Summit Hotel Properties executives lowered the company's revenue expectations for 2024 due to softening leisure demand in the summer, but the combination of an urban rebound and selective asset sales has helped the company maintain broader earnings expectations.
Speaking during the company's second quarter earnings call, President and CEO Jonathan Stanner noted his company benefited from strong group demand in the quarter, which boosted mid-week performance in urban hotels.
"We've experienced broad-based demand growth in our urban portfolio, highlighted by Indianapolis, Cleveland and Charlotte, which all experienced double-digit [revenue per available room] growth during the second quarter," he said.
The company lowered its full-year RevPAR projections by 1.25% at the midpoint, now projecting a range of 1% to 2.5%, while dropping its projections for adjusted earnings before interest, taxes, depreciation and amortization for real estate by 1% at the midpoint, now calling for a range of $188 million to $196 million.
"Last summer's trends to greater international travel and cruises have largely continued into this year, creating some additional headwinds into domestic leisure travel," he said. "While our top-line assumptions have moderated for the second half of the year, we made only a minor adjustment to our adjusted EBITDA [for real estate] range, which highlights the strength of our efficient operating model and our ability to drive hotel EBITDA growth and margin expansion despite lower revenue growth expectations."
Trey Conkling, executive vice president and chief financial officer, said controlling costs is going to be what determines success for Summit and similarly positioned hotel REITs for the balance of 2024.
"Moderating expense growth was a key driver of strong second quarter results and represents the fourth consecutive quarter that expenses have exhibited a more normalized cadence representative of a stabilized cost structure," he said.
Asset Sales
During the quarter, the company sold three properties for a total gross price of $84 million. The three hotel include the dual-brand Courtyard and SpringHill Suites New Orleans Warehouse Arts District — which combined have 410 rooms and sold for $73 million — and the 119-room Hilton Garden Inn College Station, which traded for $11 million.
Stanner noted the company was focusing on delivering its balance sheet with proceeds from the sales, and also noted the hotels had roughly $44 million in required capital expenditures saved by selling them.
In all, the company has sold nine hotels for $131 million over the last 15 months.
Second-Quarter Performance
Stanner said the company saw strong performance in the quarter, with RevPAR up 3.4% year over year for the full quarter, with 4.5% growth in April and 6.5% growth in May. Occupancy was the primary driver of growth in the quarter, up 2.4%
Hotel EBITDA grew 7% in the quarter to $73.1 million with net income of $30.8 million.
The company reported $193.9 million in total revenues in the quarter, compared to $194.5 million during the same quarter the prior year.
As of press time, Summit's stock was trading at $6.349 per share, down 6.6% year to date. The NYSE Composite was up 10.5% for the same period.