The hotel industry enjoyed a record-setting year in 2014, which really drove the results of Pebblebrook Hotel Trust (NYSE:PEB) this past quarter. The company enjoyed strong double-digit growth across nearly every metric that matters for its business as industry demand accelerated throughout the year and was significantly higher than hotel supply growth. It's a trend the company doesn't see slowing down in 2015, which is why it's boosting its dividend by a very generous 34.8%.
Here's a closer look at the quarter, as well as what to expect in 2015.
Checking in on the numbers
Pebblebrook Hotel Trust reported funds from operations, or FFO, of $32.6 million, or $0.46 per share. That's 17.9% higher than the fourth quarter of 2013. Driving this growth was the company's same-property revenue per available room, or RevPAR, which rose 7.4% in the quarter to $193.42, as occupancy increased 1% to 81.5% in the quarter.
One thing Pebblebrook was able to do in the quarter was to raise its same-property revenue by 4.5% while holding its same-property hotel expenses to just an 0.8% increase. That combination enabled the company to provide a nice boost to its bottom line, as evidenced by the 13.6% boost in same-property EBITDA to $57.4 million.
The company's growth is being largely driven by two factors. Externally, the company is enjoying the very strong fundamentals within the hotel industry. Last year, demand grew by 4.5% while supply checked in at only 0.9%, which helped push industry occupancy levels to historical highs. Meanwhile, Pebblebrook saw a return on the $57.1 million it spent last year on capital improvements at its hotels. Those improvements helped its hotels attract more guests who spent more money, enabling the company to outperform the industry's growth.
Pebblebrook expects both of these trends to continue in 2015. It sees a moderately growing U.S. economy leading to 6%-7% RevPAR growth within the hotel industry. Meanwhile, it sees its growth outperforming the industry again, as it expects its own RevPAR to grow by 6.5%-7.5% in 2015. On top of that, it expects its margins to improve again next year so that its same-property EBITDA will grow by 8% to 10.7%. Again, the company is going to keep its costs in check so that more of its growth hits the bottom line.
This growth, however, assumes that Pebblebrook doesn't acquire any additional hotels in 2015. Historically, the company does tend to acquire a handful of new hotels each year, as evidenced by the half-dozen properties it bought last year. Should the company find additional properties at a decent value, this could provide some additional upside to its 2015 outlook.
Pebblebrook enjoyed a very strong quarter, which capped off a solid year for the company. The company is sharing its success with its investors in a very tangible way by boosting its dividend 44% over the past year, including the recently announced 34.8% increase. While the payout might not grow as much in 2015, the company looks to enjoy above-industry-average growth, which should enable it to continue to grow its dividend in the years ahead.