Hotel Trust Cashing in Everything but Casinos : Lodging: Hotel Investors, suffering declining profits and a lower stock price, plans to sell its traditional hotel properties.

Hotel Investors Trust in Woodland Hills and its affiliate, Hotel Investors Corp., are getting out of the traditional hotel business and betting their future on the gaming industry.

Stung by sharp declines in their profit and stock price, the companies said they plan to sell all the hotels they own and operate except for two casino-hotels in Las Vegas.

The trust owns 36 traditional lodging properties (including Holiday Inn, Ramada and Hilton franchise outlets around the country), and the corporation operates 32 of them. Although they are separate entities, the stocks of the trust and the San Diego-based corporation are paired together and the companies jointly report their financial results.

In the Los Angeles area, Hotel Investors’ properties include the Vagabond Inns in Woodland Hills and Rosemead.

Once the companies sell their hotels, they plan to pay off their combined $150 million in long-term debt, said John F. Rothman, chief executive of Hotel Investors Trust. Remaining proceeds likely would be used to buy additional gaming properties, although that is not certain, he said.

“We might decide we want to pay a special dividend, we might want to purchase some of our stock,” he said. “But obviously, if we find the opportunities in gaming to be as attractive as we think, they are likely to be applied in that direction.”

L. George Rieger, chairman of Rieger, Robinson, Harrington & Co., a New York money management firm that owns about 550,000, or 5%, of Hotel Investors’ stock, said Hotel Investors had no viable alternative but to sell the hotels to raise cash.

Given the company’s problems, it’s unlikely that Hotel Investors could borrow money, and its low stock price--well below its book value of $13.50-$14 a share--makes it nearly impossible for the company to sell additional shares to the public, Rieger said.

The companies decided to flee the traditional hotel business because strong competition and overbuilding in the industry have severely shaved profit margins in the mid-priced hotel market where Hotel Investors competes.

Hotel Investors compounded its problems by purchasing several poor hotels, mostly in the Southeast, as the industry conditions were growing worse, Rieger said. Hotel Investors “bought the wrong properties at the wrong time,” he said.

Rothman declined to estimate how much the hotel properties might bring, but added that several people have expressed an interest in buying them. As of June 30, the hotels had a stated value of about $200 million on the companies’ books, and the two hotel-casinos were valued at roughly $53 million.

Hotel Investors plans to auction its properties, and the actual combined sales price for the hotels could be significantly different than their stated asset value.

“We’d like to get more, we might get less” than $200 million, Rothman said.

Hotel Investors’ stock closed Monday at $8.25 a share in New York Stock Exchange composite trading, compared with $25 a share in 1987.

In the fiscal year that ended Aug. 31, 1987, the Hotel Investors companies earned $9.9 million on revenue of $64.5 million. But in 1988--the companies have since changed their financial reporting periods to a calendar year--the trust and corporation earned only $1.3 million on revenue of $93.9 million.

Moreover, the companies lost $244,000 on revenue of $57.1 million in the first half of 1989, and the deteriorating performance prompted the companies last November to slash their quarterly dividend by half, to 25 cents a share.

Despite Hotel Investors’ problems, Rothman predicted that a hotel chain would find Hotels Investors’ hotels appealing.

“The properties are in good locations, they’re in physically good shape, and would represent a strategic investment for another hotel company,” he said.

More investments in gaming properties appeal to Hotel Investors because the company already has absorbed the start-up costs of becoming a licensed operator in Las Vegas, where it operates the King 8 and Bourbon Street casino-hotels, Rothman said. The casino-hotels accounted for 28% of Hotel Investors’ revenue in the first six months of 1989.

“We’ve paid the price of admission” to the Las Vegas market, Rothman said.