Chatham Lodging Trust Raises Outlook Amid Margin Gains

Chatham Lodging Trust ((CLDT)) has held its Q1 earnings call. Read on for the main highlights of the call.

Chatham Lodging Trust’s latest earnings call struck an upbeat note, as management highlighted strong hotel-level execution, widening margins, and a recently closed $92 million Hilton portfolio acquisition already outperforming expectations. While localized softness, higher utilities, and renovation disruptions weighed on some markets, executives emphasized that Silicon Valley strength, accretive capital deployment, and robust shareholder returns leave the company in a stronger position heading into 2026.

Raised Guidance and Growing Capital Returns

Chatham lifted its 2026 outlook by roughly 15% since February, underscoring confidence in the earnings power of its portfolio and recent deals. The company also continued to reward shareholders, lifting the common dividend by 11% in the first quarter after a 28% hike in 2025, while keeping the dividend-to-FFO payout ratio near 32%, suggesting ample capacity for further increases.

Aggressive Share Repurchases Signal Undervaluation

Management leaned into buybacks, repurchasing 2.2 million shares, about 4% of common equity, through the first quarter at an average price of $7.04, implying roughly a 10% cap rate on 2026 guidance. Another 200,000 shares were bought in April around $8.34, and the company plans to complete its $25 million program by 2026 using free cash flow that is projected to rise from $15 million in 2025 to about $20 million in 2026.

Accretive Six-Hotel Hilton Portfolio Acquisition

On March 3, Chatham closed a $92 million acquisition of six Hilton-branded hotels totaling 589 rooms, with an average age of about 10 years and two-thirds of the rooms in extended-stay formats. Funded via its revolver at approximately 5.1%, the portfolio needs limited near-term CapEx and is already delivering, with RevPAR up 6% in the first quarter and 7% in April and occupancy at 74%, leaving leverage at a moderate 32.5%.

Operational Outperformance and Margin Expansion

Comparable hotel EBITDA rose 5% year over year in the first quarter to $21.4 million as hotel EBITDA margins expanded by around 135 to 140 basis points. The portfolio’s GOP margin reached 40.2% and hotel EBITDA margin climbed to 31.8%, with GOP up roughly 60 basis points versus 2025, reflecting disciplined expense control and improved profitability across much of the platform.

RevPAR Strength Led by Silicon Valley

Portfolio RevPAR finished the first quarter up 1%, recovering from a 5% decline in January to 1% growth in February and 5% growth in March, highlighting momentum as the quarter progressed. Silicon Valley, excluding a renovated Mountain View asset, stood out with RevPAR up 23%, steady 72% occupancy across four hotels, ADR up 10% to $210, and RevPAR hitting $152, a post-pandemic quarterly high.

Expense Control and Labor Efficiency Support Margins

Chatham continued to trim costs, with labor and benefits per occupied room falling more than 1%, or about $0.50 per occupied room, in the quarter. Hotel EBITDA margins also benefited from about $0.5 million in property tax refunds, lower insurance renewals, and other efficiencies that helped offset roughly 12% higher utility costs at comparable hotels.

Disciplined CapEx and Development Pipeline

First quarter CapEx totaled about $6 million, against a full-year budget of roughly $27 million, reflecting a measured approach to upgrades. The newly acquired Hilton hotels require minimal near-term spend, with only the Hampton Inn & Suites Paducah slated for renovation over the next two years, while Chatham pushes ahead with plans to start development of a Portland, Maine hotel targeting an opening before fall 2028.

Conservative but Constructive Full-Year Outlook

For 2026, Chatham now expects RevPAR growth between 0% and 2%, adjusted EBITDA of $95.3 million to $99.6 million, and adjusted FFO per share of $1.21 to $1.29, with second quarter RevPAR projected to rise 1% to 2%. Management framed this guidance as deliberately conservative given pockets of demand softness but reiterated its intention to pursue opportunistic acquisitions and further share repurchases as conditions permit.

Regional Weakness in Coastal Northeast and Texas

Not all markets are firing, as the coastal Northeast saw RevPAR decline about 8% in the quarter, and the Courtyard Dallas Downtown recorded a steep 26% RevPAR drop amid convention center renovations and related demand disruption. Austin also remained challenging, with market RevPAR down roughly 6% over the last year and the Residence Inn Austin under renovation for most of the quarter, though that work is now complete.

Convention Calendar Softness and RevPAR Headwinds

Management flagged a softer 2026 convention calendar compared with 2025, which is expected to drive about a 2% RevPAR decline for the remainder of the year in convention-driven periods. These headwinds, combined with patchy group demand, contributed to the cautious tone inside the otherwise improved guidance, as management aims to avoid overpromising on near-term top-line growth.

Renovation and Weather-Related Disruptions

Certain assets faced temporary disruptions, notably the Mountain View property where significant renovation forced the gatehouse to close and check-in to operate out of guest rooms, pressuring performance. Additionally, a massive snowstorm earlier in the quarter weighed on results in the middle of the country and Northeast, underscoring how weather volatility can still swing quarterly numbers.

Rising Utilities and Macro Uncertainty

Utility costs rose about 12% at comparable hotels in the quarter, though Chatham largely absorbed this through other savings and refunds, keeping margins expanding. Management also noted broader geopolitical and macro uncertainties, including developments in the Middle East and potential gas price swings, which could either bolster or temper travel demand depending on how they evolve.

Muted Transaction Market and Selective Capital Recycling

The hotel transaction market remains difficult for individual asset sales, with management saying deal flow has improved compared with a year ago but is similar to last quarter’s still-muted levels. Chatham expects only limited disposal activity, perhaps one or two assets, as it continues to recycle capital selectively while focusing on accretive buys like the recent Hilton portfolio.

Seasonal Variability in Adjusted FFO

Adjusted FFO for the first quarter came in at $0.20 per share, a figure that must be viewed against the company’s full-year guidance of $1.21 to $1.29 per share. Management emphasized that seasonal patterns and one-off factors, including renovations and weather, can cause near-term swings in earnings even as the underlying trajectory for 2026 remains positive.

Forward-Looking Guidance and Strategic Priorities

Chatham’s raised guidance reflects growing confidence in modest RevPAR gains, sustained margin expansion, and disciplined capital allocation anchored by its 32.5% leverage ratio and ongoing buybacks. With the $92 million Hilton acquisition contributing to higher RevPAR and hotel EBITDA margin guidance now about 100 basis points higher than before, the company’s forward plan centers on enhancing profitability, finishing its $25 million buyback, and deploying CapEx and development capital where returns look most compelling.

Chatham Lodging Trust’s earnings call painted a picture of a REIT that is tightening operations, leaning into accretive deals, and returning more cash to shareholders while maintaining a prudent stance on risk. For investors, the story is one of improving fundamentals and disciplined capital allocation, tempered by market-specific softness and macro uncertainty that the company has already woven into its conservative but rising outlook.