Like the share price of LaSalle Hotel, that of peer Pebblebrook Hotel plummeted about 11 percent last week following the release of the second-quarter results for 2015. Same-property RevPar grew 3.8 percent, falling short of company expectations, and occupancy decreased 0.9 percent to 87.1 percent. Full-year same-property RevPar growth was also cut 200 basis points to the 4.5-5.5 percent range, contrasting with the untouched guidance for full-year adjusted FFO-per-share of $2.47-2.55.
Pebblebrook attributed its lower Q2 RevPar figure to major renovations in two West Coast hotels and to occupancy decline due to rate repositioning. Furthermore, management thought the Miami, San Francisco and West LA markets had been slightly weaker, and Manhattan RevPar has also declined. Management noted that such weaknesses have not been across the board and that the portfolio has otherwise been strong, as were other Q2 2015 figures compared to those of last year. Adjusted FFO-per-share grew 29 percent to $0.72, and same-property EBITDA margins advanced 230 basis points to 36 percent. Same-property ADR increased 4.8 percent to $249.31 from Q2 2014.
Although Pebblebrook has been borrowing capital for hotel acquisition, redevelopment has been important to its growth strategy. A significant portion of the borrowed amount has also gone into redeveloping Pebblebrook’s current footprint. During H1 2015, it purchased two hotels for $305.1 million and invested $53.4 million in hotel property improvement. In addition, management sees 2016 positively and thinks it’s more likely that ADR and RevPar will be higher, having seen more consistent ADR growth figures in the 5 percent, as opposed to 4 percent, range.
PEB continues to be more expensive than its hotel peers and has had one of the highest price-to-FFOs in its sector. Dividend yield is below the peer sector median, at 3 percent.
Source: Pebblebrook Hotel, Fast Graphs
Written by Heli Brecailo
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