Pebblebrook Hotel Trust (PEB) Earnings

Management highlights

• First quarter results well above outlook across key earnings metrics. Strength broad across portfolio with 32 hotels exceeding revenue forecasts and 34 exceeding GOP forecasts. • San Francisco benefited from Super Bowl and large citywide convention. Los Angeles recovered from fire-related disruptions. • Urban and resort portfolios showed strong performance with various market-specific details. • Strategic operating initiatives driving revenue growth and expense control. • Capital investments of $11.9 million in quarter, expecting $65 to $75 million full year. • Completed rebranding of Mondrian Los Angeles into Velourian Los Angeles Curator Collection by Hilton.

Guidance

• Net debt-to-EBITDA ratio declined to 5.5 times. • Expect capital investments of $65 to $75 million full year. • Revised REVPAR growth outlook range to 2.75% to 4.75%, total REVPAR growth to 3 to 5%. • Forecast same property EBITDA growth of 5.2% to 8.6% with midpoint at almost 7%.

Segment performance

Same property hotel EBITDA increased 27.6% to $82.2 million, coming in 8.2 million above the high end of outlook. Adjusted EBITDA was 73.3 million, up 29.5% from last year, and 9.3 million above the high end. Adjusted FFO for diluted share doubled year over year to 32 cents, which was nine cents above the high end of outlook. At property level, same property occupancy increased 550 basis points, ADR increased 2.8%, rep part increased 11.8%, total revenue increased 10.1%. Same property total expenses increased just 5.6%, driving 327 basis points of hotel EBITDA margin expansion. San Francisco was exceptional with rep par increasing 44.5% and hotel EBITDA more than tripling. Los Angeles recovered sharply with Rep Park climbing 31.5% and Occam City growing more than 16 points. Urban portfolio posted rent-par growth of 14.3%, total rent-par growth of 12.9%, and EBITDA growth of 55.1%. San Diego urban hotels delivered rent-par growth of 8.7%. Chicago had RepR increasing 5.6%. Washington, D.C. had RepR declining 24.1%. Boston had Repar down 3%. Resorts had Repar rising 7.5%, total Repar increasing 6.7%, and EBITDA climbing 13.9%.

Risks & headwinds

• Heightened geopolitical tensions could pressure travel demand. • Increased uncertainty around travel, visibility has shortened. • Potential negative impact from higher oil prices on travel demand, especially international inbound. • Impact of conflict in the Middle East on airline ticket pricing, capacity, jet fuel availability.

Analyst Q&A

• Q: Cooper Clark asked about historical impact of higher oil prices on travel demand and when to expect negative impact.

  A: Historically gas prices not impactful, airline ticket prices key. Resorts drive-to, impact on airline-dependent resorts.

• Q: Smith Rose asked about rebranding Mondrian to Velourian and La Playa's first quarter.

  A: Rebranding due to better positioning with Hilton, La Playa first quarter well, on track for $28 to $30 million range.

• Q: Ari Klein asked about World Cup impact and San Francisco recovery.

  A: World Cup not likely headwind, San Francisco recovery strong with rev par growth expected.

• Q: Gregory Miller asked about AI and independent hotels.

  A: Active in AI area, hotels on system for max visibility, partnered with Canary AI.

• Q: Rich Hightower asked about Q2 outlook and LA economy.

  A: Cautious on Q2, LA economy driven by entertainment, music, fashion industries.

• Q: Duane Fenningworth asked about asset sales in LA and SF.

  A: Opportunistic on asset sales, markets showing performance, bids on high profile properties in next 30 days.

• Q: Michael Bellisario asked about out-of-room spending and revenue management.

  A: Out-of-room spending healthy, focusing on taking pricing opportunity while maintaining occupancy.

• Q: Chris Darling asked about Paradise Point redevelopment.

  A: California coastal approvals received, but permit approvals process taking 6-9 months, not kicking off this year.