RLJ Lodging Trust Q3 FY2024 earnings call

• Third quarter results were ahead of expectations despite storms, with RevPAR growth exceeding the industry, demonstrating the resiliency of the urban-centric portfolio. - Effective expense management led to EBITDA growth exceeding year-over-year RevPAR growth. - Capital allocation: Successfully refinanced near-term debt maturities, entered a new $500 million term loan, sold a non-core hotel in Denver, repurchased shares, and increased the quarterly dividend by 50%. - Business transient segment was the best-performing, with nearly 9% revenue growth driven by ADR and occupancy gains. Group segment saw strong performance with 3.4% revenue growth. Leisure revenues were stable but ADR declined, while non-room revenue growth contributed to total revenue growth.

The third quarter RevPAR growth was 2%, driven by a 1.4% increase in occupancy and a 0.6% increase in ADR. Occupancy was 75.1%, ADR was $193.39, and RevPAR was $145.23. Business transient segment saw nearly 9% revenue growth in the third quarter, led by ADR and occupancy gains. Group segment achieved 3.4% revenue growth, led by a 1.4% increase in demand and a 1.9% increase in ADR. Leisure revenues grew by 2% in the third quarter, primarily driven by a 4% increase in demand but offset by a 2% decline in ADR. Non-room revenue grew by 7.3%, driving total revenue growth of 3%. Urban hotels achieved 2.5% RevPAR growth, with urban lifestyle hotels (representing approximately 40% of the portfolio) seeing 3.2% RevPAR growth.

• For 2024, comparable RevPAR growth is expected to range between 1% and 2.5%, comparable hotel EBITDA between $382.5 million and $402.5 million, corporate adjusted EBITDA between $346.5 million and $366.5 million, and adjusted FFO per diluted share between $1.45 and $1.58. - 2024 RLJ capital expenditures are estimated to be in the range of $100 million to $220 million, and net interest expense is expected to be in the range of $92 million to $94 million.

• Impact from recent storms, holiday calendar shift, and the election may constrain performance.

Q: Austin Wurschmidt asked about the improvement in large corporate account demand and specific industries and regions.

A: Leslie Hale and Tom Bardenett responded that industries like consultants, accountants, and technology (with international travel from India and China in Silicon Valley) are seeing improvement, and midweek revenues increased.

Q: Michael Bellisario inquired about the year-over-year lift from conversions and comparison to prior expectations.

A: Sean Mahoney said they are ahead of underwriting expectations, with top-line growth around 10% and bottom-line growth of 20-25% year-over-year.

Q: Jonathan Jenkins asked if corporate demand inflected higher post-Labor Day.

A: Leslie Hale characterized it as a steady improvement, with urban thesis intact and all demand segments benefiting.

Q: Dori Kesten asked about external growth prospects in 2025.

A: Leslie Hale and Sean Mahoney mentioned urban continuing to outperform, business travel improving, strong group pace, favorable markets, and conversions continuing to ramp.

Q: Chris Woronka asked about renovations and Marriott's cost cuts.

A: Leslie Hale and Sean Mahoney answered about renovation cadence and welcoming Marriott's cost-cutting initiatives for franchisees.

Q: Gregory Miller asked about leisure demand in New York and Florida.

A: Leslie Hale and Tom Bardenett responded that leisure demand in New York is pacing fine, and in Florida, there are ads to attract demand with demand shifting but overall stable.

Q: Floris van Dijkum asked about potential asset sales and acquisition opportunities.

A: Leslie Hale said they will be opportunistic based on market assessment, with the transaction market currently constrained but expected to improve in 2025.