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Pebblebrook Hotel Trust(PEB) - 2024 Q4 - Earnings Call Transcript
PEBPebblebrook Hotel Trust(PEB)2025-02-27 17:10
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Financial Data and Key Metrics Changes - For the full year 2024, same-property total RevPAR increased by 2.1%, driven by gains across both urban and resort properties along with stronger out-of-room spending [5] - Adjusted EBITDA rose by 0.8% to 359.2million,exceedingthemidpointoftheoutlookby359.2 million, exceeding the midpoint of the outlook by 11.2 million [5] - Adjusted FFO per diluted share grew by 5% to 1.68,surpassingtheoutlookmidpointby1.68, surpassing the outlook midpoint by 0.09 [5] Business Line Data and Key Metrics Changes - In Q4, same-property total RevPAR increased by 1.8%, with resorts growing by 4% and urban hotels by 0.7% [6] - Same-property resort occupancy jumped by 3.7% to 65%, while urban occupancy rose by 2.9% to 68.1% [11] - Same-property resort revenue grew by 4.3% in Q4, outpacing the 0.7% growth at urban properties [13] Market Data and Key Metrics Changes - San Diego, the second-largest market by EBITDA, saw a 6.9% increase in occupancy, while San Francisco and Chicago improved by 2.8% [12] - For the full year, resort total revenues rose by 1.2%, while urban properties posted a 3.1% gain [14] - Excluding challenges in San Francisco, LA, and Portland, same-property urban total revenue growth would have been 7.7% [14] Company Strategy and Development Direction - The company completed a 525millionportfolio−wideredevelopmentprogram,withearlyreturnsfromrecentinvestmentsbeingencouraging[21]−In2025,capitalinvestmentsareprojectedat525 million portfolio-wide redevelopment program, with early returns from recent investments being encouraging [21] - In 2025, capital investments are projected at 65 million to 75million,reflectingtheportfolio′sexcellentconditionandreducedneedforadditionalcapital[22]−Thecompanyanticipatescontinuedupsidefromstrategicinvestmentsmadeinrecentyears,withsignificantRevPARsharegainsexpected[36]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementnotedthatthenormalizationofresortrateshaslargelyrunitscourse,withnofurthermeaningfuldeclinesexpectedin2025[15]−Thecompanyexpressedoptimismabouttherecoveryofurbanproperties,despitechallengesinkeymarketslikeSanFrancisco,LA,andPortland[35]−Managementhighlightedpotentialeconomicconcernsduetodomesticpolicyannouncements,whichcouldimpacttheoveralloutlook[44]OtherImportantInformation−ThecompanyreducednetdebttoEBITDAto5.8timesfromabout6.5timesin2023,reflectingstrongoperatingperformanceandproceedsfromtheHurricaneIansettlement[28]−Thecompanyreceivedabout75 million, reflecting the portfolio's excellent condition and reduced need for additional capital [22] - The company anticipates continued upside from strategic investments made in recent years, with significant RevPAR share gains expected [36] Management's Comments on Operating Environment and Future Outlook - Management noted that the normalization of resort rates has largely run its course, with no further meaningful declines expected in 2025 [15] - The company expressed optimism about the recovery of urban properties, despite challenges in key markets like San Francisco, LA, and Portland [35] - Management highlighted potential economic concerns due to domestic policy announcements, which could impact the overall outlook [44] Other Important Information - The company reduced net debt to EBITDA to 5.8 times from about 6.5 times in 2023, reflecting strong operating performance and proceeds from the Hurricane Ian settlement [28] - The company received about 10 million in real estate tax and municipal tax credits in 2024, which are not assumed in the 2025 outlook, creating a headwind to expense growth [20] Q&A Session Summary Question: Expectations for out-of-room spend growth in 2025 - Management expects out-of-room spend to increase at a rate greater than RevPAR growth, driven by positive client feedback and increased spending in various non-room revenue areas [66][68] Question: Insights on the DC market and government exposure - Management noted high anxiety among government employees but highlighted positive demand drivers such as the inauguration and increased activity in the first year after elections [72][75] Question: Confidence in leisure rates and potential for growth - Management indicated that some properties are expected to see rate increases, with confidence stemming from strong bookings and rate trends [85][86] Question: Impact of LA wildfires on the portfolio - Management acknowledged the uncertainty of the impact but noted recent positive trends in travel recovery, with expectations for significant demand from rebuilding efforts [90][92] Question: Updates on San Francisco market developments - Management reported improvements in San Francisco, including increased demand and a more business-friendly environment, with expectations for mid to high single-digit RevPAR growth [127]