RLJ continues quest for quality
RLJ continues quest for quality
26 FEBRUARY 2016 9:14 AM
RLJ Lodging Trust ended 2015 with RevPAR up 3.9% over 2014, and the REIT sold a total of 23 non-core hotels throughout the year. 
BETHESDA, Maryland—RLJ Lodging Trust is continuing its growth trajectory toward quality in 2015, posting a sixth consecutive year of positive revenue-per-available-room growth for the year.
The real estate investment trust ended 2015 with RevPAR up 3.9% over 2014 and consolidated hotel earnings before interest, taxes, depreciation and amortization of approximately $405 million, a 6.1% increase over 2014. 
As of press time, RLJ’s stock price was down 3.65% year to date. By comparison, the Baird/STR Hotel Stock Index was down 2.3% over the same period. 
Part of the company’s quality goals include asset sales. RLJ President and CEO Tom Baltimore told analysts Thursday on the fourth-quarter earnings call that the company sold 23 non-core hotels in 2015 (including one in the fourth quarter) for a total of $252.5 million.
“The RevPAR of the hotels sold was approximately 42% below our portfolio average and the margins were 450 basis points lower than our portfolio average,” he said. 
The company recycled part of those proceeds into the acquisition of three hotels during the year, and then returned approximately $400 million of capital to shareholders through dividends and 8 million shares of stock buy-backs. 
Top markets in 2015
Baltimore spent a lot of time on the call discussing performance in RLJ’s top markets, which were key drivers for overall performance. RevPAR growth was driven by hotel performance in Dallas (RevPAR growth of 14.5% for the year), Northern California (up 13.7%), Portland, Oregon (up 13.5%), Tampa, Florida (up 12%) and Atlanta (up 10.3%). 
Baltimore highlighted Northern California in particular, where RevPAR was up 13.7% for the year and 15.3% during the fourth quarter.  
“Technology and innovation (are) driving the Bay Area economy and we expect our hotels to continue to benefit from those trends in 2016,” he said, adding that hotels in the region also saw a significant RevPAR lift in February from the Super Bowl. 
The company recently opened the Courtyard San Francisco Union Square and Baltimore predicted Northern California to have a strong 2016 overall. 
Washington, D.C., was another focus for RLJ in 2015, Baltimore said. The company is positioning itself in 2016 to take advantage of strong citywide demand surrounding political activity including the November presidential election.
“In anticipation of what we’re expecting to be a strong (2016) for the market, we renovated four of our hotels and acquired the Hyatt Place Washington, D.C., hotel on K Street,” he said. 
While RevPAR at RLJ’s New York properties dropped 2.5% for 2015 and 1.8% during the fourth quarter, Baltimore said he was “pleased by our hotels’ outperformance relative to the market and our increased market share.” He admitted that the supply-demand imbalance may persist in the near term, but he remained confident the city will absorb supply in the long run. 
Still, Baltimore said that the company “will also explore lightening (its) load in New York.”
In Houston, Baltimore said RLJ’s properties were not immune to declining oil prices. That, plus the fact that the company did significant renovations at four of its nine Houston hotels led to Houston’s RevPAR declining 8.3% for the full year and 13.1% for the quarter. 
“Last year in Houston was a pretty significant miss,” he said. “No one could have expected what happened.” 
Future strategies
Despite certain impacts in select markets, Baltimore was overall optimistic about the lodging cycle and the company. 
“We believe that 2016 will be another year of positive RevPAR growth, as key industry trends such as below-average supply growth, historically high occupancy levels and growing corporate demand continue to move in the right direction,” he said. “Our view is that the combination of favorable sector fundamentals and a generally healthy economy will extend the lodging cycle.” 
He said the company expects 2016 RevPAR growth of 3% to 5%, EBITDA margins between 36.5% and 37.5% and consolidated hotel EBITDA between $425 million and $450 million. 

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