WEST PALM BEACH, FL—Chatham Lodging Trust, a lodging real estate investment trust (REIT) that invests in upscale, extended-stay hotels and premium-branded, select-service hotels and owns 133 hotels wholly or through joint ventures, today released results for the third quarter ended Sept. 30, 2016. In addition, the company updated its guidance for 2016.
Net income declined $0.9 million to $13.4 million. Net income per diluted share was $0.34, in line with the company’s revised guidance range of $0.33-$0.34 per share issued on Oct. 10, 2016. Portfolio Revenue per Available Room (RevPAR) declined 2.1%, compared to the 2015 third quarter to $143 for Chatham’s 38 wholly owned hotels. ADR improved 1.8% to $170, and occupancy was down 3.9% to 84%.
Adjusted EBITDA declined $2.2 million to $37.2 million, while Adjusted FFO declined $1.9 million to $27.4 million. Adjusted FFO per diluted share was $0.71, within the company’s revised guidance of $0.70-$0.71 per share.
The operating margins experienced a 180 basis point reduction in comparable hotel gross operating profit margins (total revenue less total hotel operating expenses) to 50.6%, using comparable hotels regardless of ownership, and comparable hotel EBITDA margins dropped 310 basis points to 43.7%.
“Our 2015 third quarter was very strong with our occupancy reaching a historic high of 87%. Although we successfully increased room rates in the 2016 third quarter, our occupancy softened, resulting in a 2.1% RevPAR decline,” noted Jeffrey H. Fisher, Chatham’s president and CEO. “Our RevPAR was adversely impacted more than expected due to restrained business travel, as well as new supply in several of our key markets and a significant worsening in demand in our oil-industry influenced Houston and western Pennsylvania markets. We have six hotels in those markets, and those properties experienced a 21% drop in RevPAR. Those markets negatively impacted our overall RevPAR performance by approximately 200 basis points, the major cause of our RevPAR decline.”
“Our margins came under pressure as a result of weakening RevPAR combined with higher expenses related to wage and benefit costs, as well as rising guest acquisition costs, primarily from online travel agency commissions and guest rewards from the brands,” said Dennis Craven, Chatham’s COO. “The entirety of our margin decline was attributable to these expenses with wages and benefits impacting margins by approximately 120 basis points while guest acquisition costs increased 50 basis points.
“Given our unique relationship with Island Hospitality, we quickly implemented a number of cost-saving initiatives to offset these challenges,” Craven added. “Some of these will not be fully realized until 2017, but our ability to implement changes swiftly is a strategic advantage.”
“We are reducing our full-year Adjusted EBITDA and FFO per share guidance by approximately 3% and our RevPAR growth range by 70-100 basis points, based on the current outlook for the hotel industry and our portfolio. We expect the trends that have impacted us through the third quarter will continue for the balance of 2016,” Fisher concluded.