Chatham Lodging Trust ((CLDT)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Chatham Lodging Trust’s recent earnings call painted a generally positive picture, highlighting successful asset sales and strengthened financials. The company celebrated operational successes in key markets, although it faced challenges in some regional areas and rising guest acquisition costs.
Successful Asset Sales
Chatham Lodging Trust reported the completion of the sale of five hotels for $83 million. This strategic move aimed to enhance the company’s portfolio by divesting lower RevPAR properties, thereby strengthening its overall asset base.
Share Buyback and Financial Strength
The company has implemented a $25 million share buyback plan, successfully repurchasing 20,000 shares. Chatham Lodging Trust has reduced its leverage to 21% and projects nearly $20 million in free cash flow for 2025, indicating robust financial health.
Operational Success in Key Markets
In key markets, Chatham Lodging Trust saw significant growth, with Silicon Valley hotels experiencing a 3% RevPAR increase, contributing to a 3% rise in hotel EBITDA. The Pittsburgh market also achieved a remarkable 23% growth, reaching a historical second-quarter RevPAR high.
Improved Operating Margins
The company reported an increase in gross operating profit margins by 30 basis points. This improvement was driven by effective cost control measures, including reduced labor costs per occupied room.
Record-Breaking May Performance
Chatham Lodging Trust achieved all-time high ADR and RevPAR in May, with second-quarter occupancy levels matching post-pandemic highs at 82%. This performance underscores the company’s strong operational capabilities.
Weakness in Certain Markets
Despite overall positive results, the company faced challenges in specific regions. Texas saw a RevPAR decline due to convention center closures, with the Austin market down 14% in the quarter. Seattle also experienced a 4% RevPAR drop.
Impact of Reduced International Travel
The decline in Canadian and European travel has affected the industry, with Seattle particularly impacted by a 47% decrease in automobile border crossings, highlighting the challenges posed by reduced international travel.
Guest Acquisition Costs Rise
Chatham Lodging Trust noted a 15% increase in commissions, impacting margins by 30 basis points. This rise was attributed to changes in booking channels, indicating a shift in guest acquisition strategies.
Forward-Looking Guidance
Looking ahead, Chatham Lodging Trust provided strategic updates, including a projected second-quarter occupancy rate of 82% and RevPAR and FFO per share hitting the top of their guidance range. The company plans to use the $83 million from hotel sales for developments like the Home2 Portland project, potential hotel acquisitions, and stock repurchases. They anticipate RevPAR growth of flat to 1% for 2025, with adjusted EBITDA between $89 million and $93 million, and adjusted FFO per share ranging from $0.95 to $1.03.
In conclusion, Chatham Lodging Trust’s earnings call reflected a positive sentiment with successful asset sales and strengthened financials. While facing challenges in certain markets and rising guest acquisition costs, the company remains optimistic about its strategic initiatives and future growth prospects.