Chatham Lodging Trust’s Earnings Call Highlights Achievements and Challenges

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

The recent earnings call of Chatham Lodging Trust presented a balanced sentiment, highlighting both significant achievements and notable challenges. The company announced a share buyback plan and a substantial dividend increase, reflecting positive developments. However, concerns were raised regarding a decline in RevPAR in April, economic uncertainties affecting future growth, and increased operating costs.

Share Buyback Plan Announcement

The board of trustees at Chatham Lodging Trust approved a $25 million share buyback plan. This initiative is part of the company’s strategy to enhance shareholder value by repurchasing shares, which can potentially increase the stock price and earnings per share.

Dividend Increase

Chatham Lodging Trust announced a 29% increase in its quarterly common dividend, bringing it to $0.09 per share. This increase translates to an annualized yield of over 5%, signaling the company’s strong financial position and commitment to returning value to shareholders.

Successful Hotel Sales

The company successfully sold five older hotels, generating $83 million in proceeds. These properties, with an average age of 25 years, were among the lowest RevPAR performers in the portfolio. The sale allows Chatham to focus on more profitable assets and improve overall portfolio quality.

RevPAR Growth and Margin Improvement

Chatham Lodging Trust achieved impressive RevPAR growth, among the highest in the lodging sector, and improved GOP profit margins in the first quarter. This growth was particularly strong in tech-dependent markets, demonstrating the company’s ability to capitalize on market trends.

Strong Performance in Key Markets

The company reported RevPAR growth in six of its top seven markets, with Silicon Valley and Los Angeles showing significant increases of 8% and 14%, respectively. This strong performance underscores Chatham’s strategic positioning in high-demand areas.

Phoenix Hotel Performance

The Home2 Suites Phoenix downtown exceeded budgeted expectations, achieving 12% top-line growth and 25% EBITDA growth. This performance highlights the hotel’s operational efficiency and market appeal.

RevPAR Decline in April

Despite earlier successes, Chatham experienced a 4% decline in RevPAR in April, attributed to holiday weekends and a slowdown in business travel. This decline poses a challenge to maintaining growth momentum.

Uncertain Economic Outlook

The company projects flat RevPAR growth for the year due to economic uncertainty. This cautious outlook reflects broader market conditions and potential impacts on travel demand.

Government Travel Impact

In March, RevPAR in Washington D.C. hotels declined by 8%, influenced by reduced government travel. This trend highlights the sensitivity of certain markets to specific travel segments.

Increased Operating Costs

Chatham reported a rise in utility costs by approximately 10% and complementary F&B costs by 20%. These increased operating expenses could pressure profit margins if not managed effectively.

Forward-Looking Guidance

Looking ahead, Chatham Lodging Trust remains focused on enhancing shareholder value through strategic initiatives. The company plans to continue its share repurchase program and explore potential acquisitions. Despite challenges, Chatham’s guidance projects flat RevPAR growth for the year, with adjusted FFO per share expected to range from $0.95 to $1.03.

In conclusion, Chatham Lodging Trust’s earnings call reflected a balanced sentiment, with significant achievements such as a share buyback plan and dividend increase offset by challenges like RevPAR decline and increased costs. The company remains committed to strategic growth and enhancing shareholder value, despite economic uncertainties.