8-K: Braemar Hotels & Resorts Reports Mixed Q2 Results, Highlights Shareholder Value Plan

Braemar Hotels & Resorts reported a mixed second quarter with strong urban hotel performance offset by resort softness, while also announcing progress on its Shareholder Value Creation Plan.

Summary

• Braemar Hotels & Resorts announced its second quarter 2024 results, which included a net loss of $(21.9) million, or $(0.33) per diluted share.
• The company's comparable RevPAR decreased by 1.5% year-over-year to $305, while comparable hotel EBITDA was $51.1 million.
• Urban hotels showed strong performance with a 6% RevPAR growth, while resort average daily rates experienced softness.
• The Four Seasons Resort Scottsdale at Troon North continued to perform well, achieving a 10% RevPAR growth and a 21.6% increase in Hotel EBITDA.
• The company has refinanced, extended, or paid down all of its 2024 debt maturities.
• Braemar has made progress on its Shareholder Value Creation Plan, including the sale of the Hilton La Jolla Torrey Pines for $165 million.
• The company has redeemed approximately $40.1 million of its non-traded preferred stock.
• The company's total assets were $2.2 billion, with $1.2 billion in loans at a blended average interest rate of 8.1%.
• Approximately 77% of the company's debt is effectively fixed, and 23% is effectively floating.
• The company ended the quarter with $120.3 million in cash and cash equivalents and $60.7 million in restricted cash.
• A quarterly common stock dividend of $0.05 per share was declared, equating to an annual yield of approximately 5.6%.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to strong urban hotel performance and progress on the Shareholder Value Creation Plan, but tempered by the overall RevPAR decrease and net loss.

Positives

• Urban hotels demonstrated strong performance with 6% RevPAR growth.
• The Four Seasons Resort Scottsdale continues to exceed expectations with a 10% RevPAR growth and a 21.6% increase in Hotel EBITDA.
• The company has successfully addressed all 2024 debt maturities.
• The sale of the Hilton La Jolla Torrey Pines generated $165 million and a 7.2% capitalization rate.
• The company has made progress on its Shareholder Value Creation Plan, including a preferred share redemption program and a common share buyback authorization.
• Group revenue pace is accelerating, with group rooms revenue for the full year pacing ahead of last year by 3%.
• The Capital Hilton showed significant improvement after completing a major renovation, with a 14% increase in Total Revenue and a 24% increase in Hotel EBITDA.
• The company has a solid liquidity position with $120.3 million in cash and cash equivalents.

Negatives

• Comparable RevPAR for the overall portfolio decreased by 1.5% year-over-year.
• Resort average daily rates experienced softness, offsetting the strong performance of urban hotels.
• The company reported a net loss attributable to common stockholders of $(21.9) million, or $(0.33) per diluted share.
• The Ritz-Carlton Reserve Dorado Beach had a challenging quarter.

Risks

• The company is facing softness in resort average daily rates.
• The company's financial results are subject to numerous assumptions, uncertainties, and known or unknown risks.
• The company's dividend policy is reviewed on a quarter-to-quarter basis and may not be increased.
• The company is evaluating the sale of two more hotels, which may not be successful.
• The company's debt levels are significant, with $1.2 billion in loans.

Future Outlook

The company believes it is on firm footing to perform well in both the near and long term and is optimistic about the future for its portfolio.

Management Comments

• We continue to be very encouraged by the strong performance of our urban hotels.
• We are pleased with the progress we have made on our recently announced Shareholder Value Creation Plan.
• We believe these announcements reflect our commitment to maximize value for our shareholders.
• We remain very well positioned with a solid balance sheet and promising outlook.

Industry Context

The company's performance reflects the broader trends in the hospitality industry, with urban hotels showing strength while resorts are experiencing some softness in average daily rates. The company's focus on luxury assets aligns with the demand for high-end travel experiences.

Comparison to Industry Standards

• Braemar's urban hotel RevPAR growth of 6% is a positive sign, indicating a strong recovery in city center travel, which is in line with trends seen in other major hotel REITs such as Host Hotels & Resorts and Park Hotels & Resorts.
• The 1.5% decrease in overall RevPAR is a concern, as many hotel REITs are reporting positive RevPAR growth, although the softness in resort rates is a common theme across the industry.
• The sale of the Hilton La Jolla Torrey Pines at a 7.2% cap rate is a reasonable valuation, comparable to recent transactions in the luxury hotel space, such as the sale of the Hyatt Regency Boston Harbor.
• The company's focus on capital expenditures, with an anticipated spend of $80-100 million, is in line with industry trends of reinvesting in properties to maintain competitiveness, similar to what companies like Pebblebrook Hotel Trust are doing.

Stakeholder Impact

• Shareholders will benefit from the Shareholder Value Creation Plan, including the preferred share redemption program and common share buyback authorization.
• Employees may be impacted by the ongoing renovations and potential asset sales.
• Customers will benefit from the ongoing renovations and improvements to the hotel properties.
• Creditors will be impacted by the company's debt refinancing and paydown activities.

Next Steps

• The company will continue to execute its Shareholder Value Creation Plan.
• The company is evaluating the sale of two more hotels.
• The company will continue to make capital expenditures across its portfolio.
• The company will update investors on its progress in the coming quarters.

Key Dates

Keywords

RevPAR, Hotel EBITDA, Shareholder Value Creation Plan, Debt Refinancing, Asset Sales, Preferred Stock Redemption, Common Stock Buyback, Urban Hotels, Resort Hotels, Capital Expenditures