Roundup of REIT earnings from 1Q 2024

NATIONAL REPORT — Hotel REITs saw mixed results in the first quarter with challenging comparisons to the first quarter of 2023 and the timing of the Easter holiday creating headwinds for many of the real estate investment trusts.

There were many notable acquisitions and divestments in the first quarter, highlighted by Apple Hospitality, which paid its highest-ever total for a hotel asset with its acquisition of the AC Hotel by Marriott Washington DC Convention Center for approximately $116.8 million. Ashford Hospitality Trust continued to sell off assets and handed off 14 properties back to lenders as it continues to dispose of properties and refinance its debt. Host Hotels & Resorts made headlines after the quarter’s end by acquiring a pair of hotels in Nashville for $530 million.

Meanwhile, Ashford Trust and DiamondRock Hospitality both announced changes at CEO.

The first quarter of the 2024 earnings season is nearly complete. Here, we summarize many REIT reports with analyst insights.

Ashford Hospitality Trust
The Dallas-based REIT said its comparable RevPAR for hotels decreased 0.9% to $128.55 during the first quarter on a 1.6% increase in comparable ADR and a 2.4% decrease in comparable occupancy. Its comparable hotel EBITDA was $74.3 million for the quarter while its adjusted EBITDAre was $59.5 million. AHT also said it has lined up buyers for several hotels to pay off its debt. AHT CEO Rob Hayes, who is leaving in June, said the company needs to pay off about $107 million of a $200 million loan from Oaktree Capital Management that matures in 2026. Hayes said AHT has three hotels under a sales agreement and another five under letters of intent. Last month, the REIT said it handed over possession and control of 14 of its hotels, in two loan pools (Keys A and Keys B), back to the loan servicers after originally announcing the intention to do so with 19 hotels last July. The REIT has already sold three hotels in 2024: a 144-key Residence Inn in Salt Lake City, Utah, for $19.2 million, a 390-key Hilton Boston Back Bay for $17.1 million and an 85-key Hampton Inn in Lawrenceville, Georgia, for $8.1million.

Michael Bellisario, an analyst at RW Baird, said, “Earnings miss expectations due to KEYS A and B portfolios being transferred to a court-appointed receiver; March hotel-level results were softer than forecasted... Positively, the company continues to make progress with asset sales, and we believe the Oaktree loan could be repaid in 3Q24.”

Apple Hospitality REIT
In a stifled hotel transaction market that has remained challenging because of unchanged interest rates, the Richmond, Virginia-based REIT has a competitive advantage, according to its CEO. “If you look at our performance over the past 12 months, we’ve taken more than our fair share of total transactions, and we certainly continue to view ourselves as well positioned relative to potential competition,” CEO Justin Knight said. Knight, speaking during Apple’s first-quarter earnings call, pointed to its two latest acquisitions, the 299-key SpringHill Suites by Marriott Las Vegas Convention Center for approximately $75 million and the 234-key AC Hotel by Marriott Washington DC Convention Center for approximately $116.8 million (its highest price yet for an asset), as prime examples of the space where the REIT continues to be competitive. The REIT said its ADR (+0.8%) and RevPAR (+0.7%) were both up slightly and “seasonally stable” in the first quarter, while occupancy remained flat. Knight said April’s RevPAR numbers are already on the higher end of its full-year guidance range, which points to better trends in the second and third quarters.

Bellisario said the earnings finished slightly ahead of expectations, with lower hotel operating expenses as the positive variance. “Recently, sentiment has been relatively negative toward [Apple] (and other select-service-focused hotel REITs on our coverage list, too) given more challenging growth comparisons and less urban/group exposures," he said. “But with this setup, we expect investors to have a directionally positive view of Apple’s 1Q24 earnings beat and full-year guidance updates.” Apple said the first quarter performance reached the midpoint of its internal forecast and has revised its EBITDA and margin outlooks because of its most recent acquisitions. The company’s RevPAR guidance has remained unchanged at 2% to 4% growth while its hotel EBITDA rose to $498.9-$523.7 million, an approximate $11 million increase over its prior guidance.

Chatham Lodging Trust
The West Palm Beach, Florida-based REIT said its portfolio RevPAR increased 2 % to $120 compared to Q123. ADR increased 1% to $171, while occupancy increased to 70% for the company’s portfolio of 38 hotels. Chatham said RevPAR at its Silicon Valley and Bellevue, Washington hotels was up 17% year-over-year and RevPAR in April was up 5% YOY across the portfolio. Chatham had a net loss of $5.5 million compared to a net loss of $5 million in Q123. Its hotel EBITDA margin was 30.8% in the 2024 first quarter, up 0.1% YOY. Approximately 64% of Chatham’s hotel EBITDA over the last 12 months was generated from its extended-stay hotels, the highest concentration for any public lodging REIT. During the quarter, Chatham had a CapEx of $10 million, and its full-year CapEx budget is approximately $37 million. The REIT used free cash flow to reduce its net debt by approximately $6 million, and the company has a net debt of $412 million through the end of Q1. 

DiamondRock Hospitality Company
The Bethesda, Maryland-based REIT said its total revenues were $256.4 million, a 3.8% increase from 2023. Its comparable RevPAR was $184.23, a 0.4% decrease year-over-year from 2023. Its comparable hotel adjusted EBITDA was $61.4 million, a 3% decrease from 2023.

The REIT said that the first quarter's total revenue growth was largely in line with original expectations as strong food and beverage sales from the 10.2% increase in group room nights offset much of the softer top-line growth at several of its luxury resorts. DiamondRock said it had healthy group sales production in the quarter and concluded with 85% of its budgeted full-year group revenues on the books. The REIT also raised its full-year earnings guidance. DiamondRock previously announced that EVP and CFO Jeffrey Donnelly has been named CEO and will join the company’s board after its annual meeting in May. Donnelly succeeded Mark Brugger, who left the company after 20 years. DiamondRock reduced its executive team structure from six to four as part of the moves.

Bellisario said, “No change in our positive outlook. First-quarter results were slightly ahead of expectations (better non-rooms revenue), which is encouraging given weaker industry-wide and resort RevPAR recently and commentary from most peers that have noted leisure softness emerging during 1Q24. Full-year guidance was increased, which is what investors were expecting and asking us about two weeks ago when the management changes were announced. The increased guidance primarily reflects lower G&A and management’s greater confidence in the group outlook, particularly out-of-rooms spend.”

Host Hotels & Resorts
The Bethesda, Maryland-based REIT, the largest in the U.S., said hotel total RevPAR increased 0.5% year-over-year to $359.58 as strong contributions from group business led to an increase in F&B revenues with banquet and catering revenue exceeding its prior peak from Q123. Hotel RevPAR decreased by 1.2% in the first quarter, driven by the impacts of the wildfires in Maui, unseasonable weather in several markets and unanticipated delays in renovations.

Bellisario said the results contain moving pieces that make comparability difficult. “The most important fundamental takeaways are: 1Q24 comparable hotel EBITDA was better than expected/feared despite weaker RevPAR growth, and 2024 comparable Hotel EBITDA guidance was reduced by ~1%. Expectations for 1Q24 had declined slightly over the prior ~30 days, and investors likely were bracing for a weaker RevPAR print.” He noted that the second-quarter outlook is unchanged “given still-strong group bookings  – investors had been viewing Host’s 2H24 implied guidance as aggressive.” Host made headlines in April by acquiring the 1 Hotel Nashville and the adjacent Embassy Suites from a group of owners that includes a Starwood Capital Group affiliate for $530 million.

Park Hotels & Resorts
The Tysons, Virginia-based REIT said its comparable RevPAR increased nearly 8% year-over-year, fueled by strategic investments in Hawaii, Key West and Orlando. It exceeded overall upper upscale hotel performance by nearly 500 basis points compared to STR research. CEO Thomas Baltimore, Jr. said this was an “especially strong performance because of tough year-over-year comparisons (2023 RevPAR also increased 28% YOY). The REIT said performance at its resort and urban hotels continues to accelerate and combined RevPAR at its Hawaii hotels increased nearly 7%. Park completed renovation projects in 2023 that drove RevPAR gains at its Casa Marina resort in Key West (+34%), Bonnet Creek Orlando complex (+9%) and its Signia Bonnet Creek (+16%). Group demand continued to improve, with revenue pacing up by nearly 11% YOY, driven by accelerated business demand.

Baltimore said the REIT has current liquidity of over $1.3 billion (including approximately $950 million of available capacity under the Company’s revolving credit facility) and is looking at reshaping its portfolio “through investing in value-enhancing ROI projects, disposing of non-core assets and strengthening our balance sheet by extending maturities.” Group business increased 1.8% in Q124, while transient was down 2.7%. Park expects to spend approximately $260 to $280 million in CapEx in 2024.

Pebblebrook Hotel Trust
The Bethesda, Maryland-based REIT declared a net loss of $27.5 million in the first quarter while same-property RevPAR increased 1.7% year-over-year while its same-property EBITDA $59.8 million was down 2.3% YOY while its adjusted EBITDA was flat. The REIT said group and transient business demand continued to recover and drove occupancy gains at its Washington, D.C., San Diego, San Francisco, Los Angeles and Boston properties, while leisure demand remained roughly in line with 2023. Pebblebrook said recently redeveloped hotels, including the Hilton San Diego Gaslamp Quarter, Margaritaville Hotel San Diego Gaslamp Quarter, Viceroy Santa Monica Hotel, L’Auberge Del Mar, 1 Hotel San Francisco, and Estancia La Jolla Hotel & Spa, have shown “healthy gains” in RevPAR and market share. The REIT said its $49 million redevelopment of Newport Harbor Island Resort, $26 million for Estancia La Jolla Hotel & Spa and the restoration and rebuilding of LaPlaya Beach Resort & Club in Naples, Florida, after Hurricane Ian offer up optimism for future performance improvement. The company completed $33.9 million in CapEx in the first quarter, excluding LaPlaya. The REIT had $65 million in cash, cash equivalents and restricted cash through Q1, plus $636.3 million of undrawn availability on its $650 million senior unsecured revolving credit facility.

Bellisario said Q1 performance “was solid, and expectations for 2Q24 (even adjusted for forecasted property tax credits) were relatively in line with expectations. With only modest top-line growth forecasted, Pebblebrook is refocusing on expenses and efficiencies to drive better bottom-line performance.”

RLJ Lodging Trust
The Bethesda, Maryland-based REIT said its comparable RevPAR was $137.88, a 1% increase from last year, while total revenue increased 3.1% to $324.4 million. RLJ had a hotel EBITDA of $88.9 million, a 2.3% decrease year-over-year, while adjusted EBITDA was $79.6 million, a 3.7 decrease YOY. The REIT said that, through the first quarter, it has approximately $1 billion in total liquidity, with approximately $350.2 million in unrestricted cash, $600 million available under its revolving credit facility, and $2.2 billion in outstanding debt. RLJ said it has already addressed all of its 2024 debt maturities. In the first quarter, RLJ acquired the 304-key Wyndham Boston Beacon Hill for approximately $125 million, previously subject to a ground lease that expired in 2028.

Bellisario said, “1Q24 results matched our forecasts, but adjusted EBITDA fell short of consensus… Big picture, RLJ’s update was straightforward, in our view, and we expect the focus to remain on the company’s urban exposure, which should drive top-line outperformance versus peers and the continued ramp-up from recent/ongoing conversion projects.”

Ryman Hospitality Properties
The Nashville-based REIT posted revenue of $528 million for the first quarter, a 7.4% increase year-over-year, with hospitality revenue of $461.5 million, an 8.7% increase. Occupancy was down to 67% (a 5.3% decrease), Ryman had an ADR of $244.85 for the quarter (a 5.3% increase) while RevPAR was down 2.9%, and total RevPAR was down 1.9%. Ryman said it had strong banquet and AV contribution per group room night, which it says is a positive indicator of ground spending and overall segment strength. Its same-story hospitality performance reflected the same themes, with ADR also posting a record of $244.85, a 2.9% increase and a new record. Ryman said its JW Marriott Hill Country property in Texas delivered strong first-quarter performance: “We are beginning to see operational efficiency improvements from our asset management capabilities.”

Analysts at Truist Securities said: “RHP noted some softness in the second-half of 1Q24 in transient demand in ‘several’ of their markets (given RHP’s hotels are in seven cities if you include Austin, ‘several’ could suggest most of their markets). RHP noted they remain confident in the long-term growth outlook for their markets and the remainder of 2024.”

Sunstone Hotel Investors
The Aliso Viejo, California REIT reported that comparable RevPAR decreased 5.1% year-over-year to $223.06 while ADR was $325.16 (down 2.4%) and occupancy was 68.6% (down 190 basis points). Adjusted EBITDA decreased 9.2% to $54.5 million. CEO Bryan Giglia said the first quarter of 2023 benefited from compressed demand, and the REIT expects performance for the remainder of the year to accelerate. The company also announced the acquisition of the Hyatt Regency San Antonio Riverwalk from the proceeds of its recent sale of the Boston Park Plaza. The company also announced the Confidante Miami Beach suspended operations on March 25 for an extensive renovation as it converts to an Andaz Miami Beach later this year. Sunstone is also converting the Renaissance Long Beach to the Marriott Long Beach Downtown after extensive renovation work is expected to be completed in the second quarter.

Bellisario said, “From a headline perspective, Sunstone’s 1Q24 earnings beat (and handily beat consensus) and full-year guidance was raised (all acquisition-related); the quarterly dividend was increased as well (+$0.02 to $0.09/share). Under the surface, though, results were mixed, in our view. Same-store performance fell short of our expectations on lower revenues and lower profitability, particularly at the company’s largest four hotels – results at the three renovation hotels (D.C., Long Beach, and Miami) matched our forecast in the aggregate... We view the quarter and overall update as relatively mixed.”

Here is a recap of REITs from the fourth quarter and full year 2023.