RLJ Lodging Trust Q3 FY2025 earnings call

• Overall, third quarter RevPAR results were in line with expectations, with urban markets showing stronger performance and momentum building in Northern California. - Non-room revenue growth and cost containment contributed to solid bottom-line results despite RevPAR headwinds. - RevPAR decline was affected by factors like difficult holiday comps, hurricane-related business, softer citywide calendars, and renovations. - Urban hotels outperformed the broader portfolio, with San Francisco CBD hotels achieving 19.4% RevPAR growth. - Non-government-related business travel saw 2.4% revenue growth, corporate rates up 3%, but government-related transient demand remained low. - Advancing 3 transformative renovations, 4 recently completed conversions had 6% growth, Renaissance Pittsburgh conversion started, and Wyndham Boston will convert to Hilton's Tapestry Collection.

Third quarter RevPAR declined by 5.1%, balanced between occupancy and ADR. Occupancy was 73%, average daily rate was $190, and RevPAR was $139. Urban hotels' RevPAR outpaced the broader portfolio by 50 basis points this quarter. Non-room revenues grew by 1.3%. Hotel EBITDA in the third quarter was $80.8 million with margins of 24.5%.

• Adjusted full-year 2025 outlook: comparable RevPAR growth range of negative 1.9% to negative 2.6%; comparable hotel EBITDA between $357.5 million and $365.5 million; adjusted EBITDA between $324 million and $332 million; adjusted FFO per diluted share between $1.31 and $1.37. - Fourth quarter affected by government shutdown, travel-related headwinds, and delay in renovation ramping. - 2026 encouraged by constructive economic environment, lapping difficult comparisons, low new supply, and tailwinds like World Cup, US 250th anniversary, and major sporting events.

• Government shutdown impact on travel propensity, compression lack, and delay in renovation ramping in key markets. - Macro uncertainty affecting consumer and corporate confidence. - Travel-related headwinds such as impact on air traffic control system.

Q: Could you dive into the revenue management strategies? Maybe just how you changed your approach in the quarter, given that performance was weaker? And then also, what are you seeing in terms of booking channels and booking window that guide your near-term outlook?

A: In quarter 3, focused on diversifying mix by focusing more on leisure side to replace group. Leisure demand was up, and had opportunities in urban leisure. Channels: brand.com had great demand, OTA had growth on weekends, BT grew including through global distribution systems.

Q: I wanted to go back to the leisure segment for a moment. And just wondering if you're seeing more price sensitivity from that customer or is it more that you're just targeting more bookings through discount channels and other leisure channels, and that's driving maybe some of the softness around pricing?

A: Leisure demand has been relatively stable, room nights up in third quarter. Price sensitivity shows in booking channels, but government shutdown affects travel willingness.

Q: You'd referenced the significant RevPAR growth in San Francisco CBD and just positive outlook for the region. I guess, first, is it translating to your hotels across Northern California? Or do you need to see additional recovery before it really broadens out? And then second, wondering how that top line growth, again, that you referenced is translating to the bottom line just given some of the expansion pressures in the region?

A: CBD has back-to-back quarters of 19% growth, AI space growth, office demand up, convention calendar good. Silicon Valley sees BT growth from tech companies. On bottom line, costs in SF have moved but mix of rate growth vs demand growth is encouraging long term.