Improving business travel demand during the first quarter drove Pebblebrook Hotel Trust (PEB 0.39%) to update its outlook earlier this month. Those travel trends turned out to be stronger than even its more optimistic expectations, helping the company to deliver results that were above the updated forecast. Because of that, the company is even more encouraged about what lies ahead in 2018.

Pebblebrook results: The raw numbers


Q1 2018

Q1 2017

Year-Over-Year Change

Same-property RevPAR




Same-property EBITDA

$55.6 million

$54.5 million


Adjusted FFO

$46.2 million

$38.7 million


AFFO per share




Data source: Pebblebrook Hotel Trust. RevPAR = revenue per available room. AFFO = adjusted funds from operations.

A modern high-end hotel room with a view over the water.

Image source: Getty Images.

What happened with Pebblebrook this quarter?

Strong travel trends enabled Pebblebrook to book across-the-board outperformance:

  • Pebblebrook initially thought that RevPAR would be between $189 and $193, which would have been 3.5% to 1.5% lower year over year. While the company's updated forecast called for a RevPAR decline of 0.25% to 0.5%, actual results came in even better at just a 0.2% dip. That's mainly a result of some continued sluggishness in San Francisco as a result of the disruption from a major renovation of a convention center that attracts travelers to the company's hotels. Without that impact, RevPAR would have increased 0.7% year over year due to strong travel trends.  
  • The increased occupancy helped drive earnings per hotel (same-property EBITDA) and cash flow (AFFO) higher. On a per-share basis, AFFO increased by a greater degree than expected due to share repurchases, coming in above the high end of the company's updated forecast range of $0.63 to $0.65 per share, and even further above its initial guidance of $0.51 to $0.55 per share.
  • Pebblebrook also benefited from the reopening of the LaPlaya Beach Resort & Club in Florida, which closed after sustaining damage from Hurricane Irma last year. While the company has additional repair work in the resort scheduled for later this year, it expects insurance to cover this disruption. Pebblebrook also received a net $3.4 million in business interruption proceeds during the quarter for losses sustained in 2017, which gave AFFO an added boost.

What management had to say

CEO Jon Bortz, commenting on the company's results, said:

We're extremely pleased with our portfolio's first quarter operating performance, which significantly exceeded our initial outlook, as our results were much stronger than expected. We are encouraged by the improved business travel demand trends we're seeing, including increased short-term group and transient bookings, better group attendance and increased overall group spend. Leisure demand also continued to be solid. The overall improvements in business travel were broad-based across our portfolio, which enabled us to handily beat our outlook for Same-Property RevPAR growth, Adjusted EBITDA and Adjusted FFO per diluted share. These favorable demand trends have continued into the second quarter, which is encouraging, and makes us more optimistic about overall industry performance for 2018, as well as for our portfolio.

Looking forward

That optimism shows in the company's revised guidance for 2018. Overall, Pebblebrook sees AFFO landing in the range of $178 million to $186.5 million, which is about 3.2% higher at the midpoint than its initial outlook. It now expects AFFO per share ranging between $2.56 and $2.69, which would be as much as a 4.7% improvement from 2017.

One other item to keep an eye on is the company's attempts to acquire rival LaSalle Hotel Properties (LHO). Pebblebrook has made three unsolicited offers; the latest and final one was for $32.49 per share, which is a 33.2% premium to LaSalle's stock before Pebblebrook made its first offer of $29.95 a share a month ago. Pebblebrook has already strategically purchased 4.8% of LaSalle's outstanding shares in hopes of pushing toward an agreement.