As a result of impact from Hurricane Florence on its Myrtle Beach and Charleston markets, and other factors such as asset sales, RLJ Lodging Trust lowered its outlook for full-year 2018.
BETHESDA, Maryland—RLJ Lodging Trust had to overcome multiple headwinds in the third quarter, some of which led to the real estate investment trust lowering its full-year 2018 guidance.
Leslie Hale, president and CEO of RLJ, said “overall, the third quarter was noisy for the lodging sector.”
“The industry, and our portfolio, faced multiple headwinds, including July 4 falling (during) the week, the Jewish holiday falling on heavy corporate travel days and difficult comps from post-hurricane recovery efforts last year, which were further complicated by Hurricane Florence,” she said.
Hale added that “the combination of Hurricane Florence and incremental softness” led to a decline in revenue-per-available-room growth of 0.8% for the quarter, compared with the same period last year. Average daily rate increased 0.9% and occupancy decreased 1.6%, according to the REIT’s earnings release.
The RevPAR decline was below expectations RLJ had at the beginning of the quarter, Hale said. Properties in Myrtle Beach and Charleston were directly affected by Hurricane Florence, which account for 5% of RLJ’s earnings before interest, taxes, depreciation and amortization. These markets affected RevPAR growth for the quarter by 40 basis points, according to the release.
Incremental softness was also seen in Louisville, Kentucky, Austin, Texas and Denver, Hale said.
“Excluding these three markets and the impact of Hurricane Florence, our RevPAR would have increased by 0.8%,” she said.
Chicago was RLJ’s strongest market in the third quarter, with “hotels (achieving) robust RevPAR growth of 6.7%, and increased market share by 350 basis points,” Hale said, adding that the market benefited from a strong citywide calendar and the ramp-up of a hotel that was under renovation in 2017. The CEO said she expects to see continued strength in the market in the fourth quarter.
RLJ sold four properties during the third quarter, according to the company’s earnings release:
- the 205-room Embassy Suites by Hilton Napa Valley for $102 million;
- the 152-room DoubleTree by Hilton Hotel Columbia for $12.9 million;
- the 362-room Vinoy Renaissance St. Petersburg Resort & Golf Club for $188.5 million; and
- the 309-room DoubleTree by Hilton Burlington Vermont for $35 million.
The company also sold a 243-room annex building that is part of the Holiday Inn San Francisco – Fisherman’s Wharf for $75.3 million, “of which the company’s pro rata share was approximately $30.4 million,” the earnings release states.
Impact from Hurricane Florence, the asset sales and other factors played a role in the company’s decision to lower its guidance for the full year, the release states.
RevPAR for full-year 2018 is expected to decline between 1.25% and 0.50%, down from the prior outlook of 0.5% decline to 1% growth. Adjusted EBITDA was expected to range between $519 million to $550 million for 2018, but is now forecasted to fall between $518 million to $528 million.
As of press time, RLJ’s stock was trading at $19.67 a share, down 10.5% year to date. The Baird/STR Hotel Stock Index was down 11.7% for the same time period.