Chatham Lodging Trust Reports Strong Q4 Earnings

Chatham Lodging Trust ((CLDT)) has held its Q4 earnings call. Read on for the main highlights of the call.

Chatham Lodging Trust’s recent earnings call painted a picture of a company in a strong financial position, buoyed by impressive RevPAR growth, improved operating margins, and successful asset sales. Despite facing challenges such as a decline in the Dallas market and increased payroll costs, the overall sentiment was positive, with achievements outweighing the negatives and pointing towards future growth.

Strong RevPAR Growth

Chatham Lodging Trust reported a 4% growth in RevPAR during the fourth quarter, surpassing industry performance. This growth was particularly pronounced in Silicon Valley, where RevPAR increased by 14%, highlighting robust demand in tech-driven markets.

Improved Operating Margins

The company achieved its highest fourth-quarter operating margins in three years, with a 150 basis point increase to 41%. This improvement was attributed to effective expense management and moderating labor costs, underscoring operational efficiency.

Successful Asset Sales and Debt Reduction

Chatham Lodging Trust successfully sold or is under contract to sell six hotels for $101 million, reducing net debt by $29 million in 2024. This strategic move lowered the leverage ratio to 23%, a significant decrease from 35% in 2019, reflecting prudent financial management.

GRESB Recognition

The company participated in the Global Real Estate Sustainability Benchmark, achieving a commendable score of 83 and earning four out of five stars. This recognition underscores Chatham’s commitment to sustainability and responsible investment.

Dividend Returns

Chatham returned $22 million in dividends to preferred common shareholders, demonstrating strong cash flow management and a commitment to rewarding shareholders.

Decline in Dallas Market

The Dallas market faced challenges, with RevPAR declining due to the nearby convention center’s closure for expansion over the next 24 months, impacting local demand.

Challenges in Leisure Travel

Leisure-focused hotels saw only a 1% RevPAR growth from June through August, indicating a softening in leisure travel demand during this period.

Wage and Benefit Cost Increases

Payroll-related costs, including medical insurance, workers’ compensation, and vacation, rose by 19% in the fourth quarter and nearly 25% for the year, posing a challenge to cost management.

Forward-Looking Guidance

Looking ahead, Chatham Lodging Trust anticipates RevPAR growth of 1% to 3.5% for 2025, with adjusted EBITDA projected between $92 million to $97 million. The company plans to reinvest proceeds from asset sales into higher-yielding assets, aiming for continued financial strength and growth.

In summary, Chatham Lodging Trust’s earnings call highlighted a robust financial performance, with strong RevPAR growth and improved margins. Despite some market-specific challenges, the company’s strategic asset sales and debt reduction efforts have positioned it well for future growth, with a positive outlook for 2025.