Chatham Lodging Trust(CLDT) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - RevPAR growth of 3% was achieved, exceeding expectations, with GOP margins at 43%, showing a year-over-year margin decline of only 70 basis points [6][9] - The company repaid $297 million of maturing debt and reduced net debt by$ 29 million in 2024, achieving a leverage ratio reduction to 23% from 25% a year ago [9][10] - Adjusted EBITDA for Q4 2024 was $21.4 million, with a GOP margin of 40.5% and hotel EBITDA margin of 37.5%, reflecting strong expense control [35][36] Business Line Data and Key Metrics Changes - Other departmental profits increased by 8%, contributing to overall profitability outside the room division [6] - RevPAR at leisure hotels increased by 1.4%, but excluding a hotel under renovation, the growth was approximately 6% [25] - The top five RevPAR hotels included the Residence Inn Fort Lauderdale with$ 208, followed by the Residence Inn White Plains at $196 [25] Market Data and Key Metrics Changes - RevPAR growth in six of the top eight markets was noted, with significant growth in technology-dependent markets like Silicon Valley, where RevPAR increased by 14% [14][15] - The New York area hotels remained flat, while Dallas experienced a decline due to the convention center's closure [14] - Overall, RevPAR growth was approximately 7% across top markets when excluding Dallas [14] Company Strategy and Development Direction - The company plans to commence hotel development in Portland, Maine, with expectations of a 150 to 200 basis points premium over existing hotel acquisition cap rates [19][48] - The focus remains on acquiring higher-yielding, higher-margin assets through capital recycling, with a strategy to sell lower-performing hotels [24][75] - The company aims to leverage its low debt levels to pursue growth opportunities and maintain strong operational performance [21][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth of business travel demand, which is expected to drive RevPAR growth [11][12] - The company anticipates continued strong performance in 2025, with guidance for RevPAR growth of 1% to 3.5% for the full year [38] - Concerns were raised about the impact of tech company policies on intern business, which may affect future demand [60] Other Important Information - The company achieved a GRESB score of 83, earning four out of five stars and a Green Star for sustainability efforts [10] - Capital expenditures for 2025 are projected at approximately$ 26 million, including renovations for three hotels [33] Q&A Session Summary Question: Insights on asset recycling and acquisition market - Management noted that the acquisition market remains thin, with a bid-ask gap for high-quality assets, but they are actively seeking replacement assets for sold hotels [43][45] Question: Details on Portland development - The Portland Hampton Inn is expected to yield a premium over existing hotel cap rates, with the project being in a favorable market due to a hotel moratorium [48][49] Question: Disparity in occupancy versus ADR - Management indicated that business travel demand is driving occupancy growth, while ADR typically lags behind occupancy improvements [54][55] Question: Guidance on RevPAR growth assumptions - The guidance reflects a cautious outlook, with expectations for occupancy-driven growth and potential ADR increases in peak months [58][71] Question: Impact of wildfires in Los Angeles area - No physical damage was reported to assets in the LA area, and one hotel benefited from displaced residents due to the wildfires [80] Question: Stock valuation concerns - Management acknowledged the stock's stagnant performance and attributed it to higher interest costs and market uncertainties, particularly in Silicon Valley [84][88]