While other hotel companies report headwinds during the first quarter, CorePoint Lodging execs report the company benefited from favorable year-over-year comparisons as it evaluates its real estate portfolio to improve operational performance.
IRVING, Texas—Hotels that reopened after renovations and hurricane-related repairs provided favorable year-over-year comparisons for CorePoint Lodging, executives said during the company’s first-quarter earnings call. They expect that trend to continue through the year.
Comparable revenue per available room grew by 3% during the first quarter, President and CEO Keith Cline said. While average daily rate remained flat, the reopening of hotels allowed occupancy to increase. As a result, the company’s hotels also realized comparable RevPAR index growth of 530 basis points, he said.
“Hurricane hotels benefited from cycling over the room closures from the first quarter of last year and repositioned properties benefited from growth in ADR and occupancy as they continue to ramp,” he said.
CorePoint faced “significant headwinds” in its oil markets, particularly West Texas, he said. However, the total portfolio RevPAR grew by 4.6%, which was driven by 10 non-comparable hotels that were primarily affected by hurricanes, he said. Additionally, adjusted earnings before interest, taxes, depreciation and amortization for real estate reached $43 million, a 16% year-over-year increase, he said.
RevPAR growth will continue to benefit from lapping hurricane displacement and the reopening of repositioned properties through the rest of the year, Cline said. The company is forecasting more moderate top-line growth, he said, so the asset management team will focus on cost control measures in areas such as labor, third-party online travel agency fees, property insurance and real estate taxes. The second quarter is projected to be the weakest of the year in year-over-year comparisons, he said.
As of press time, CorePoint’s stock was trading at $13.52, up 10.1% year to date. The Baird/STR Hotel Stock Index was up 15.4% for the same time period.
CorePoint is continuing to evaluate its portfolio to find opportunities to expand its profit margins and improve overall performance, Cline said. It’s focusing on two strategic initiatives this year to unlock the potential of the company’s portfolio and to maximize results, he said.
Its first initiative is an aggressive asset management strategy that involves working closely with Wyndham Hotels & Resorts, which manages CorePoint’s properties, to improve operational performance with a focus on underperforming hotesl, he said. It will also work to leverage Wyndham’s broad distribution network and infrastructure, he said.
The second initiative is its ongoing strategic review of its real estate portfolio to identify hotels that no longer fit in CorePoint’s strategic plans and consider them for possible disposition, he said.
The La Quinta brand’s property management and revenue-generating systems transitioned into Wyndham’s distribution network in April, Cline said.
“While it’s too soon to measure the financial benefits to our hotels from our transition to the Wyndham distribution network, we continue to believe there will be opportunities to drive traffic to direct channels by cross-selling in their call centers and via their website,” he said. “We also believe that the Wyndham loyalty platform represents a meaningful opportunity to drive incremental revenue as more customers are exposed to the La Quinta brand.”
CorePoint is focused on its mix of revenue through direct channels as well as the overall cost of customer acquisition, he said. The second half of the year, when the La Quinta brand is fully integrated, should provide more insight into the effect of being part of Wyndham’s network, he said.
The company is continuing its review of its portfolio, looking at its lowest-performing hotels and disposing its non-core assets, Cline said. The company sold three non-core assets (in addition to the two non-core hotels previously sold) as part of this process, he said.
EVP and CFO Daniel Swanstrom said the total gross sales of the first two non-core assets came to approximately $4.5 million. The gross sales prices of the recently announced three non-core assets sold amounted to approximately $16 million, or a little more than $40,000 per key, he said. The net proceeds from each sale will be used to pay down commercial mortgage backed securities debt, he said.
“Buyer interest in our non-core assets remain strong, and we continue to evaluate additional opportunities to create value for our shareholders through the sale of further non-core assets,” he said. “Toward that end, we have a number of our non-core assets that are currently in various stages of the marketing and sale process, and we will continue to keep you posted on our strategic disposition activity as the year progresses.”