La Quinta’s Q1 RevPAR helped by hotels in oil tracts
La Quinta’s Q1 RevPAR helped by hotels in oil tracts
04 MAY 2017 9:02 AM

On a first-quarter earnings call, La Quinta President and CEO Keith Cline said the company’s 2.8% RevPAR growth was positively affected by properties located in oil tracts. 

IRVING, Texas—La Quinta Holdings executives reported a revenue per available room jump, the third-consecutive quarter of market share growth and little further information on the company’s proposed business split in a first-quarter earnings call with investors Wednesday night.

“During the first quarter, we grew RevPAR, including a positive contribution from our properties in the STR-defined oil tracts, and continued to see significant improvement in our guest satisfaction scores, which led us to our third-consecutive quarter of market share growth,” said La Quinta President and CEO Keith Cline. “We also added to a strong pipeline that will allow us to further expand our reach into new markets and take advantage of our unique growth opportunity in the industry.” (STR is the parent company of Hotel News Now.)

For the first quarter, RevPAR increased 2.8%, according to a company news release. The company also grew “franchised and other fee-based revenue” by 8%.

The company opened nine franchised hotels in the first quarter, including its ninth property in Mexico, according to the release. La Quinta’s franchised pipeline rose to 249 hotels, and 12 franchise agreements were signed in markets such as San Francisco, California, and Frisco, Texas.

As of press time, La Quinta’s stocks were up 0.14% year to date. The Baird/STR Hotel Stock Index was up 23.59% over the same period.

Proposed spinoff
In January, La Quinta announced the possible split of its real estate business from its franchise and management businesses. An analyst asked if the company’s improving performance would have any influence on this decision. Cline said the company is still considering the option. 

“As we mentioned from the onset of pursuing a potential spin, we had thought that this could be the next logical step as we think about the evolution of the business,” Cline said. “And we really do believe that spin (of) the organization into two independently operated companies with independent strategies and management teams, pursuing … opportunities that naturally follow to each business, could actually be additive to our strategies. And as you think about some of the investments that we’re putting into the business now, specifically a lot of the repositioning efforts that are going along … that clearly will benefit PropCo and OpCo in this potential new structure.

“So I think that our performance and the strategies that we’re putting in place really could be additive to a spin transaction regardless of whether we end up spinning the business into two organizations or not,” he said. “We believe we’re on the right path to create long-term value for the entire enterprise, and spinning the company into two different organizations, I believe, wouldn’t (throw) that off track.”

Energy markets
When asked by analysts about performance in oil tracts, or energy markets, Cline said he expects performance to moderate.

“As we think about the energy markets, as we’ve been discussing over the past year, we expect the performance in those markets to continue to moderate,” he said, “and they continue to do that in the first quarter. As you think about what drove some of the impacts in those markets, it was really petrochemical companies that were really placing inbound calls to get rooms in those markets throughout Q1.”

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