Chatham Lodging Trust(US:CLDT)2022-11-08 21:12Financial Data and Key Metrics Changes - Q3 2022 RevPAR was $150, a 34% increase compared to Q3 2021 and up 1% from Q3 2019, driven by strong leisure demand and business travel recovery [40][41] - Operating margins for same-store hotels reached 50.5%, up 160 basis points from 2019, indicating strong operational efficiency [7][34] - Free cash flow for the quarter was nearly $25 million, up 25% from Q2 2022 and 150% from Q3 2021 [8] Business Line Data and Key Metrics Changes - The portfolio excluding Silicon Valley and Bellevue saw a 4% increase in RevPAR compared to 2019, with ADR growth of 11% offset by a 7% decline in occupancy [26] - Tech-driven hotels in Silicon Valley and Seattle are still recovering, with expectations to surpass 2019 levels in the future [25] Market Data and Key Metrics Changes - Strong demand was noted in primary business travel markets such as Silicon Valley, Seattle, Dallas, and Austin, with group demand also increasing in Dallas, San Diego, and San Antonio [14][27] - Weekday occupancy rose to 79% in Q3, up from 76% in Q2, indicating a recovery in business travel [28] Company Strategy and Development Direction - The company is exploring hotel acquisitions but faces challenges due to a wide bid-ask spread in the current market [10] - Plans for a new hotel development in Portland, Maine, are underway, although the project is expected to take a couple of years to complete [11][52] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of business travel and the potential for continued strong ADR growth in 2023 [13][20] - The company is well-positioned with a strong balance sheet and plans to reinstate dividends in the near future [21][58] Other Important Information - The company has reduced net debt by approximately 40% since the pandemic, achieving the lowest leverage levels in over a decade [8][42] - Capital expenditures for the quarter were $3 million, with plans for renovations at three hotels costing approximately $11 million [39] Q&A Session Summary Question: Trends in Silicon Valley post-intern business - Management noted that while demand is lower than during the intern season, tech clients are still generating room demand, albeit at reduced levels [45][46] Question: Incremental costs and labor costs outlook - Management indicated that headcount remains down about 20% compared to pre-pandemic levels, with expectations for mid-single-digit wage increases in 2023 [47][48] Question: Intern business sustainability and backfilling options - Management is confident that the intern business will continue, and if necessary, they would revert to attracting non-business travel segments [51] Question: Portland development project details - The project is expected to take a couple of years to complete, with significant opportunities anticipated [52] Question: October performance and seasonality - October RevPAR was down compared to September, with expectations for a typical seasonal decline in November and December [54][55] Question: Acquisition opportunities and market conditions - Management highlighted the need for pressure on hotel owners to narrow the bid-ask spread for acquisition opportunities to arise [56] Question: Dividend reinstatement expectations - Management confirmed plans to reinstate dividends, with calculations ongoing to determine the appropriate level [58]