Chatham Lodging Trust (CLDT) Reports Mixed Q4 Results Amidst Market Challenges
Revenue Per Available Room (RevPAR): Increased by 2.5% to $121 in Q4 2023 compared to Q4 2022.
Net Loss: Expanded to $11.0 million applicable to common shareholders, from a net loss of $4.0 million in Q4 2022.
Adjusted EBITDA: Slightly rose by $0.4 million to $20.8 million in Q4 2023 from the previous year.
Adjusted Funds From Operations (AFFO): Decreased to $9.8 million in Q4 2023, down from $10.2 million in Q4 2022.
Asset Sale: Sold the Hilton Garden Inn Denver Tech Center for approximately $18 million post-quarter.
Leverage Ratio: Reduced to 25% from 27%, marking the lowest level in a decade.
Dividends: Paid common share dividends of $0.28 per share in 2023, up from $0.07 per share in 2022.
On February 27, 2024, Chatham Lodging Trust (NYSE:CLDT), a real estate investment trust specializing in upscale, extended-stay hotels, released its 8-K filing, detailing its financial results for the fourth quarter ended December 31, 2023. The company, which operates across various states in the U.S. and holds its assets through Chatham Lodging, LP, reported a mixed set of financial figures that reflect both the resilience and the challenges faced by the lodging sector.
Company Overview
Chatham Lodging Trust operates a single segment of upscale extended-stay hotels under major brands such as Hilton, Marriott, and Hyatt. The company's revenue streams are primarily derived from room sales, which constitute the bulk of total revenue, with additional income from food and beverage, and other hotel services.
Performance and Challenges
The fourth quarter saw a modest increase in RevPAR, driven by a 2 percent rise in occupancy and a 0.5 percent uptick in the average daily rate. Notably, RevPAR for the Silicon Valley and Bellevue hotels surged by 14 percent over the previous year's quarter. However, the company incurred a wider net loss of $11.0 million, compared to a $4.0 million loss in the same period last year. This net loss was attributed to a diluted net loss per common share of $(0.23), a significant drop from $(0.08) per share in Q4 2022.
The hotel EBITDA margin contracted to 31.6 percent from 33.3 percent in the previous year, reflecting operational challenges. Despite these hurdles, Chatham Lodging Trust managed to slightly increase its Adjusted EBITDA and maintained a steady Adjusted FFO per diluted share. The sale of the Hilton Garden Inn Denver Tech Center post-quarter is a strategic move that may streamline the company's asset portfolio.
Chatham Lodging Trust's financial achievements in 2023, including a 25 percent increase in other department profits and a reduction in net debt by $26 million, underscore the company's focus on operational efficiency and balance sheet strength. These efforts are crucial for REITs, which rely on robust capital structures and the ability to generate consistent cash flows for shareholder distributions.
Financial Highlights and Analysis
Key financial metrics from the income statement and balance sheet reveal a nuanced picture of Chatham Lodging Trust's performance. The company's leverage ratio improved, reflecting a more conservative capital structure. The common share dividend increase from $0.07 to $0.28 per share signals confidence in the company's cash flow generation capabilities.
Chatham Lodging Trust's president and CEO, Jeffrey H. Fisher, commented on the year's performance, stating:
"The lodging industry in 2023 was interesting given the differing RevPAR trends each segment experienced with leisure, group and business travel behaving independent of each other. For Chatham, it was quite the roller coaster, with the beginning of the year meaningfully impacted by significant layoffs in the technology sector, followed by the elimination of internship programs for the summer, all while business travel in most other markets was performing well."
Looking ahead, Fisher expressed optimism for 2024, citing encouraging early trends and the company's financial flexibility to address debt maturities, make acquisitions, and grow FFO and distributable cash flow.
In conclusion, Chatham Lodging Trust's Q4 2023 results reflect a company navigating a complex market environment with strategic asset sales, prudent financial management, and a focus on long-term growth. While the widened net loss presents a challenge, the company's incremental gains in key performance metrics and a strong dividend payout position it as a potentially attractive option for value investors.
Explore the complete 8-K earnings release (here) from Chatham Lodging Trust for further details.
This article first appeared on GuruFocus.
