HPT CEO: Mixed performance in ’18, but outlook good
HPT CEO: Mixed performance in ’18, but outlook good
28 FEBRUARY 2019 10:00 AM

While tough weather-related comps, ongoing renovations and increased supply put a damper on Hospitality Properties Trust’s overall performance in 2018, President and CEO John Murray said 2019 is shaping up to be better.

NEWTON, Massachusetts—Performance for Hospitality Properties Trust’s portfolio was a mixed bag in both its 2018 fourth quarter and full year due to a number of factors, company executives said on HPT’s fourth-quarter and full-year earnings call with analysts. But 2019 should be better for the company and its operators, President and CEO John Murray said.

“With a positive economic outlook for 2019, (average daily rate) improvement and occupancy levels flat or slightly down, for 2019 we predict (revenue per available room) growth through rate and occupancy improvement,” Murray said. “Our combination of active asset management, strong brands, good location and continued regular capital investment gives us confidence that despite headwinds, HPT’s operators will meet their expectations.”

Murray cited the company’s ongoing renovations plan, non-repeat business due to weather events in 2017 and increased room supply in some of its key markets as factors that dampened the company’s 2018 performance.

HPT’s Q4 comparable hotel RevPAR declined 1.7% to $86.24, occupancy decreased 1.7 percentage points to 68.2% and ADR increased 0.8% to $126.45, compared to the same quarter in 2017, according to the company’s financial news release.

For the full year, comparable RevPAR was up 0.5% to $96.22, occupancy decreased 0.9 percentage points to 74.8% and ADR increased 1.7% to $128.64.

HPT CFO and Treasurer Brian Donley said that in the quarter, the company’s highest-growth RevPAR came from its Sonesta properties, while its Wyndham Hotel Group and Radisson properties had the weakest quarter, largely because of hurricane-related comps for the Wyndham hotels and a high percentage of the Radisson hotels under renovation.

As of 31 December 2018, HPT owned 326 hotels in the United States, Canada and Puerto Rico; 324 were managed by hotel operating companies and two were leased.

At press time, HPT stock was trading at $26.98, up 13.1% year to date. The Baird/STR Hotel Stock Index was up 14.2% for the same time period.

In October 2018 the company acquired a 164-suite property in Scottsdale, Arizona, which it rebranded as Sonesta Suites Scottsdale Gainey Ranch. Purchased at an 8% cap rate, Murray said the property underwent a full renovation in 2017 and needs no additional renovations.

In January the company completed the sale of 20 travel centers to Travel Centers of America, a deal that helped the company acquire the Kimpton Hotel Palomar in Washington, D.C., in February for $141.5 million.

Looking forward, Murray said the company could see more opportunities for full-service hotel acquisitions in 2019, provided they meet the company’s preferences.

“Eighty to eighty-five percent of our portfolio is select-service or extended stay and the balance is full-service,” Murray said. “Since the (ALIS conference in January), we’ve seen a pickup in full-service offerings and a more modest volume of select-service, so … as long as we can identify opportunities where the yield is acceptable to us and one of our major operators is willing to add it to their portfolio, probably we’ll do more full-service this year.”

The company continues on an aggressive renovations path, but Murray said “renovation disruption will continue in Q1 (2019), but there will be fewer for the full year, and we’re expecting to see positive lifts from the 50 (hotels) that completed renovations in 2018.”

The company did renovations at 72 hotels in 2018, and Murray said he expects that number to be 43 for 2019.

Last year the company completed 35 renovations by the third quarter, and Murray said RevPAR gains were noticeable at renovated properties.

“Overall, the recently renovated increased RevPAR by 9.6%” he said.

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