REIT earnings: Host, RLJ, Park, DiamondRock, Pebblebrook

Many of the major U.S. REITs reported earnings over the past week. Here is a roundup about their performances, major news and outlook for 4Q23:

City centers fuel Host

Host Hotels & Resorts reported 3Q23 earnings, Comparable hotel RevPAR was $201.32 in the third quarter and $214.67 year-to-date, representing an increase of 1.8% and 10.4%, respectively, compared to the same periods in 2022, primarily driven by an increase in occupancy for the quarter and growth in both occupancy and rate year-to-date. Continued growth in city-center markets fueled by improvements in group business led to the overall improvement, offsetting moderating rates at resorts in comparison to the third quarter of 2022.

“We have also reached an agreement with Hyatt to complete transformational reinvestment capital projects at six properties (Host expects to invest $125-200 million/year over the next 3-4 years) as we build on our successful capital allocation strategy over the past few years,” said Host President and CEO James Risoleo. “In addition, we repurchased approximately $100 million of our common stock and paid a third quarter dividend of $0.18 per share, a 20% increase over the second quarter dividend. Despite the impact of the wildfires in Maui, we maintained the midpoint of our previous full year comparable hotel RevPAR growth at 8% and tightened our full year guidance range to 7.25% to 8.75%, which remains relatively wide given the evolving nature of demand on Maui. We believe our strong balance sheet puts us in a position to execute on multiple fronts, and as a result, leaves Host well positioned for future growth.”

RLJ expects better business in NoCal

RLJ Lodging Trust reported 3Q23 earnings that showed RevPAR increased 3.4% over last year and achieved 98% of third quarter 2019 results. Portfolio comparable RevPAR of $141.81 was led by both occupancy and ADR growth. Total revenue for Q3 2023 was reported at $334.4 million. RLJ also increased third quarter dividend by 25% and repurchased 1.5 million common shares for approximately $14.4 million at an average price per share of $9.81. Guidance for 4Q23 showed RevPAR projected to be +2-6%. Management expects stronger convention business in Northern California. Hotel EBITDA guidance is $82-$92 million.

“We were pleased that our urban-centric portfolio achieved RevPAR growth that exceeded the industry for the third straight quarter,” said President and CEO Leslie Hale. “Our results were led by our urban markets, which benefited from the continued improvement in business travel, ongoing robust group demand, healthy urban leisure trends and recovering inbound international travel. Our RevPAR growth accelerated throughout the third quarter, with RevPAR exceeding 2019 levels for the first time in September. These positive trends also carried into October. Overall, we remain constructive on the outlook for lodging fundamentals, which continue to unfold with trends favorable for our urban-centric portfolio. In addition to achieving above industry RevPAR growth, we also executed on multiple capital allocation initiatives including share repurchases and increasing our dividend, demonstrating the optionality of our strong balance sheet."

Park reshaping portfolio

Park Hotels & Resorts reported 3Q23 earnings that showed improvement in demand as business travel accelerated and group demand continued to return to its urban hotels. During the third quarter, comparable group bookings for 2023 increased by over $25 million, or over 110,000 room nights, as compared to the end of June 2023, of which approximately $10 million was recognized during the third quarter. As of the end of September 2023, comparable group revenue pace and room night bookings for 2023 were nearly 93% and over 86% of what 2019 group bookings were as of the end of September 2019, respectively, with average comparable group rates exceeding 2019 average group rates by nearly 8% for the same time period. In addition, 2024 comparable group revenue pace increased nearly 18% compared to the same time last year. Comparable RevPAR for the third quarter of 2023 increased approximately 3% compared to the third quarter of 2022, or nearly 5% excluding the Casa Marina Key West, Curio Collection, where operations were suspended throughout the third quarter for a comprehensive renovation.

Highlights during the quarter include a 7% increase in comparable RevPAR across our urban portfolio that was driven by the New York Hilton Midtown where RevPAR increased nearly 30% coupled with continued strength at our Hawaii hotels. Park has exited its two Hilton San Francisco hotels, which have been placed into a court-ordered receivership. Park declared a third quarter 2023 cash dividend of $0.15 per share to stockholders of record as of September 29, 2023. The third quarter 2023 cash dividend was paid on October 16, 2023. The effective exit from the Hilton San Francisco hotels in October 2023 results in a required additional distribution. Thus, Park's Board of Directors declared a special cash dividend of $0.77 per share on October 27, 2023, which will be paid on January 16, 2024, to stockholders of record as of December 29, 2023.

Park executed strategic capital allocation initiatives, including the repurchase of 5.8 million shares of its common stock under an existing repurchase program at a significant discount to its estimated net asset value, and reinvested over $70 million back into its current portfolio, nearly half of which was for the Casa Marina Key West, Curio Collection. “With approximately $1.7 billion of liquidity, we believe we are well-positioned to continue executing on our strategic initiatives, including reshaping our portfolio, investing in strategic ROI projects and opportunistically repurchasing stock and/or acquiring assets, to create long-term value for our shareholders,” said Chairman and CEO Thomas Baltimore.

DiamondRock adds in Montana

DiamondRock Hospitality Co. reported 3Q23 earnings with adjusted EBITDA of $73.2 million, 6% ahead of Street estimates. Comparable RevPAR was $210.03, a 1.1% decrease from 2022 and a 7.6% increase over 2019 (down slightly from 2Q23's +8%). Total comparable revenues were +0.1%.

DiamondRock acquired Chico Hot Springs Resort located in Paradise Valley, Montana, for $33 million on August 1, 2023. The $27 million purchase price for the 117-room, 153-acre resort represents an 8.1% capitalization rate on 2022 net operating income. The adjacent ranch, a 595-acre parcel purchased for approximately $6 million, provides extensive on-site trails for hiking and horseback riding as well as potential for future expansion of the resort or residential lot sales. The acquisition was funded from corporate cash on hand. DiamondRock also completed the rebranding of the Hilton Boston Downtown/Faneuil Hall to The Dagny, an independent lifestyle boutique hotel.

“For the fourth quarter, we expect our RevPAR growth to improve approximately 100 basis points from the third quarter and be essentially flat compared to 2022 driven by improving results from our resort portfolio," said President and CEO Mark Brugger.

The company declared a quarterly cash dividend of $0.03 per common share.

Weather impacts Pebblebrook

Pebblebrook Hotel Trust reported 3Q23 earnings that showed a net loss of $56.5 million and same-property total RevPAR increasing 0.2% versus 2022, with urban markets rising 4.3%. Tropical Storm Hilary and Hurricane Idalia negatively impacted RevPAR growth by approximately 90 bps. Urban performance continues to improve and 4Q23 group and transient revenue pace is up 13% compared to 4Q22.

“Our third quarter bottom line results were at the top end of our expectations, even after the negative impact of severe weather events on both coasts and the labor strikes in the entertainment industry that primarily affected our Los Angeles properties,” said Pebblebrook Chairman and CEO Jon Bortz. “We continued to see healthy occupancy improvements in our urban market hotels, driven by improving group and transient business travel, as well as solid gains in weekend leisure demand. Our third quarter resort portfolio occupancy was flat year-over-year, though it would have been higher if not for the severe weather events.”