Pebblebrook Hotel Trust — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Pebblebrook owned interests in 46 hotels with 11,924 guest rooms. Financial amounts below are in millions unless noted.
Financial and operating performance
- Revenue: $314.1, up 2.7% from $305.7. Room revenue was $198.1; food and beverage revenue was $81.1.
- Profitability: Operating loss was $1.4, versus operating income of $5.2. Net loss was $27.5, compared with $22.0; loss attributable to common shareholders was $39.0, or $0.32 per share, versus $33.9, or $0.27 per share.
- Margins: GAAP operating margin was approximately -0.4%, versus 1.7%. Hotel-level revenue less hotel operating expenses was $98.0, about 31.2% of revenue, versus $91.4, about 29.9%.
- Non-GAAP measures: FFO was $29.6, essentially flat; FFO available to common shareholders and units was $17.8 versus $17.5. EBITDAre was $56.2, down from $57.1.
- Cash flow: Operating cash flow was $46.0, nearly unchanged from $46.2. Investing cash outflow was $38.5, including $49.5 of hotel improvements and $11.5 of property insurance proceeds. Financing cash outflow was $136.2, including $110.3 of debt repayments. Cash and cash equivalents were $56.7 at quarter-end; cash plus restricted cash was $65.0.
- Debt and liquidity: Debt principal was $2,219.5 ($2,206.7 net of unamortized costs and discounts), down from $2,329.9 principal at year-end. Cash and restricted cash plus senior revolver availability totaled $701.3, as reported by the company. The $650.0 senior revolver had $636.3 available after letters of credit; the separate PHL facility had $20.0 available. The company reported covenant compliance and no mortgage-loan cash traps.
- Hotel metrics: Same-property occupancy rose to 61.3% from 59.4%; ADR declined to $299.34 from $303.90. RevPAR increased to $183.39 from $180.38, and Total RevPAR to $282.55 from $279.05. LaPlaya and Newport Harbor Island were excluded from these same-property statistics.
Material changes versus Q1 2023
- Revenue growth primarily reflected LaPlaya’s staged recovery from Hurricane Ian, partly offset by hotel and retail-property sales in 2023 and Newport Harbor Island’s redevelopment closure.
- Hotel operating expenses increased $1.7, including higher LaPlaya activity and comparable-property labor costs, partly offset by properties sold and the Newport closure.
- Property taxes, insurance and ground rent rose $3.5, including a $2.0 increase in property insurance and $1.5 in real estate taxes. General and administrative expense increased $2.2, primarily from employee compensation.
- Q1 2023 included a $6.6 gain on property sales and $8.1 of business-interruption insurance income; Q1 2024 included $4.0 of such insurance income. Interest expense decreased $1.0, reflecting debt paydowns and capitalized interest, partly offset by higher rates on unhedged debt.
Outlook, risks and unusual items
- Management said Q1 results surpassed its outlook, citing continued recovery in urban business demand, increased occupancy in several markets, leisure demand roughly in line with the prior year, and LaPlaya’s encouraging ramp-up. Management expects these trends to continue if the economic recovery and return of international travel persist.
- The company expects $85–$90 of 2024 capital investments, including renovations and redevelopment/repositioning work. It said Newport Harbor Island was expected to reopen soon following redevelopment; no specific reopening date is provided.
- LaPlaya repairs were substantially complete. The company had received $100.0 of preliminary insurance advances through March 31 and continued negotiating the property and business-interruption claim settlement. Recovery timing and final amounts remain uncertain.
- Debt actions included repaying $110.0 of term loans and extending $356.7 of Term Loan 2024 to January 2028. A remaining $43.3 matures in October 2024; $410.0 of Term Loan 2025 matures in October 2025. Management expects to address maturities with cash, revolver borrowings, asset-sale proceeds and/or refinancing.
- Key risks include hotel-demand and economic volatility, inflation and operating costs, interest rates and financing access, reliance on third-party hotel managers, travel disruptions, and renovation or redevelopment delays and cost overruns. The filing reports no material change to previously disclosed risk factors and no material litigation.
- The first quarter is generally seasonally weaker for the company. Management stated that interim results are not necessarily indicative of full-year performance.
Important facts for investors to verify
- Progress and final proceeds from LaPlaya’s insurance claims, and the pace and costs of its operating recovery.
- Newport Harbor Island’s reopening timing, redevelopment spending and resulting operating contribution.
- Liquidity, refinancing plans and covenant headroom ahead of the October 2024 and October 2025 term-loan maturities.
- Whether hotel demand, occupancy and rate trends support the company’s operating expectations and $85–$90 capital-investment plan.
- How much of reported operating cash flow and liquidity remains available after debt service, lease obligations, capital needs and preferred distributions.