Yahoo Finance Chatham Lodging Trust (CLDT) (Q1 2024) Earnings Call Transcript Highlights: Navigating Market ...
RevPAR Growth: 2% increase, with significant contributions from tech hotels in Silicon Valley and Bellevue.
Free Cash Flow: $8.3 million, up 10% from Q1 2023.
Net Income: Not specifically mentioned, but related financial health indicated by strong free cash flow and RevPAR growth.
Earnings Per Share (EPS): Adjusted FFO per share was $0.16.
Hotel Sales: Sold Hilton Garden Inn Denver Tech for $18 million.
Hotel Investments: Plans for acquisitions targeting higher RevPAR and growth markets.
Debt Management: Lowest leverage levels in over a decade, net debt to EBITDA ratio at 4 times.
Capital Expenditures: $10 million spent in Q1, with a total of $37 million expected for 2024.
Hotel EBITDA: $21 million for Q1 2024.
Adjusted EBITDA: $18.9 million for Q1 2024.
Release Date: May 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Chatham Lodging Trust reported a 2% increase in RevPAR, driven by growth in both occupancy and ADR, outperforming industry averages.
Generated $8.3 million in free cash flow for the quarter, marking a 10% increase over the same period in 2023.
Strong performance in tech-driven hotels, with significant RevPAR growth in Silicon Valley and Bellevue markets.
Successfully sold the Hilton Garden Inn Denver Tech for $18 million, aligning with strategic goals to optimize the portfolio.
Maintained a healthy balance sheet with low leverage levels and increased financial flexibility through additional borrowings.
Negative Points
Excluding the five tech-driven hotels, first quarter RevPAR was down 1%.
GOP margins at comparable hotels decreased by 120 basis points, primarily due to increased labor and benefits costs.
Faced challenges in the Los Angeles market, with underperformance in business travel affecting key hotels.
Anticipated capital expenditures of approximately $37 million for 2024, indicating significant ongoing investment needs.
Despite overall growth, certain leisure markets like Savannah and Destin showed weakness, impacting performance.
Q & A Highlights
Q: Can you provide more color on the weekend occupancy dynamics and what might be driving that? Is there an element of consumer softness? A: Dennis Craven, EVP and COO of Chatham Lodging Trust, noted that the first quarter weekend occupancy was about the same as weekday, down 200 basis points, driven by Savannah and Destin. He attributed this to a pullback in leisure markets that spiked during 2021 and 2022 due to the pandemic. As business travel resumes, the expectation was that leisure travel would soften, which is what was observed.
Q: What is the incremental opportunity for other revenues, like parking, to enhance growth and profit? A: Dennis Craven explained that Chatham has implemented broad increases in parking rates and is exploring surge pricing during high-demand events. Additionally, they are enhancing retail offerings within their hotels, focusing on quick grab items and adjusting pricing, particularly for alcoholic beverages, to boost revenue.
Q: Regarding the flexibility tech companies are providing with intern programs, do you think this is the new normal? What is the size of the intern program this year compared to previous years? A: Dennis Craven mentioned that intern levels are up from last year but still below 2019 levels. Jeff Fisher added that while the exact numbers are unclear, the presence of intern programs, regardless of the accommodation choice, should boost market compression and benefit occupancy and RevPAR.
Q: Can you discuss the cost pressures you're currently facing? A: Dennis Craven indicated that staffing issues are minimal across their markets. The most significant cost increases are in real estate taxes, property insurance, and health insurance, with health insurance continuing to see double-digit annual increases. However, utility costs have started to decrease.
Q: What are your criteria for entering new markets, particularly regarding capital recycling with dispositions and acquisitions? A: Jeff Fisher stated that they are encouraged by recent sales and are looking to sell hotels in markets that are slow to recover or have limited upside. They aim to enter markets with strong population and business growth, focusing on newer properties or those where developers need to manage capital due to maturing debts.
Q: Can you provide additional color on the strong RevPAR in April, especially with the shift of Easter and other factors? A: Dennis Craven highlighted that the strong April RevPAR was driven by their tech hotels, which saw a 12% increase. The overall demand strength across the portfolio, particularly from business travelers, contributed to this performance. He noted that weekday travel rates are beginning to ramp up, which could lead to a strong second quarter.
Q: Any insights on the Los Angeles market performance and outlook? A: Dennis Craven acknowledged that Los Angeles had been one of their strongest markets until a recent downturn last quarter. The soft performance was partly weather-driven, with a current lack of business travel into downtown and Warner Center areas. However, signs of recovery are beginning, particularly in Woodland Hills and Marina del Rey.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
