Pebblebrook Hotel Trust Q2 Earnings Call Highlights

Pebblebrook exceeded Q2 guidance, with same-property hotel EBITDA rising 7.1% to $123.3 million and adjusted FFO reaching $0.68 per share. RevPAR increased 6.5%, driven primarily by a 4.7% gain in average daily rates. Resorts and San Francisco led growth: resort RevPAR climbed 12% and San Francisco RevPAR rose 16%, while weaker performance in Washington, D.C., and downtown San Diego weighed on parts of the urban portfolio. The company raised its full-year outlook for same-property RevPAR growth to 4.5%-5.5% and adjusted FFO to $1.69-$1.76 per share, supported by improving July trends, asset sales and stronger liquidity.

Pebblebrook Hotel Trust NYSE: PEB reported second-quarter results that exceeded the high end of its outlook, driven by pricing gains, strong resort performance and continued recovery in San Francisco, while raising its full-year outlook for revenue per available room and adjusted funds from operations. Same-property hotel EBITDA increased 7.1% year over year to $123.3 million, which Co-President and Chief Financial Officer Raymond Martz said was $6.6 million above the high end of the company’s outlook. Adjusted EBITDA totaled $116.2 million, while adjusted FFO reached $0.68 per diluted share, exceeding the high end of guidance by $0.06.

Portfolio occupancy rose about 130 basis points to 79.4%, average daily rate increased 4.7%, and RevPAR grew 6.5%. Martz said nearly three-quarters of RevPAR growth came from higher rates rather than occupancy gains, reflecting greater pricing confidence as hotel demand and compression increased.

Resorts were the company’s principal growth driver during the quarter. Resort RevPAR rose 12%, while total RevPAR increased 10.9% and resort hotel EBITDA grew 18.5%. Resorts accounted for roughly $16.5 million of the portfolio’s $18.3 million revenue increase, according to Martz. LaPlaya benefited from its post-hurricane construction ramp-up, with occupancy rising by more than 11 points, RevPAR increasing 33.9%, and EBITDA climbing 28.8%. Paradise Point in San Diego posted 22% RevPAR growth and EBITDA growth of more than 40%. Newport and Estancia, two redeveloped resort properties, also posted sizable gains. Newport’s RevPAR rose 20.3%, supported by a 13.5% ADR increase, while EBITDA increased almost 26%. Estancia recorded 22.8% RevPAR growth and 54.7% EBITDA growth. Martz said the company identified $6 million of upside from those two recent redevelopment projects and said their returns remain on track.

San Francisco was Pebblebrook’s strongest urban market. Occupancy increased nearly 500 basis points and ADR rose almost 9%, resulting in 16% RevPAR growth and 24.6% hotel EBITDA growth. The company said Snowflake and Databricks citywide events in June helped offset the absence of the RSA citywide, which shifted to March. Year to date, EBITDA at the company’s seven San Francisco hotels increased by more than $13 million, or 110%, from the prior year. Los Angeles RevPAR rose 8.6% and hotel EBITDA increased nearly 14%, with year-to-date EBITDA up approximately $6 million, or 73%.

Performance was weaker in certain urban markets. Downtown San Diego RevPAR declined 9.1% against a difficult citywide comparison, while Washington, D.C., RevPAR fell 9.9% amid weak government-related travel demand and property-level leadership transitions. Across the urban portfolio, RevPAR rose 4.1%, but total RevPAR increased only 0.8% and hotel EBITDA declined 1%. Margins Expand Despite Mixed Group Trends Transient demand led the quarter, with transient revenue rising nearly 10% on a 7% increase in ADR. Group revenue declined about 2%, while corporate group revenue was essentially flat. Martz said the g...