Hersha Hospitality Trust: Share Price Benefits Little From Industry Tailwinds

RevPar Growth

Hersha Hospitality Trust (NYSE:HT) is a small capitalization hospitality REIT that runs limited-service hotels in high-barrier-to-entry markets, such as Boston, Los Angeles, New York, Philadelphia, San Diego and Washington DC. In fact, New York, Boston and the entire West Coast together account for more than half of Hersha’s portfolio of 8,259 rooms distributed over 51 hotels. Most of these hotels are classed as either upscale or upper mid-scale and are under brands known all over the nation.

For a limited-service hospitality REIT, Hersha enjoys, operationally speaking, EBITDA margins that are higher than even those of full-service hotels. Over the past few years, in addition, the company has consistently demonstrated rises in occupancy, average daily rate and revenue per available room. Total revenues for 2014 were almost 50 percent higher than those of 2010.

EBITDA Margins

The company has been making recent efforts to increase share price, making it more attractive for investors. This May, they repurchased shares worth $42 million, and this Monday they did a reverse share split of issued and common shares and common units at a 1:4 ratio.

Like the hospitality industry in general, Hersha was hard-hit by the Great Recession. Since 2010, however, funds from both operations and dividends have increased, and the business has kept the dividend payout rate reasonable. The dividend yield has been around 4.3 percent.

Locations

According to Fast Graphs, the current price-to-FFO ratio—about 12—has been below its last five-year norm. This is consistent with Hersha’s efforts to raise the share price. It also indicates how undervalued the company has been.

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Source: Hersha Hospitality Trust, Fast Graphs


Written by Heli Brecailo

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