Since the onset of spring break travel in March, CorePoint Lodging has been able to consistently drive weekend rate growth at its hotels in leisure and drive-to markets, executives said on a call reporting first-quarter 2021 earnings.
Keith Cline, president and CEO of the midscale, select service hotel-focused real estate investment trust, said performance steadily improved after the historically slower season in the third and fourth quarters to achieve comparable occupancy of 53% and comparable revenue per available room of $39 during the first quarter.
March was the strongest month in the quarter with occupancy of 62%, he said. This number lags behind the 71% occupancy achieved during the same period of 2019, but the current trends are encouraging.
When CorePoint's portfolio returns to its 2019 occupancy levels will depend on how the summer goes, Cline said.
"The rest of the story will play out as we go through the summer months and really see how strong peak season is this summer," he said. "I don't want to go too far out right now and project [against] 2019 results, but we are certainly encouraged by the amount of the gap versus 2019 that has been closed in the last couple months."
Leisure travel currently represents two thirds of CorePoint's bookings with weekends outpeforming weekdays. Operating outperformance is "occurring dramatically" in Sunbelt states such as Florida and California, he said.
The start of the spring break travel season in March paired with CorePoint's leisure traveler mix has allowed the company to "consistently deliver weekend rate growth," he said.
While the company is optimistic about the demand trend, the continued rollout of COVID-19 vaccines and easing restrictions, Cline said CorePoint will remain focused on cost-control initiatives until demand is closer to pre-pandemic levels.
Core Portfolio and Disposition Strategy
The REIT's core portfolio of 105 hotels mostly located in the top 50 metropolitan statistical areas continued to outperform during the quarter, with "over 1,000 basis points higher RevPAR index gains than our noncore portfolio," Cline said.
There's a higher concentration of these hotels in West Coast and Sunbelt markets, and the company "continues to believe that the core portfolio represents our higher quality and growth potential assets," he said.
The company closed on the sale of nine noncore hotels for a total of $42 million during the quarter, said Dan Swanstrom, executive vice president and chief financial officer. It closed on the sale of six more of these assets subsequent to quarter end for $37 million.
CorePoint has completed the sale of 120 noncore assets for $530 million in gross proceeds since the inception of its disposition program in March 2019, he said. The company currently has 48 hotels under contract with qualified buyers. Those sales are expected to generate total gross proceeds of approximately $278 million.
"Between the 120 hotels sold to date and these 48 hotels under contract, we have addressed about 80% of the 210 hotels we identified as noncore," he said. "This strategy is a proven value creator for CorePoint, and we look forward to recording our continued progress on the strategies during the year."
Labor Challenges
There was a labor shortage within the hotel industry going into the pandemic, and that shortage has increased, Cline said.
To manage through the current labor shortage, he said CorePoint's properties have been doing things such as not cleaning stay over rooms to "create additional housekeeping capacity in the hotels."
He added his company is working with partners to incentivize people to enter the hospitality job force and stay in it.
"We are in dialogue every day with our third-party manager on either a combination of incentives or programs to [encourage] people to jump into the hospitality industry and once they are in, incentivize them to stay," he said. "We're in active discussions now on programs we'd like to deploy as we go into the summer months. The shortage of labor today is certainly one of the top topics in this building."
As of press time, CorePoint's stock was trading at $10.19 a share, up 58.7% year to date. The New York Stock Exchange Composite was up 15% for the same period.