RLJ Lodging Trust Q1 FY2026 earnings call

• Lodging industry started strong in 2026, urban-centric portfolio outperformed. First quarter RevPAR growth balanced by occupancy and ADR gains. February and March RevPAR grew 6% and 9% respectively. Urban markets performed well, with Northern California and New York City showing strong RevPAR growth. Business travel saw 9% revenue growth driven by AI-related spending and corporate profits. Leisure trends strong with 5% revenue growth and 3% rate growth. Group segment had healthy booking trends, with second quarter group bookings picking up. Non-room revenue growth of 8.2% underscoring ROI initiatives. Transformative renovations and conversions delivering tangible results, with 4 major renovations at high occupancy hotels and 7 completed conversions showing strong results. Advanced conversion pipeline including Renaissance Pittsburgh and Wyndham Boston projects.

In the first quarter, RevPAR grew 4.8%, outperforming the industry by 100 basis points. Non-room revenue grew robustly, exceeding RevPAR performance by over 300 basis points. Urban-centric portfolio outperformed the industry, with markets like Northern California achieving 27% RevPAR growth, New York City over 8% RevPAR growth. Business-transient revenues grew 9% with room nights up nearly 700 basis points. Leisure revenues grew 5% with 3% rate growth. Group segment had healthy booking trends, with revenue pace up 900 basis points and ADR up 3% over last year, and second quarter group bookings picked up. Portfolio non-room revenue grew 8.2%, contributing to total revenue growth of 5.4%. Renovations at high occupancy hotels achieved 9% RevPAR and 10% EBITDA growth, and conversions generated 16% EBITDA growth. Occupancy was 70.8%, ADR $210, RevPAR $149, hotel EBITDA $89.9 million with 26.4% margins, adjusted EBITDA $80.9 million, adjusted FFO per diluted share $0.33.

For 2026, expects comparable RevPAR growth 1.5%-3.5%, hotel EBITDA $356M - $380M, corporate adjusted EBITDA $324M - $348M, adjusted FFO per diluted share $1.29 - $1.45. Capital expenditures $80M - $90M, cash G&A $32.5M - $33.5M, net interest expense $101M - $103M. Second quarter adjusted EBITDA contribution slightly lower than last year, balance in back half. Outlook assumes continued strength in BT, resiliency in leisure demand, positive group pace, favorable footprint for catalysts like World Cup and America's 250th anniversary, ongoing momentum in Northern California, growth in non-room revenues from ROI initiatives and renovated/converted properties.

Macro environment uncertainty driven by evolving geopolitical backdrop causing shorter booking windows and limiting visibility. Energy expenses elevated due to winter storms and energy market disruption from war. Potential impact on results from shorter booking windows in group and leisure segments, although no noticeable impact observed yet.

Q: Michael Bellisario asked about accelerating business demand offset by shorter booking window and out-of-room spending.

A: Leslie said BT acceleration was broad-based, group booking shorter but materializing, leisure booking window elongated. Out-of-room spending driven by business travel, including business group increasing in mix, F&B and other ancillary revenues growing due to ROI initiatives.

Q: Austin Wurschmidt asked about RevPAR growth cadence and World Cup impact.

A: Q1 better than expected, Q2 trends in line, May soft due to comps, June benefits from World Cup, third quarter more from World Cup due to later-stage games, 250th anniversary and sales force in fourth quarter. World Cup blocks picking up, transient ADR in line.

Q: Tyler Batory asked about defining leisure travel and capital allocation.

A: World Cup-related transient travel is leisure, capital allocation balanced between dispositions, conversions, and buybacks, conversions showing strong results with high returns.

Q: Gregory Miller asked about Louisville and Austin performance.

A: Louisville Marriott connected to convention center with strong growth, top accounts returning. Austin convention center renovation underway, self-contained group business and adjacent assets performing, expecting positive for remainder of year.

Q: Kenneth Billingsley asked about second quarter adjusted EBITDA and Pittsburgh draft.

A: Second quarter adjusted EBITDA lower due to Q1 strength, Pittsburgh draft successful with significant demand.

Q: Floris Van Dijkum asked about renovation returns and capital allocation.

A: Capital spend $80M - $90M on ROI renovations, expect high double-digit returns, conversion cadence 2 per year, Boston conversion expected to have 40% EBITDA upside.

Q: Chris Woronka asked about Silicon Valley market and conversion clarification.

A: Silicon Valley market encouraged with BT momentum, return to office, record office leasing. Conversions include Wyndhams and other assets with expiring franchise agreements.

Q: Chris Darling asked about transaction market and guidance.

A: Transaction market improved due to better debt market, spreads tightened, fundamentals better. Guidance considers tax credit last year, third quarter benefits from World Cup, 250th anniversary, and Salesforce.