Pebblebrook Hotel Trust Q1 FY2025 earnings call

Key Points - Strong Q1 performance despite economic uncertainty, driven by occupancy gains, ancillary revenue, and market share gains at redeveloped properties. - Achieved significant hotel operating efficiencies and cost reductions, with same-property hotel EBITDA exceeding the high end of the outlook. - La Playa in Naples continued its strong recovery post-hurricanes, with total RevPAR up 22% and EBITDA climbing nearly 30% year-over-year. - Invested $16.7 million in capital projects, with full-year capital plan unchanged between $65M and $75M. - Group demand remained solid, with group room nights up 5.4% year-over-year, contributing 28.2% of room revenue. - Focus on operational efficiencies across all expense categories, including rebidding contracts, labor management, and energy efficiency projects.

Resorts saw an 8.2% increase in RevPAR with a 4.2 percentage point occupancy climb. Urban total RevPAR declined 2.2%, but excluding Los Angeles, same-property total RevPAR rose 6%. Same-property hotel EBITDA totaled $62.3 million for the quarter, surpassing the midpoint of the outlook. Adjusted EBITDA was $56.6 million, and adjusted FFO was $0.16 per share. La Playa in Naples had a standout quarter with total RevPAR surging 22% and total hotel EBITDA climbing nearly 30% year-over-year, surpassing 2019's levels.

Guidance - Slightly reducing the top end of the full-year outlook while lowering and widening the low end of revenue, EBITDA, and FFO assumptions. - Expectations for first half of the year to be within the previously provided outlook range, with Q1 beating and Q2 likely towards the lower end. - Second half outlook lowered due to increased economic uncertainty, reduced government and international inbound demand, and early signs of lagging bookings for the second half, particularly Q3. - Midpoint of revised guidance reflects the most likely outcome, with potential for rebound if trade policy issues are resolved quickly.

Risks - Economic uncertainty leading to potential pullback in travel demand. - Reduction in government and government-related travel, which makes up 3%-5% of total demand. - International travel imbalance with outbound travel growing while inbound international travel declining. - Potential tariff impacts on costs related to FF&E, lighting, electrical, and sustainable operating supplies. - Lingering price competition in the LA market and potential negative impact on results in the third quarter.

Q: Jay Kornreich asked about the second half outlook and business transient travel.

A: Raymond Martz said the second half is affected by economic uncertainty and reduced government travel, but business transient travel so far hasn't shown a downturn.

Q: Smedes Rose asked about tariff impacts on costs and DC exposure.

A: Raymond Martz said tariffs would impact FF&E and other imports, and DC exposure is spread across the country with positive crosscurrents offsetting some negative government travel impacts.

Q: Floris van Dijkum asked about transaction markets and buybacks.

A: Thomas C. Fisher and Raymond Martz discussed transaction market uncertainty and that buybacks will be evaluated based on macro conditions and free cash flow.

Q: Shaun Kelley asked about DC submarket and May/June outlook.

A: Jon Bortz explained positive crosscurrents in DC and that May/June outlook is affected by convention setup.

Q: Duane Pfennigwerth asked about LA recovery and drive-to demand.

A: Jon Bortz discussed leading indicators for LA recovery as bookings and drive-to demand benefits in downturns.

Q: Jamie Feldman asked about expense efficiency and capital allocation.

A: Jon Bortz and Raymond Martz talked about expense efficiency across categories and capital allocation towards buybacks.

Q: Gregory Miller asked about summer performance and labor efficiency.

A: Jon Bortz said summer performance is uncertain, and labor efficiency efforts focus on maintaining guest satisfaction.

Q: Ari Klein asked about DC longer-term views and Key West performance.

A: Jon Bortz said DC view remains positive, and Key West's performance is due to investment and strategic booking.

Q: Chris Darling asked about international travel and Key West.

A: Jon Bortz and Raymond Martz discussed international travel uncertainty and Key West's success from investment and strategy.