Pebblebrook Hotel Trust (NYSE:PEB) reported resilient performance in their third quarter earnings call, despite facing headwinds from adverse weather events and entertainment industry strikes. The company highlighted strong corporate group and transient demand in urban markets, particularly Washington, D.C. and San Francisco, as key drivers for the positive results. However, they also noted a decline in leisure travel at resorts due to lower room rates and decreased demand for premium upgrades.
Key takeaways from the call include:
- The company reported gross proceeds of $300.8 million year-to-date and has over $829 million in liquidity.
- Pebblebrook has been divesting urban properties as part of their strategy to rebalance their portfolio between leisure and business segments. To date, they have sold 36 urban properties since 2016 for over $3.1 billion.
- The company expects business travel to gradually recover while leisure travel normalizes at higher levels of domestic travel.
- They anticipate growth in group and transient business in the fourth quarter and expect total revenues to grow by about 1.5% to 4.5% compared to the same period last year.
- The company is optimistic about increased adjusted EBITDA in the future, estimating a $30-50 million higher EBITDA compared to the current year.
- Pebblebrook is planning to complete the repositioning of the LaPlaya property in time for the prime season, subject to permitting approvals.
Despite a slight decline in RevPAR growth due to storms and strikes, Pebblebrook remains optimistic about the future, with ongoing strategic capital allocation plans to rebalance its portfolio between business and leisure and between urban and resort properties. As part of this strategy, the company has entered into a contract to sell Hotel Zoe Fisherman's Wharf and has bolstered its cash reserves and liquidity position.
The company has been reducing its total debt and increasing its cash position, replacing a $165 million loan with a new secured loan of $140 million. Pebblebrook has been focusing on acquiring leisure-focused resort properties and reducing urban properties. They believe their portfolio is now roughly 50-50 between business and leisure and expect the leisure portion to edge slightly higher.
Pebblebrook also discussed industry trends, noting a flattening in the recovery of demand and a decline in overall industry occupancy. They discussed their capital investment strategies, focusing on taking advantage of the public-private arbitrage opportunity by selling urban properties and using the proceeds to reduce debt and repurchase shares. They have sold 14 properties since the pandemic began for gross proceeds of $881.8 million.
Looking forward, the company expects a modest boost in performance in October due to favorable calendar events and conventions in certain markets. They anticipate growth in group and transient business in the fourth quarter and expect total revenues to grow by about 1.5% to 4.5% compared to the same period last year.
During the earnings call, Pebblebrook's CEO, Jon Bortz, discussed the company's portfolio dispositions and expressed optimism about the long-term prospects for Boston but had concerns about Washington, D.C. due to ongoing issues.
InvestingPro Insights
With real-time data from InvestingPro, let's delve deeper into Pebblebrook Hotel Trust's financial landscape. The company's market cap stands at $1430M USD, indicating its size and influence in the industry. A noteworthy point from the InvestingPro data is the negative P/E Ratio of -13.08, which may suggest the market expects lower earnings in the future. Furthermore, the Revenue Growth of 6.51% in the last twelve months as of Q3 2023, though positive, has been slowing down.
InvestingPro Tips reveal a few interesting facts about the company's financial strategy and performance. Management has been aggressively buying back shares, which can be a sign of confidence in the company's future. The company has also maintained dividend payments for 14 consecutive years, demonstrating a commitment to returning value to shareholders. However, it's worth noting that the company has been trading near its 52-week low, which might be a concern for potential investors.
For more in-depth analysis and additional tips, consider upgrading to InvestingPro's premium service. With over 10 additional tips available for Pebblebrook Hotel Trust, the platform provides a comprehensive view of the company's financial health and market position.
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