Chatham Lodging Trust announces 2nd Quarter 2024 results: Net income of $7.0m.

WEST PALM BEACH, FLA. – Chatham Lodging Trust, a lodging real estate investment trust (REIT) that invests in upscale, extended-stay hotels and premium-branded, select-service hotels, today announced results for the second quarter ended June 30, 2024.

 Second Quarter 2024 Operating Results

• Portfolio Revenue Per Available Room (RevPAR) – Increased 4 percent to $151 compared to the 2023 second quarter for the 38 comparable hotels (excludes the Home2 Phoenix Downtown that opened in January 2024). Average daily rate (ADR) was unchanged versus 2023 at $183, and occupancy jumped 4 percent to 82 percent for the 38 hotels owned as of June 30, 2024.

• • For the first time since 2019, portfolio RevPAR of $151 exceeded 2019 RevPAR of $147.

• • RevPAR for the Silicon Valley and Bellevue hotels was up 10 percent over the 2023 second quarter to a post-pandemic second quarter high of $152.
• Net Income – Net income of $7.0 million compared to net income of $9.4 million in the 2023 second quarter. Net income per diluted common share was $0.10 versus $0.15 during the 2023 second quarter.
• Hotel EBITDA Margin – Generated margins of 39 percent in the 2024 second quarter compared to 2023 second quarter margins of 41 percent.
• Adjusted EBITDA – Produced second quarter adjusted EBITDA of $31.4 million versus $31.9 in 2023.
• Adjusted FFO – Earned adjusted FFO of $19.9 million in the 2024 second quarter compared to $21.8 million in second quarter of 2023. Adjusted FFO per diluted share was $0.39 in 2024 and $0.43 in 2023.
• Acquires hotel for first time since 2022 – Closed on the recently opened, 148-room Home2 Suites by Hilton Phoenix Downtown for $43.3 million or approximately $293,000 per room.
• Balance Sheet Repositioned – Repaid $261 million of maturing debt in the quarter through the issuance of CMBS debt, borrowings on its unsecured term loan and revolving credit facility as well as available cash generated from free cash flow and an asset sale earlier in 2024.

The following chart summarizes the consolidated financial results for the three- and six-months ended June 30, 2024, and 2023, based on all properties owned during those periods ($ in millions, except margin percentages and per share data):

“The second quarter was a great quarter for Chatham and our shareholders, posting impressive results for the quarter, with all key metrics finishing at the top of our guidance range and completing a multi-year transformation of our balance sheet that positions us strongly for future opportunities,” emphasized Jeffrey H. Fisher, president and chief executive officer of Chatham Lodging Trust. “We delivered adjusted FFO per share of $0.39, beating consensus estimates behind strong RevPAR growth of 4 percent, hotel EBITDA margins of 39 percent and again driving increased other department profits by approximately $0.4 million or 16 percent.

“In addition to our operating results, we made great strides repositioning our balance sheet. With that repositioning essentially completed, I am excited about our prospects for growth as we have the financial capacity and flexibility to prudently make hotel investments and grow earnings and cash flow. Additionally, we will continue to opportunistically sell assets in 2024 with the intent to redeploy those proceeds into additional hotel investments,” Fisher highlighted.

Hotel RevPAR Performance

The below chart summarizes key hotel financial statistics for the 38 comparable hotels owned as of June 30, 2024, compared to the 2023 and 2019 second quarters:

The below chart summarizes RevPAR statistics by month for Chatham’s comparable hotels:

Fisher continued, “Yet again, our second quarter RevPAR growth of 4 percent significantly outperformed industry-wide RevPAR growth by approximately 60 percent, and for the first time since the pandemic, portfolio RevPAR exceeded 2019 levels. Critical to our outperformance is growth in technology related travel demand in Silicon Valley and Bellevue, and our five hotels produced strong RevPAR growth of 10 percent in the quarter. Importantly, we have tremendous internal upside, the most of any of our peers, as our tech hotel RevPAR is 19 percent below pre-pandemic levels and will eventually return to 2019 levels.

“Business travel demand, our most important segment, continues to gain momentum as we saw broad gains across our portfolio. Additionally, our leisure demand has held up pretty well with RevPAR at our 7 predominately leisure hotels only declining 2 percent in the quarter. Portfolio-wide occupancy of 82 percent was our highest quarterly occupancy since the 2019 third quarter, and interestingly, occupancy was up over last year every single week of the second quarter,” Fisher concluded.

RevPAR performance for largest markets of Chatham Lodging Trust comprise 71 percent of trailing twelve-month hotel EBITDA  (based on EBITDA contribution over the last twelve months) is presented below:

“Markets representing over half of our EBITDA experienced RevPAR growth between 5 and 10 percent in the quarter. Continuing a great trend, our primarily tech driven hotels in Silicon Valley and Bellevue led the way with combined RevPAR growth of 10 percent in the quarter, driven by a 4 percent gain in occupancy and a 5 percent gain in ADR. Occupancy reached 78 percent in the quarter, encouragingly approaching second quarter 2019 occupancy of 81 percent. Increasing occupancy levels will allow us to continue to push ADR growth as we move forward and close the RevPAR gap versus 2019,” commented Dennis Craven, Chief Operating Officer in Chatham Lodging Trust. “Excluding Silicon Valley and Bellevue, second quarter RevPAR of $150 exceeds 2019 levels by approximately 10 percent, our highest quarterly outperformance since then.

“Importantly, our other most significant markets are primarily business travel focused markets, and the gains we produced in the quarter in Washington, D.C., Greater New York, San Diego and Dallas are attributed to increased business travel demand. We saw broad growth with eleven of our hotels generating double digit RevPAR growth. We do not believe recent performance is necessarily a trend. June was adversely impacted by the timing of the Juneteenth holiday, and July was hit by the timing of the July 4th holiday, which actually impacted the week following the holiday.”

Approximately 64 percent of Chatham’s hotel EBITDA over the last twelve months was generated from its extended-stay hotels, the highest concentration of extended-stay rooms of any public lodging REIT. Second quarter 2024 occupancy, ADR and RevPAR for each of Chatham’s major brands is presented below (number of hotels in parentheses):

Hotel Operations Performance

The below chart summarizes key hotel operating performance measures for the three months ended June 30, 2024, and 2023. Gross operating profit is calculated as hotel EBITDA plus property taxes, ground rent and insurance (in millions, except for RevPAR and margin percentages):

Corporate Update

The below chart summarizes key financial performance measures for the three months ended June 30, 2024, and 2023. Corporate EBITDA is calculated as hotel EBITDA minus cash corporate general and administrative expenses and is before debt service and capital expenditures. Debt service includes interest expense and principal amortization on its secured debt, as well as dividends on its preferred shares of $2.0 million per quarter. Cash flow before CapEx and common dividends is calculated as corporate EBITDA less debt service and preferred share dividends. Amounts are in millions, except RevPAR.

Home2 Phoenix Acquisition

 In May, Chatham Lodging Trust acquired the recently opened, 148-room Home2 Suites by Hilton Phoenix Downtown for $43.3 million or approximately $293,000 per room. Upon stabilization, the acquisition is expected to produce RevPAR in excess of $150 and generate an estimated NOI yield over 9 percent.

Strategically located in the heart of downtown Phoenix, the Home2 Suites is the closest hotel to the Footprint Center (home to the NBA Phoenix Suns and WNBA Phoenix Mercury) and Chase Field (home to the Arizona Diamondbacks), mere blocks from the Phoenix Convention Center and adjacent to the revitalized Warehouse District that houses numerous upscale event venues, and will also be home to the under-construction headquarters/practice facility/fan experience for the Suns and the Mercury. In excess of two million guests visit each of the Footprint Center and Chase Field annually for sports and entertainment events. The Convention Center ranks among the top ten convention centers in the country and offers nearly 1,000,000 square feet of meeting and prime exhibition space, including three exhibition halls, two 45,000-plus square foot ballrooms and an Executive Conference Center.

Downtown Phoenix is a vibrant, 1.7 square miles that drives incredibly diverse demand for hotels into its urban core. In addition to the Footprint Center, Chase Field and Convention Center, downtown Phoenix includes 11.5 million square feet of office space, a 28-acre Bioscience Core comprised of 1.6 million square feet with plans to essentially double that size in the coming years, almost 1.0 million square feet of retail space, numerous museums and theaters and lastly, expanding downtown campuses for Arizona State University, University of Arizona Medical School and Norther Arizona University (combined approximately 16,000 students).

Fisher stated, “We are really excited about this beautiful, brand new, high-quality hotel located in the heart of downtown Phoenix, a market in the early stages of the type of renaissance we have seen occur in other large urban downtowns across the country over the past decade. The hotel enters a thriving lodging market as Phoenix has experienced the industry’s second-highest RevPAR CAGR over the past five years. This is the only Hilton-branded extended-stay hotel in downtown Phoenix and will benefit from the diverse demand generators, all of which are in a high-growth phase.”

Capital Markets & Capital Structure

During the 2024 second quarter, Chatham:

• Repaid the following maturing mortgages:

• • Residence Inn Anaheim $29 million mortgage on April 5^th

• • Mountain View $35 million mortgage on May 31st

• • Savannah $28 million maturing mortgage on June 6th

• • Three mortgages aggregating $169 million on the Residence Inn Silicon Valley 1, Silicon Valley 2 and San Mateo on June 28th

• • Subsequent to the end of the quarter – the Hilton Garden Inn Marina Del Rey $18 million mortgage on July 5th
• Borrowed an additional $50 million on its term loan on May 3rd
• Issued $23 million of five-year CMBS debt secured by the Hyatt Place Pittsburgh North Shore on May 31st, with the loan carrying an interest rate of 7.29 percent and interest-only payments for the duration of the loan
• Issued $37 million of CMBS debt on June 6th. This includes a $15 million loan secured by the Hampton Inn Exeter, N.H., and a $22 million loan secured by the SpringHill Suites Savannah, Ga. Both loans have 10-year terms with an interest rate of 6.7 percent and interest-only payments for the duration of the loans

As of June 30, 2024, Chatham Lodging Trust had net debt of $442 million (total consolidated debt less unrestricted cash). Total debt outstanding as of June 30, 2024, was $452 million at an average interest rate of 6.8 percent, comprised of $192 million of fixed-rate mortgage debt at an average interest rate of 6.5 percent, $140 million outstanding on its term loan at a rate of 6.9 percent and $120 million outstanding on the company’s $260 million senior unsecured revolving credit facility. Based on the ratio of Chatham’s net debt to hotel investments at cost, it’s leverage ratio was approximately 26 percent.

“Since the end of 2022, we have patiently and prudently repositioned our balance since to address almost $400 million of maturing debt using asset sales, issuance of new debt and free cash flow,” emphasized Jeremy Wegner, Chatham Lodging Trust ’s chief financial officer. “After repaying the maturing loan in early July, our massive transformation is essentially complete with only $30 million of debt maturing over the next year. We are well-situated to benefit from an expected declining interest rate environment as almost 60 percent of our debt is based on floating rates. Based on outstanding debt as of June 30, 2024, for every 100 basis point decline in SOFR, our AFFO per share will increase $2.6 million or $0.05 per share. Additionally, we have 29 unencumbered properties to support additional growth opportunities.” 

Hotel Investments

During the second quarter, the company incurred capital expenditures of $8 million and approximately $19 million year-to-date. 2024 budget of Chatham Lodging Trust is approximately $37 million. A renovation of the Courtyard Dallas Addison commenced in July and is expected to be completed in the third quarter. A renovation of the SpringHill Suites Savannah is expected to commence in September.

Vicky Karantzavelou

Co-Founder & Chief Editor - TravelDailyNews Media Network | Website | + Posts

Vicky is the co-founder of TravelDailyNews Media Network where she is the Editor-in Chief. She is also responsible for the daily operation and the financial policy. She holds a Bachelor's degree in Tourism Business Administration from the Technical University of Athens and a Master in Business Administration (MBA) from the University of Wales.

She has many years of both academic and industrial experience within the travel industry. She has written/edited numerous articles in various tourism magazines.

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