Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Chatham Lodging Trust (CLDT, Financial) successfully repaid approximately $280 million of maturing debt, leaving only $30 million due over the next year, indicating strong financial management.
- The company acquired a new hotel, the Home2 Suites by Hilton Phoenix Downtown, strategically located in a vibrant area, which is expected to drive diverse demand.
- RevPAR growth was strong at 4% for the quarter, with occupancy levels up every day compared to last year, indicating a recovery in business travel.
- Chatham Lodging Trust (CLDT) reported a GOP margin of 46%, finishing at the top of their guidance range, showcasing effective cost management.
- The company is positioned to benefit from declining interest rates due to their exposure to floating rate debt, potentially increasing FFO by $2.6 million for every 100 basis points decline in SOFR.
Negative Points
- RevPAR growth was impacted by the timing of the Juneteenth holiday and the July 4th holiday, leading to a decline in performance during those periods.
- Hotel EBITDA margins were down 230 basis points compared to the previous year, partly due to non-recurring expenses and increased costs in areas like payroll and insurance.
- The leisure segment of their portfolio saw a RevPAR decline of 2%, indicating potential challenges in this market segment.
- The company faces challenges in achieving ADR increases, particularly in the leisure segment, which could impact overall revenue growth.
- Chatham Lodging Trust (CLDT) has some hotels facing upcoming renovations, which could require significant capital expenditure without a clear return on investment.
Q & A Highlights
Q: Can you elaborate on the trends you've been seeing in recent weeks, particularly in tech markets, and how leisure demand is affecting the third quarter outlook?
A: Dennis Craven, Chief Operating Officer, noted that leisure hotel performance was down 2% in the second quarter and doesn't expect significant changes. The July 4th holiday impacted RevPAR, but overall, they anticipate steady performance with potential improvement as business travel picks up post-summer.
Q: From a RevPAR cadence for the second half of the year, would you expect the fourth quarter to be softer than the third quarter?
A: Dennis Craven indicated that October is typically strong, especially for tech hotels. They expect the fourth quarter to have a similar range to the third quarter, maintaining a steady outlook.
Q: Are there similar acquisition opportunities like the Home2 Phoenix, and what types of assets are you looking to sell?
A: Jeffrey Fisher, CEO, mentioned that while the Phoenix acquisition was unique, they expect more opportunities as the year progresses. Dispositions will focus on lower RevPAR hotels facing renovations, aiming to recycle capital into more promising assets.
Q: Is there anything from a demand perspective that concerns you?
A: Dennis Craven stated that despite economic concerns, they see no significant demand slowdown. Occupancy levels remain strong, and they feel insulated from leisure pullbacks due to limited exposure.
Q: Can you explain the stronger-than-expected margin performance in the quarter?
A: Jeremy Wegner, CFO, attributed the margin outperformance to better-than-expected property taxes and excellent productivity in rooms labor, which remained flat year-over-year on a cost-per-occupied-room basis.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
