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01/10 16:01
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed picture. While there are positive aspects such as increased revenues, reduced labor costs, and stable occupancy, there are also concerns like declining RevPAR and cautious full-year guidance. The Q&A section reveals management's confidence in recovery and expense control, but lacks detailed guidance on asset sales and ADR improvement. The share repurchase program and cost-saving measures are positive, but the lack of strong growth signals tempers enthusiasm. Overall, the sentiment is neutral due to balanced positives and negatives, with no major catalysts for a significant stock price movement.
Same-store RevPAR Declined 3.6% year-over-year, driven by a 3.3% decline in average daily rate and an unfavorable shift of room night mix to lower-rated segments. Special events and the Easter holiday shift into April also contributed to the decline.
Occupancy Declined less than 0.5% year-over-year, with a second quarter occupancy of 78%, representing the second highest nominal occupancy in the past 5 years. The decline was influenced by special events and holiday shifts.
RevPAR Index Increased by nearly 150 basis points to 115%, reflecting a 240 basis point increase year-over-year in the NCI portfolio, attributed to successful revenue strategies.
Operating Expenses Increased only 1.5% year-over-year or 2% on a per occupied room basis, due to effective management of wages, reduced reliance on contract labor, and improved employee retention.
Adjusted EBITDA $50.9 million for the second quarter, reflecting the company's ability to manage expenses and benefit from share repurchase activity.
Adjusted FFO $32.7 million or $0.27 per share, supported by lower interest expenses and a reduced share count from share repurchases.
Food and Beverage Revenue Increased 9% year-over-year, driven by reconcepting of certain properties and implementation of new charges like breakfast fees.
Other Revenues Increased 3% year-over-year, supported by the implementation of resort and parking fees.
Contract Labor Costs Declined by 13% year-over-year, now representing 10.5% of total labor costs, which is 700 basis points below peak COVID levels.
Turnover Rates Declined nearly 40% from peak COVID levels, improving productivity and reducing training costs.
Interest Expense Savings Estimated annual savings of approximately $2 million due to refinancing activities.
Onera Fredericksburg Expansion: Completed a 23-unit expansion at Onera Fredericksburg, a luxury landscape hotel in Texas Hill Country. The expansion includes new units, a multiunit lodge, an additional pool, commissary, and guest enhancements. The property has demonstrated strong performance with a year-to-date RevPAR of $360 and hotel EBITDA margins of nearly 50%.
Market Share Growth: RevPAR index grew by nearly 150 basis points to 115%, among the highest levels post-pandemic. The NCI portfolio achieved a 240 basis point increase year-over-year in RevPAR index.
Regional Performance: Strong RevPAR growth in San Francisco (18%), Chicago (10%), and Florida markets (Orlando 9%, Miami 16%, Tampa 5%). Pittsburgh also showed strong performance with 11% RevPAR growth.
Expense Management: Operating expenses increased only 1.5% year-over-year, with a 13% reduction in contract labor and a 40% decline in employee turnover from peak COVID levels. Hourly wages increased by just 1.2%.
Refinancing Activities: Refinanced $58 million mortgage for AC Element hotel in Miami and $400 million term loan for GIC Joint Venture, reducing interest rates and extending maturities. Estimated annual interest savings of $2 million.
Share Repurchase Program: Repurchased 3.6 million shares for $15.4 million at an average price of $4.30 per share, reducing shares outstanding by 3% and achieving a dividend yield of 7.4%.
Asset Sales: Two non-core hotels under contract for sale, with proceeds expected to exceed share repurchase funding and contribute to balance sheet deleveraging.
RevPAR Decline: Same-store RevPAR declined 3.6% in Q2 2025, driven by a 3.3% decline in average daily rate and narrowing booking windows, indicating pricing sensitivity and demand volatility.
Government Policy Disruption: Government-related demand, which represents 5%-7% of total room nights, declined over 20% year-over-year in Q2 2025, impacting revenue.
International Travel Decline: Net inbound international travel declined approximately 18% year-over-year in Q2 2025, reducing demand.
Special Events Impact: Year-over-year comparisons were negatively affected by the absence of high-rated events like the solar eclipse and NCAA Final Fours, creating a 125 basis point headwind to RevPAR growth.
Market-Specific Challenges: Key markets like Dallas, Atlanta, Phoenix, and New Orleans experienced significant RevPAR contraction due to renovation disruptions and difficult year-over-year comparisons.
Booking Volatility: Narrowed booking windows and increased pace volatility have made forecasting challenging, widening the range of potential outcomes for the year.
Property Tax Increases: Increased property taxes offset insurance savings, creating a financial headwind expected to persist through the year.
Renovation Displacement: Renovation activities in markets like Atlanta and New Orleans caused temporary displacement, negatively impacting RevPAR.
Macroeconomic Uncertainty: Broader macroeconomic uncertainty is negatively impacting near-term fundamentals, including demand and revenue expectations.
RevPAR Outlook: The company expects the operating trends experienced in the second quarter to generally continue into the third quarter, with a forecasted RevPAR decline of approximately 3%. Incremental improvements are anticipated in August and September, with demand stabilization and a stronger industry group and convention calendar expected to improve trends in the fourth quarter.
Full-Year Financial Guidance: Current operating trends point to metrics modestly below the low end of the guidance ranges provided in February 2025 for adjusted EBITDAre and Adjusted FFO and FFO per share. Full-year adjusted EBITDA and AFFO per share are expected to finish within 1% to 2% of initial figures, despite RevPAR growth being approximately 200 basis points below the initial growth target.
Long-Term Supply Growth: The company anticipates historically low supply growth for new hotels, with 2025 marking the second consecutive year of supply growth below 1%. This trend is expected to continue for several years, amplifying the benefits of a more constructive demand and pricing environment.
Market-Specific Projections: San Francisco and Silicon Valley are expected to continue experiencing outsized growth. Future convention center pace is up double digits in Phoenix and New Orleans, and newly renovated hotels in these markets are expected to provide additional lift to results. Frisco is projected to benefit from the opening of the Universal Kids Resort in 2026 and ongoing corporate relocation trends.
Capital Expenditures: Full-year 2025 capital expenditure spend is reduced to $60 million to $65 million on a pro rata basis, reflecting a $2.5 million reduction at the midpoint. The company has invested over $250 million in capital expenditures over the past three years, resulting in a portfolio in excellent physical condition.
Debt and Liquidity: The company has no debt maturities until 2028, with liquidity of over $310 million and an average interest rate of 4.6%. Recent refinancing activities have reduced borrowing costs and extended maturities, positioning the company to navigate near-term volatility and pursue growth opportunities.
Quarterly Common Dividend: On August 1, 2025, the Board of Directors declared a quarterly common dividend of $0.08 per share, representing an annualized dividend of $0.32 per share and a dividend yield of over 6%. The payout ratio is approximately 35% based on the trailing 12-month AFFO.
Share Repurchase Program: The Board of Directors approved a $50 million share repurchase program. During Q2 2025, 3.6 million shares were repurchased for $15.4 million at an average price of $4.30 per share, representing a 15% discount to the current trading price. This reduced shares outstanding by approximately 3% and was executed at an implied dividend yield of 7.4%, which is 120 basis points above borrowing costs. The repurchase activity is funded by proceeds from asset sales, with two hotels under contract for sale expected to close in Q3 or Q4 2025.
The earnings call presents mixed signals. While there are positive aspects like improved employee turnover, reduced capital expenditures, and successful asset sales, the RevPAR decline and modest financial guidance are concerning. The Q&A section highlights stabilization in leisure demand and optimism for future events, but also notes pressures from government demand and unclear management responses. These factors suggest a balanced outlook, resulting in a neutral sentiment.
The earnings call presents a mixed picture. While there are positive aspects such as increased revenues, reduced labor costs, and stable occupancy, there are also concerns like declining RevPAR and cautious full-year guidance. The Q&A section reveals management's confidence in recovery and expense control, but lacks detailed guidance on asset sales and ADR improvement. The share repurchase program and cost-saving measures are positive, but the lack of strong growth signals tempers enthusiasm. Overall, the sentiment is neutral due to balanced positives and negatives, with no major catalysts for a significant stock price movement.
The earnings call presents mixed signals: strong shareholder return plans with dividends and buybacks, but declining revenue and ADR, and contracting EBITDA margins. The Q&A reveals stabilization in government and international segments, but uncertainties remain, especially with management's vague responses on expense management. Overall, the positive impact of shareholder returns and liquidity is offset by revenue declines and lack of clear future guidance, leading to a neutral outlook.
The earnings call summary reveals several negative factors: a decline in RevPAR, economic uncertainty, reduced capital expenditure, and high labor costs. The Q&A section indicates stabilization at lower levels for government and international travel, but management's unclear responses on expense relief and mix shift add to concerns. Despite a share repurchase program, the overall sentiment is negative due to weak financial performance, economic uncertainty, and unclear guidance on expense management. These factors suggest a likely negative stock price movement in the near term.
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