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01/11 12:00
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed picture: strong RevPAR growth in key markets and a robust shareholder return plan are offset by lowered guidance for RevPAR and adjusted EBITDA, and challenges in Hawaii. The Q&A reveals management's confidence in asset sales and refinancing, but there are uncertainties in group bookings and labor costs. The market cap suggests moderate reactions. Overall, the sentiment is neutral, reflecting balanced positive and negative factors.
Q2 RevPAR $196, representing a 160 basis point decline year-over-year. Excluding Hilton Hawaiian Village and Royal Palm South Beach, year-over-year RevPAR growth would have exceeded 2%. The decline was due to the labor strike recovery at Hilton Hawaiian Village and the suspension of operations at Royal Palm South Beach for renovation.
Total hotel revenues for Q2 $645 million. No year-over-year change or reasons for change were explicitly mentioned.
Hotel adjusted EBITDA for Q2 $191 million, resulting in a margin of 29.6%. No year-over-year change or reasons for change were explicitly mentioned.
Adjusted EBITDA for Q2 $183 million. No year-over-year change or reasons for change were explicitly mentioned.
Adjusted FFO per share for Q2 $0.64, exceeding expectations. No year-over-year change or reasons for change were explicitly mentioned.
Bonnet Creek complex RevPAR Increased nearly 12% year-over-year, driven by strong transient demand and enhanced commercial strategies. Waldorf Astoria within the complex reported a 24% increase in RevPAR year-over-year due to improved group and transient demand.
Casa Marina resort RevPAR Increased nearly 4% year-over-year, with transient occupancy increasing by over 20%. The increase was attributed to its position as a premier hotel and the addition of the El Dorado restaurant.
Puerto Rico RevPAR Increased nearly 18% year-over-year, driven by strong leisure and business transient demand. Caribe Hilton outperformed its comp set with a RevPAR index of 120%.
JW Marriott Hotel in San Francisco RevPAR Growth exceeded 17% year-over-year, driven by solid transient and group demand and an increase in convention room nights.
Hilton Midtown New York RevPAR Increased nearly 10% year-over-year, supported by a 16% increase in group revenue and an 11% increase in leisure revenue.
Hilton Denver RevPAR Growth exceeded 6% year-over-year, fueled by strong performance across both group and leisure segments.
Hyatt Regency Boston RevPAR Increased 5% year-over-year, driven by a 22% increase in leisure revenue.
Hawaii properties combined RevPAR Declined approximately 12% year-over-year, impacted by weaker inbound travel from abroad and recovery from the Q4 labor strike at Hilton Hawaiian Village.
Royal Palm South Beach Renovation: The hotel suspended operations in mid-May for a transformative renovation and repositioning, with an expected reopening in Q2 of next year ahead of the 2026 World Cup. The $103 million investment is expected to generate returns of 15%-20%, doubling the hotel's EBITDA to nearly $28 million once stabilized.
Hilton Hawaiian Village Renovation: The final phases of room renovation projects for two room towers in Hawaii commenced, including a $48 million investment in the Rainbow Tower and a $36 million investment in the Palace Tower. Both projects are expected to be completed in early Q1 of next year.
Hilton New Orleans Riverside Renovation: The second phase of a three-phase renovation project is underway, with $31 million invested to upgrade 428 guestrooms in the main tower. The remaining 489 guestrooms are scheduled for renovation in 2026.
Orlando Market Performance: The Bonnet Creek complex delivered record-setting revenue for Q2, with RevPAR exceeding expectations and increasing nearly 12% year-over-year. The Waldorf Astoria reported a 24% increase in RevPAR, driven by strong transient and group demand.
Key West Market Performance: Casa Marina resort reported a 4% year-over-year increase in RevPAR, with transient occupancy increasing by over 20%. Food and beverage revenue reached a new Q2 record, driven by increased transient volume and the newly added El Dorado restaurant.
Puerto Rico Market Performance: RevPAR increased nearly 18% year-over-year, driven by strong leisure and business transient demand. Caribe Hilton outperformed its comp set with a RevPAR index of 120%.
Expense Management: Total expense growth was limited to 40 basis points for the quarter, or 1% excluding Royal Palm South Beach. A 25% reduction in property insurance premiums will result in $5 million in savings through year-end.
Debt Management: Efforts are underway to address $1.4 billion in 2026 debt maturities, including a $1.275 billion CMBS loan on Hilton Hawaiian Village and a $123 million mortgage loan on Hyatt Regency Boston.
Noncore Asset Dispositions: The sale of Hyatt Centric Fisherman's Wharf for $80 million was completed, with discussions ongoing for other noncore assets. The goal is to dispose of 18 noncore hotels by year-end to enhance portfolio quality.
Portfolio Optimization: Decisions were made to close Embassy Suites Kansas City Plaza Hotel and exit two additional noncore hotels, DoubleTree Seattle Airport and DoubleTree Sonoma, to improve portfolio quality and increase nominal RevPAR and margins.
Hawaii Market Challenges: The Hawaii market continues to face near-term headwinds, including weaker inbound international travel and recovery from last year's labor strike at Hilton Hawaiian Village. Combined RevPAR at the two properties declined by approximately 12% during the quarter.
Economic Uncertainty: Heightened economic uncertainty, including tariffs, elevated inflation, and geopolitical issues, is expected to weigh on travel demand during the third quarter.
Group Demand Weakness: Softer-than-anticipated group demand is forecasted for Q3, with group pace lower by 380 basis points to down 14%, marking the weakest quarter of the year.
Leisure Transient Demand: Softer leisure transient demand is expected for Q3, mainly due to heightened economic uncertainty, reduction in government demand, and weaker inbound international visitation.
Debt Maturities: The company faces significant debt maturities in 2026, including a $1.275 billion CMBS loan on Hilton Hawaiian Village Resort and a $123 million mortgage loan on Hyatt Regency Boston Hotel, requiring near-term solutions to address these obligations.
Renovation Disruptions: Renovation projects, such as the Royal Palm South Beach, which suspended operations in May, are causing temporary disruptions, impacting RevPAR and overall portfolio performance.
Transaction Market Challenges: The transaction market remains challenging, impacting the company's ability to dispose of noncore assets and achieve its target of $300 million to $400 million in dispositions by year-end.
Expense Growth: Looking ahead to the remainder of the year, the company expects continued low expense growth, driven by cost savings identified through analysis and a 25% reduction in property insurance premiums, resulting in $5 million in savings through year-end.
Noncore Asset Dispositions: The company aims to achieve $300 million to $400 million in noncore asset dispositions by year-end, with active discussions ongoing for several assets.
Portfolio Quality Enhancement: The removal of noncore assets is expected to increase nominal RevPAR by over $5 and margins by nearly 70 basis points, enhancing the quality of the portfolio.
Royal Palm South Beach Renovation: The comprehensive renovation project at Royal Palm South Beach Resort is expected to generate returns of 15% to 20% on a $103 million investment, with EBITDA expected to double to nearly $28 million once stabilized. The hotel is scheduled to reopen in Q2 2026, ahead of the World Cup.
Hawaii Renovation Projects: Final phases of room renovations at Hilton Hawaiian Village and Hilton Waikoloa Village are expected to be completed in early Q1 2026, with investments of $48 million and $36 million, respectively.
Hilton New Orleans Riverside Renovation: The second phase of a 3-phase renovation project is underway, with $31 million invested to upgrade 428 guestrooms. The final phase is scheduled for 2026.
Bonnet Creek Complex Performance: The complex is expected to deliver high single-digit RevPAR growth throughout the remainder of the year, with 2025 EBITDA forecasted to exceed $90 million, nearly 40% above prior peak.
Key West Hotels Performance: Total RevPAR is projected to grow high single digits over last year, driven by sustained transient room demand and food and beverage activity.
Puerto Rico Hotels Performance: Mid- to upper single-digit RevPAR growth is expected for the back half of the year, driven by strong leisure and business transient demand.
Urban Portfolio Performance: RevPAR growth is expected to reaccelerate to 3% to 5% in Q4, with outsized gains expected in Hawaii, Denver, Orlando, Key West, Boston, Seattle, and Chicago.
Hawaii Market Outlook: Performance in Hawaii is expected to accelerate meaningfully in Q4, with high teens combined RevPAR growth. The long-term outlook remains favorable due to limited new supply and anticipated improvement in inbound travel from abroad.
Q3 and Q4 RevPAR Forecast: Q3 RevPAR is expected to decline by approximately 4% to 5%, while Q4 RevPAR growth is expected to reaccelerate to 3% to 5%.
Adjusted EBITDA and FFO Guidance: Full-year adjusted EBITDA forecast is increased to $620 million at the midpoint, with adjusted FFO per share increasing to $1.95 at the midpoint.
Dividend Payment: On July 15, the company paid a second quarter cash dividend of $0.25 per share. Additionally, on July 25, the company declared a third quarter cash dividend of $0.25 per share, to be paid on October 15 to stockholders of record as of September 30. The dividend translates to an annualized yield of approximately 9%.
The earnings call summary highlights strong financial performance, strategic partnerships, and optimistic guidance. The company's focus on asset sales, cost reduction, and strategic investments, along with a positive outlook for key markets like Hawaii, supports a positive sentiment. Despite some challenges, such as market volatility and a potential government shutdown, management's confidence and clear strategic direction indicate a positive stock price movement. Considering the market cap, the stock is likely to see a positive reaction in the 2% to 8% range over the next two weeks.
The earnings call presents a mixed picture: strong RevPAR growth in key markets and a robust shareholder return plan are offset by lowered guidance for RevPAR and adjusted EBITDA, and challenges in Hawaii. The Q&A reveals management's confidence in asset sales and refinancing, but there are uncertainties in group bookings and labor costs. The market cap suggests moderate reactions. Overall, the sentiment is neutral, reflecting balanced positive and negative factors.
The earnings call reveals a mixed picture with negative elements outweighing positives. EPS missed expectations significantly, and RevPAR declined. Despite share repurchases and dividends, guidance was lowered across key metrics, and management expressed uncertainty about asset sales. The Q&A highlighted concerns about geopolitical factors and slow recovery in Hawaii. The market cap indicates moderate sensitivity, suggesting a stock price decline between -2% to -8% over the next two weeks.
The earnings call presents a mixed picture: strong total hotel revenues and positive RevPAR growth in some areas are offset by challenges like labor issues and RevPAR declines in key locations. The Q&A section reveals uncertainty in asset sales and market variability, but management remains cautiously optimistic. The share repurchase program and high dividend yield are positives, but the lack of clear guidance on asset impairments and weak group pace for Q2 and Q3 temper enthusiasm. Given the market cap, the stock is expected to have a neutral reaction.
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