ESA Sees Dip in Revenue and RevPAR in Q4

CHARLOTTE, NC—Extended Stay America Inc. and ESH Hospitality Inc. have reported consolidated results for the three and twelve months ended Dec. 31, 2019, seeing a decline in both revenue and RevPAR numbers.

Extended Stay America’s President/CEO Bruce Haase, said, “We were pleased to finish the year on a strong December performance, where we gained more than 400 basis points of RevPAR index on our competitive set and 210 basis points for the full fourth quarter of 2019.”

Haase continued, “In 2020, we will focus on a return to the basics and fully exploiting the value inherent in our high-margin extended-stay business model. We believe there is opportunity to improve the guest experience and property performance, more aggressively curate our asset portfolio, and grow the Extended Stay America brand through an asset-light franchising strategy. We will also continue to focus on returning significant capital to our shareholders while maintaining strong financial discipline.”

Capital Expenditures
The company invested $83.3 million in capital expenditures during the fourth quarter of 2019. This includes $13.4 million in renovation capital, $8.4 million in IT capital and $35.3 million in capital for hotel development and land acquisitions. The company invested $261.3 million in capital expenditures for the full year 2019.

Hotel and Development Pipeline
As of Dec. 31, 2019, the company had a pipeline of 75 hotels representing approximately 9,100 rooms after opening four hotels in 2019.

Financial and Operating Results
Total revenues for the three months ended Dec. 31, 2019, were $284.2 million, a decrease of 1.9% over the same period in the prior year due to asset dispositions in 2018 and a decline in comparable company-owned RevPAR. Adjusting for asset dispositions in 2018, total revenues declined 1.1% during the fourth quarter. For the full year 2019, total revenues declined 4.5% to $1,218.2 million, driven by asset dispositions and a decrease in comparable system-wide RevPAR. Adjusting for asset dispositions in 2018, total revenues decreased 0.3%.

Comparable system-wide RevPAR for the three months ended Dec. 31, 2019, decreased 0.8% over the same period in 2018 to $46.94, driven by a 4.0% decline in ADR, partially offset by a 240 basis point increase in occupancy. Company-owned RevPAR decreased 1.7% during the quarter. Comparable system-wide RevPAR for the full year 2019 declined 0.9% over 2018 driven by a 2.9% decline in ADR, partially offset by a 150 basis point increase in occupancy. The company’s RevPAR outperformed its competitive set by 0.6% during the full year on a comparable system-wide basis.

Adjusted EBITDA for the three months ended Dec. 31, 2019, was $108.8 million, a decline of 14.1% compared to the same period in 2018. Adjusted EBITDA was impacted by CEO and related transition costs, legal settlement expense and other unanticipated net expense items arising after the company’s November 2019 guidance totaling approximately $10 million. Adjusted EBITDA excludes non-cash equity-based compensation expense of $0.8 million and $0.9 million in other expenses. Adjusted EBITDA for the full year 2019 was $535 million, a decline of 10.8%, due primarily to asset dispositions in 2018 resulting in lost contribution of $21.4 million and an increase in comparable company-owned hotel operating expenses.

Adjusted FFO for the three months ended Dec. 31, 2019, was $67.8 million compared to $77.8 million in the same period in 2018. The decline in Adjusted FFO was due to an increase in comparable company-owned hotel operating expenses, CEO and related transition costs, legal settlements and a decline in comparable company-owned RevPAR. Adjusted FFO per diluted Paired Share was $0.37 compared to $0.41 in the same period in 2018. Adjusted FFO for the full year 2019 was $337.6 million, or $1.81 per diluted Paired Share, compared to $382.8 million, or $2.02 per diluted Paired Share, in 2018.

Adjusted Paired Share Income for the three months ended Dec. 31, 2019, was $24.9 million, or $0.14 per diluted Paired Share, compared to $38.6 million, or $0.21 per diluted Paired Share, in the same period in 2018. The decline in Adjusted Paired Share Income was driven by an increase in comparable company-owned hotel operating expenses, CEO and related transition costs, legal settlements and a decline in Comparable Company-owned RevPAR, partially offset by a decrease in effective tax rate. Adjusted Paired Share Income per diluted Paired Share for the full year 2019 was $0.95 compared to $1.14 in 2018.