RevPAR Growth: 1.6% driven by a 2.1% increase in ADR, offset by a 0.5% decline in occupancy. Urban Hotels RevPAR Growth: 3.6% with weekday urban RevPAR growing by 4.9%. Group Revenue Growth: 10% driven by strong city-wide events. Leisure Segment Revenue Growth: 2% in the first quarter. Hotel EBITDA: $85.3 million with a margin of 26.1%. Adjusted EBITDA: $77.6 million. Adjusted FFO per Diluted Share: $0.31. First Quarter Occupancy: 69.1% with an ADR of $204.31 and RevPAR of $141.23. Total Revenue Growth: 1.2% with a 3.8% increase in out-of-room spend. Operating Cost Growth: 2.9% in the first quarter. Share Repurchases: Approximately 2.7 million shares for $24.3 million at an average price of $8.91 per share. Quarterly Dividend: $0.15 per share. 2025 RevPAR Growth Outlook: Between 1% and up 1%. 2025 Comparable Hotel EBITDA Outlook: Between $365.5 million and $395.5 million. 2025 Corporate Adjusted EBITDA Outlook: Between $332.5 million and $362.5 million. 2025 Adjusted FFO per Diluted Share Outlook: Between $1.38 and $1.58.

Warning! GuruFocus has detected 4 Warning Sign with RLJ.

Release Date: May 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

RLJ Lodging Trust (NYSE:RLJ) achieved RevPAR growth of 1.6% in the first quarter, driven by a 2.1% increase in ADR. The company's urban hotels experienced robust RevPAR growth of 3.6%, with several markets achieving high single-digit growth. RLJ successfully recycled capital by selling a non-core asset at an attractive 18 times multiple and redeploying proceeds into accretive share repurchases. The company strengthened its balance sheet by addressing current and forward debt maturities, including a new $300 million term loan maturing in 2030. RLJ's conversions are showing strong performance, with recent conversions in Houston, New Orleans, and Pittsburgh achieving 35% RevPAR growth.

Negative Points

March and April performance fell short of initial expectations, with RevPAR down 1.3% in March and forecasted to decline 1-2% in April. The company is experiencing softness in government and international demand, which is expected to persist throughout the year. Booking windows have shortened significantly, with 58% of bookings occurring within seven days, reflecting heightened uncertainty. The transaction market is currently challenging, with fewer opportunities for asset sales due to the uncertain economic environment. RLJ adjusted its full-year guidance downward due to reduced visibility and continued macroeconomic risks, reflecting a more cautious outlook.

Story Continues

Q & A Highlights

Q: Leslie, can you elaborate on the trends you observed in March and April, and how they compared to your initial expectations? A: Leslie Hale, President and CEO, explained that March was expected to be slightly positive but ended at negative 1.3%. April was initially expected to be the strongest month of the second quarter but is now projected to decline between 1% and 2%. The softness in government-related demand and elongated spring break due to Easter timing contributed to these results.

Q: Can you provide an overview of the current financing environment and RLJ's access to capital? A: Sean Mahoney, CFO, noted that the bank market remains strong for top-quality sponsors like RLJ. The high-yield market saw some disruption but has stabilized, with costs now 50-75 basis points higher than earlier in the year. The CMBS market is active but may require higher debt yields due to underwriting challenges.

Q: What factors led to the revision of RLJ's full-year guidance, and what gives you confidence in the current outlook? A: Leslie Hale stated that the guidance revision is due to softness in government and international demand, along with reduced visibility and uncertainty. The current outlook assumes stability in group, business transient, and leisure demand, but the economic backdrop and uncertainty will ultimately determine the final results.

Q: Can you discuss the recovery momentum in Northern California and its impact on RLJ's performance? A: Leslie Hale highlighted positive developments in Northern California, including a stronger citywide calendar, improved business climate, and increased office absorption. The region's RevPAR growth was supported by events and tech demand, with Silicon Valley assets up 11% in Q1.

Q: How is RLJ approaching asset dispositions and share repurchases in the current market environment? A: Leslie Hale mentioned that RLJ is opportunistic with asset sales, focusing on strategic benefits for buyers. The current market uncertainty has slowed new transactions. RLJ remains committed to share repurchases, having recycled proceeds from a recent sale into buybacks, and views buybacks as a priority given the current backdrop.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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