- Q2 RevPAR: Increased by 1.7%.
- Total RevPAR: Rose by 2.5%.
- Same-Property Hotel EBITDA: Exceeded midpoint of Q2 outlook by $5.2 million, topped high-end by $2.7 million.
- Adjusted EBITDA and FFO: Exceeded midpoint of Q2 outlook by $10 million, topped high-end by $7.5 million.
- Adjusted FFO per Share: Outperformed midpoint by $0.08, exceeded top of Q2 outlook by $0.06.
- San Diego Properties Occupancy: Improved by 9 percentage points to 81%.
- San Diego RevPAR Growth: 22.4%.
- Chaminade Resort & Spa RevPAR: Increased by almost 25%.
- Estancia La Jolla Hotel & Spa RevPAR: Increased by over 28%.
- Urban Properties Occupancy: Increased by 2.5 percentage points.
- Urban Properties RevPAR: Increased by 2.6%, total RevPAR rose by 3.4%.
- Resort Properties Occupancy: Increased by 3.5 percentage points.
- Resort RevPAR: Declined by 0.7%, total RevPAR improved by 0.6%.
- Group Revenue: Increased by 4%.
- Transient Demand: Strengthened with a 4.4% uptick over last year.
- Same-Property RevPAR: Declined by 2.2% in April, increased by 6.9% in May, modest rise of 0.4% in June.
- Newport Harbor Island Resort EBITDA: Generated $1.6 million.
- LaPlaya EBITDA: Produced $7 million in Q2, $15.3 million year-to-date.
- Hotel EBITDA Margin: 31.5%, a 180 basis point improvement from prior year quarter.
- Operating Expenses: Declined by 3.8% per occupied room, before fixed expenses declined by 1.5%.
- Insurance Premiums: Increased by about 5%, insurance rates declined by approximately 1%.
- Debt: $110 million of cash on June 30, weighted average cost of debt at 4.4%, 75% at fixed rates, 71% unsecured.
Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Pebblebrook Hotel Trust (PEB, Financial) exceeded its Q2 financial outlook, with adjusted EBITDA and FFO surpassing expectations by $10 million and $7.5 million, respectively.
- The company observed strong performance from newly redeveloped and repositioned properties, capturing market share and improving cash flows.
- Urban markets like San Diego, Chicago, Boston, and Washington, D.C. showed healthy occupancy gains, contributing to overall positive performance.
- Efficiency and cost-saving initiatives led to lower year-over-year operating expenses, boosting hotel profitability.
- Pebblebrook Hotel Trust (PEB) raised its 2024 full-year outlook for same-property hotel EBITDA, adjusted EBITDA, and FFO, indicating confidence in continued strong performance.
Negative Points
- Underperforming urban markets such as Portland, Los Angeles, and San Francisco negatively impacted overall urban recovery.
- Resort RevPAR declined by 0.7% due to a 5.4% decrease in ADR, indicating price sensitivity among leisure travelers.
- The company adopted a more cautious top-line outlook for the second half of the year due to increased price sensitivity among leisure travelers.
- Severe weather in Southern Florida in early June led to increased cancellations and reduced bookings at Florida resorts, impacting overall performance.
- Concerns about gradually slowing ADR growth and a slowing economy were highlighted, indicating potential challenges ahead.
Q & A Highlights
Q: In your reduction for 2024 RevPAR growth, can you dig into if certain markets drove an outsized amount of that reduction? Or if it was more of a high-level cut for greater price sensitivity of the leisure guests and potential slowing in just general demand?
A: Yes. The reductions in demand are really the resulting reductions in ADR as we regrow our distribution channels back to where we were pre-pandemic. The biggest impacts are falling on weekends and in underperforming markets like Portland, San Francisco, and L.A., and to a lesser extent, in the resort markets. - Jonathan Bortz, CEO
Q: I had a question on EBITDA. What are the elements that need to happen to get the urban EBITDA to increase significantly? Is it return to office? Greater travel demand?
A: A meaningful part of that upside in EBITDA comes from the returns on the investments we made in the portfolio in terms of redevelopments and upscaling properties. For cities, it's clear that there are cities that created issues or had issues created during the pandemic. As these cities recover in terms of quality of life and perception, we are confident that great cities like San Francisco and Los Angeles will recover as strong markets. - Jonathan Bortz, CEO
Q: When did you begin to see higher-end consumers become more price conscious? And what is your level of concern that businesses begin to pull back?
A: We started seeing this in the third quarter. As for businesses, we haven't seen any increase in attrition and cancellation across the portfolio. At this point, we haven't seen anything on the corporate side or the business side, either in group or transient, which are continuing to improve. - Jonathan Bortz, CEO
Q: From a repositioning and renovation perspective, what would you view as Pebblebrook's key growth drivers into next year?
A: The key drivers are clearly the redevelopments that we've done, such as Newport Harbor Island Resort, Estancia, Jekyll Island Club Resort, Margaritaville in San Diego Downtown, and Hilton Gaslamp. They are ramping well, picking up new demand, and gaining share. - Jonathan Bortz, CEO
Q: If you go back to your guidance three months ago and compare it to the new guidance today, can you attribute the change to lower property taxes, higher BI, and favorable variance on property insurance renewal rates?
A: Property taxes came in about $1 million higher, BI is about $3 million higher, and property insurance savings are a few hundred thousand dollars a month. The other half of the guidance change is due to operational efficiencies, accounting for about $3.5 million to $4 million. - Raymond Martz, CFO
Q: Can you talk about the process of converting Le Meridien Santa Monica to Hyatt? Was either party willing to provide key money to facilitate the conversion?
A: We chose Hyatt due to the lack of competition on the west side of L.A. Hyatt felt that this would be strongly beneficial to their brand family. We entered into an attractive franchise arrangement with key money provided by Hyatt. - Jonathan Bortz, CEO
Q: Can you quantify how much lower are the net rates on these rooms that you're getting through new channels? Are these bookings still occurring pretty short term?
A: Depending on the promotional offering, typical promotions are probably in the range of 20% to 30% off. For the most part, these are new customers, although existing customers on our mailing list may also take advantage of these offers. - Jonathan Bortz, CEO
Q: Compared to 2019, are you using these channels more or less the same?
A: We are probably still not at the same level we were using them before, with the exception of new consortia channels like Capital One and Costco. These consortia channels are very attractive and provide a better net rate than OTA channels. - Jonathan Bortz, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
