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01/11 03:34
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights a strong recovery in key markets like San Francisco and Los Angeles, driven by major events and AI industry demand. Despite a slight EBITDA decline, the company maintains effective cost management and investment strategies. Positive guidance for 2026, with increased group revenues and favorable market conditions, suggests a positive stock reaction. The Q&A reveals confidence in market recovery and strategic asset management, though some management responses lacked clarity. Given the company's $1.6 billion market cap, these factors suggest a positive stock price movement between 2% to 8% over the next two weeks.
Same-property hotel EBITDA $105.4 million, in line with the midpoint. Adjusted EBITDA was $99.2 million, exceeding the midpoint by $2.2 million. This reflects resilience in the operating model, focus on driving efficiencies, and disciplined cost management.
Adjusted FFO per share $0.51, $0.03 above the midpoint. This reflects strong operational execution and cost control.
Same-property occupancy Increased nearly 190 basis points. This was driven by improved performance in urban markets and resorts, despite challenges in Los Angeles and Washington, D.C.
ADR (Average Daily Rate) Declined 5.4%, resulting in a 3.1% decline in RevPAR and a 1.5% drop in same-property total RevPAR. The decline was due to competitive pricing in D.C. and L.A., disruptions from ICE activity, National Guard deployments, and increased demand through lower-priced booking channels.
San Francisco RevPAR Rose 8.3% in Q3 on a 690 basis point jump in occupancy, driving EBITDA higher by 10.9%. Growth was fueled by an active convention calendar and recovery in business and leisure travel.
Chicago RevPAR Increased 2.3%, driven by leisure events, improving weekday corporate travel, and stronger weekend leisure. This was achieved despite a difficult comparison to last year’s Democratic National Convention.
Resort portfolio total RevPAR Increased by 0.7%, led by Newport Harbor Island Resort (RevPAR up 29%, total RevPAR up 35.9%) and Jekyll Island Club Resort (RevPAR up 8%, total RevPAR up over 11%). Estancia La Jolla's RevPAR rose 5.7%. This reflects the success of redevelopment programs.
Washington, D.C. RevPAR Declined 16.4% due to reduced government travel and lower tourism activity. Challenges are expected to persist in Q4 due to the federal government shutdown.
Los Angeles RevPAR Declined 10.4%, driven by rain, price competition, and disruptions from fires, ICE rates, and National Guard deployments. Conditions are stabilizing as the political environment cools.
Same-property hotel expenses before fixed costs Rose just 0.4% year-over-year. On a per occupied room basis, expenses declined about 2%, reflecting exceptional operating discipline.
LaPlaya adjusted EBITDA Expected to generate approximately $36.6 million this year, compared to $42.8 million in 2024, which benefited from elevated BI collections following Hurricane Ian.
Capital investment $14.2 million in the quarter, with a full-year target of $65 million to $75 million. This reflects a return to a normalized investment pace post-redevelopment program.
Convertible notes $400 million offering of 1.625% convertible notes completed in September, used to retire $400 million of 1.75% convertible notes due 2026 at a 2% discount to par. $50 million worth of common shares repurchased during the quarter.
AI-enabled tools: Piloting AI-enabled tools to improve hiring, retention, service delivery, cleanliness, and productivity.
Redeveloped properties: Properties like Newport Harbor Island Resort, Estancia La Jolla, and others are showing strong performance post-redevelopment, with increased market share and profitability.
San Francisco: RevPAR rose 8.3% in Q3, driven by an active convention calendar and recovery in business and leisure travel. The city is benefiting from the AI revolution and improved safety and vibrancy.
Chicago: RevPAR increased 2.3%, supported by leisure events, corporate travel, and weekend leisure.
Resort portfolio: Total RevPAR increased by 0.7%, with Newport Harbor Island Resort leading with a 29% RevPAR jump.
Cost management: Same-property hotel expenses rose just 0.4% year-over-year, with a 2% decline in expenses per occupied room.
Capital investment: Invested $14.2 million in Q3, with a full-year target of $65-$75 million, reflecting a return to normalized investment levels.
Hotel sale: Entered an agreement to sell a hotel for $72 million, with the transaction expected to close in Q4.
Convertible notes: Completed a $400 million offering of 1.625% convertible notes, using proceeds to retire $400 million of 1.75% notes due 2026.
Geopolitical and Macroeconomic Uncertainty: The company faced challenges due to heightened geopolitical and macroeconomic uncertainty, which impacted demand and pricing.
Unfavorable Holiday Calendar Shift: The holiday calendar shift negatively affected performance, particularly in September.
Decline in ADR and RevPAR: Average Daily Rate (ADR) declined by 5.4%, leading to a 3.1% drop in RevPAR, driven by competitive pricing and lower-priced booking channels.
Weakness in Los Angeles and Washington, D.C.: Los Angeles and Washington, D.C. were the most challenged markets, with RevPAR declines of 10.4% and 16.4%, respectively, due to safety concerns, government travel reductions, and disruptions.
Government Shutdown Impact: The ongoing federal government shutdown significantly reduced government and government-related travel, particularly in Washington, D.C., and impacted air travel and cancellations.
Group Demand Weakness: Group demand was pressured, with reduced attendance at healthcare, education, and government-related events, and weaker international participation at conventions.
Competitive Pricing Pressures: Renewed pricing competition in the industry led to a lack of ADR growth, particularly in urban markets.
Supply Chain and Weather Disruptions: Los Angeles faced disruptions from earlier fires and rain, which created safety concerns and rate pressures.
Economic Uncertainty and Tariff Policy: Uncertainty related to tariff policy and government spending reductions created hesitancy among businesses and consumers, impacting travel demand.
Operational Cost Pressures: While cost controls were effective, there is ongoing pressure to manage operating expenses amid a challenging demand environment.
2026 Outlook: The company is cautiously optimistic about 2026 due to favorable fundamentals, including macroeconomic stabilization, normalized hotel demand growth correlating with GDP, and historically low new supply levels. The holiday calendar is expected to be more favorable, with key holidays aligning better for leisure travel. Major events like the World Cup, America's 250th anniversary celebrations, and other sports events are expected to boost demand in key markets. Redeveloped properties are expected to contribute to outperformance, and urban markets like San Francisco, Portland, and Chicago are primed for recovery. Group room nights, ADR, and group revenues are all pacing ahead of 2025 levels.
Q4 2025 Guidance: Same-property RevPAR is expected to range between -1.25% to +2%, with total RevPAR between -1.25% and +2.7%. Total hotel expenses are projected to grow just 0.8% at the midpoint, with expenses per occupied room expected to decline. The outlook assumes the government shutdown will end soon, but the shutdown has already negatively impacted government-related travel and cancellations.
Redeveloped Properties: Redeveloped properties like Newport Harbor Island Resort, Estancia La Jolla, and others are expected to continue ramping up, contributing to market share gains and higher profitability in 2026. Newport Harbor Island Resort is projected to generate almost $17 million in EBITDA for 2025, exceeding prior forecasts.
Major Events Impact: The company expects significant incremental demand in 2026 from major events, including 28 World Cup matches, NCAA basketball tournaments, America's 250th anniversary celebrations, the Super Bowl, NBA All-Star game, and College Football National Championship game. These events are expected to materially benefit markets like Los Angeles, Boston, Miami, and San Francisco.
Macroeconomic and Industry Trends: The company anticipates macroeconomic uncertainty to fade in 2026, with business investment ramping up due to AI and reshoring. The hotel industry is expected to benefit from low new supply levels and a return to positive demand growth correlating with GDP. The company believes the disruptions from 2025 will dissipate, leading to a more favorable environment.
Share Repurchase: We also concurrently repurchased $50 million worth of common shares during the quarter at a significant discount to NAV, which is accretive to FFO and NAV per share.
The earnings call summary reveals mixed signals: while there are improvements in operational expenses and future growth potential, the macroeconomic outlook remains cautious, with declining RevPAR and deferred capital expenditures. The Q&A section indicates uncertainty around asset sales and capital allocation. Although there is optimism for 2026, current guidance and economic conditions suggest a stable outlook. Given the mid-sized market cap, the stock is likely to remain neutral, with limited movement over the next two weeks.
The earnings call highlights a strong recovery in key markets like San Francisco and Los Angeles, driven by major events and AI industry demand. Despite a slight EBITDA decline, the company maintains effective cost management and investment strategies. Positive guidance for 2026, with increased group revenues and favorable market conditions, suggests a positive stock reaction. The Q&A reveals confidence in market recovery and strategic asset management, though some management responses lacked clarity. Given the company's $1.6 billion market cap, these factors suggest a positive stock price movement between 2% to 8% over the next two weeks.
The earnings call summary shows mixed signals: strong financial health with increased cash and reduced debt, but cautious revenue outlook and declining RevPAR. The Q&A reveals management's optimism about recovery and efficiency gains, but concerns about pricing sensitivity and unclear guidance on key projects. These factors, along with a market cap of $1.63 billion, suggest a neutral stock price movement over the next two weeks.
The earnings call highlights several negative factors: softening demand, competitive pressures, international travel decline, economic policy uncertainty, and group cancellations. Despite some positive financial metrics, the lack of guidance on share repurchases, the negative impact of LA wildfires, and management's vague responses in the Q&A add to the negative sentiment. The market cap of $1.63 billion suggests moderate sensitivity to these factors, leading to a likely stock price decrease of -2% to -8%.
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