Pebblebrook Hotel ((PEB)) has held its Q4 earnings call. Read on for the main highlights of the call.
Pebblebrook Hotel Trust’s recent earnings call painted a picture of both triumph and tribulation. The company showcased strong performances in its resort and redeveloped properties, alongside improved financial metrics and reduced leverage. However, challenges loomed from natural disasters, urban market headwinds, and costs from new labor agreements, resulting in a mixed outlook for certain regions.
Strong Resort Performance
Resort occupancy at Pebblebrook Hotel Trust increased by 3.7% to 65%, with RevPAR climbing 8.8% at California resorts. This growth was primarily driven by a 15% increase in business group demand and a 7% rise in food and beverage revenue, highlighting the robust performance of the company’s resort segment.
Positive Financial Metrics
The company reported an adjusted EBITDA rise of 0.8% to $352-$359.2 million, surpassing the midpoint of its outlook by $11.2 million. Additionally, adjusted FFO per diluted share grew by 5% to $1.68, exceeding expectations by $0.09, reflecting the company’s solid financial standing.
RevPAR Growth Despite Challenges
Despite facing challenges, Pebblebrook’s same-property total RevPAR increased by 2.1% for the full year. The company noted a potential 3.7% increase in Q4 RevPAR, excluding disruptions caused by storms, indicating resilience in its revenue performance.
Strong Performance of Redeveloped Properties
Redeveloped properties experienced significant gains, with a 10.7-point occupancy increase, an 11.3% surge in RevPAR, and over 20% EBITDA growth. These properties also achieved a 1,100 basis point market share gain, underscoring the success of Pebblebrook’s redevelopment efforts.
Reduced Leverage
Pebblebrook successfully reduced its net debt to EBITDA ratio to 5.8 times from 6.5 times in 2023. This reduction was supported by strong operating performance and free cash flow, reflecting the company’s commitment to maintaining financial stability.
Successful Capital Investments
The company completed $91 million in capital investments in 2024, with early returns being extremely encouraging. Looking ahead, Pebblebrook plans to reduce capital investments to $65-$75 million in 2025, focusing on strategic projects.
Improved Urban Hotel Performance
Urban occupancy rose by 2.9 percentage points to 68.1%, driven by solid growth in business group and transient demand. This improvement highlights the company’s efforts to enhance its urban hotel performance.
Impact of Natural Disasters
Natural disasters, including Hurricanes Elaine and Milton, caused disruptions, notably affecting LaPlaya Beach Resort’s EBITDA. These events created an earnings headwind, impacting the company’s overall performance.
Challenges in Key Urban Markets
Pebblebrook faced ongoing headwinds in key urban markets such as San Francisco, Los Angeles, and Portland, which constrained urban performance. Excluding these markets, same-property urban total revenue growth would have been 7.7%.
Negative Impact from LA Wildfires
The LA wildfires led to significant group and transient cancellations, resulting in a projected $9-$12 million impact on rooms revenue and a $12-$16 million hit to total revenue, highlighting the challenges posed by natural disasters.
Labor Agreement Costs
New labor agreements in several urban markets resulted in one-time costs, causing same-property hotel EBITDA for Q4 to fall $4 million below Q4 2023 levels, reflecting the financial impact of these agreements.
Forward-Looking Guidance
Pebblebrook Hotel Trust’s forward-looking guidance indicates a focus on operational efficiencies and cost controls, with anticipated industry RevPAR growth of 1 to 3% in 2025. The company plans a capital investment of $65 to $75 million, with potential redevelopment projects, including the Paradise Point Resort in San Diego. Additionally, Pebblebrook successfully executed $1.6 billion in debt refinancing and extensions, ending 2024 with a reduced net debt to EBITDA ratio of 5.8 times.
In summary, Pebblebrook Hotel Trust’s earnings call reflected a mixed sentiment, with strong performances in resorts and redeveloped properties countered by challenges from natural disasters and urban market headwinds. The company’s forward-looking guidance suggests a cautious yet optimistic outlook, focusing on strategic investments and operational efficiencies to navigate future challenges.