Chatham (CLDT) EPS Drops 30%

Chatham Lodging Trust (CLDT 1.49%), a real estate investment trust focused on upscale extended-stay and select-service hotels, announced results for the second quarter on August 6, 2025. The trust reported earnings per share (EPS) of $0.07 for Q2 2025. Only non-GAAP EPS for Q2 2025 was ahead of analyst expectations; revenue was below estimates and EPS was lower than the same period last year. Non-GAAP EPS beat the consensus of $0.06 for Q2 2025, while non-GAAP revenue was $28.5 million, below the analysts' estimate of $79.7 million. Adjusted funds from operations (FFO) per diluted share reached $0.36 in Q2 2025, at the top end of guidance. Despite a flat industry backdrop, the quarter saw stable hotel operating margins and continued capital return to shareholders. Non-GAAP revenue declined in Q2 2025, Chatham delivered solid execution and achieved guidance targets amid sluggish demand in parts of the portfolio.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Key Success Factors

The trust specializes in owning upscale extended-stay and select-service hotels in major U.S. markets. By using a real estate investment trust (REIT) structure, it avoids federal income tax on distributed earnings as a REIT but must pay out at least 90 % of taxable income to shareholders.

Its hotel portfolio is managed primarily by Island Hospitality Management and leans heavily on established brands such as Residence Inn by Marriott, Homewood Suites by Hilton, and Hyatt Place. Key success factors include disciplined acquisitions—typically of underperforming or undervalued hotels in high-demand locations—and strategic asset recycling, meaning the company sells lower-performing properties and reinvests proceeds in better opportunities. Chatham’s financial strategy emphasizes prudent leverage while sustaining consistent dividend payments, positioning itself for resilience in a cyclical and competitive lodging industry.

Quarterly Highlights and Financial Performance

The company’s top-line revenue for Q2 2025 was $80.3 million, down 7.2% compared to the second quarter of 2024. Net income to common shareholders totaled $3.4 million, or $0.07 per diluted share, for Q2 2025, down from $4.9 million, or $0.10 per share, in Q2 2024. Importantly, adjusted funds from operations—a core REIT profitability metric—were $18.5 million, or $0.36 per diluted share, for Q2 2025, matching the high end of the company’s guidance. Hotel-level gross operating profit (GOP) margins remained steady at 46% for Q2 2025, and hotel EBITDA margin held nearly steady year over year, slipping only 0.4 percentage points in Q2 2025.

Operating metrics stayed stable in the face of uneven demand. Revenue per available room (RevPAR) in the comparable hotel portfolio slipped 0.6% to $155 in Q2 2025. Occupancy was flat at 82% for Q2 2025, while average daily rate (ADR) held at $191 for Q2 2025, matching last year’s record for May. The period began with weak demand in April but rebounded in May and June of Q2 2025, with RevPAR up 2% and 1% in May and June 2025, respectively, for Chatham's 34 comparable hotels. The overall decline in adjusted EBITDA (non-GAAP) in Q2 2025 compared to Q2 2024 was mainly due to the impact of five asset sales totaling $83 million in proceeds, helping reduce leverage to 21% from 23% at year-end 2024.

Segment performance in core markets was mixed. In Silicon Valley, which accounts for 16% of hotel EBITDA over the last twelve months, RevPAR rose 3% in Q2 2025. San Diego registered a 5% increase in RevPAR in Q2 2025, boosted by convention activity, while Dallas saw a 9% RevPAR decline in Q2 2025 compared to Q2 2024, driven by a temporary convention center closure. The company’s seven leisure-driven hotels, excluding a property under renovation, recorded a 4% RevPAR lift in Q2 2025. By brand, Residence Inn properties, which make up over half of hotel EBITDA, saw a 1% RevPAR gain in Q2 2025. The extended-stay hotel segment, consistently Chatham’s largest, remained resilient.

From a capital return perspective, The trust raised its quarterly common dividend by 29% to $0.09 per share, up from $0.07, in Q1 2025, and initiated its first-ever $25 million share buyback program in Q1 2025, purchasing approximately 20,480 shares at an average price of $7.02. The $9 million in capital expenditures for Q2 2025 included significant renovations and added rooms at several properties. The sale of five legacy hotels—each with subpar RevPAR and averaging over 20 years old—enabled Chatham to reduce debt and free resources for higher-return uses.

Looking Ahead: Guidance and Trends

For the third quarter, management expects RevPAR in the range of $153 to $156 for Q3 2025, which would represent a year-over-year RevPAR change of (1.5)% decline to 0.5% growth. Total hotel revenue is projected between $78.8 million and $80.3 million for Q3 2025, while adjusted EBITDA is expected to be between $24.7 million and $26.8 million. Adjusted FFO per diluted share is forecast to fall between $0.29 and $0.33 for Q3 2025. For fiscal 2025, guidance reflects expected stable performance: RevPAR is expected at $142 to $143 (0% to 1% growth) for fiscal year 2025, adjusted EBITDA is projected between $89 million and $93 million, and adjusted FFO per diluted share between $0.95 and $1.03 for 2025 (non-GAAP). Hotel EBITDA margins are expected to trend slightly down to a range of 34–35% in 2025.

No major acquisitions are currently built into guidance, and management cited continued caution regarding the pricing and returns available for external growth. Chatham will focus on cost discipline and portfolio management to navigate the cyclical lodging environment. The quarterly dividend was increased by 29% to $0.09 per share in Q1 2025. Investors should monitor trends in major tech and coastal markets, asset recycling progress, and further management updates on capital deployment.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.