Chatham Lodging Trust(CLDT) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company repaid approximately $280 million of maturing debt in the past three months, leaving only$30 million of maturing debt over the next year [3] - FFO is expected to increase by $2.6 million or$0.05 per share for every 100 basis points decline in SOFR [3] - Q2 2024 hotel EBITDA was $33.7 million, adjusted EBITDA was$31.4 million, and adjusted FFO was $0.39 per share [14] Business Line Data and Key Metrics Changes - RevPAR growth was 4$151, exceeding 2019 levels for the first time since the pandemic [5] - Occupancy rates for key weekday business travel days were 85% on Monday, 88% on Tuesday, 84% on Wednesday, and 83% on Thursday [5] - RevPAR for tech hotels in Silicon Valley and Bellevue increased by 10% in the quarter, with Bellevue showing a 14% increase [6][7] Market Data and Key Metrics Changes - RevPAR in markets representing over half of the trailing 12-month EBITDA grew between 5% and 10% [9] - San Francisco's airport saw international passenger traffic surpass 2019 levels in April and May, indicating a recovery in travel demand [11] - The company noted that the competitive set occupancy at tech hotels was up 8% to approximately 70% in the quarter [6] Company Strategy and Development Direction - The company is actively marketing a handful of hotels for sale, expecting to realize between $40 million and$80 million from these sales [4] - The acquisition of a new hotel, Home2 Suites by Hilton Phoenix, for $43.3 million is part of the strategy to increase exposure in desirable markets [4] - The company aims to benefit from declining interest rates and has the capacity to acquire hotels that are accretive to FFO and cash flow [8] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong occupancy levels and business travel demand, despite some concerns about leisure travel pullback [20] - The company expects RevPAR growth of 0$28.2 million and $30.6 million [15] - Management noted that the normalization phase post-COVID is underway, with no immediate concerns about a significant economic slowdown [20] Other Important Information - GOP margins of 46$700,000 of one-time non-recurring expenses [8] - The company spent $48 million in capital expenditures during the quarter and expects to spend approximately$37 million in 2024 [13] - Average hourly wages for labor costs were only up 1% from December, indicating improved productivity [12] Q&A Session Summary Question: Trends in recent weeks and leisure demand impact on Q3 outlook - Management indicated that leisure hotel performance was down 2% in Q2 and does not expect significant changes for Q3, with a potential slight decline [16] Question: RevPAR cadence for the second half of the year - Management expects the fourth quarter to be similar to the third quarter, with October typically being a strong month for tech hotels [17] Question: Opportunities for acquisitions and dispositions - Management noted that the Home2 Phoenix acquisition was unique, with expectations for more deal flow as the year progresses, while also looking to sell lower RevPAR hotels facing renovations [18] Question: Demand commentary and concerns - Management expressed no immediate concerns about demand slowdown, citing strong occupancy levels and a normalization phase post-COVID [20] Question: Margin performance and outperformance drivers - Management attributed margin outperformance to better-than-expected property taxes and improved productivity on rooms labor [21] Question: Feedback on transaction market for hotel sales - Management reported positive feedback on hotel sales, with expectations to achieve targeted pricing ranges [22]