CHARLOTTE, NC—Extended Stay America, Inc. (ESA) and ESH Hospitality, Inc., for the third quarter ended Sept. 30, reported RevPAR of $46.75 and occupancy of 79.8%.
Third Quarter Highlights
- Net income of $31.5 million
- Total revenues of $285.9 million
- Comparable system-wide RevPAR declined 14.7% to $46.75
- Comparable system-wide occupancy of 79.8%
- Adjusted EBITDA of $112.7 million
- Adjusted Funds From Operations (FFO) of 40 cents per diluted paired share
- Adjusted paired share income of 19 cents per diluted paired share
- Comparable system-wide RevPAR index of 129, a 3,230 basis point increase
“We are pleased with another strong quarter easily outperforming every industry benchmark and improving our RevPAR index by more than 30% against our closest competition,” said Bruce Haase, ESAs president/CEO. “Our performance illustrates the strength of our unique operating model, our singular focus on the extended-stay segment and the successful implementation of a wide variety of operational, marketing and distribution channel initiatives.”
He continued, “We generated strong free cash flow and fully repaid our REIT’s outstanding revolver during the quarter. While others in the industry are forced to make difficult short-term decisions, we continue to invest in our properties, our people and our longer-term strategies, which will enable further long-term success as the lodging markets recover.”
Financial and Operating Results
Total revenues for the three months ended Sept. 30 were $285.9 million, a decrease of 14.1% over the same period in 2019 due to the impact of the COVID-19 pandemic. Total revenues for the first nine months of 2020 were $783.0 million, a decrease of 16.2% compared to the same period in 2019.
Comparable system-wide RevPAR for Q3 declined 14.7% over the same period in 2019 to $46.75, driven by a 13.7% decline in ADR and a 100 basis point decrease in occupancy to 79.8%. Comparable system-wide RevPAR year-over-year percentage change improved each month during the third quarter. Comparable system-wide RevPAR for the first nine months of 2020 declined 16.9% to $43.06.
Hotel operating margin for Q3 was 47.3%, compared to 53.8% in the same period in 2019 due a decrease in RevPAR caused by the COVID-19 pandemic. Hotel operating expenses during the third quarter of 2020 declined by 2.5% from the same period in 2019, or approximately 3.5% on a comparable basis. Hotel operating margin for the first nine months of 2020 was 45.1%, compared to 52.9% in the same period of 2019, driven by a decrease in RevPAR due to the COVID-19 pandemic.
Net income for Q3 was $31.5 million, compared to net income of $53.2 million for the same period in 2019. The decrease in net income was due to a decline in comparable system-wide RevPAR, partially offset by an income tax benefit, lower net interest expense and lower hotel operating expenses. Net income for the first nine months of 2020 was $30.6 million, compared to net income of $141.3 million for the same period in 2019.
Adjusted EBITDA for Q3 was $112.7 million, a decline of 27.9% compared to the same period in 2019. The decline in adjusted EBITDA was due to a decline in comparable system-wide RevPAR. Adjusted EBITDA for the quarter excludes non-cash equity-based compensation expenses of $1.7 million, $1.3 million in loss on disposal of assets and $0.8 million in other expenses. Adjusted EBITDA for the first nine months of 2020 was $284.8 million compared to $426.3 million in the same period of 2019.
Capital Expenditures and Balance Sheet
ESA invested $39.6 million in capital expenditures during the third quarter of 2020. This included $2.9 million in renovation capital and $16.7 million in capital for hotel development. For the first nine months of 2020, it invested $144.9 million in capital expenditures.
As of Sept. 30, the company had $396.4 million in cash and equivalents, including $14.9 million in restricted cash, and total debt outstanding was $2.73 billion. It repaid its $350.0 million revolver at ESH Hospitality, Inc. in full during the third quarter due to the strong increases in RevPAR compared to earlier in the pandemic and the improvement in free cash flow in recent months. Excluding the $350 million revolver repayment made in the third quarter, the company increased its cash position by $63.9 million despite its investments in renovations and hotel development.
Hotel and Development Pipeline
As of Sept. 30, ESA had a pipeline of 65 hotels representing approximately 7,900 rooms. One company-owned hotel and one franchised hotel opened during the third quarter, resulting in a total of eight system-wide hotels opened in the first nine months of 2020.