Hotel Real Estate Investment Trusts (REITs) in the United States faced a mixed second quarter in 2024, largely driven by the softening of leisure travel and the normalization of broader travel trends. According to analyst Michael Bellisario of R.W. Baird, these factors have led to more modest RevPAR (Revenue Per Available Room) growth projections for the remainder of the year. While total U.S. hotel industry RevPAR grew by 2.5% in the second quarter, the median RevPAR for hotel REITs lagged slightly behind at 2%, adjusted to 2.2% when accounting for major renovations.
Several hotel REITs have reported earnings that reflect these broader trends. For instance, Ashford Hospitality Trust has been working diligently to pay down its strategic financing, with a significant reduction in outstanding loan balances. However, a sluggish economic backdrop has slowed this process, pushing the expected completion date of its deleveraging efforts into the fourth quarter of 2024.
Apple Hospitality REIT managed to achieve a 2.5% growth in RevPAR during the second quarter, though it adjusted its expectations for the rest of the year downward, citing slower growth trends and consumer pricing sensitivity.
Chatham Lodging Trust faced a challenging quarter with a 25% drop in net income compared to the same period last year, despite a 4% increase in RevPAR within its portfolio. Similarly, DiamondRock Hospitality saw a modest RevPAR increase of 2.2%, but it outperformed expectations with a significant rise in group revenue and strong performance at its urban properties.
Host Hotels & Resorts and Pebblebrook Hotel Trust both revised their full-year guidance downward due to weaker-than-expected demand and a more price-sensitive leisure traveler base. Notably, Host’s properties in Maui were particularly impacted by the wildfires, which had a substantial drag on the REIT’s portfolio RevPAR.
In contrast, Ryman Hospitality stood out as a positive performer, reporting record second-quarter net income and revenue. Ryman’s sophisticated revenue management approach allowed it to avoid some of the challenges faced by other hotel REITs, particularly in terms of group demand.
Finally, Sunstone Hotel Investors reported a decline in RevPAR and adjusted EBITDA, with ongoing renovations contributing to these results. Despite the lower performance in the quarter, the REIT remains optimistic about future growth driven by investments in key properties.
For investors, the second quarter results of these hotel REITs highlight the importance of strategic asset management and a focus on mitigating risks associated with fluctuating travel trends. While some REITs have successfully navigated the challenges, others may continue to face headwinds as leisure travel demand softens and the industry adjusts to a new normal.
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