for the year
ended December 31, 1996.
BDO Seidman, LLP
Chicago, Illinois
November __, 1997
