Pebblebrook Hotel Trust Shines in Earnings Call

Pebblebrook Hotel ((PEB)) has held its Q3 earnings call. Read on for the main highlights of the call.

Pebblebrook Hotel Trust’s recent earnings call conveyed a generally positive sentiment, underscored by strong operational performance and strategic cost management. The company demonstrated growth in key markets such as San Francisco, despite facing challenges like a decline in Average Daily Rate (ADR) and weaknesses in certain urban markets. The outlook for 2026 remains optimistic, buoyed by expected macroeconomic improvements and major events on the horizon.

Strong Operational Performance

Pebblebrook Hotel Trust reported impressive operational results, with same-property hotel EBITDA reaching $105.4 million, aligning with the company’s midpoint expectations. Adjusted EBITDA surpassed the midpoint by $2.2 million, totaling $99.2 million. Additionally, the Adjusted Funds From Operations (FFO) per share was $0.51, which was $0.03 above the anticipated midpoint.

San Francisco Market Strength

The San Francisco market emerged as a standout performer, with Revenue Per Available Room (RevPAR) increasing by 8.3% in the third quarter. This growth was driven by a 690 basis point surge in occupancy, which in turn boosted EBITDA by 10.9%. The market’s success was attributed to an active convention calendar and a rebound in both business and leisure travel demand.

Successful Cost Management

Pebblebrook’s effective cost management strategies were evident as same-property hotel expenses, excluding fixed costs, rose by only 0.4% year-over-year. On a per occupied room basis, expenses actually declined by about 2%, highlighting the company’s operational efficiency.

Positive Outlook for 2026

Looking ahead, Pebblebrook Hotel Trust maintains an optimistic outlook for 2026. The company anticipates a favorable macroeconomic environment, low supply growth, and significant events such as the World Cup and America’s 250th anniversary celebrations to drive future growth.

Redevelopment Program Success

The company’s redevelopment initiatives have borne fruit, with properties like Newport Harbor Island Resort and Jekyll Island Club Resort experiencing substantial growth. Newport Harbor’s RevPAR jumped 29%, and total RevPAR surged by 35.9% compared to pre-renovation performance in 2023.

Decline in ADR and RevPAR

Despite an increase in same-property occupancy by nearly 190 basis points, Pebblebrook faced a 5.4% decline in ADR, leading to a 3.1% decrease in RevPAR and a 1.5% drop in same-property total RevPAR.

Weakness in Washington, D.C. and Los Angeles

The company reported challenges in Washington, D.C., where RevPAR declined by 16.4% due to reduced government travel demand. Similarly, Los Angeles experienced a 10.4% decline in RevPAR, impacted by competitive pricing and disruptions from ICE activity and National Guard deployments.

Impact of Government Shutdown

The ongoing government shutdown has adversely affected Pebblebrook’s operations, leading to reduced government travel and cancellations, which in turn impacted overall demand.

Guidance and Future Expectations

Pebblebrook Hotel Trust’s guidance for the future remains robust despite external challenges. The company achieved a same-property hotel EBITDA of $105.4 million and adjusted EBITDA of $99.2 million, surpassing its midpoint by $2.2 million. The company plans to leverage strong free cash flow and cash on hand to address upcoming debt maturities, supported by a successful $400 million convertible notes offering.

In conclusion, Pebblebrook Hotel Trust’s earnings call highlighted a strong operational performance and strategic growth in key markets, despite facing some challenges. The company’s forward-looking guidance remains positive, with expectations for continued growth driven by macroeconomic improvements and major upcoming events. Investors and stakeholders can remain optimistic about Pebblebrook’s future prospects.