In the last quarter of 2024, real estate investment trust Summit Hotel Properties closed two acquisitions, setting the company up for a strong year, CEO Jonathan Stanner said on the fourth quarter and year-end earnings call.
Austin, Texas-based Summit closed on the acquisitions of the 250-room Hampton Inn Boston-Logan Airport and the 149-room Hilton Garden Inn Tysons Corner for $96 million through its joint venture with GIC Real Estate in December.
“Our most recent acquisitions have been funded by a thoughtful and methodical disposition strategy, selling 10 hotels over the past 18 months for nearly $150 million of gross proceeds, while eliminating approximately $50 million of near-term capital needs,” Stanner said. “The well-located hotels in dynamic submarkets of Boston and Washington, D.C., feature industry-leading brands and minimal near-turn capital needs. The purchase price represents an attractive 8.8% capitalization rate, based on 2024 net operating income, and a significant discount to replacement cost.”
Stanner added that revenue per available room growth for the two hotels was over 6% in 2024. The December deal is just the latest from Summit’s JV with Singapore-based GIC, which originated in 2019.
“We now own 41 hotels in our joint venture with GIC, the vast majority of which have been acquired since 2022,” he said. “Operating performance in this portfolio had been terrific, as RevPAR grew nearly 3%, driving 5% hotel [earnings before interest, taxes, depreciation and amortization] growth in 2024.”
These hotels have seen “significant improvement in performance” once added to Summit’s portfolio, he said, which is “further validating our ability to identify investment opportunities and develop and implement business plans in value accretive manner.”
Part of Summit’s strategy is to invest in high-return-on-investment capital projects that are set to drive EBITDA growth. One example is Summit’s 261-room Courtyard Fort Lauderdale Beach hotel, which is completing its renovations to guestrooms and public spaces. The oceanfront property will reopen in the spring with upgraded outdoor areas, including a pool-side bar and enhanced pool deck.
“While the hotel has always been a top performer in our portfolio, we have identified significant rate in ancillary revenue opportunities,” Stanner said. “We intend to capture post-renovation in a market where it is virtually impossible to build new competitive supply.”
All going according to plan
Another part of Summit's 2024 plan was to target six markets REIT executives believed were poised for fast growth, including Baltimore, Louisville, Minneapolis, New Orleans, San Francisco and San Jose. For the most part, these bets paid off, Stanner said.
“Aside from the well-documented challenges in San Francisco, the remaining five markets performed exceptionally well, achieving RevPAR growth of over 13%, which drove a 35% increase in hotel EBITDA,” he said. “Minneapolis, San Jose, Baltimore, and New Orleans all had double-digit RevPAR growth for the year, with the latter two markets achieving nominal RevPAR that exceeded 2019 levels for the first time.”
So far, the start of 2025 has been stable for Summit, Stanner said, pointing to growing business-transient demand at the REIT's hotel portfolio. While first-quarter RevPAR growth is tracking below projections for the full year, January’s winter storm disruption has been essentially balanced out by demand driven by the Super Bowl in New Orleans, where Summit has six hotels.
“We had tremendous success managing expenses in 2024, and while our year-over-year comparisons are more difficult in 2025, we are confident in our ability to continue to control operating expenses, driven by the benefits of our efficient operating model and the strength of our operating team,” he said.
Looking to the future
Some of the tailwinds that the hotel industry faces in the long term are lack of new supply thanks to rising construction costs, interest rate increases and tight construction lending norms. But Summit is playing the long game.
“Looking beyond 2025, the lodging industry stands to benefit from a powerful, long-term consumer shift towards experiences over material goods,” Stanner said. “Consumers, particularly younger demographics, continue to prioritize travel, unique destinations and high-quality accommodations as part of their lifestyle and spending habits.”
The demand is there, he added, and “Summit’s well-located, high-quality portfolio is well positioned to capture this long-term growth.”
“Driven by the combination of these factors, we expect another solid year of performance in 2025, with the favorable long-term trajectory for both the industry broadly and Summit more specifically,” he said.
William “Trey” Conkling, the REIT’s executive vice president and chief financial officer, credited fourth-quarter RevPAR growth to urban and suburban regions, especially Summit’s key markets, which include New Orleans, Indianapolis, Chicago, Houston, Minneapolis and Tampa.
Conkling highlighted Summit’s balance of prioritizing “returning capital to shareholders, investing in our portfolio, producing corporate leverage, and maintaining liquidity for future growth opportunities,” he said, adding that “for the full year, we anticipate RevPAR growth of 1% to 3%, which translates to an adjusted EBITDA range of $184 million to $198 million.”
By the numbers
For the fourth quarter, Summit reported a net income of $700,000, compared to a net loss of $16.6 million for the same period in 2023. The company’s pro-forma RevPAR increased 1.4% to $117.21 compared to the fourth quarter of 2023.
Additionally, pro-forma ADR increased 0.9% to $164 in the fourth quarter compared to the same period in 2023, and pro-forma occupancy increased 0.5% to 71.5%.
Fourth-quarter revenue for 2024 exceeded $172.9 million, slightly down from $177.4 million reported last year for the same period.
For the full year, Summit reported total revenue of $731.8 million in 2024, slightly down from $736.1 million in 2023. Adjusted EBITDA for real estate was nearly $192.2 million in 2024, compared to $190 million in the same period for 2023.
As of February, Summit’s portfolio consisted of 97 properties — 53 of which are wholly owned — with a total of 14,553 guestrooms located in 25 states.
As of publication time, Summit stock was trading at $6.31 per share, down 2.3% year over year. The NYSE Composite Index was up 13.5% for the same period.