8-K: Xenia Hotels & Resorts Reports Mixed First Quarter 2024 Results Amidst Renovation Impacts

Xenia Hotels & Resorts announced its first quarter 2024 results, showing a mix of positive and negative trends, with a significant renovation impacting overall performance.

Summary

• Xenia Hotels & Resorts reported a net income of $8.5 million, or $0.08 per share, for the first quarter of 2024.
• Adjusted EBITDAre decreased by 8.5% to $65.3 million compared to the same period last year.
• Adjusted FFO per diluted share increased to $0.44, up $0.04 from the first quarter of 2023.
• Same-property occupancy increased by 130 basis points to 67.4%.
• Same-property ADR decreased by 3.5% to $262.39.
• Same-property RevPAR decreased by 1.5% to $176.86, but excluding the Hyatt Regency Scottsdale renovation, it increased by 3.7% to $178.07.
• Same-property hotel net income decreased by 10.1% to $36.7 million, but excluding the Hyatt Regency Scottsdale, it increased by 15.6% to $34.6 million.
• Same-property hotel EBITDA decreased by 8.5% to $70.7 million, but excluding the Hyatt Regency Scottsdale, it increased by 4.7% to $67.2 million.
• The company repurchased 468,107 shares of common stock for approximately $6.3 million at a weighted-average price of $13.51 per share.
• A first quarter dividend of $0.12 per share was declared.
• The company invested $33.4 million in portfolio improvements during the quarter.
• The transformative renovation of the Hyatt Regency Scottsdale is progressing as planned and is expected to be completed by the end of the year.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative due to mixed results, with positive aspects like increased occupancy and FFO offset by declines in key metrics like EBITDA and RevPAR. The ongoing renovation and economic uncertainty add to the cautious outlook.

Positives

• Adjusted FFO per diluted share increased by $0.04 compared to the first quarter of 2023.
• Same-property occupancy increased by 130 basis points compared to the first quarter of 2023.
• Excluding the Hyatt Regency Scottsdale renovation, Same-Property RevPAR increased by 3.7% and Hotel Net Income increased by 15.6%.
• The company repurchased shares and declared a dividend.
• The company has full availability on its revolving line of credit and no debt maturities until August 2025.
• The company is seeing strong growth at larger group-oriented hotels and recently renovated hotels.
• The company estimates that Same-Property RevPAR, excluding Hyatt Regency Scottsdale, grew by approximately 6.2% in April.

Negatives

• Adjusted EBITDAre decreased by 8.5% compared to the first quarter of 2023.
• Same-property ADR decreased by 3.5% compared to the first quarter of 2023.
• Same-property RevPAR decreased by 1.5% compared to the first quarter of 2023.
• Same-property hotel net income decreased by 10.1% compared to the first quarter of 2023.
• Same-property hotel EBITDA decreased by 8.5% compared to the first quarter of 2023.
• Same-property Hotel EBITDA Margin decreased by 228 basis points compared to the first quarter of 2023.
• The Hyatt Regency Scottsdale renovation is negatively impacting overall results.

Risks

• The transformative renovation of the Hyatt Regency Scottsdale is negatively impacting near-term results.
• Visibility into overall demand for the remainder of the year remains limited in the current operating environment.
• The company's full year 2024 guidance is based on the current economic environment and does not take into account any unanticipated impacts to the business or operations.
• Disruption due to renovations is expected to negatively impact Adjusted EBITDAre and Adjusted FFO by approximately $16 million.
• The company is exposed to general economic uncertainty and potential contraction in the U.S. or global economy.
• The company is dependent on third-party managers of its hotels.
• The company is exposed to risks associated with the hotel industry, including competition, increases in wages and benefits, and energy costs.

Future Outlook

The company is maintaining the midpoint of its previously provided Adjusted EBITDAre guidance range, and expects the Grand Hyatt Scottsdale and other recent renovations to drive meaningful earnings growth in 2025 and beyond. They also estimate that Same-Property RevPAR, excluding Hyatt Regency Scottsdale, grew by approximately 6.2% in April.

Management Comments

• We are pleased with our first quarter results as our portfolio RevPAR and Adjusted EBITDAre exceeded our expectations for the quarter, said Marcel Verbaas, Chair and Chief Executive Officer of Xenia.
• Despite the impact of the shift in the timing of Easter weighing on March results, our Same-Property RevPAR increased by 3.7% for the quarter when excluding the results at Hyatt Regency Scottsdale.
• We are encouraged by early results in the second quarter, as we estimate that Same-Property RevPAR, excluding Hyatt Regency Scottsdale, grew by approximately 6.2% in April.
• We remain bullish that the soon-to-be launched Grand Hyatt Scottsdale, as well as other recently completed renovations and our most recent acquisitions, will drive meaningful earnings growth in 2025 and beyond.

Industry Context

The results reflect the ongoing recovery in the hospitality sector, with group demand and business transient travel showing signs of improvement. However, the impact of renovations and macroeconomic uncertainty continue to pose challenges. The company's focus on luxury and upper upscale hotels in key markets positions it to benefit from the recovery, but it is also exposed to the risks of the current economic environment.

Comparison to Industry Standards

• Xenia's performance is mixed compared to other hotel REITs. While occupancy increased, the decrease in ADR and RevPAR is concerning, especially when compared to peers that have shown stronger pricing power.
• The impact of the Hyatt Regency Scottsdale renovation is significant, and the company's ability to manage this project and deliver on its expected returns will be a key factor in its future performance.
• Companies like Host Hotels & Resorts and Park Hotels & Resorts, which also operate in the upscale segment, have reported varying results, with some showing stronger RevPAR growth, indicating that Xenia's performance is not universally reflective of the industry.
• The share repurchase program is a positive sign, but the company's overall financial performance needs to improve to justify the current valuation.

Stakeholder Impact

• Shareholders may be concerned about the decrease in EBITDA and RevPAR, but encouraged by the share repurchase and dividend.
• Employees may be impacted by the ongoing renovations and any changes in hotel operations.
• Customers may experience disruptions due to renovations, but will benefit from the improved facilities once completed.
• Suppliers may see changes in demand based on the company's performance and renovation activities.
• Creditors will be monitoring the company's debt levels and ability to meet its obligations.

Next Steps

• The company will continue the transformative renovation of the Hyatt Regency Scottsdale, with completion expected by the end of the year.
• The company will focus on driving growth at its larger group-oriented hotels and recently renovated properties.
• The company will monitor the macroeconomic environment and its impact on demand.
• The company will conduct its quarterly conference call on May 3, 2024.

Key Dates

Keywords

Hotel REIT, Real Estate Investment Trust, Hospitality, Hotels, RevPAR, EBITDA, FFO, Occupancy, ADR, Renovation, Dividends, Share Repurchase