PORTLAND, OR— While the newspaper headline was busy trumpeting hard times being experienced by Shilo Inns, the 47-property chain’s COO Jim McCulloch was even busier “setting the record straight” by noting the company was nonetheless faring better than most of its competitors. Indeed, a story appearing in The Oregonian was accurate when it spoke of Shilo Inns hammering out an agreement with Bank of America covering a $30-million debt, but McCulloch— and Mark Hemstreet, the chain’s founder, owner and president— took exception to labeling the payment problems as a default. “It was the bank that alleged this [situation]was a default; our lawyers are convinced there’s no default involved here,” said McCulloch. “In fact, what we’ve done is work out a repayment plan with the bank where, for a six-month period, we’ll be paying interest only on the outstanding debt. “Moreover,” he added, “this is not something out of the ordinary. We are similarly in the process of renegotiating with a host of [other]lenders to re-work our existing debt structures.” But it was with the overall tone of the news story that McCulloch and his Shilo Inns associates took umbrage. Among the claims felt to be disparaging (at the very least) were such allegations and contentions as: • daunting competition from national brands siphoned off guests; • (the company has suffered a significant) drop-off in business; • (the company is suffering a) current cash crunch; • the privately held chain suffered a big plunge in revenue…plummeting at least 15%; • (the company) lost money; • at least twice in the past decade, Shilo has quietly been put on the selling block; and, in general, • (the company has) a host of obstacles to overcome for it to remain a viable competitor in the mid-priced hotel game. The real deal, according to McCulloch, is that Shilo Inns’ RevPAR was down just 1.5% through Sept. 11, and only during the rest of that month did the chain register a 15% drop-off. Since then, he said, RevPAR has steadily improved each month…though it still lags the year-earlier comparable period. “Actually,” McCulloch noted, “even though our fourth quarter RevPAR was down 9% and our RevPAR for the year was down 5.4%, I believe we outperformed the industry as a whole.” Moving on to the organization’s cash-flow situation, McCulloch pointed out that Shilo Inns at this time is at its “normal, cyclical bottom in cash flow…which has obviously been further impacted by the events of Sept. 11, the recession, and the routine seasonality of the firm’s business cycle.” As he explained: “We may be slightly behind where we’ve been in the past, but it’s certainly not anything to get worked up about. By no means is the current situation destroying the company. Finally, as for thoughts of selling the company, McCulloch maintained “it’s not unusual to test the waters on a regular basis…if for no other reason than to gauge what your holdings are worth at any given time on the open market. But we’re definitely looking at the lodging business long term,” he emphasized. “We have shed some properties over the years, but that’s allowed us to replace them with newer, higher-end hotels. “In fact, we feel we’re still very much in the acquisition mode,” McCulloch offered. “Just last fall we picked up another property in the Portland suburbs, and even now we have our eye on others that might make suitable and strategic additions to our portfolio.”
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