RLJ Lodging Trust Balances Growth and Challenges in Earnings Call

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

The recent earnings call of RLJ Lodging Trust reflected a balanced sentiment, highlighting both positive and challenging aspects of the company’s performance. On the positive side, the company showcased strong urban hotel performance, successful capital recycling, and growth in group segment revenues. However, these were tempered by declines in RevPAR during March and April, uncertainties in macroeconomic conditions, and softness in government and international demand.

Positive RevPAR Growth in Urban Hotels

Urban hotels were a bright spot for RLJ Lodging Trust, achieving a robust RevPAR growth of 3.6%. This growth was particularly strong in several urban markets, driven by business travel and large events, which contributed to high-single-digit growth in these areas.

Strong Performance in Initial Conversions

The company’s initial conversions have shown impressive results, with a 14% RevPAR growth during the first quarter. Notably, the Nashville conversion stood out with a 16% RevPAR growth, underscoring the success of these strategic moves.

Successful Capital Recycling and Strengthened Balance Sheet

RLJ Lodging Trust successfully sold a non-core asset at an 18 times multiple, using the proceeds for share repurchases. The company also addressed debt maturities and secured a new term loan, demonstrating a commitment to strengthening its balance sheet.

Group Segment Revenue Growth

The group segment revenue saw a 10% increase, fueled by strong city-wide events in key markets such as Washington DC, San Francisco, New Orleans, and Louisville. This growth highlights the company’s ability to capitalize on large-scale events to boost revenues.

RevPAR Decline in March and April

Despite the positive trends earlier in the year, March RevPAR declined by 1.3% due to an elongated spring break and an uncertain macroeconomic backdrop. April is also forecasted to see a decline between 1% and 2%, indicating ongoing challenges.

Impact of Uncertain Macro Environment

The uncertain macroeconomic environment has led RLJ Lodging Trust to adjust its full-year guidance. The company cited reduced visibility on lodging operating results, influenced by elevated macroeconomic risks and volatility.

Soft Government and International Demand

Government and international demand remained soft, impacting overall performance. Government demand accounts for approximately 3% of revenues, highlighting a need for diversification in demand sources.

Forward-Looking Guidance

Looking ahead, RLJ Lodging Trust projects a RevPAR growth range between -1% and 1%, with comparable hotel EBITDA expected to be between $365.5 million and $395.5 million. The company emphasized its proactive balance sheet management, including refinancing efforts and share repurchases, maintaining a strong liquidity position with over $0.8 billion available.

In summary, RLJ Lodging Trust’s earnings call presented a mixed outlook, balancing strong urban hotel performance and strategic financial maneuvers against challenges posed by macroeconomic uncertainties and declining RevPAR in recent months. The company’s forward-looking guidance reflects cautious optimism, with a focus on maintaining financial stability and capitalizing on growth opportunities where possible.