8-K: Xenia Hotels & Resorts Reports Mixed Q4 and Full Year 2023 Results, Increases Dividend

Xenia Hotels & Resorts announced its fourth quarter and full year 2023 results, showing a decrease in key metrics but exceeding expectations for Adjusted EBITDAre and Adjusted FFO per share, and increased its dividend by 20% for Q1 2024.

Summary

• Xenia Hotels & Resorts reported a net income of $7.6 million, or $0.07 per share, for the fourth quarter of 2023.
• Adjusted EBITDAre for the quarter was $59.4 million, an 8.0% decrease compared to the same period in 2022.
• Adjusted FFO per diluted share was $0.41, which was flat compared to the fourth quarter of 2022.
• Same-property RevPAR decreased by 3.4% to $157.69, but excluding the Hyatt Regency Scottsdale renovation, it increased by 1.2% to $162.51.
• For the full year 2023, net income was $19.1 million, or $0.17 per share.
• Full year Adjusted EBITDAre decreased by 2.0% to $251.7 million, and Adjusted FFO per diluted share was flat at $1.54.
• Same-property RevPAR for the full year increased by 3.9% to $169.46, and excluding the Hyatt Regency Scottsdale, it increased by 6.4% to $170.57.
• The company repurchased 3,897,777 shares of common stock in Q4 and 10,414,262 shares for the full year.
• Xenia increased its quarterly dividend by 20% to $0.12 per share for the first quarter of 2024.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive. While there are some negative aspects such as decreased net income and EBITDA, the company exceeded expectations in key metrics, increased its dividend, and has a positive outlook for 2024. The ongoing renovations and macroeconomic uncertainties temper the overall positive sentiment.

Positives

• Adjusted EBITDAre and Adjusted FFO per share exceeded expectations for the fourth quarter.
• The company successfully completed several significant capital projects in 2023.
• Xenia demonstrated a commitment to returning capital to shareholders through share repurchases and increased dividends.
• The company's Same-Property RevPAR, excluding the impact of the Hyatt Regency Scottsdale renovation, showed positive growth for both the quarter and the full year.
• The company has a strong liquidity position with approximately $615 million available as of December 31, 2023.
• The company has no debt maturities until August 2025.

Negatives

• Net income attributable to common stockholders decreased significantly in both the fourth quarter and full year 2023 compared to 2022.
• Adjusted EBITDAre decreased by 8.0% in the fourth quarter and 2.0% for the full year compared to the prior year.
• Same-property RevPAR decreased by 3.4% in the fourth quarter, although this was primarily due to the Hyatt Regency Scottsdale renovation.
• Same-Property Hotel EBITDA Margin decreased by 162 basis points in the fourth quarter and 153 basis points for the full year.
• The ongoing renovation at Hyatt Regency Scottsdale negatively impacted the company's overall performance.

Risks

• The company faces macroeconomic uncertainty and potential economic contraction that could affect travel demand.
• Inflationary pressures could increase labor and operating costs, impacting profit margins.
• The company is dependent on third-party managers for its hotels, which limits its direct control over strategic decisions.
• The company is exposed to risks associated with the hotel industry, including competition, cyber incidents, and downturns in economic conditions.
• Renovation projects, such as the one at Hyatt Regency Scottsdale, can cause disruptions and cost overruns.
• The company's performance is subject to seasonal and cyclical fluctuations in the real estate and hospitality businesses.

Future Outlook

The company expects to benefit from continued recovery across its portfolio, improving results of recently acquired properties, and favorable returns on several capital projects in 2024. The transformation of Hyatt Regency Scottsdale into a Grand Hyatt is expected to benefit the portfolio later in 2024 and beyond. The company provided full year 2024 guidance with a Same-Property RevPAR change between 2.0% and 5.0% and Adjusted FFO per Diluted Share between $1.59 and $1.78.

Management Comments

• Marcel Verbaas, Chair and Chief Executive Officer of Xenia, stated that Adjusted EBITDAre and Adjusted FFO per share exceeded expectations for the fourth quarter.
• Mr. Verbaas noted that the company's performance was supported by ongoing asset management initiatives and good cost control.
• Mr. Verbaas expressed excitement about growth opportunities in 2024 and beyond, citing the expected recovery in business transient and group demand.

Industry Context

This announcement reflects the ongoing recovery in the hospitality industry, with Xenia's performance being impacted by both positive trends and specific challenges such as renovations. The company's focus on luxury and upper upscale hotels positions it to benefit from the expected recovery in business and leisure travel. The increase in dividend also signals confidence in the company's future performance.

Comparison to Industry Standards

• Xenia's Same-Property RevPAR growth of 3.9% for the full year 2023 is a mixed result compared to other hotel REITs, with some peers showing stronger recovery while others are still facing challenges.
• The company's Adjusted EBITDAre decrease of 2.0% for the full year is below the performance of some competitors who have shown positive growth in this metric.
• The company's focus on renovations and repositioning of assets is a common strategy in the industry to enhance long-term value, but it can lead to short-term disruptions as seen with the Hyatt Regency Scottsdale.
• The increase in dividend by 20% is a positive sign for investors and is a higher increase than some of its peers, indicating confidence in future cash flows.
• The company's debt levels are in line with other hotel REITs, but the weighted-average interest rate of 5.47% is a factor to consider in the current interest rate environment.

Stakeholder Impact

• Shareholders will benefit from the increased dividend and share repurchases.
• Employees may experience changes due to ongoing renovations and operational adjustments.
• Customers may experience disruptions during hotel renovations but will benefit from improved facilities in the long term.
• Suppliers may see changes in demand based on the company's capital expenditure plans.
• Creditors will be impacted by the company's debt management and financial performance.

Next Steps

• The company will continue the transformative renovation of the Hyatt Regency Scottsdale, with completion expected by the end of 2024.
• The company will focus on improving results at recently acquired properties.
• The company will continue to monitor macroeconomic conditions and their impact on travel demand.
• The company will pay a dividend of $0.12 per share on April 15, 2024.

Key Dates

Keywords

Xenia Hotels & Resorts, Hotel REIT, Real Estate Investment Trust, Hotel Performance, RevPAR, EBITDA, FFO, Dividend, Hotel Renovation, Capital Expenditures, Share Repurchase