Pebblebrook Hotel Reports Q1 2026 Results: Full Earnings Call Transcript
Pebblebrook Hotel (NYSE: PEB ) held its first-quarter earnings conference call on Wednesday. Below is the complete transcript from the call. Benzinga APIs provide real-time access to earnings call transcripts and financial data. Visit https://www.benzinga.com/apis/ to learn more. Access the full call at https://events.q4inc.com/attendee/776585065 Summary Pebblebrook Hotel Trust reported an exceptional first quarter, with financial performance exceeding the high end of their outlook. Key metrics include a 27.6% increase in same property Hotel EBITDA to $82.2 million, and a 29.5% increase in adjusted EBITDA to $73.3 million. Strategic initiatives focused on expanding revenue-generating amenities and effective expense control were highlighted, contributing to a 327 basis point expansion in hotel EBITDA margin. The company is cautious about the remainder of 2026 due to geopolitical tensions and potential economic uncertainty, but remains optimistic given current booking trends. Operational highlights include strong performance in urban and resort markets, with notable RevPAR growth in San Francisco and Los Angeles, driven by events like the Super Bowl and conventions. Management emphasized the positive impact of strategic rebranding efforts, like the Valorian Los Angeles Curator Collection by Hilton, and investments in technology and efficiency improvements. Full Transcript OPERATOR Greetings and welcome to Pebblebrook Hotel Trust First Quarter Earnings Conference Call. At this time, all participants are on a listen only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press Star0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Raymond Martz, co President and Chief Financial Officer. Thank you. Please go ahead. Raymond Martz (Co President and Chief Financial Officer) Thank you Donna and good morning everyone. Welcome to our first quarter 2026 earnings call. Joining me today is John Bortz, our Chairman and Chief Executive Officer and Tom Fisher, our Co President and Chief Investment Officer. But before we begin, I'd like to remind everyone that our remarks are as of today, April 29, 2026 and today's comments may include forward looking statements that are subject to various risks and uncertainties. Please review our SEC filings for a detailed discussion of these risk factors and visit our website for reconciliations of any non GAAP financial measures mentioned today. Now let's jump into the first quarter financial results. We had an exceptional first quarter with results well above the high end of our outlook across key earnings metrics. Same property Hotel EBITDA increased 27.6% to 82.2 million, coming in 8.2 million above the high end of our outlook. Adjusted EBITDA was 73.3 million, up 29.5% from last year and 9.3 million above the high end. Adjusted FFO for diluted share doubled year over year to 32 cents which was 9 cents above the high end of our outlook. So this was a very strong quarter by any measure. Even more important performance was not narrowly driven. While we had a great setup, the strength was broad across the portfolio and the performance came from both stronger revenues and superb expense control at the property level. Same property occupancy increased 550 basis points, ADR increased 2.8% and RevPAR increased 11.8% and total revenue increased 10.1%. Same property total expenses increased just 5.6%, driving 327 basis points of hotel EBITDA margin expansion. More than half of the incremental same property revenue flow through to hotel ebitda. That reflects the strategic operating initiatives we've been implementing across the portfolio, the benefits from our investments in revenue generating amenities and venues and strong execution by our property teams and asset managers. The strength extended across the portfolio with 32 hotels exceeding revenue forecast and 34 exceeding GOP forecasts in the quarter and San Francisco was exceptional while it benefited from the super bowl and a large citywide convention that shifted into the first quarter. All segments including business and leisure transient were incredibly strong and continue to recover. Revpar increased a robust 44.5% and Hotel EBITDA more than tripled from a year ago climbing by 11.6 million. Los Angeles also recovered sharply from last year's fire related disruptions with RevPAR climbing 31.5% and occupancy growing more than 16 points to 74.6%. The improvement across LA properties was broad based helped by a stronger leisure demand, improving entertainment related group and leisure activity and the ramp up of our recently renovated and rebranded Hyatt Centric Delfino in Santa Monica, Louisiana's Q1. Same property EBITDA increase recaptured all of the EBITDA loss in the first quarter from last year's fires. While San Francisco and LA were standout markets, they were far from the whole story. Our urban portfolio posted RevPAR growth of 14.3%, total RevPAR growth of 12.9% and EBITDA growth of 55.1%. San Diego Urban Hotels delivered RevPAR growth of 8.7% driven by a 900 basis point jump in occupancy supported by healthy weekend leisure demand. Chicago also turned in a good quarter with RevPAR increasing 5.6%. Washington D.C. was our most challenged market in Q1 with RevPAR declining 24.1% reflecting a very difficult inauguration comparison and continued weakness in government related travel though we have seen some recent improvements. Boston was another softer market with RevPAR down 3% reflecting lighter citywide calendar, two major winter storms and the rooms renovation at Revere Hotel Boston Common. We expect both markets to improve in the second quarter given the better event calendars. Our resorts also had a very strong quarter with RevPAR rising 7.5%, total RevPAR increasing 6.7% and EBITDA climbing 13.9%. Resort performance was driven by resilient leisure demand, healthy on property spending, favorable holiday timing and the continued ramp up of our redeveloped assets. We also benefited from an earlier than normal spring break which pulled more spring break travel into March from April. Several resorts delivered double digit Revpar gains including Newport Harbor Island Resort, La Playa Beach Resort and Club Skamania Lodge, Paradise Point Resort and Spa, San Diego Mission Bay Resort and Estancia La Jolla Hotel and Spa. Overall first quarter demand was encouraging despite heightened geopolitical tensions and increased uncertainty around travel. Leisure demand remained strong, business transit continued to grow and recover and group was stable consistent with broader travel and spending commentary. Visibility has shortened somewhat since late March, but we have not seen any material change in booking trends to date. Premium leisure and business travel have remained healthy to date. Weekday RevPAR increased 9.7% overall and 12% in our urban markets, while Weekend RevPAR increased 15%. Overall. Weekend Leisure demand remains healthy, but the improvements in weekday demand is equally important as it reflects a continued recovery in business, transient and group travel and creates more meaningful earnings power as urban occupancies rebuild. What also stood out this quarter was the quality of the revenue growth. Out of room revenues again grew up nicely 7.6%. Overall, food and beverage revenues increased 7.4%, outlet revenues were up 10.2%, and banquets and catering revenues increased 4.8%. Guests were not only staying with us in greater numbers, but they were also spending more on property and that is exactly the kind of revenue mix that supports increased profitability. On the expense side, our strategic operating initiatives again delivered this quarter. Total expenses rose by only 5.6% while total revenues increased 10.2%. Food and beverage revenues rose 7.4% while food and beverage expenses increased just 3.7%. Sales and marketing expenses, excluding franchise fees grew only 3.9% while energy costs actually declined 2.8%. And on a per occupied room basis, total expenses declined 2.8% and total expenses for fixed costs declined 3.2%, demonstrating the favorable benefits of the operating leverage in our portfolio, we are generating more efficiencies from improved labor productivity and technology use, tighter cost controls and continued benefits from property level efforts to reduce energy and water consumption. Said more simply, as revenues improve, our portfolio is flowing more of that upside to the bottom line than it did a year or two ago. And a quick point on one time items because it is important to put this quarter into the proper context. The super bowl contributed about 215 basis points to same property RevPAR, and the recovery in Los Angeles contributed another 285 basis points. Offsetting those benefits. The two winter storms reduced RevPAR by about 115 basis points, and the difficult inauguration comparison in Washington D.C. reduced it by another 105 basis points. Even after adjusting for those items, same property Revpar still grew by roughly 9%, underscoring the overall strength of the quarter. This strong underlying performance translated into higher free cash flow and greater financial flexibility. On the capital side, we invested $11.9 million to our properties during the quarter, including guest room renovations at Chaminade Resort and Spa and Rivera Hotel Boston Commons, both of which are now substantially complete. For the full year, we still expect to capital investments of 65 to 75 million, which represents a much more normalized run rate and an important tailwind for higher discretionary free cash flow and greater flexibility for debt reduction and share repurchases. We also completed the April 1 rebranding of Monduran Los Angeles into the Valorian Los Angeles Curator Collection by Hilton. We believe that strategic change has and will creates value for the property. Rebranding as an independent franchise hotel within Curio Leverages, Hilton's distribution platform pairs it with a strong entrepreneurial style operator in Pivot and preserves the distinctive distinctive character of this iconic hotel and we made this change at no cost as franchise related key money funded the changeover. We appreciate the partnership with both Hilton and Pivot through during this strategic transition and we are excited to work together to drive improved performance at this important property in la. Moving to our Balance sheet Our net debt to EBITDA ratio declined to 5.5 times from 5.9 times at the end of last year. We ended the quarter with 204.6 million of cash and restricted cash, along with roughly 641 million of capacity on a revolving credit facility. Our weighted average interest rate remained a very attractive 4.1%, with approximately 98% of our debt effectively fixed and 98% unsecured. And since the start of the year, We've repurchased over 400,000 common shares at an average price of $12.11 per share. Higher EBITDA, improved debt metrics and strong liquidity all moved in the right direction. Stepping back, the first quarter takeaway is clear. Despite heightened macro uncertainty and risk, the quarter demonstrated stronger demand across both urban and resort markets, healthy revenue quality and disciplined expense control. At the same time, we're not assuming the balance of the year will be as visible as the first quarter. Recent events in the Middle east, higher fuel prices, more fallout from the war, and broader economic uncertainty could pressure travel demand and booking patterns. However, based on our current booking trends and broader travel and spending commentary, the demand environment remains constructive, particularly for premium leisure and business travel. So while we feel really good about the first quarter and the underlying trend line, we remain appropriately cautious on the balance of the year. And with that, I'd like to turn the call over to John for more color on the quarter, the demand trends that we're seeing across the portfolio, the broader industry backdrop, and our outlook for the balance of 2026. John Bortz (Chairman and Chief Executive Officer) John thanks, Ray. In our last earnings call just 60 days ago, we laid out the extremely favorable setup we were looking at for 2026. We also provided a robust outlook for our portfolio for Q1 but a cautious outlook for the rest of the year. Given our experience in 2025 with major policy actions, geopolitical events, and weather events that negatively impacted us in a material way. Our concern about major geopolitical risks proved warranted as the conflict in the Middle east began just 48 hours after our earnings call. To summarize the setup for 2026 that we discussed, we have easy comparisons to a year that was negatively impacted by a number of policy and geopolitical events. We have a favorable macroeconomic environment and a uniquely strong events calendar, particularly in our markets. We have the best holiday calendar we could ever remember. There is very limited supply growth for 2026 and beyond, and we maintained our view that hotel demand would re correlate to GDP absent major policy or geopolitical surprises in our markets. We highlighted that San Francisco's recovery would continue to build, Los Angeles would benefit from easy fire related comparisons. Washington D.C. would benefit from easier government related comparisons past the tough inauguration comp and our recently redeveloped and repositioned properties were likely to continue to ramp. We also believed our upper upscale and luxury positioning would remain outperformers given the continued strength of the more affluent consumer. When we look at how the first quarter played out, that favorable backdrop translated into even better results than we were expecting. I think it's fair to call the first quarter a blowout quarter on both the top line and the bottom line. The setup was accurate and we delivered with the favorable setup. We haven't seen RevPAR and total RevPAR growth at these levels since the third quarter of 2014. Excluding one unusually strong pandemic recovery quarter in 2023 and our same property hotel EBITDA, growth of 27.6% was even stronger than Q3. 14. At the industry level, Q1 demand growth of 2% clearly began to demonstrate its reconnection with GDP growth, and industry demand would have been even better but for two of the largest winter storms in history that hit in late January and late February. Occupancies increased as demand followed GDP growth while supply grew just 0.6% in March, we began to see more compression days and ADR growth improved to an impressive 3.8% with a solid 2.4% increase for the quarter. Industry RevPAR in Q1 increased by a much improved 3.8%. Leisure demand was very strong throughout the quarter, aided by the favorable holiday timing around New Year's and the combined Valentine's Day and President's day weekend. Importantly, that leisure strength didn't just benefit our resorts. Our urban markets, especially San Francisco, Los Angeles and San Diego all continued to benefit from the post pandemic return of leisure demand to the cities. The early Easter and school spring breaks also helped March, though partly at the expense of April performance. We likely also saw some benefit in Southern California and South Florida from traveler ships away from Mexico and from poor snow conditions out West. For Pebblebrook, we saw the same industry benefits in Q1 and more the event calendar delivered as we captured increased demand from events throughout our portfolio. Our Hollywood, Florida resort benefited from demand from the College Football National Championship game in Miami as our Property is just 11 miles from the stadium, far closer than most hotels in Miami and Miami Beach. All of our San Francisco hotels achieved very robust results from the super bowl and its week of activities and events in February, and our LA hotel saw a lift from the NBA All Star Game and related activities which were also in February. Our hotels in San Diego, Chicago and Washington D.C. saw increased demand due to the NCAA Men's Basketball tournament games in March. Events in Q1 definitely pushed our results higher, maybe even more than we were expecting. As Ray indicated, our redeveloped and repositioned properties all continue to ramp up led by Hyatt Centric Delfina, Santa Monica, Skamania Lodge, Newport Harbor Island Resort, La Playa Beach Resort and Club Estancia, La Jolla Hotel and Spa and Hilton San Diego Gaslamp quarter. They all gained significant share in the quarter with more to go for them and many others in the portfolio where we invested so heavily in prior years and we continue to reap the benefits. Business Transient continued to recover across the industry and our portfolio during the quarter we saw even stronger growth in corporate travel in San Francisco and Los Angeles, where both cities are seeing the benefits from return to office policies. Group also grew industry wide and for Pebblebrook in Q1 we delivered strong group revenue growth, primarily driven by a 7.4% increase in group ADR that was aided by the Super Bowl. We had a fantastic quarter all around, but it's highly likely to be our strongest quarter by the of the year by far. Looking ahead, we remain appropriately cautious given policy and geopolitical risks, particularly the potential impact of the ongoing conflict in the Middle East. Right now we're mostly concerned with the potential economic slowdown, rising airline ticket prices, cutbacks in airline capacity and routes, and potential ... Full story available on Benzinga.com
