8-K: Xenia Hotels & Resorts Reports Mixed Second Quarter Results, Adjusts Full-Year Guidance

Xenia Hotels & Resorts announced its second quarter 2024 results, showing a mix of positive and negative trends, and has moderately lowered its full-year Adjusted EBITDAre guidance.

Summary

• Xenia Hotels & Resorts reported a net income of $15.3 million, or $0.15 per share, for the second quarter of 2024.
• Adjusted EBITDAre decreased by 8.4% to $68.4 million compared to the same quarter last year.
• Adjusted FFO per diluted share increased by 10.6% to $0.52 compared to the second quarter of 2023.
• Same-property occupancy increased by 240 basis points to 71.0%, while the average daily rate (ADR) decreased by 1.7% to $261.53.
• Same-property RevPAR increased by 1.8% to $185.69, but excluding the Hyatt Regency Scottsdale renovation, it increased by 5.0% to $191.28.
• Same-property Hotel EBITDA decreased by 7.5% to $73.4 million, but excluding the Hyatt Regency Scottsdale renovation, it increased by 1.2% to $74.1 million.
• The company repurchased 468,107 shares of common stock at an average price of $13.51 per share for a total of $6.3 million.
• The company sold the Lorien Hotel & Spa for $30 million, representing a 21.3x multiple and a 3.1% capitalization rate.
• Full-year Adjusted EBITDAre guidance has been lowered, with a new range of $243 million to $255 million.
• The company has updated its full year 2024 outlook, with a revised Same-Property RevPAR change of 2.00% to 4.00%.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative due to mixed results, lowered guidance, and ongoing challenges with renovations. While there are some positive aspects, the negative trends and lowered outlook temper the overall sentiment.

Positives

• Net income increased by 11.2% compared to the second quarter of 2023.
• Adjusted FFO per diluted share saw a significant increase of 10.6% compared to the second quarter of 2023.
• Same-property occupancy increased by 240 basis points, indicating strong demand.
• Excluding the impact of the Hyatt Regency Scottsdale renovation, Same-Property RevPAR increased by 5.0%, showing strong performance in other properties.
• The company successfully sold the Lorien Hotel & Spa at a favorable multiple and capitalization rate.
• The company has significant liquidity with $594 million available, including cash and a revolving line of credit.
• The company is seeing positive momentum in corporate transient and group demand.
• The company is experiencing strong results at newly renovated properties such as Grand Bohemian Hotel Orlando, Hotel Monaco Salt Lake City and Canary Hotel Santa Barbara.

Negatives

• Adjusted EBITDAre decreased by 8.4% compared to the second quarter of 2023.
• Same-property ADR decreased by 1.7% compared to the second quarter of 2023.
• Same-property Hotel EBITDA decreased by 7.5% compared to the second quarter of 2023.
• Same-property Hotel EBITDA Margin decreased by 238 basis points compared to the second quarter of 2023.
• Leisure demand was softer than anticipated in the second quarter.
• The company has moderately lowered the midpoint of its full-year Adjusted EBITDAre guidance.
• Renovation disruption is expected to negatively impact Adjusted EBITDAre and Adjusted FFO by approximately $17 million.

Risks

• The company faces macroeconomic uncertainty, which limits visibility in forecasting.
• Continued expense pressure and increased uncertainty are impacting the company's outlook.
• Renovation disruptions, particularly at the Hyatt Regency Scottsdale, are negatively impacting financial results.
• The company is exposed to risks associated with the hotel industry, including competition, increases in wages and benefits, and energy costs.
• The company is dependent on third-party managers of its hotels.
• The company is exposed to risks associated with the real estate industry, including environmental contamination and costs of complying with the Americans with Disabilities Act.
• The company is exposed to interest rate increases.
• The company is exposed to the risk of not qualifying as a REIT.
• The company is exposed to the risk of uninsured or underinsured losses, including those relating to natural disasters, terrorism, government shutdowns and closures, civil unrest, or cyber incidents.
• The company is exposed to the risk of labor shortages.
• The company is exposed to the risk of disruptions in supply chains resulting in delays or inability to procure required products.

Future Outlook

The company has moderately lowered the midpoint of its full-year Adjusted EBITDAre guidance due to recent trends, continued expense pressure, and increased uncertainty. The company expects the Hyatt Regency Scottsdale renovation to drive strong revenue and earnings growth in 2025 and beyond.

Management Comments

• Marcel Verbaas, Chair and Chief Executive Officer of Xenia, stated that the portfolio produced meaningful RevPAR growth in the second quarter, driven by strong results at newly renovated hotels and hotels in key markets.
• Mr. Verbaas also noted that the company is pleased with its operators cost control efforts in a challenging operating environment.
• Mr. Verbaas mentioned that the company is seeing positive momentum in corporate transient and group demand, but leisure demand was softer than anticipated.
• Mr. Verbaas stated that the transformative renovation of Hyatt Regency Scottsdale is proceeding well and is expected to be completed by the end of the year.

Industry Context

The results reflect a mixed environment for the hospitality industry, with strong demand in some segments offset by softer leisure demand and rising costs. The company's focus on renovations and strategic asset sales aligns with industry trends of enhancing property value and optimizing portfolios. The company's performance is being impacted by the ongoing renovations at the Hyatt Regency Scottsdale, which is a significant project for the company.

Comparison to Industry Standards

• While Xenia's occupancy rates show improvement, the decrease in ADR is a concern, as many hotel REITs are focused on maintaining or increasing both occupancy and rates.
• Compared to peers like Host Hotels & Resorts and Park Hotels & Resorts, Xenia's Adjusted EBITDAre growth is lagging, indicating potential challenges in cost management or revenue generation.
• The sale of the Lorien Hotel & Spa at a 21.3x multiple is a positive sign, but it is important to compare this to other recent hotel transactions to assess its relative value.
• The company's capital expenditure plans are significant, and it will be important to monitor the return on these investments compared to industry benchmarks.
• The company's focus on luxury and upper upscale hotels is consistent with industry trends, but it is important to assess how well it is executing this strategy compared to competitors like Pebblebrook Hotel Trust.

Stakeholder Impact

• Shareholders may be concerned about the lowered guidance and decreased profitability.
• Employees may be affected by cost control measures and potential changes in operations.
• Customers may experience disruptions due to ongoing renovations.
• Suppliers may be impacted by changes in the company's capital expenditure plans.
• Creditors may be concerned about the company's debt levels and profitability.

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 monitor the performance of its newly renovated properties and continue to focus on cost control.
• The company will continue to evaluate opportunities for strategic asset sales and share repurchases.
• The company will conduct its quarterly conference call on August 2, 2024, to discuss the results and outlook.

Key Dates

Keywords

Xenia Hotels & Resorts, Hotel REIT, Real Estate Investment Trust, EBITDA, FFO, RevPAR, Occupancy, ADR, Hotel EBITDA, Renovation, Hospitality, Lodging