Jon Bortz, chairman and CEO of Pebblebrook Hotel Trust, started the firm’s Q3 call by highlighting key numbers and highlights from the firm’s third quarter financial results. “At the bottom line our overall third quarter financial performance exceeded our expectations. Same property hotel EBITDA was $75.9 million, which was $0.2 million above their operating of our outlook. Adjusted EBITDA of $69.4 million was $1.8 million above the upper end of our Q3 outlook. Adjusted FFO was $51.2 million or $0.74 per share, which exceeded the upper end of our outlook by $0.02 per share, so another solid quarter from an all bottom line financial metrics.”
On the hotel operating side, he noted that same property total RevPAR increased 1.5%, same property RevPAR increased 1%, which was squarely in the middle of the REIT’s outlook of zero to 2% growth. “We estimate that the disruption from the Marriott Starwood and the Intercon Kimpton integrations negatively impacted our third quarter RevPAR growth by an estimated 70 basis points and a renovations at Sir Francis Drake and Embassy Suite San Diego negatively impacted the quarter by roughly 50 basis points.”
The company’s RevPAR increase was driven by a 1.1% increase in our average rate and a 0.1% decrease in occupancy to 89.5%. “Same property non-room revenue increased by 2.8% above our room revenue growth, which has been a consistent trend across our portfolio throughout the year. As a result our same property total revenues increased 1.5%, same property operating expenses were again well controlled increasing only 1.4%, which enabled same property hotel EBITDA to grow 1.7% and margins to increase 6 basis points.”
Most of the REITs best performing hotels in the quarter were in San Francisco, which had an improved convention calendar during the third quarter as compared to last year, when two of the three convention center buildings were closed. “This created more rate compression opportunities for our seven San Francisco hotels despite some ongoing renovations in the quarter,” he said.
“Our San Francisco hotels generated a RevPAR gain of 8%, which was in line with the Smith Travel Research San Francisco urban track data despite rooms renovations at Sir Francis Drake that commenced in early September and took about 150 basis points off our San Francisco performance in the quarter.”
He added that Hotel Zoe, which was renovated last year with its completion in June continues to ramp up nicely and led the portfolio during the quarter with a RevPAR gain of 24.2%. “Other strong performance in the third quarter included several of our San Francisco hotels, Hotel Zelos, Hotel Zeppelin and Hotel Zetta. InterContinental Buckhead was another stand out performer in the quarter as the new executive management team that was put in place last year continues to execute well.”
He also noted that the company has managed to “significantly grow group pace allow them to gain almost 1,000 basis points on market share year-to-date through September. We expect further positive strides in 2019 at the Intercon Buckhead and want to acknowledge the great progress our team has made in the last year. Our underperforming hotels included Hotel Modera, Portland, which continues to be challenged with its transition from the hotel’s recent renovation and management company change in addition to be negatively impacted by the increased supply in the Portland market, which also affected Hotel Vintage Portland another under performer in the quarter.”