RLJ Lodging Trust Signals Confident Outlook After Q1

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

RLJ Lodging Trust’s latest earnings call struck a distinctly upbeat tone, with management emphasizing operational outperformance, strong liquidity and clear returns from recent renovations and conversions. While they acknowledged headwinds such as higher energy costs, shorter booking windows and a mixed transaction market, the company projected confidence that its balance sheet strength and asset repositioning can sustain growth through near-term volatility.

RevPAR Gains and Top-Line Strength

RLJ reported a 4.8% rise in Q1 RevPAR to $149, beating broader industry performance by roughly 100 basis points and showing accelerating momentum into March. Management added that February RevPAR grew 6.1%, March 8.9% and preliminary April trends are tracking around 4% higher, signaling a solid start to the year.

Occupancy and ADR Both Support Growth

Performance was balanced across demand and pricing, with occupancy up 2.6 percentage points to 70.8% and ADR rising 2.1% to $210. Executives stressed that this mix of higher occupancy and rate supports more durable RevPAR gains and reflects improving demand across leisure, corporate and group segments.

Urban Markets Lead the Charge

Urban assets were a standout, outperforming STR’s urban benchmark by about 110 basis points and benefiting from ongoing recovery in key gateway cities. Northern California RevPAR surged 27% while New York rose more than 8%, South Florida about 10% and Houston and Denver each delivered 14% growth, underscoring the portfolio’s leverage to high-demand urban destinations.

Non-Room Revenue and Margin Expansion

Non-room revenues climbed 8.2%, led by stronger food and beverage, parking, audiovisual and meeting income, as well as grab-and-go offerings. These higher-margin streams helped widen non-room margins by around 130 basis points and pushed total revenue growth to about 5.4%, outpacing room-only performance.

EBITDA Growth and Improving Margins

Hotel EBITDA reached $89.9 million, up $6.1 million year over year, representing 7.2% growth on the back of higher revenues and disciplined cost control. Hotel EBITDA margin expanded to 26.4%, an improvement of 45 basis points, while adjusted EBITDA came in at $80.9 million and adjusted FFO per diluted share was $0.33 for the quarter.

Conversions and Renovations Deliver Tangible Upside

RLJ highlighted that four major high-occupancy renovations completed last year produced a 9% RevPAR lift and a 10% EBITDA increase in Q1. Seven completed conversions generated 16% EBITDA growth with total revenues up roughly 8%, and management continues to target high double-digit returns on renovations and around 40% incremental EBITDA upside on select conversions such as Wyndham Boston.

Capital Allocation and Shareholder Returns

The company reiterated a disciplined approach to capital, balancing reinvestment in high-ROI projects with direct shareholder returns. RLJ paid a quarterly dividend of $0.15 per share, which management described as well covered, and indicated that future share repurchases would likely be funded by opportunistic asset dispositions when pricing is attractive.

Balance Sheet Strength and Liquidity Buffer

Recent refinancing activity expanded undrawn capacity by $500 million, enhancing financial flexibility and supporting future investment or debt reduction. Management plans to repay $500 million of senior notes maturing July 1, which would leave the company with more than $950 million in liquidity, including a $600 million undrawn revolver, no debt maturities until 2029, a 4.6% weighted-average interest rate, 75% of debt fixed or hedged and 84 of 92 hotels unencumbered.

Cost Pressures from Energy and Weather

Energy expenses were a notable pressure point in Q1 as winter storms and disruptions in global energy markets drove higher utility costs. While RLJ offset some of these increases with savings in other expense categories, management flagged energy as a lingering headwind that could temper margin progression if volatility persists.

Shorter Booking Windows Raise Visibility Risk

Management pointed to shortening booking windows, particularly in group business, as a key source of uncertainty even as current demand remains healthy. With groups committing closer to arrival dates, the company has less forward visibility, which is contributing to a more cautious tone in its full-year outlook despite strong Q1 results.

Shifted Earnings Cadence and Mixed Transaction Market

Although full-year guidance was largely reaffirmed, RLJ expects Q2 adjusted EBITDA contribution to be slightly below last year, with more earnings weighted toward the back half of 2026. Executives also noted that while the hotel transaction market has improved, it remains uneven, and the company completed no dispositions in Q1, implying that capital recycling will stay opportunistic rather than programmatic.

RevPAR Outlook Tempered Despite Strong Start

The full-year comparable RevPAR outlook of 1.5% to 3.5% implies a moderation from Q1’s 4.8% growth, reflecting management’s conservative stance against a murky macro backdrop. Investors should expect solid but not explosive top-line gains as RLJ balances optimism around urban recovery and asset repositioning with caution on rates, demand and late-cycle risks.

Guidance and Forward-Looking Framework

Incorporating Q1 strength, RLJ now projects 2026 comparable hotel EBITDA between $356 million and $380 million and corporate adjusted EBITDA of $324 million to $348 million, with adjusted FFO per diluted share of $1.29 to $1.45. The company expects total capex of $80 million to $90 million, cash G&A of $32.5 million to $33.5 million and net interest expense of $101 million to $103 million, reiterating that total revenue growth should outpace RevPAR, while Q2 EBITDA is expected to be modestly softer year over year before rebounding in the back half.

RLJ Lodging Trust’s earnings call painted a picture of a hotel REIT executing well operationally while keeping its balance sheet in strong shape and reinvesting in its portfolio for higher returns. For investors, the message was one of cautious optimism: near-term visibility is imperfect and energy costs are a drag, but robust urban performance, proven renovation payoffs and ample liquidity underpin a constructive medium-term outlook.