• RevPAR Growth: Increased 1.5% year-over-year for the same-store portfolio.
• EBITDA Margin: Contracted less than 50 basis points compared to the previous year.
• Operating Expenses: Increased 1.5% year-over-year.
• Urban Portfolio RevPAR: Increased nearly 3%, with notable growth in San Francisco at 13.5%.
• Adjusted EBITDA: $45 million for the first quarter.
• Adjusted FFO: $27.4 million or $0.22 per share.
• Capital Expenditures: $16 million on a consolidated basis, $14 million on a pro rata basis.
• Interest Rate: Average interest rate of approximately 4.6%.
• Dividend: Quarterly common dividend of $0.08 per share.
• Share Repurchase Program: $50 million approved by the Board of Directors.

• Warning! GuruFocus has detected 7 Warning Signs with INN.

Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• RevPAR and same-store portfolio increased by 1.5% compared to the first quarter of last year, driven by a mix of rate and occupancy growth.
• Strong cost controls resulted in EBITDA margin contraction of less than 50 basis points, with pro forma operating expenses increasing only 1.5% year over year.
• Urban markets such as New Orleans, Tampa, San Francisco, Chicago, and Downtown Houston experienced significant RevPAR growth, with San Francisco achieving a 13.5% increase.
• The completion of the Courtyard by Marriott Oceanside, Fort Lauderdale Beach renovation is expected to drive incremental revenue and close the rate gap with competitive oceanfront properties.
• The company has a strong liquidity position with over $300 million in total liquidity and no significant debt maturities until 2027.

Negative Points

• March RevPAR declined 1.6% in the same-store portfolio, with a 10% decline in the qualified segment, indicating weakness in government-related demand.
• Demand softening was observed in early March, driven by weakness in government and international travel, particularly from Canada.
• The company expects April RevPAR to decline between 4% and 5% due to challenging calendar comparisons related to the solar eclipse and Easter shift.
• Second quarter RevPAR is expected to decline between 2% and 4% compared to the previous year, impacted by difficult special event comparisons.
• The company's performance is tracking toward the lower end of guidance ranges for full-year adjusted EBITDA, adjusted FFO, and adjusted FFO per share.

Q & A Highlights

Q: Can you give us a sense of how trends have evolved within government and international travel since the initial impact earlier this year? Have these segments stabilized, or are you continuing to see pressure in the booking window? A: Jonathan Stanner, President and CEO, explained that the most acute impact was felt in March, particularly from government travel. While these segments have stabilized at lower levels, there is optimism for recovery throughout the year. The government efficiency efforts led to broad-based cuts, but some level of travel is expected to return as the year progresses.

Q: How have trends evolved for business transient (BT) customers relative to initial expectations, and where do you see these trends going in the short term? A: Stanner noted that midweek negotiated business, a proxy for business transient travel, has held up reasonably well. Although this segment is closely monitored due to its sensitivity to economic weakness, it has shown resilience and has not trended down significantly.

Q: Is the shorter booked weekend leisure segment, often referred to as "extra trips," the most impacted by current conditions? A: Stanner acknowledged some softness in leisure travel but expects it to be one of the more resilient segments during economic uncertainty. While there may be a shift towards more domestic and drive-to travel, large-scale cancellations of summer vacations are not anticipated.

Q: With Q2 guidance indicating negative RevPAR, is there a consideration to revisit brand agreements for expense relief similar to COVID-era measures? A: Stanner emphasized that the current demand dynamics are different from the pandemic or the financial crisis. While proactive expense management is ongoing, including a $10 million reduction in CapEx, there is no immediate need to revert to COVID-era cost controls unless conditions worsen significantly.

Q: Regarding the share buyback program, how do you plan to fund it, and what are your thoughts on capital allocation? A: Stanner explained that the buyback is a response to significant stock price dislocation, presenting a compelling investment opportunity. Funding will come from reduced CapEx, potential asset sales, and leveraging the balance sheet slightly. The program is seen as a timely opportunity to buy back stock at an attractive basis.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.