Chatham Lodging Trust(CLDT) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - RevPAR for the third quarter declined 0.3%, which was at the upper end of the guidance range of flat to minus 1.5% [10][29] - Adjusted EBITDA rose over 3% and adjusted FFO rose over 2% compared to the previous year [5][27] - Net income for the quarter was $10.1 million, down from $14.7 million in Q3 2018, primarily due to impairments [26] Business Line Data and Key Metrics Changes - RevPAR for the 40 comparable wholly owned hotels was $145, with ADR rising 0.5% to $173 and occupancy declining 80 basis points to 85% [14] - Other revenue significantly increased, with parking revenue up $400,000 or 22% in the quarter [20][21] Market Data and Key Metrics Changes - Silicon Valley showed strong performance with RevPAR up almost 5% to $194, while Houston struggled with a 17% decline to $84 [16][19] - Washington D.C. experienced a RevPAR gain of 5.4% to $152, driven by strong performance at the Tysons Residence Inn [17] Company Strategy and Development Direction - The company plans to explore asset sales on a limited and opportunistic basis to invest in development opportunities, such as the $65 million Warner Center project in LA [12] - Acquisitions remain challenging due to unreasonable seller expectations regarding cap rates [12] Management Comments on Operating Environment and Future Outlook - Management indicated that maintaining operating margins will require approximately a 2% RevPAR gain on a stabilized basis [35] - The company expects Q4 RevPAR to decline by 5% to 6.5%, influenced by difficult comparisons from the previous year [29][30] Other Important Information - The balance sheet remains strong with $86 million drawn under the revolving credit facility and $164 million of remaining availability [28] - Full year adjusted EBITDA is now expected to be between $128.7 million and $131.1 million [32] Q&A Session Summary Question: How should we think about the trade-off between RevPAR and EBITDA for next year? - Management indicated that maintaining margins will be challenging in Q4 due to expected RevPAR declines, but they believe a 2% gain may help maintain margins in 2020 [34][35] Question: Can you discuss the performance of specific markets versus budgets? - Silicon Valley outperformed expectations, while Houston and Boston met expectations, and Los Angeles underperformed due to weaker demand [39][40] Question: What is the status of the 2018 acquisitions? - The 2018 acquisitions are underperforming in total revenue, but there are signs of improvement, particularly at the Summerville Residence Inn [42] Question: What are the labor cost pressures in key markets? - Labor costs are particularly pressured in California and Seattle due to high demand and low availability of labor [54]