GENERAL
The following discussion should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this Form 10-K.
We are engaged in the ownership and operation of hotel properties. At
At
Our operations consist of one reportable segment -
The Chief Operating Decision Maker ("CODM"),
The Trust has its hotel investments in the southwest region of
Our results are significantly affected by the overall economy and travel,
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. Unfavorable changes
in these factors, such as the virus-related travel slowdown in the Fiscal Year
starting
Over time, we expect our
We expect the current Fiscal Year 2024 to be continued recovery of the travel
industry, continued recovery of our Hotel's occupancy levels, continued recovery
of room rates, as well as continuation of current cost control all leading to
improved profitability of our hotels. We believe that we have positioned the
Hotels to remain competitive through our now fully completed
Our strategic plan is to continue to obtain the full benefit of our real estate equity, by ultimately obtaining full market value for our two Hotels at market value which is believed by management to be substantially higher than lower book values, over the next 24-36 months. In addition, the Trust is seeking a larger private reverse merger partner that may benefit from a merger that would afford that partner access to our listing on the NYSE AMERICAN.
In the process of reviewing merger opportunities, the Trust identified in
We experienced weak economic conditions during Fiscal Year 2022, ended
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Our strategic plan is to continue to obtain the full benefit from hotel
operations, and from our real estate equity, by marketing the remaining two
Hotels over the next 12-36 months. In addition, the Trust is seeking a larger
private reverse merger partner that may benefit from a merger that would afford
that partner access to our listing on the NYSE AMERICAN. In the process of
reviewing merger opportunities, the Trust identified and invested
Our expenses consist primarily of property taxes, insurance, corporate overhead,
interest on mortgage debt, professional fees, non-cash depreciation of the
Hotels and hotel operating expenses. Hotel operating expenses consist primarily
of payroll, guest and maintenance supplies, marketing, and utilities expenses.
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. In Fiscal Year 2023, as compared with Fiscal 2022, occupancy decreased
approximately 2.17% to 73.96% from 75.60% in the prior Fiscal Year. ADR
increased by
For the Fiscal Year 2023, ending
For the 2022 Fiscal Year (
The following table shows certain historical financial and other information for the periods indicated: For the Twelve Months Ended Albuquerque January 31, 2023 2022 Change %-Incr/Decr Occupancy 82.27 % 83.44 % -1.17 % -1.40 % Average Daily Rate (ADR)$ 98.90 $ 85.32 $ 13.58 15.92 % Revenue Per Available Room (REVPAR)$ 81.36 $ 71.19 $ 10.17 14.29 % For the Twelve Months Ended Tucson January 31, 2023 2022 Change %-Incr/Decr Occupancy 68.07 % 70.04 % -1.97 % -2.81 % Average Daily Rate (ADR)$ 92.88 $ 81.66 $ 11.22 13.74 % Revenue Per Available Room (REVPAR)$ 63.22 $ 57.19 $ 6.03 10.54 % For the Twelve Months Ended Combined January 31, 2023 2022 Change %-Incr/Decr Occupancy 73.96 % 75.60 % -1.64 % -2.17 % Average Daily Rate (ADR)$ 95.66 $ 83.34 $ 12.32 14.78 % Revenue Per Available Room (REVPAR)$ 70.75 $ 63.00 $ 7.75 12.30 % 8
No assurance can be given that occupancy, ADR and/or REVPAR will or will not increase or decrease as a result of changes in national or local economic or hospitality industry conditions.
We enter into 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 "Item 1 - Business - Management and Licensing Contracts." ? For a discussion of guarantees of our mortgage notes payable by certain related parties, see Note 11 to our Consolidated Financial Statements - "Mortgage Notes Payable." ? For a discussion of our equity sales and restructuring agreements involving certain related parties, see Notes 3, and 4 to our Consolidated Financial Statements - "Sale of Ownership Interests in Albuquerque Subsidiary," and "Sale of Ownership Interests in Tucson Hospitality Properties Subsidiary," respectively. ? For a discussion of other related party transactions, see Note 19 to our Consolidated Financial Statements - "Other Related Party Transactions."
Results of operations of the
Overview
A summary of total Trust operating results for the Fiscal Years ended
2023 2022 Change % Change Total Revenues$ 7,145,687 $ 6,409,800 $ 735,887 11 % Operating Expenses 7,443,022 6,713,135 729,887 11 % Operating Loss (297,335 ) (303,335 ) 6,000 2 %
Interest Income and Other 68,072 1,061,464 (993,392 ) (94 )% Interest Expense
(530,347 ) (367,235 ) (163,112 ) (44 )% Employee Retention Benefit 1,403,164 350,791 1,052,373 300 % Sales and Occupancy Taxes - 798,000 (798,000 ) (100 )% Income Tax Benefit 93,497 50 93,447 186,894 % Consolidated Net Income 737,051 1,539,735 (802,684 ) (52 )% REVENUE
For the twelve months ended
We realized a 12% increase in room revenues during Fiscal Year 2023 as room
revenues were approximately
9 EXPENSES
Total expenses before interest expense, employee retention credit, sales and
occupancy taxes and income tax provision were approximately
Room expenses consisting of salaries and related employment taxes for property
management, front office, housekeeping personnel, reservation fees and room
supplies were approximately
General and administrative expenses include overhead charges for management,
accounting, shareholder, and legal services. General and administrative expenses
of approximately
Sales and marketing expense increased approximately
Repairs and maintenance expense increased by approximately
Hospitality expense increased by approximately
Utility expenses increased approximately
Hotel property depreciation expenses decreased by approximately
Real estate and personal property taxes, Insurance and Ground Rent expenses
decreased approximately
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Sales and occupancy tax expenses increased approximately
Employment Tax Refunds and Credits, for the two previously filed calendar years
2020, and 2021, respectively, resulted in the Employment Retention Tax Credit.
As a result, the Trust conservatively placed an amount equal to approximately
12% of this total as a Tax Credit Receivable and Tax Refund on the Balance Sheet
and Income statement, respectively, for the Fiscal Years ended
LIQUIDITY AND CAPITAL RESOURCES
Overview -
Two principal sources of cash to meet our cash requirements, include monthly
management fees from our two hotels and distributions to our investors of our
share of the Partnership's cash flow of the
Hotel operations were significantly affected by occupancy and room rates at the
Hotels in the Fiscal Year 2022. We anticipate occupancy will continue to climb
modestly in Fiscal 2023, while room rates continue to climb aggressively in
Fiscal 2023, and the related economic and travel rebound which started in Fiscal
2022 will continue in Fiscal 2023 (
With approximately
IHT and
Refer to Note 6 - "Note Receivable" for information related to the Sale of IBC Hospitality Technologies (IBC).
There can be no assurance that we will be successful in raising additional or replacement funds, or that these funds may be available on terms that are favorable to us. If we are unable to raise additional or replacement funds, we may be required to refinance or sell certain of our assets to meet our liquidity needs, which may not be on terms that are favorable.
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We anticipate no material additional competitive new-build hotel supply during the remaining Fiscal Year 2024, and accordingly we anticipate steady hotel supply in our markets and increased travel demand as the industry rebounds with recovery of revenues and operating margins. We expect the challenge for the upcoming current Fiscal Year to be the continued economic and travel recovery of leisure, corporate, group, and government business in the markets in which we operate, which may affect our ability to recover occupancy and increase room rates while maintaining and/or building market share.
Positive cash provided by operating activities totaled approximately
On
On
On
The Trust's Management received communication from the NYSE-American on
NON-GAAP FINANCIAL MEASURES
The following non-GAAP presentations of earnings before interest, taxes, non-cash depreciation, and amortization ("EBITDA") and funds from operations ("FFO") are made to assist our investors in evaluating our operating performance.
Adjusted EBITDA is defined as earnings before interest expense, amortization of loan costs, interest income, income taxes, depreciation and amortization, and non-controlling interests in the Trust. We present Adjusted EBITDA because we believe these measurements (a) more accurately reflect the ongoing performance of our hotel assets and other investments, (b) provide more useful information to investors as indicators of our ability to meet our future debt payments and working capital requirements, and (c) provide an overall evaluation of our financial condition. Adjusted EBITDA as calculated by us may not be comparable to Adjusted EBITDA reported by other companies that do not define Adjusted EBITDA exactly as we define the term. Adjusted EBITDA does not represent cash generated from operating activities determined in accordance with GAAP and should not be considered as an alternative to (a) GAAP net income or loss as an indication of our financial performance or (b) GAAP cash flows from operating activities as a measure of our liquidity.
12 A reconciliation of Adjusted EBITDA to net loss attributable to controlling interests for the Fiscal Years endedJanuary 31, 2023 and 2022 approximate follows: Twelve Months Ended January 31, 2023 2022 Net income attributable to controlling interests$ 523,000 $ 254,000 Add back: Depreciation 702,000 725,000 Interest expense 530,000 367,000 Less: Interest Income (65,000 ) (1,061,000 ) Adjusted EBITDA$ 1,690,000 $ 285,000
FFO is calculated on the basis defined by the
A reconciliation of FFO to net income (loss) attributable to controlling
interests for Fiscal Year ended
Twelve Months Ended January 31, 2023 2022 Net income attributable to controlling interests$ 523,000 $ 254,000 Add back: Depreciation 702,000 725,000 Non-controlling interest 214,000 1,286,000 FFO$ 1,439,000 $ 2,265,000
The Trust reported Consolidated Net Loss from operations of approximately
13 FUTURE POSITIONING
In viewing the hotel industry cycles, recently reconfirmed by the COVID-19
disruption of travel and hospitality, the
The table below provides book values, mortgage balances and Estimated Market Asking Price for the Hotels.
Book Mortgage Estimated Market
9,500,000 Tucson Oracle 6,120,679 8,266,677 18,500,000$ 7,186,600 $ 9,528,470 $ 28,000,000
The "Estimated Market Asking Price" is the amount at which we believe may sell each of the Hotels and is adjusted to reflect hotel sales in the Hotels' areas of operation and projected upcoming 12 month earnings of each of the Hotels. The Estimated Market Asking Price is not based on appraisals of the properties.
We have from time to time listed hotel properties with a long time highly successful local real estate hotel broker who has successfully sold four of our hotel properties. We believe that each of the assets have an estimated market asking price that is reasonable in relation to its current fair market value. We plan to sell our remaining two Hotel properties within 24-36 months. We can provide no assurance that we will be able to sell either or both of the Hotel properties on terms favorable to us or within our expected time frame, or at all.
Although believed feasible, we may be unable to realize the asking price for the individual Hotel properties or to sell and/or refinance one or both. However, we believe that the asking price values are reasonable based on upturn local market conditions, comparable sales, and anticipated continued upturns in occupancy, rates, and profits per hotel. Changes in market conditions have in part resulted, and may in the future result, in our changing one or all of the asking prices.
Our long-term strategic plan is to obtain the full benefit of our real estate
equity, to benefit from our
SHARE REPURCHASE PROGRAM
For information on the Trust's Share Repurchase Program, see Part II, Item 5.
"Market for the Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet financing arrangements or liabilities. We do not have any majority-owned or controlled subsidiaries that are not included in our consolidated financial statements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
As a partial offset to the current hotel industry Virus induced drop in demand
pressure, the Trust looks to benefit from, and expand, its
Asset Impairment
We believe that the policies we follow for the valuation of our hotel
properties, which constitute the majority of our assets, are our most critical
policies. The
14 Sale ofHotel Assets
Management believes that our currently owned Hotels are valued at prices that are reasonable in relation to their current fair market value. At this time, the Trust is unable to predict when, and if, either of its Hotel properties will be sold. The Trust seeks to sell one hotel per year or both over the next 12-36 months. We believe that each of the assets is available at a price that is reasonable in relation to its current fair market value. The plan is to work to sell the remaining two hotel properties over the next 12-36 months, and if needed beyond.
Revenue Recognition
Revenues are primarily derived from the following sources and are recognized as services are rendered and when collectability is reasonably assured. Amounts received in advance of revenue recognition are considered deferred liabilities.
Revenues primarily consist of room rentals, food and beverage sales, management
and trademark fees and other miscellaneous revenues from our properties.
Revenues are recorded when rooms are occupied and when food and beverage sales
are delivered. Management and trademark fees from non-affiliated hotels include
a monthly accounting fee and a percentage of hotel room revenues for managing
the daily operations of the Hotels and the one hotel owned by affiliates of
Each room night consumed by a guest with a cancellable reservation represents a contract whereby the Trust has a performance obligation to provide the room night at an agreed upon price. For cancellable reservations, the Trust recognizes revenue as each performance obligation (i.e., each room night) is met. Such contract is renewed if the guest continues their stay. For room nights consumed by a guest with a non-cancellable reservation, the entire reservation period represents the contract term whereby the Trust has a performance obligation to provide the room night or nights at an agreed upon price. For non-cancellable reservations, the Trust recognizes revenue over the term of the performance period (i.e., the reservation period) as room nights are consumed. For these reservations, the room rate is typically fixed over the reservation period. The Trust uses an output method based on performance completed to date (i.e., room nights consumed) to determine the amount of revenue it recognizes on a daily basis if the length of a non-cancellable reservation exceeds one night since consumption of room nights indicates when services are transferred to the guest. In certain instances, variable consideration may exist with respect to the transaction price, such as discounts, coupons and price concessions made upon guest checkout.
In evaluating its performance obligation, the Trust bundles the obligation to provide the guest the room itself with other obligations (such as free Wi-Fi, grab and go breakfast, access to on-site laundry facilities and parking), as the other obligations are not distinct and separable because the guest cannot benefit from the additional amenities without the consumed room night. The Trust's obligation to provide the additional items or services is not separately identifiable from the fundamental contractual obligation (i.e., providing the room and its contents). The Trust has no performance obligations once a guest's stay is complete.
We are required to collect certain taxes and fees from customers on behalf of government agencies and remit these back to the applicable governmental agencies on a periodic basis. We have a legal obligation to act as a collection agent. We do not retain these taxes and fees and, therefore, they are not included in revenues. We record a liability when the amounts are collected and relieve the liability when payments are made to the applicable taxing authority or other appropriate governmental agency.
SEASONALITY
See Item 1 for related discussion of seasonality.
15 INFLATION
We rely entirely on the performance of the Hotels and InnSuites ability to
increase revenue to keep pace with inflation. Operators of hotels in general,
and InnSuites in particular, can change room rates quickly, but competitive
pressures may limit InnSuites ability to raise rates as fast as or faster than
inflation. During Fiscal Year 2023, ended
INVESTMENT IN UNIGEN POWER, INC.
On
The Trust purchased secured convertible debentures ("Debentures") in the
aggregate amount of
The total of all stock ownership upon conversion of the note receivable and
exercise of warrants could total up to 3 million
On the Trust's balance sheet, the investment of the
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Engineering work is on hold, while
Based on a 96 core "super computer " simulated test together with advanced
software,
The
The Trust has valued
FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-K, 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) our plans and expectations regarding future sales of hotel properties; and (vii) trends affecting our or any Hotel's financial condition or results of operations.
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:
? Virus Pandemic and its effect on the Travel Industry; ? potential risk of investments, including the investment inUniGen ; ? inflation and economic recession; ? terrorist attacks or other acts of war; ? 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; ? available cash, supply chain issues, and increased labor costs for diversified clean energy development and production; ? 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, 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, Covid-19 restrictions, 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; ? concentration of our investments in the InnSuites Hotels® brand; ? loss of membership contracts; ? the financial condition of franchises, brand membership companies, travel related companies, and receivables from travel related companies; ? ability to develop and maintain positive relations with "Best Western" and potential future franchises or brands; ? real estate and hospitality market conditions; ? 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 and cyber security; 17 ? the need to periodically repair and renovate our Hotels at a cost at or in excess of our standard 4% reserve; ? tariffs and health travel restrictions may affect trade and travel; ? our ability to cost effectively integrate any acquisitions with the Trust in a timely manner; ? increases in the cost and availability of labor, energy, healthcare, insurance and other operating expenses as a result of inflation, or 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 ever-changing tax laws.
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.
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