Austin, Texas-based Summit Hotel Properties is going all-in on glamping. After acquiring the company's first "luxury treehouse resort" late in 2022, the company is expanding its first glamping resort and developing another.
Jonathan Stanner, president and CEO of the hotel-focused real estate investment trust, said the company expects to continue growing through a strategic partnership with glamping resort brand Onera, which includes the right of first refusal for their next 10 projects. The company acquired a 90% stake in a joint venture to buy the Onera Fredericksburg, an 11-unit site in Fredericksburg, Texas, in October, along with an adjacent 6.4-acre parcel for $5.2 million.
Now both Summit's glamping footprint and investment are slated to grow significantly.
"Yesterday, we announced the initial development of our next two Onera-branded projects — the expansion of our Onera Fredericksburg site and a newly funded mezzanine loan for a separate glamping site — both of which are expected to open in 2024," Stanner said during the company's fourth-quarter and full-year 2022 earnings call. "Combined with our initial acquisition of the Fredericksburg property, we expect to invest between $40 million and $45 million in these first three projects, which are forecast to generated mid-teens unlevered, stabilized yields. In addition, we have several other exciting projects under review that feature similar return profiles to our existing projects and would allow us to continue to scale our investment in this rapidly growing segment of our industry."
Stanner said 2022 was a busy year on the acquisition front for Summit, "with the acquisition of more than $900 million of high quality hotels." That figured is buoyed significantly with the January 2022 closing of a $776.5 million acquisition of 27 hotels from NewcrestImage.
But Summit kept up its busy pace of deals in the fourth quarter, signing two separate portfolio deals to sell a total of six hotels.
The first deal for a gross price of $50.5 million is for the 160-room Residence Inn Atlanta Midtown/Peachtree at 17th and the 123-room Courtyard Kansas City Country Club Plaza along with a parcel of vacant land in San Antonio. The company also inked a $28.1 million deal to sell four hotels: the 151-room Hyatt Place Chicago/Lombard/Oak Brook, the 126-room Hyatt Place Chicago/Hoffman Estates, the 97-room Hilton Garden Inn Minneapolis/Eden Prairie and the 93-room Holiday Inn Express & Suites Eden Prairie — Minnetonka.
Stanner said the six hotels under contract were well below the company's typical performance levels for both revenue and profits and were due to capital investments.
"Importantly, all six of these hotels are due for significant renovations and the sales would allow us to forego near-term capital expenditures of between $35 million and $40 million," he said.
The company spent $76.5 million on capital improvements in 2022 and projects to spend between $60 million and $80 million in 2023.
Earnings Performance
Summit officials reported total revenues of $172.3 million for the fourth quarter of 2022 and $675.7 million for the full year, according to its earnings release. Revenue per available room was up 17.9% year over year in the fourth quarter to $109.01 and up 37.9% for the year to $110.91, with hotel earnings margins up 401 basis points for the year.
The company reported a net loss for the year of $16.9 million.
The latest guidance from the REIT calls for RevPAR growth between 6% and 11% in 2023.
As of press time, Summit's stock was trading at $7.40 per share, up 2.5% year to date. The NYSE Composite was up 1.6% for the same period.