Chatham Lodging Trust Ups Guidance, Leans Into Buybacks

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 a notably upbeat tone as management highlighted stronger-than-expected operations, widening margins and a major accretive acquisition that is already outperforming expectations. While pockets of market weakness, renovation disruptions and higher utilities temper near-term results, executives emphasized that the positives in Silicon Valley, capital returns and a higher 2026 outlook clearly outweigh current headwinds.

Raised Guidance and Robust Capital Returns

Chatham lifted its 2026 outlook by roughly 15% since February, signaling growing confidence in earnings power and cash flow durability. Management also raised the common dividend 11% in the first quarter, following a 2025 increase of 28%, yet the dividend still represents about 32% of FFO, suggesting ample room for further growth without straining the balance sheet.

Aggressive Share Repurchases Signal Undervaluation

The company leaned into buybacks, repurchasing 2.2 million shares through the first quarter, about 4% of its common equity base, at an average price of $7.04. Another roughly 200,000 shares were purchased in April at about $8.34, and management plans to complete a $25 million repurchase program by 2026 using free cash flow, implying confidence that the stock trades below intrinsic value.

Accretive Acquisition of Six Hilton Hotels

Chatham closed a $92 million acquisition of six Hilton-branded hotels totaling 589 rooms, funded with revolver borrowings at an interest cost near 5.1%. The portfolio is relatively young, with an average age around ten years and roughly two-thirds extended-stay, and it is already posting RevPAR growth of 6% in the first quarter and 7% in April with 74% occupancy.

Operational Outperformance and Margin Expansion

Comparable hotel EBITDA rose 5% in the first quarter to $21.4 million, while hotel EBITDA margins expanded by roughly 135 to 140 basis points year over year. GOP margin reached 40.2% and hotel EBITDA margin 31.8%, with GOP up about 60 basis points versus the prior year, reflecting tight expense control and better flow-through on modest revenue gains.

RevPAR Strength Driven by Silicon Valley

Portfolio-wide RevPAR improved 1% in the quarter, with momentum building from a 5% decline in January to 5% growth in March, but Silicon Valley stood out with a 23% RevPAR increase excluding a renovating Mountain View asset. Occupancy at the four Silicon Valley hotels held at 72%, while ADR climbed 10% to $210 and RevPAR reached $152, a post-pandemic high, with two Sunnyvale hotels up 26% in the quarter.

Expense Discipline and Labor Efficiency Gains

Chatham’s margin gains were supported by disciplined expense management as labor and benefits per occupied room fell more than 1%, saving about $0.50 per occupied room. Insurance renewals came in lower and property tax refunds totaling roughly $0.5 million helped offset about a 12% jump in utility costs at comparable hotels, keeping profitability on an upward path.

Prudent CapEx and Targeted Development

Capital spending was approximately $6 million in the first quarter against a full-year budget of about $27 million, underscoring a measured approach to reinvestment. The recently acquired Hilton hotels require limited near-term CapEx, with only the Hampton Inn & Suites Paducah slated for renovation in the next two years, and Chatham is planning to commence development of a hotel in Portland, Maine with opening targeted before fall 2028.

Conservative but Positive Full-Year Outlook

Management’s updated 2026 guidance calls for 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. Second-quarter RevPAR is expected to rise about 1% to 2%, and executives reiterated plans to stay active in opportunistic acquisitions and share repurchases while aiming for hotel EBITDA margins that are about 100 basis points higher than prior guidance.

Regional Weakness in Coastal Northeast and Texas

Not all markets are participating in the upswing, as coastal Northeast RevPAR declined around 8% in the first quarter, highlighting pressure in that region. In Texas, the Courtyard Dallas Downtown saw RevPAR drop roughly 26% due to convention center renovations and related demand disruption, while Austin RevPAR fell about 6% over the past year, compounded by renovation work at the Residence Inn Austin.

Convention Calendar Softness and RevPAR Headwinds

Management highlighted a softer convention calendar compared with 2025, and they expect RevPAR in convention-driven periods to fall roughly 2% for the remainder of the year. This drag is already baked into guidance, and executives portrayed their outlook as deliberately conservative to account for reduced group demand and event-related volatility.

Renovation and Weather-Related Disruptions

Beyond structural demand factors, near-term operations are being temporarily disrupted by on-property projects and severe weather, particularly in Mountain View where a significant renovation has shut the gatehouse and moved check-in to guest rooms. A major snowstorm early in the quarter also hurt performance across parts of the middle of the country and the Northeast, depressing otherwise improving trends.

Rising Utilities and Macro Uncertainty

Utility expenses surged about 12% at comparable hotels, but Chatham largely absorbed the hit by squeezing costs elsewhere, preserving margin momentum. Management also pointed to geopolitical risks and fuel price volatility as wildcards for travel demand, noting they could either provide a modest boost or become a headwind depending on how conditions evolve.

Muted but Improving Transaction Market

The company characterized the hotel transaction market as still challenging for individual asset sales, though deal flow is better than a year ago and broadly similar to last quarter. Chatham expects to execute only one or two dispositions as part of ongoing capital recycling, suggesting a focus on selective pruning rather than aggressive portfolio shrinkage.

Seasonality Evident in Q1 Adjusted FFO

First-quarter adjusted FFO came in at $0.20 per share, a level that reflects seasonal and short-term variability relative to the full-year guidance range of $1.21 to $1.29. Management argued that investors should view the quarter’s earnings in the context of a stronger back half and contributions from the new Hilton portfolio, which are expected to support the higher 2026 profit outlook.

Forward-Looking Guidance and Strategic Priorities

Chatham’s upgraded guidance hinges on modest RevPAR growth, continued margin expansion and incremental benefits from its recent acquisition, supported by a leverage ratio of about 32.5%. The company plans to fund a $25 million share repurchase program with growing free cash flow, maintain disciplined CapEx around $27 million and pursue targeted acquisitions, all while sustaining a well-covered and rising dividend.

Chatham Lodging Trust’s earnings call painted a picture of a lodging REIT that is steadily strengthening its operating base while thoughtfully returning capital to shareholders. With Silicon Valley leading RevPAR gains, margins moving higher and a sizable Hilton acquisition already outperforming, management appears confident that disciplined capital allocation and cost control will outweigh localized softness and macro uncertainties in the years ahead.