Earnings call transcript: Chatham Lodging Trust Q2 2025 beats EPS forecasts

Chatham Lodging Trust reported its Q2 2025 earnings on August 6, showcasing stronger-than-expected financial results. The company reported earnings per share (EPS) of $0.07, surpassing the forecasted $0.05 by 40%. Revenue also exceeded expectations, reaching $80.29 million against a forecast of $79.68 million. Following the announcement, Chatham Lodging’s stock experienced a modest increase of 0.45%, closing at $6.71. According to InvestingPro analysis, the company is currently trading below its Fair Value, with multiple ProTips indicating attractive valuation metrics. InvestingPro subscribers can access eight additional ProTips and a comprehensive Pro Research Report for deeper insights into CLDT’s valuation.

Key Takeaways

• Chatham Lodging Trust’s EPS surpassed forecasts by 40%.
• Revenue exceeded expectations by $0.61 million.
• The company maintained a strong GOP margin at 46.3%.
• A $25 million share buyback program was launched.
• Positive outlook supported by tech investments and GDP growth.

Company Performance

Chatham Lodging Trust demonstrated robust performance in Q2 2025, with significant improvements in key financial metrics. The company achieved an all-time high in Average Daily Rate (ADR) and Revenue per Available Room (RevPAR) in May, indicating strong demand in its markets. The sale of the Courtyard Houston and other strategic asset sales have bolstered Chatham’s financial position, reducing leverage to 3.5 times net debt to EBITDA.

Financial Highlights

• Revenue: $80.29 million, slightly above forecasts
• EPS: $0.07, 40% above forecast
• Hotel EBITDA: $30.9 million
• Adjusted EBITDA: $28.5 million
• Adjusted FFO: $0.36 per share
• GOP Margin: 46.3%, up 30 basis points YoY

Earnings vs. Forecast

Chatham Lodging’s actual EPS of $0.07 exceeded the forecasted $0.05, marking a 40% surprise. This beat is noteworthy compared to the company’s historical performance, reflecting effective cost management and strategic asset sales. Revenue also topped expectations, albeit by a smaller margin of 0.77%.

Market Reaction

Following the earnings release, Chatham Lodging’s stock rose by 0.45% in pre-market trading, reflecting investor confidence in the company’s performance and outlook. The stock remains within its 52-week range, with a low of $5.83 and a high of $10. InvestingPro analysis indicates the stock has shown significant volatility, with analyst targets ranging from $8 to $9, suggesting potential upside. The stock’s beta of 1.5 indicates higher volatility compared to the broader market.

Outlook & Guidance

Looking ahead, Chatham Lodging anticipates a flat to 1% increase in RevPAR for the full year 2025. The company projects adjusted EBITDA between $89 million and $93 million and adjusted FFO between $0.95 and $1.03 per share. The outlook is supported by continued GDP growth and tech investments, with muted new hotel supply expected.

Executive Commentary

CEO Jeff Fisher emphasized the company’s strategic execution and robust balance sheet, stating, "We’ve executed on most all strategic fronts and fit in a great position to grow and add value." COO Dennis Craven highlighted ongoing acquisition opportunities, remarking, "We’re always looking. We’re always underwriting."

Risks and Challenges

• Potential market saturation in key regions.
• Economic uncertainties affecting travel demand.
• Rising operational costs, including labor and benefits.
• Competitive pressures in the hospitality sector.
• Geopolitical factors impacting international travel.

Q&A

During the earnings call, analysts inquired about potential additional asset sales and the company’s acquisition strategy. Management also discussed plans to expand the share buyback program and the development timeline for the Home2 project in Portland, expected to take 21-24 months.

Full transcript - Chatham Lodging Trust (REIT) (CLDT) Q2 2025:

Conference Operator: Ladies and gentlemen, good morning, and welcome to the Chatham Lodging Trust Second Quarter twenty twenty five Financial Results Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Chris Daley, president of DTE pub public relations.

Please go ahead.

Chris Daley, President of DTE Public Relations, DTE Public Relations: Thank you, Ryan. Good morning, everyone, and welcome to the Chatham Lodging Trust second quarter twenty twenty five results conference call. Please note that many of our comments today are considered forward looking statements as defined by federal securities laws. These statements are subject to risks and uncertainties, both known and unknown, as described in our most recent Form 10 ks and other SEC filings. All information in this call is as of 08/06/2025, unless otherwise noted, and the company undertakes no obligation to update any forward looking statements to conform the statement to actual results or changes in the company’s expectations.

You can find copies of our SEC filings and earnings release, which contain reconciliations to non GAAP financial measures referenced on this call on our website at chathamloggingtrust.com. Now to provide you with some insight in Chatham’s twenty twenty five second quarter results, allow me to introduce Jeff Fisher, chairman, president, and chief executive officer Dennis Craven, executive vice president and chief operating officer and Jeremy Wagner, Senior Vice President and Chief Financial Officer. Let me turn the session over to Jeff Bishop. Jeff? Thanks,

Jeff Fisher, Chairman, President, and Chief Executive Officer, Chatham Lodging Trust: Chris. Good morning, everyone. I certainly appreciate everybody being on our call today. Before I comment on our second quarter, I want to update some of our key corporate initiatives. We completed the sale of all five hotels we listed in the fourth quarter and are very happy with the results.

We sold five hotels, as a reminder, with an average age of 25 years at an approximate 6% capitalization rate on twenty twenty four NOI levels for proceeds of $83,000,000 Each of these five hotels were among the six lowest RevPAR hotels in our portfolio at cap rates lower than our cost of debt and our value enhancing. We currently have two additional hotels listed for sale, and of course, it’s too early in the process to comment on the specifics of each transaction, but these would be further opportunistic sales. We intend to use the proceeds from the five asset sales as well as those currently listed if we sell them to fund our Home2 Portland development, acquire hotels and repurchase shares of our stock, and we look forward to being opportunistic on all those accounts to continue to add shareholder value where we can. Our Board of Trustees approved a $25,000,000 share buyback plan in May. And during the quarter, we repurchased approximately 20,000 shares at a weighted average price of $7.2 We intend to be a bit more active in the third quarter given current share price levels.

And our balance sheet continues to get stronger as we’ve reduced our leverage to now only 21% and are projected to create almost $20,000,000 of free cash flow in 2025 after dividends. We positioned ourselves to add value in multiple ways. During the third quarter, we intend to launch an upsized and recast syndication of our credit facility and term loan, further enhancing our financial condition and lowering overall borrowing costs. We’re hopeful that process is complete by the time we speak again in November. Operationally, we’re pretty pleased with the results of our second quarter, delivering RevPAR and FFO per share at the top of our guidance range.

Second quarter occupancy of 82% matched last year’s second quarter occupancy and is a post pandemic high. Additionally, we hit an all time high in ADR and RevPAR in May. We grew our operating margins this year. And, yes, we did benefit from nonrecurring refunds. But even excluding those onetime impact, margins would have declined less than 1%.

Not bad considering the RevPAR results for the quarter. I believe our island operating team will do even better in the third and fourth quarters in that regard After a challenging start to the quarter when April RevPAR was down 4%, we grew RevPAR in May and June to essentially finish with flat RevPAR for the quarter. Our core business segment, Business Traveler, remains healthy and growing as we are seeing our highest occupancies during the week. When comparing us to our peers, I want to reiterate that we’ve beaten industry RevPAR growth for now fourteen consecutive quarters or three and a half years. Our largest market, Silicon Valley, continued this recovery to pre pandemic levels, and it was good to see our occupancy at all four hotels reached 80% in the quarter, which is an important hurdle.

The amount of investments being committed by tech companies combined with the Applied Materials expansion and the NVIDIA Innovation Center will certainly help facilitate additional demand growth in the Valley. And those demand generators are around the corner from our two large hotels in Sunnyvale. Another good sign of the underlying momentum in Silicon Valley is that multifamily rental growth rates are accelerating. For example, in their recent quarterly report, Essex Property Trust pointed out that their highest growth rates are in the Northern California regions. Our press release included details on our largest market performance, and Dennis will expand further on those, but I want to highlight some interesting tidbits from other markets.

Our Sunbelt markets are performing well with our two Charleston hotels showing strong growth. And encouragingly, our two Florida hotels experiencing RevPAR growth in the quarter after being down last year and in the first quarter this year. Texas, as a reminder, three of our five hotels are being adversely impacted due to the closure of their city’s respective convention centers for expansion and that being specifically Downtown Dallas and Austin. RevPAR in the entire Austin market is down 6% year to date and down 14% in the quarter, with the only good news being the domain market is less bad than that at down 5% in the quarter and 11% year to date. In Seattle, the entire market, including Bellevue, is soft and feeling the effects of reduced Canadian travel with RevPAR down 2% year to date and 4% in the second quarter.

The automobile border crossings in the region were down 47% in the second quarter. And lastly, driven by some great events, our second quarter in Pittsburgh was huge with growth of 23% and a second quarter RevPAR of a $151 was its highest second quarter in history. Second quarter events, special events included its first motocross championship in April, three concerts and the Monster Jam in May and then the US Open in June. Next year during the second quarter, we have the NFL draft right outside our front door, which should be great for the hotel. As we look forward ahead to the balance of the year, we are essentially leaving our guidance unchanged, Growing business travel demand across a good portion of our portfolio is encouraging, yet offsetting that is weakness in the convention demand in Austin, Dallas and San Diego, which had an all time best year in 2024.

Leisure demand has held up well for us, yet the decline in travel from Canada and Europe is certainly impacting the industry overall. For us, government travel rebounded post Liberation Day after our three DC hotels saw RevPAR decline 9% in April. RevPAR was up approximately 2% for the balance of that quarter. As an industry, I believe we’re poised for some better performance in the coming years. Supply, demand, that’s the key here.

And, of course, we all know that new supply should continue to be muted for some time as we look forward. It’s expensive to build, and it’s my belief the development only makes sense in some very special markets in The U. S. Looking past 2025, current GDP growth rates are encouraging, and the outlook is even more so given the massive investments being made by companies across The U. S, including the substantial commitments made to the technology advancements and all things AI.

Adding to this is all the announced foreign investment coming in The US in the coming years. Historically speaking, we all know there’s a strong correlation between GDP growth and RevPAR growth. Operationally, as a reminder, we’ve got great internal growth potential with the recovery, continued recovery of the Silicon Valley hotels. There’s quite a bit happening in the market, not only with the largest companies in the world that are based there and the future continues to look bright. Silicon Valley once again took over the number one ranking for startups and is the global epicenter of innovation with abundant capital and continuously creating groundbreaking technologies.

In conclusion, I’m excited about our prospects going forward. We’ve executed on most all strategic fronts and fit in a great position to grow and add value with a very strong balance sheet. With that, I’d like to turn it over to Dennis. Thanks, Jeff. Good morning, everyone.

Some additional RevPAR color. RevPAR growth at our four Silicon Valley hotels, like Jeff said, was up 3%, and we are able to grow hotel EBITDA an additional 3% to almost $5,000,000 Our Silicon Valley hotels were really no different than our portfolio in that April was quite soft due to the consecutive Easter and Passover holidays, along with the initial reactions from Liberation Day. Within the quarter, RevPAR to four Silicon Valley hotels was down 2% in April, then up 3% in May and a strong 6% in June. At our home too in Phoenix, as a reminder, it opened in early twenty twenty four. We acquired the hotel in 2024, and RevPAR was up over 60% in the quarter.

As we enter the fall, we are encouraged with our sales efforts there, especially related to the convention center and other group related business that often has to be targeted at least a year in advance. LA RevPAR was up 1% in the quarter as demand related to the California wild wildfire wildfires pretty much left the market and especially our Woodland Hills hotel, where we had a significant amount of business there in the quarter. Within our LA market, our three hotels, our Residence Inn Anaheim was up 6% and our Marina Del Rey Hilton Garden Inn was up 3% with our Home two Woodland Hills down 5%. Our six predominantly leisure hotels account for about 20% of our EBITDA, and they had a great quarter with RevPAR surging 4% when you exclude our Portsmouth Hilton Garden Inn that was under renovation into the quarter. Our top five RevPAR hotels in the in the quarter were our residents in Washington DC with RevPAR of $239 followed by our gas plant residents in.

And both of those RevPARs were the highest second quarter RevPARs in each of their respective histories. Rounding out our top five for our Hilton Garden in Marina Del Rey, our Residence Inn, White Plains, New York, and our Hampton, Portland, all three with RevPAR over $200 in the quarter. On the operations front, for the third consecutive quarter, we drove our gross operating profit margins higher, 30 basis points above last year’s levels. Although we benefited from about $800,000 workers’ compensation related refund, it was a group really attributable to to very good claims experiences, and kudos to our operating team for minimizing those costs. As we all know, labor and benefits are by far our largest expense and on a per occupied room basis, these costs were down 7%.

But when you take out the impact of that refund, labor and benefits were still down year over year on a per occupied room basis. We continue to allocate meaningful energy closely monitoring our productivity at that level. Most other operating line items were relatively stable year over year. So guest acquisition related commission costs were up approximately 15% has increased our exposure has increased really due to just different channels of booking business in the quarter. That increase impacted margins by approximately 30 basis points in the quarter.

We had 17 hotels produced over $1,000,000 of GOP in the quarter. And for the fourteenth consecutive quarter, our Gaslamp Residence Inn led the way with GOP of almost 3,000,000. Our two Sunnyvale Residence Inn made the top five for the first time since the heavy intern 2021 coming in at second and fifth respectively. And not to be outdone, our Embassy Suites Springfield, Virginia delivered GOP of $2,000,000 in the quarter, and coming in fourth despite a tough market was our Bellevue Residence Inn with GOP of $1,600,000 On the CapEx front, we spent approximately $9,000,000 in the quarter. And importantly, so far in 2025, we’ve added eight rooms to our existing portfolio, converting meeting and other spaces into more profitable guest rooms.

Those rooms include five rooms at the Hilton Garden Inn in Portsmouth, two rooms at the Residence Inn, White Plains, and a suite at the Hampton Inn Exeter. Within these locations at any reasonable valuation, we’ve added probably 3,000,000 to $4,000,000 in value to our portfolio at a fraction of the cost. Our last two renovations of 2025 are to commence later this year in the fourth quarter with those being at the Residence Inn Austin and the Residence Inn Mountain View, California. With that, I’ll turn it over to Jeremy.

Chris Daley, President of DTE Public Relations, DTE Public Relations: Thanks, Dennis. Good morning, everyone. Our Q2 twenty twenty five hotel EBITDA was $30,900,000 adjusted EBITDA was $28,500,000 and adjusted FFO was $0.36 per share. Our GOP margin for the quarter of 46.3% was up 30 basis points from Q2 twenty twenty four despite the flattish RevPAR environment due to continued strong expense control, moderating inflationary cost pressures and the benefit of approximately $1,300,000 of workers’ compensation, insurance and tax refunds. In Q2, we continued our asset recycling by completing the sale of the Courtyard Houston for $23,500,000 which represents an LTM cap rate of 5.8%, including $3,600,000 of required capital expenditures.

Our successful asset recycling over the past few years has reduced the age and improved the quality of our hotel portfolio and significantly reduced our leverage. The reduction in leverage along with the successful refinancing of our material debt maturities over the last couple of years has significantly enhanced our financial flexibility. This added flexibility gave us the confidence to announce our first ever share repurchase program in Q2, which we started utilizing in June. With leverage of 3.5 times net debt to EBITDA as of June 30, we have significant capacity to pursue attractive investment opportunities, whether in the form of acquisitions or share repurchases. Turning to our Q3 and full year 2025 guidance, we expect RevPAR of minus 1.5% to plus 0.5%, adjusted EBITDA of $24,700,000 to $26,800,000 and adjusted FFO of $0.29 to $0.33 per share in Q3 and RevPAR growth of flat to plus 1%, adjusted EBITDA of $89,000,000 to $93,000,000 and adjusted FFO per share of $0.95 to 1.03 per share for the full year.

This guidance assumes no further asset sales, capital markets activity or changes in floating interest rates. This concludes my portion of the call. Operator, please open the line for questions.

Conference Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Please press star and one on the telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and 2 if you would like to remove your question from the queue.

Please go ahead.

Dennis Craven, Executive Vice President and Chief Operating Officer, Chatham Lodging Trust: Thank you. Good morning. I wanted to go back to your comments around asset recycling. I I think in the prepared remarks, you mentioned that you’re looking to sell two more assets in addition to five that have been sold. For the two additional hotels that you’re looking to sell, are they going to be similar lower CapEx, lower RevPAR sort of hotels?

Jeff Fisher, Chairman, President, and Chief Executive Officer, Chatham Lodging Trust: Hi. Hey, Gaurav. This is Dennis. I think in one of the two instances, yes, it’s kind of it’s kind of one of the the older lower RevPAR assets. Another one is really just an opportunistic transaction we’re looking at that I think would minimize some capital requirements here in the next few years.

But, you know, we’re certainly just in the early phases of that process and, you know, hope to have something to talk about a little bit more on our next earnings call.

Dennis Craven, Executive Vice President and Chief Operating Officer, Chatham Lodging Trust: Okay. And then maybe in terms of deploying the capital, I I think you mentioned development in Portland and then acquisitions. Can you maybe remind us the time line for development in in the fourth line? And then what kind of opportunities are you seeing in the acquisition market?

Jeff Fisher, Chairman, President, and Chief Executive Officer, Chatham Lodging Trust: Yeah. I’ll start on the development side just on the timing, then I’ll let Jeff chime in on acquisitions. But generally speaking, it’s gonna be around the twenty one to twenty four month, you know, construction timeline. You know, we still have some work to do there with respect to, you know, just understanding soils and all that kind of good stuff. So, you know, I you know, ideally, we’d we’d like to get started on that sometime, you know, within the next six months or so.

But, again, probably as we kinda get to the next call, we’ll have a little more information on, you know, kickoff and all that kind of stuff. And relative to acquisitions, you know, I think it continues to be the same story for most of us. We’re always looking. We’re always underwriting. We’re always talking, you know, to owners that we dealt with before, you know, and or the brokerage community.

I still think there’s a pretty wide, you know, kind of bid ask scenario going on. But, you know, I think over time, that gap should lessen. In the meantime, we’ve got our stock buyback program, and we certainly, you know, as we indicated earlier, probably gonna ramp that up just a little bit more given the stock price today. Okay. Thank you.

That’s all I had. Thank you.

Conference Operator: Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and 1. Once again, a reminder, ladies and gentlemen, if you wish to ask a question, please press star and 1. There are no further questions, I would now hand the conference over to Jeff Fisher for his closing comments. Jeff?

Jeff Fisher, Chairman, President, and Chief Executive Officer, Chatham Lodging Trust: Thank you very much. Well, it’s a short call there. Maybe there’s a little vacation time involved, but nonetheless, we will continue on our course and look forward to talking to you for the next call. Thanks.

Conference Operator: Thank you. Ladies and gentlemen, the conference of Chatham Lodging Trust has now concluded. Thank you for your participation. You may now disconnect your lines.

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