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Pebblebrook's (PEB) Operating Trend Healthy Amid Recovery

Per Pebblebrook Hotel Trust’s PEB recently released operating update, the company’s estimated operating results for August, despite a normal back-to-school seasonality, were in line with its expectations owing to the recovery in business demand and strong rate premiums.

PEB’s same-property average daily rate (ADR) in August was $309, down from $334 in July. However, the figure increased 19% from the August 2019 levels. Occupancy for August came in at 71%, lower than July’s 74%. The occupancy at the end of the second quarter was 69%.

Pebblebrook’s revenue per available room (RevPAR) for August was recorded at $219 while the Hotel EBITDA was $37.4 million, down 11% and 25.8%, respectively, from the July levels.

Nonetheless, the group and transient business travel demand and activity continued to gain pace in September post the Labor Day return to office, with companies encouraging more meetings and booking their business travel for the remainder of 2022.

Speaking about the weekly operating trend for PEB’s total and resort portfolios, the most recent September week’s occupancy surpassed 80%, with each day except Sunday exceeding 80%, the first time since the onset of the pandemic.

The weekday operating trend shows that the occupancy in September, following the week after Labor Day, for PEB’s total and urban portfolios saw strong growth, with two weekdays in the urban portfolio surpassing 90% for the first time since the start of the pandemic.

With the ongoing recovery of the lodging industry, the demand for leisure travel too remained robust. The weekend demand in August and the first three weeks of September were strong despite the normal back-to-school seasonal patterns.

The ADR for the total and resort portfolio remained at a premium over the 2019 levels and achieved growth of 55% from the August 2019 levels, reflecting Pebblebrook’s strong pricing power. Management expects the trend to continue into the fourth quarter of 2022.

The urban portfolio’s weekend occupancy remained more than 84% for the most recent weekend in September.

Pebblebrook’s other revenues, including food and beverage, were strong too.

The operating trend from September onward seems encouraging, and we anticipate it to gain strength in the upcoming holiday season, aiding Pebblebrook’s top-line and bottom-line growth.

Additionally, in the second quarter, Pebblebrook entered into contracts to sell three urban properties for aggregate gross sales proceeds of $183.9 million. On Sep 14, 2022, the sale of Hotel Vintage Portland in Portland, OR, for $32.9 million, marked the completion of the disposition of all three properties.

Analysts seem bullish on the Zacks Rank #3 (Hold) stock. The Zacks Consensus Estimate for the company’s third-quarter 2022 FFO per share has been revised 4.8% upward over the past week to 66 cents.

Its shares have gained 5.2% in the quarter-to-date period against the industry’s fall of 1.6%.

Zacks Investment Research
Zacks Investment Research


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Stocks to Consider

Some better-ranked stocks from the REIT sector are SBA Communications SBAC, Xenia Hotels & Resorts XHR and Ashford Hospitality Trust AHT, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for SBA Communications’ ongoing year’s FFO per share has been raised marginally upward over the past week to $12.17.

The Zacks Consensus Estimate for Xenia Hotels & Resorts’ 2022 FFO per share has moved 3.2% upward in the past month to $1.59.

The Zacks Consensus Estimate for Ashford Hospitality Trust’s current-year FFO per share has moved 2.9% northward in the past month to $2.46.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.


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