8-K: Pebblebrook Hotel Trust Updates on Hurricane Impact, Expects $11.5 Million Hit to Full-Year Earnings

Pebblebrook Hotel Trust reports that while most of its southeast resorts are operational, Hurricane Milton and other storms will negatively impact full-year earnings by an estimated $11.5 million.

Summary

• Pebblebrook Hotel Trust has provided an update on the impact of Hurricane Milton and other named storms on its properties.
• Most of the company's southeast resorts are fully operational, except for LaPlaya Beach Resort & Club in Naples, Florida.
• LaPlaya sustained damage from Hurricane Helene on September 26, 2024, and Hurricane Milton on October 9, 2024.
• The Gulf Tower and Bay Tower at LaPlaya are scheduled to reopen on November 1, 2024, while the Beach House building remains closed for repairs.
• The company anticipates that repair costs will not be material and expects insurance to substantially mitigate the financial impact.
• The Beach House at LaPlaya is expected to be largely operational by the end of Q1 2025.
• Other resorts in southern Florida and Georgia experienced cancellations and reduced booking volumes, impacting Q3 and Q4 operating performance.
• The estimated impact on the company's operating performance from the storms is a $1.5 million loss in Q3 2024, a $10.0 million loss in Q4 2024, and a total loss of $11.5 million for the full year 2024.
• Same-Property RevPAR is expected to decrease by 25 bps in Q3, 100 bps in Q4, and 30 bps for the full year.
• Same-Property Total Revenue is expected to decrease by $1.2 million in Q3, $3.0 million in Q4, and $4.2 million for the full year.
• Same-Property Hotel EBITDA is expected to decrease by $1.2 million in Q3, $2.5 million in Q4, and $3.7 million for the full year.
• Adjusted FFO per share is expected to decrease by $0.01 in Q3, $0.08 in Q4, and $0.10 for the full year.

Sentiment

Score: 4

Explanation: The sentiment is negative due to the significant financial impact of the hurricanes, including the expected loss and decrease in key metrics. However, the company's expectation that insurance will mitigate the impact and the quick reopening of some parts of LaPlaya provide some positive notes.

Positives

• Most of Pebblebrook's southeast resorts are fully operational.
• The company expects insurance to substantially mitigate the financial impact of the storm damage.
• The Gulf Tower and Bay Tower at LaPlaya are scheduled to reopen quickly on November 1, 2024.
• The company anticipates that repair costs will not be material.

Negatives

• LaPlaya's Beach House building remains closed for repairs due to water and sand infiltration.
• The company expects a significant negative impact on earnings, with a $11.5 million loss for the full year 2024.
• The storms caused considerable cancellations and reduced booking volumes, affecting operating performance in Q3 and Q4.
• Same-Property RevPAR, Total Revenue, and Hotel EBITDA are all expected to decrease for the full year.

Risks

• The full extent of the damage and the associated costs may not be fully known.
• The reopening of LaPlaya's Beach House is subject to local approvals and may be delayed.
• The company's estimates are subject to change as they continue to evaluate the storms' impact.
• The company's performance is subject to various risks and uncertainties, including the state of the U.S. economy.

Future Outlook

The company will continue to evaluate the storms' impact and provide additional updates in the future as appropriate. The Beach House at LaPlaya is expected to be largely operational by the end of Q1 2025.

Management Comments

• The company anticipates that repair costs will not be material and expects that property, flood, and business interruption insurance, net of deductibles, will substantially mitigate the financial impact.
• These figures represent Pebblebrook's best estimates at this time.

Industry Context

The hotel industry is susceptible to weather-related events, and this announcement highlights the financial impact that hurricanes can have on resort properties. Other hotel REITs with properties in similar regions may face similar challenges.

Comparison to Industry Standards

• Comparing to other hotel REITs like Host Hotels & Resorts (HST) and Park Hotels & Resorts (PK), which also have properties in hurricane-prone areas, the impact on Pebblebrook appears significant, particularly the estimated $11.5 million loss for the full year.
• While specific impacts vary, the industry generally sees a temporary dip in revenue and occupancy following such events, with recovery depending on the extent of damage and insurance coverage.
• The estimated 30 bps decrease in full-year RevPAR for Pebblebrook is a notable impact, and it will be important to see how this compares to the performance of peers in their upcoming reports.
• The speed of recovery at LaPlaya, with the Gulf and Bay Towers reopening quickly, is a positive sign, but the extended closure of the Beach House is a concern.

Stakeholder Impact

• Shareholders will be negatively impacted by the reduced earnings and financial performance.
• Employees at LaPlaya may experience temporary disruptions and changes in work schedules.
• Customers may experience limited availability and services at LaPlaya.
• Suppliers may experience reduced demand due to the temporary closure of parts of LaPlaya.

Next Steps

• The company will continue to evaluate the storms' impact.
• The company will provide additional updates in the future as appropriate.
• The company will work towards the full reopening of LaPlaya's Beach House by the end of Q1 2025.

Key Dates

Keywords

Hurricane Milton, Hurricane Helene, LaPlaya Beach Resort, Hotel Operations, Property Damage, Insurance, Financial Impact, EBITDA, RevPAR, FFO, Pebblebrook Hotel Trust, Resorts