Xenia Hotels & Resorts, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Xenia is a U.S. hotel REIT focused on luxury and upper-upscale properties. It owned 32 hotels with 9,511 rooms across 14 states at quarter-end.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Total revenue | $271.1 million | $283.5 million | $540.0 million | $493.8 million |
| Operating income | $35.0 million | $50.7 million | $68.8 million | $68.5 million |
| Net income | $14.4 million | $28.5 million | $21.0 million | $23.0 million |
| Net income attributable to common stockholders | $13.8 million | $27.6 million | $20.1 million | $22.3 million |
| Diluted EPS | $0.12 | $0.24 | $0.18 | $0.19 |
| Adjusted EBITDAre attributable to common stock and unit holders | $74.7 million | $88.6 million | $146.0 million | $138.6 million |
| Adjusted FFO attributable to common stock and unit holders | $52.2 million | $66.0 million | $97.5 million | $95.1 million |
Q2 revenue declined 4.4% and net income fell 49.4% year over year; six-month revenue increased 9.4%, while net income declined 8.9%. Q2 operating margin was approximately 12.9%, versus 17.9% a year earlier. Management attributed the quarterly weakness mainly to normalizing leisure demand, renovation disruption, and lower contribution from hotels sold in late 2022. Six-month results benefited from stronger business-transient and group demand and easier early-2022 comparisons.
Portfolio RevPAR was $182.49 in Q2, down 1.6%, with occupancy of 68.6% and ADR of $265.98. For the first half, RevPAR rose 9.6% to $181.03, occupancy increased 440 basis points to 67.3%, and ADR rose 2.3% to $268.82.
Cash flow, debt, and liquidity
- Cash from operations for the first half was $100.7 million, compared with $98.6 million in 2022. Capital expenditures were $34.0 million; net investing cash outflow was $32.2 million and net financing cash outflow was $118.0 million.
- June 30 cash and cash equivalents were $255.3 million; restricted cash was $61.0 million. Total debt principal was $1.414 billion, with a weighted-average interest rate of 5.47%. Balance-sheet debt, net of financing costs and other adjustments, was $1.400 billion.
- The new senior unsecured credit facility totals $675 million, including a $450 million revolver. No revolver borrowings were outstanding, leaving the full $450 million available. The company reported $200 million available under its ATM equity program.
- Debt maturities include $474.4 million in 2025 and $280.4 million in 2026. Interest-rate swaps fixed the rates on all variable-rate debt as of June 30, according to the filing.
- In the first half, Xenia repurchased 4.45 million shares for $58.7 million and retired $30 million principal of its 2025 senior notes. It declared dividends of $0.10 per share/unit for each of the first two quarters. In July, it repurchased a further 861,002 shares for approximately $10.8 million.
Material changes, outlook, and risks
- Q2 Adjusted EBITDAre declined 15.7% and Adjusted FFO declined 20.9% year over year; both increased for the six-month period, by 5.3% and 2.5%, respectively.
- Hotel operating expenses rose 0.8% in Q2 despite lower revenue; management cited higher staffing and labor costs. Insurance premiums, property taxes, and general and administrative expenses also increased.
- In January, the company refinanced its corporate facilities, repaid a $99.5 million mortgage, amended the Andaz Napa mortgage, and entered into new term loans. Refinancing and repayments contributed to a $1.2 million first-half loss on extinguishment of debt.
- Xenia was not in compliance with covenants on one mortgage because of renovation-related disruption. This was not an event of default, but the lender may impose a cash sweep that redirects excess property cash to a lender-controlled account.
- Renovation contracts had $29.5 million of remaining commitments at June 30. The company also held $47.3 million in FF&E reserves. Legal matters are described as ordinary-course, with management not expecting a material adverse effect.
- The filing provides no specific quantified financial guidance. Management highlighted inflation, labor and insurance costs, rising interest rates, possible recession, travel demand, renovation disruption, staffing, supply-chain constraints, and hotel seasonality as uncertainties. It reported no material change in risk factors and said disclosure controls were effective.
- Unusual or non-recurring items included $0.5 million of insurance-recovery gain in Q2 and $1.2 million of first-half debt-extinguishment loss. The filing also identifies $1.7 million of legal fees related to financing transactions.
Investor verification priorities
- Review the covenant status, renovation-related operating impact, and whether the mortgage lender implements a cash sweep.
- Assess 2025–2026 maturity concentration, refinancing options, and the cost and availability of credit as debt is refinanced.
- Track hotel-level demand, especially leisure normalization versus group and business-transient trends, and the effect of renovations on RevPAR and margins.
- Compare operating cost growth—particularly labor, insurance, taxes, and capital spending—with revenue and cash generation.
- Evaluate cash remaining after share repurchases, dividends, and renovation commitments, and distinguish recurring performance from insurance gains and financing-related items.