Chatham Lodging Trust Sees RevPAR, Income Drop in Q3

WEST PALM BEACH, FL—Chatham Lodging Trust reported a slight decline in its RevPAR for the third quarter ended September 30, 2019.

“Third quarter RevPAR declined slightly and finished at the upper end of our guidance range as RevPAR in our four largest markets experienced solid gains in the quarter, but those gains were offset by weakness in Houston and Los Angeles,” said Jeffrey H. Fisher, president/CEO, Chatham Lodging Trust. “Additionally, our three Boston hotels experienced a RevPAR decline of 6.3% as two of those hotels benefitted from demand related to the Boston area gas explosions during the latter half of September 2018. Excluding the four hotels under renovation during the 2019 third quarter, 24 of our 36 hotels experienced RevPAR growth in the quarter.”

Portfolio RevPAR declined 0.3% to $148, compared to the 2018 third quarter, for Chatham’s 40 comparable wholly owned hotels. ADR rose 0.5% to $173.4, and occupancy lessened 0.8% to 85.2%.

Net Income declined $4.6 million to $10.1 million, compared to the 2018 third quarter, driven by the company’s proportionate share of impairment losses in its unconsolidated joint ventures. Net income per diluted share was $0.21 versus $0.31 for the same period a year earlier.

Adjusted EBITDA rose $0.8 million, or 2% percent higher than the 2018 third quarter, to $39.4 million, above the company’s guidance of $37.1-$39.1 million.

Adjusted FFO improved $0.2 million, to $28.6 million, versus $28.4 million in the 2018 third quarter.

For its 40 comparable hotels, despite a RevPAR decline, comparable gross operating profit margins increased 10 basis points to 48.2% versus the 2018 third quarter. Hotel EBITDA margins declined 10 basis points to 41.2% over the same period last year.

Chatham’s six largest markets comprise approximately 60% pof its hotel EBITDA. Third quarter 2019 RevPAR performance for these key markets include the following:

  • Silicon Valley RevPAR advanced 4.6%, excluding the San Mateo hotel, which was under renovation.
  • RevPAR at its two San Diego properties increased 0.9% to $180.
  • Washington, DC RevPAR improved 5.4% to $152 at its three hotels.
  • RevPAR at its three coastal hotels in Maine and New Hampshire advanced 3.8%, driven by strong leisure demand.
  • At its four Houston hotels, RevPAR decreased 16.8% to $84.
  • The two Los Angeles-area hotels experienced a 4.9% RevPAR decline to $174.

“We were very pleased with our hotel operating performance in the quarter as we continue to collaborate with Island Hospitality on a daily basis to increase revenue and reduce operating expenses or minimize increases, and this supports our thesis that we operate a best-in-class platform,” said Dennis Craven, COO, Chatham Lodging Trust. “It really is remarkable to increase margins despite a RevPAR decline. That outperformance enabled us to beat the upper end of our EBITDA and FFO guidance. Other revenue was up 22% in the quarter, driven primarily by incremental parking revenue. On the operating expense side, previously implemented programs focused on reducing repairs and maintenance expenses helped us reduce those costs $0.1 million in the quarter and improved margins by approximately 20 basis points.”

On a per occupied room basis at its 40 comparable Island-managed hotels, payroll and benefits costs increased 1.5% in the 2019 third quarter. Payroll costs per occupied room rose 4.3% in the quarter, yet benefits costs were down 7.6%.