Shares of hotel focused real estate investment trust (REIT) CorePoint Lodging (CPLG) fell out of the gate today, losing roughly 12% of their value in the first hour of trading. The company's before-the-market earnings release was the likely cause of investors' dour mood. But you have to look past the year-over-year figures to understand what's going on.
Using the typical year look back, the first quarter was a great one for CorePoint. Its revenue rose by nearly a third compared to the same quarter in 2020. Occupancy increased 11.7 percentage points. Revenue per available room (RevPAR in industry lingo) was up 71%. And adjusted funds from operations (FFO) per share came in at $0.47, up from zero a year ago. The only problem is that a year ago the world was still struggling through the coronavirus pandemic, so an improvement from that period was almost a guarantee. And that's where the problems begin.
To fully understand where CorePoint is today, you really need to look back to 2019, before the pandemic started. When you do this, you see that third-quarter 2021 revenue of $142 million was actually down from $215 million in the third quarter of 2019. Occupancy of 63.3% was down from 2019's 68.8%. And adjusted FFO was down roughly $0.02 per share over the two-year span. The only positive was RevPar, which increased from $64.67 in the third quarter of 2019 to $66.38 this year. Also worth highlighting, given the still lingering nature of the pandemic, CorePoint's occupancy fell nearly 10 percentage points between July and September of this year, with RevPar dropping nearly $18.50. Those aren't positive trends.
Things are clearly improving from the worst of the pandemic, which is good news for CorePoint and its shareholders. However, when you look back to the pre-pandemic period it's clear that business is still not back to normal. Add in the declining occupancy and RevPAR trends in the third quarter and there's also some lingering pandemic uncertainty in the air. It's not surprising that investors were displeased with the quarterly update. On top of all of this, the REIT continues to dispose of assets in a multi-year effort to streamline its business and reduce leverage, which muddies the waters even more. This is not a great option for most investors and until it reinstates its dividend only the most aggressive types should probably be looking here.