Xenia Hotels & Resorts, Inc. (NYSE: XHR) today announced results for the quarter ended September 30, 2019.
Third Quarter 2019 Highlights
- Net Income: Net income attributable to common stockholders was $10.3 million and net income per diluted share was $0.09.
- Same-Property RevPAR: Same-Property RevPAR was $164.25, an increase of 2.5% compared to the third quarter of 2018, as a result of a 140 basis point increase in occupancy and a 0.6% increase in ADR.
- Same-Property Hotel EBITDA Margin: Same-Property Hotel EBITDA Margin was 25.2%, which was a decline of 16 basis points compared to the third quarter of 2018.
- Total Portfolio RevPAR: Total Portfolio RevPAR was $164.25, a 5.4% increase compared to the third quarter of 2018.
- Adjusted EBITDAre: Adjusted EBITDAre grew $2.0 million to $62.6 million, an increase of 3.4% compared to the third quarter of 2018.
- Adjusted FFO per Diluted Share: Adjusted FFO per diluted share was $0.47, a $0.01 increase compared to the third quarter of 2018.
- Financing Activity: The Company amended its existing $125 million unsecured term loan maturing in September 2024 to lower its borrowing cost.
- Dividends: The Company declared its third quarter dividend of $0.275 per share to common stockholders of record on September 30, 2019.
"Strong RevPAR growth in our portfolio in July and August contributed to a solid quarter from a top-line and bottom-line perspective, resulting in a 2.5% Same-Property RevPAR increase and a 3.4% increase in Adjusted EBITDAre for the quarter," commented Marcel Verbaas, Chairman and Chief Executive Officer of Xenia. "Strength in transient room demand throughout our portfolio helped offset weaker group contributions, particularly in food and beverage revenues, where we faced difficult comparisons to significant growth in the third quarter last year. We remain pleased with the results of our focus on expense controls, as our Same-Property Hotel EBITDA Margin contracted by only 16 basis points on a Total Same-Property Revenue increase of 1.6%. Our operators continue to find efficiencies in the rooms and food and beverage departments, helping offset increases in fixed expenses that continue to put pressure on operating margins. These efforts resulted in an increase of only 1.8% in Same-Property hotel operating expenses, despite taxes and insurance increasing by 8.4% for the quarter, an outstanding result in this challenging operating environment."
Year to Date 2019 Highlights
- Net Income: Net income attributable to common stockholders for the nine months ended September 30, 2019 was $39.8 million and net income per diluted share was $0.35.
- Same-Property RevPAR: Same-Property RevPAR was $171.85, an increase of 2.6% compared to the nine months ended September 30, 2018, as ADR increased 1.3% and occupancy increased 100 basis points.
- Same-Property Hotel EBITDA Margin: Same-Property Hotel EBITDA Margin was 28.4%, an increase of 39 basis points compared to the nine months ended September 30, 2018.
- Total Portfolio RevPAR: Total Portfolio RevPAR was $171.85, a 4.7% increase year over year, reflecting portfolio performance and upgrades to overall portfolio quality as a result of transactions that were completed in 2018.
- Adjusted EBITDAre: Adjusted EBITDAre was $230.1 million, an increase of 2.7% from 2018.
- Adjusted FFO per Diluted Share: The Company generated Adjusted FFO per diluted share of $1.62, a $0.02 decrease compared to 2018, reflecting a 3.0% increase in Adjusted FFO offset by a higher weighted average share and unit count.
"As we near the end of 2019, we are pleased with the results of our strategic portfolio improvements, as reflected in our year to date performance," said Mr. Verbaas. "A 2.6% Same-Property RevPAR increase during the first nine months of the year and a 39 basis point improvement in Same-Property Hotel EBITDA Margin, are noteworthy achievements. Additionally, our efforts to continually enhance the competitive positioning and quality of our portfolio have resulted in an increase of our Total Portfolio RevPAR by 4.7% compared to the first three quarters of last year, and an improvement in our portfolio's STR RevPAR Index of over 300 basis points during the same time frame. While we remain cautious in our near-term outlook, we continue to believe strongly in the long-term growth prospects for our well-located, diversified, and high quality portfolio."
Operating Results
The Company's results include the following:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
| 2019 | 2018 | Change | 2019 | 2018 | Change | ||||||||||||||||
| ($ amounts in thousands, except hotel statistics and per share amounts) | |||||||||||||||||||||
| Net income attributable to common stockholders(1) | $ | 10,315 | $ | 9,244 | 11.6 | % | $ | 39,791 | $ | 93,695 | (57.5) | % | |||||||||
| Net income per share available to common stockholders - diluted | $ | 0.09 | $ | 0.08 | 12.5 | % | $ | 0.35 | $ | 0.85 | (58.8) | % | |||||||||
| Same-Property Number of Hotels | 40 | 40 | — | 40 | 40 | — | |||||||||||||||
| Same-Property Number of Rooms | 11,167 | 11,165 | 2 | 11,167 | 11,165 | 2 | |||||||||||||||
| Same-Property Occupancy(2) | 76.8 | % | 75.4 | % | 140 | bps | 77.3 | % | 76.3 | % | 100 | bps | |||||||||
| Same-Property Average Daily Rate(2) | $ | 213.94 | $ | 212.64 | 0.6 | % | $ | 222.45 | $ | 219.64 | 1.3 | % | |||||||||
| Same-Property RevPAR(2) | $ | 164.25 | $ | 160.27 | 2.5 | % | $ | 171.85 | $ | 167.48 | 2.6 | % | |||||||||
| Same-Property Hotel EBITDA(2)(3) | $ | 67,751 | $ | 67,077 | 1.0 | % | $ | 246,379 | $ | 237,114 | 3.9 | % | |||||||||
| Same-Property Hotel EBITDA Margin(2)(3) | 25.2 | % | 25.3 | % | (16) | bps | 28.4 | % | 28.0 | % | 39 | bps | |||||||||
| Total Portfolio Number of Hotels(4) | 40 | 40 | — | 40 | 40 | — | |||||||||||||||
| Total Portfolio Number of Rooms(4) | 11,167 | 11,239 | (72) | 11,167 | 11,239 | (72) | |||||||||||||||
| Total Portfolio RevPAR(5) | $ | 164.25 | $ | 155.88 | 5.4 | % | $ | 171.85 | $ | 164.13 | 4.7 | % | |||||||||
| Adjusted EBITDAre(3) | $ | 62,579 | $ | 60,547 | 3.4 | % | $ | 230,123 | $ | 224,127 | 2.7 | % | |||||||||
| Adjusted FFO(3) | $ | 53,330 | $ | 51,356 | 3.8 | % | $ | 184,848 | $ | 179,459 | 3.0 | % | |||||||||
| Adjusted FFO per diluted share | $ | 0.47 | $ | 0.46 | 2.2 | % | $ | 1.62 | $ | 1.64 | (1.2) | % | |||||||||
| (1) | Net income for the nine months ended September 30, 2019 reflects the impact of a $15 million impairment on one property. Net income for the nine months ended September 30, 2018 includes a gain on sale of investment properties of $42 million. |
| (2) | "Same-Property" includes all hotels owned as of September 30, 2019. "Same-Property" includes periods prior to the Company's ownership of The Ritz-Carlton, Denver, Fairmont Pittsburgh, Park Hyatt Aviara Resort, Golf Club & Spa, and Waldorf Astoria Atlanta Buckhead. "Same-Property" also includes renovation disruption for multiple capital projects during the periods presented and natural disaster disruption at multiple properties. The pre-acquisition operating results were obtained from the seller and/or the manager of the hotels during the acquisition due diligence process. We have made no adjustments to the historical operating amounts provided to us by the seller and/or the manager, other than to reflect the removal of historical intercompany lease revenue/expense or any other items that are not applicable to us under our ownership. The pre-acquisition operating results are not audited or reviewed by our independent auditors. Pre-acquisition operating results for periods prior to the Company's ownership have not been included in the Company's actual condensed consolidated financial statements and are included only in "Same-Property" for comparison purposes. |
| (3) | See tables later in this press release for reconciliations from net income to Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate ("EBITDAre"), Adjusted EBITDAre, Funds From Operations ("FFO"), Adjusted FFO, and Same-Property Hotel EBITDA. EBITDA, EBITDAre, Adjusted EBITDAre, FFO, Adjusted FFO, Same-Property Hotel EBITDA, and Same-Property Hotel EBITDA Margin are non-GAAP financial measures. |
| (4) | As of end of periods presented. |
| (5) | Results of all hotels as owned during the periods presented, including the results of hotels sold or acquired for the actual period of ownership by the Company. |
Hurricane Dorian Impact
Third quarter and year to date 2019 operating results were negatively impacted by Hurricane Dorian, which disrupted operations at several of the Company's properties in early September. The Company's hotels in Savannah, Georgia and Charleston, South Carolina were impacted by mandatory evacuations in these areas. Additionally, the Company's properties in Key West and Orlando, Florida experienced cancellations as a result of the storm. The Company estimates the impact was approximately $1 million to total revenues and approximately $0.5 million to Hotel EBITDA for the three and nine months ended September 30, 2019. None of the impacted properties experienced property damage exceeding their deductibles. The Company does not expect to recover proceeds for business lost as a result of the storm.
Financings and Balance Sheet
During the quarter the Company repriced its $125 million unsecured term loan maturing in September 2024 to reduce the leverage-based pricing grid. The term loan now bears an interest rate based on a pricing grid with a range of 135 to 200 basis points over LIBOR as determined by the Company's leverage ratio, a reduction of 35 to 55 basis points from the previous leverage-based grid. The Company previously fixed LIBOR on the loan through September 2022 at 1.92%, resulting in a current annual interest rate of 3.27%.
As of September 30, 2019, the Company had total outstanding debt of $1.2 billion with a weighted average interest rate of 3.74%. Over 80% of the Company's debt has interest rates which are fixed or have been hedged to fixed. In addition, the Company had $116 million of cash and cash equivalents, and full availability on its $500 million unsecured credit facility. Total net debt to trailing twelve month Corporate EBITDA (as defined in Section 1.01 of the Company's unsecured credit facility) was 3.4x as of September 30, 2019.
Capital Markets
During the three and nine months ended September 30, 2019, the Company did not issue any shares of its common stock through its At-The-Market ("ATM") program. As of September 30, 2019, the Company had approximately $62.6 million remaining available for sale under the ATM program.
Additionally, the Company did not repurchase any shares under its existing share repurchase authorization during the three and nine months ended September 30, 2019. As of September 30, 2019, the Company had approximately $96.9 million remaining under its share repurchase authorization.
Capital Expenditures
During the three and nine months ended September 30, 2019, the Company invested $26 million and $63 million in its portfolio, respectively. The Company completed several projects during the quarter including renovations of the casitas and suites at Hyatt Regency Scottsdale Resort & Spa at Gainey Ranch, the renovation of the Alvadora Spa at Royal Palms Resort & Spa, the renovation of the Daily Grill restaurant at Westin Galleria Houston, the final phase of the meeting space renovation at Marriott Woodlands Waterway Hotel, as well as the renovation of the TusCA restaurant and creation of a new Regency Club as part of a complete renovation of the lobby level at Hyatt Regency Santa Clara.
At Hyatt Regency Grand Cypress, the Company completed the renovation of Hemingway's, the signature restaurant at the property, and continued construction on the new 25,000 square foot ballroom at the resort during the quarter. The new facility, which is expected to cost approximately $32 million, is scheduled to be completed by late November.
During the quarter, the Company continued with the design and planning of the $50 million to $60 million comprehensive renovation of Park Hyatt Aviara Resort, Golf Club & Spa. Purchase orders for the guestrooms and meeting space renovations have been issued, with each scheduled to begin by late November and expected to be completed during the first half of 2020. The remaining components, include a major renovation of the exterior, including the pool amenities and exterior function spaces, lobby, restaurant, and bar renovations, as well as the redevelopment of the golf course and clubhouse improvements.
2019 Outlook and Guidance
The Company has updated its outlook for 2019 based on third quarter performance and the current economic environment. This outlook incorporates current anticipated disruption to revenues from renovations and does not assume any acquisitions, dispositions, equity or debt offerings, or share repurchases. Same-Property RevPAR change includes all 40 hotels owned as of October 31, 2019.
| 2019 Guidance | Variance to Prior Guidance | |||||||||||||||
| Low End | High End | Low End | High End | |||||||||||||
| ($ amounts in millions, except per share data) | ||||||||||||||||
| Net Income | $58 | $64 | $5 | $1 | ||||||||||||
| Same-Property RevPAR Change | 1.5% | 2.0% | 0.5% | (0.5)% | ||||||||||||
| Adjusted EBITDAre | $295 | $301 | $2 | $(2) | ||||||||||||
| Adjusted FFO | $243 | $249 | $2 | $(2) | ||||||||||||
| Adjusted FFO per Diluted Share | $2.12 | $2.18 | $0.02 | $(0.02) | ||||||||||||
| Capital Expenditures | $89 | $99 | $1 | $(3) | ||||||||||||
Additional guidance assumptions:
- Disruption due to renovations is expected to negatively impact Same-Property RevPAR Change by approximately 20 basis points.
- General and administrative expense of approximately $21 million, excluding non-cash share-based compensation, which is a $1 million reduction to prior guidance.
- Interest expense of approximately $47 million, excluding non-cash loan related costs.
- Income tax expense of approximately $5 million.
- 114.4 million weighted average diluted shares/units.
About Xenia Hotels & Resorts, Inc.
Xenia Hotels & Resorts, Inc. is a self-advised and self-administered REIT that invests primarily in uniquely positioned luxury and upper upscale hotels and resorts, with a focus on the top 25 U.S. lodging markets as well as key leisure destinations in the United States. The Company owns 40 hotels comprising 11,167 rooms across 17 states. Xenia's hotels are primarily in the luxury and upper upscale segments, and operated and/or licensed by industry leaders such as Marriott, Hyatt, Kimpton, Fairmont, Loews, and Hilton, as well as leading independent management companies including The Kessler Collection, Sage Hospitality, and Davidson Hotels & Resorts.