Pebblebrook Hotel Trust (NYSE:PEB) announced third-quarter earnings right after the closing bell today. The upscale hotel owner reported results that exceeded its own expectations, and even outperformed the hotel industry's strong growth in the quarter. Let's check in and have a closer look at the quarter.
A look at the numbers that matter
Pebblebrook Hotel Trust reported strong results across the board. Same-property Revenue Per Available Room, or RevPAR, increased to $224.25, or 11.4% higher than last year's third quarter. This exceeded the industry's growth of 9.2% as the company benefited from owning hotels in major gateway cities.
The strong revenue growth yielded even better results on the bottom line as the company was able to hold expenses to just a 3.6% increase. This allowed Same-Property EBITDA to jump 21%, to $70.1 million, while the Same-Property EBITDA Margin improved from 32.5% in last year's third quarter, to 36% this quarter. Even better was the 47.6% surge in adjusted FFO, or funds from operations, per diluted share, which came in at $0.68 this quarter, and up from $0.46 per share in last year's third quarter.
Pebblebrook noted that its hotels are benefiting from accelerating growth in business and leisure travel, as well as strong inbound international travel. This is driving substantial increases in average daily room rates according to the company. Pebblebrook doesn't expect these travel trends to slow down, which is why it's increasing its outlook for the balance of the year.
A look ahead
The company's improved outlook assumes that economic activities continue to get better while business travel trends remain positive. That outlook leads the company to project fourth-quarter Same-Property RevPAR of $190-$192, or 5%-6% higher than the fourth quarter of last year. This would yield adjusted FFO of $26.4-$28.4 million, or $0.38-$0.41 per share.
Given that outlook, the company expects full-year adjusted FFO to be $124-$126 million, with adjusted FFO of $1.87-$1.90 per share. This outlook assumes that Pebblebrook doesn't make any additional hotel acquisitions this year. If the company were to buy additional hotels before the end of the year, then this outlook could prove to be conservative.
Pebblebrook delivered a pretty solid quarter as its results beat its own expectations, as well as outperforming the hotel industry's strong growth. The company expects these high-end results to continue through the end of this year, and well into next year. Further, it expects its results to continue to outperform the hotel industry as its focus on higher-end hotels in gateway cities that have limited supply growth set the company up to enjoy higher room rates.