Chatham Lodging Trust Q3 Earnings Call Highlights

Key Points

• Third-quarter performance improved: RevPAR rose 8.3% to a record $161, occupancy reached 83%, and hotel EBITDA margin expanded 190 basis points to 38.7%.
• Silicon Valley led growth: RevPAR at the company’s four hotels there increased 23%, while hotel EBITDA rose 51%; management said restoring Sunnyvale RevPAR to 2019 levels could add $4 million to $5 million in FFO.
• Chatham raised its outlook: It forecast 2026 adjusted FFO of $1.38–$1.40 per share, above its original $1.09 guidance, and expects about $25 million in free cash flow after dividends and capital spending.

Chatham Lodging Trust NYSE: CLDT reported higher third-quarter revenue per available room and profit margins as business travel demand strengthened, particularly at its Silicon Valley hotels. The hotel owner also raised its full-year adjusted funds from operations outlook above its original forecast.

Revenue per available room, or RevPAR, rose 8.3% in the third quarter to a record $161, while portfolio occupancy reached 83%, its highest quarterly level since 2019. Adjusted FFO was $0.46 per share, adjusted EBITDA was $31.9 million and hotel EBITDA totaled $35 million, Chief Financial Officer Jeremy Wegner said on the Nov. 5 earnings call.

Hotel EBITDA margin increased 190 basis points to 38.7%, and gross operating profit margin rose 110 basis points to 44.7%. Chairman and Chief Executive Officer Jeff Fisher said business travel was the biggest driver of the quarter’s results and represents approximately 75% of the company’s EBITDA.

Silicon Valley Leads Growth

RevPAR at Chatham’s four Silicon Valley hotels jumped 23% to $174, adding 250 basis points to the company’s overall third-quarter RevPAR growth, Fisher said. Occupancy at those hotels reached 85%, and Fisher said that as occupancy rises above 80%, the company has more room to increase average daily rates.

Chief Operating Officer Dennis Craven said the Silicon Valley hotels’ gross operating profit rose 39% and hotel EBITDA increased 51% year over year. Hotel EBITDA margin rose 740 basis points to nearly 43%; a property tax refund contributed approximately 80 basis points of that improvement.

Fisher said year-to-date RevPAR at the two Sunnyvale hotels remained approximately 18% below 2019 levels. Returning those hotels to their pre-pandemic RevPAR would add an estimated $4 million to $5 million of FFO, or $0.08 to $0.10 per share, he said.

Craven said Silicon Valley occupancy still has room to grow, noting that the hotels operated at occupancy levels in the 80% to 90% range, and sometimes higher, before the pandemic, especially in the second and third quarters. The market typically slows from mid-November to mid-February, he said.

Acquired Hotels and Expense Controls

The six-hotel Midwest portfolio acquired in March generated 9.8% RevPAR growth and $3 million of hotel EBITDA in the third quarter, Wegner said. Fisher said the approximately $100 million portfolio outperformed Chatham’s broader holdings on RevPAR growth and gross operating profit margins during the quarter and year to date.

Across the portfolio, approximately 85% of hotels generated RevPAR growth and 80% increased average daily rates, Craven said. Thirteen of the company’s 39 hotels posted double-digit RevPAR gains.

Craven attributed margin gains in part to expense management and higher profits from sources outside room rentals. Other operating department profit increased approximately $700,000, or 23%, to $3.9 million. Parking profit rose 12%, while cancellation fees nearly doubled to almost $500,000, helped by collection efforts and automation.

Labor and benefits costs per occupied room increased 2.9%. Craven said the company also reduced several expenses as a share of revenue, including repairs and maintenance, utilities, property taxes and insurance.

Outlook and Capital Spending

Chatham expects full-year 2026 RevPAR growth of 4% to 4.5%, adjusted EBITDA of $104.2 million to $105.3 million and adjusted FFO of $1.38 to $1.40 per share. Fisher said the midpoint of the FFO forecast is 28% above the company’s original guidance of $1.09 per share.

Wegner said RevPAR increased 7.9% in October, and the company expects fourth-quarter growth of approximately 3.5% to 4%. Craven described the outlook for November and December as conservative, citing seasonal slowing in Silicon Valley and a renovation at the Residence Inn San Diego Gaslamp.

The company expects approximately $25 million of free cash flow in 2026 after dividends and maintenance and renovation capital expenditures. Wegner said that would allow Chatham to fund its Home2 Suites Portland development with virtually no incremental borrowing. The hotel is expected to open in 2028.

Craven said one hotel was under contract for sale for approximately $11.5 million and could close before year-end if completed. The company spent approximately $17 million on capital expenditures through the first nine months and expects a full-year budget of about $27 million.

Looking toward 2027, Fisher said some of this year’s outperformance reflected weaker prior-year comparisons, including government shutdowns. Still, he said strong business travel demand and the continued recovery in Silicon Valley support the company’s outlook. Craven said Chatham expects to renovate roughly five hotels a year over the next several years, staggering work at its major Silicon Valley properties.

About Chatham Lodging Trust (NYSE:CLDT)

Chatham Lodging Trust was a real estate investment trust that owned and operated upscale hotels and premium-branded select-service hotels in the United States. Its portfolio included properties affiliated with nationally recognized hotel brands, serving business and leisure travelers in urban, suburban and resort-oriented markets.

The company's lodging portfolio included full-service and select-service hotels operating under brands such as Hilton, Marriott and Hyatt. Chatham focused on acquiring, owning and enhancing hotel properties, while working with third-party management companies to oversee day-to-day operations.

Founded in 2009 and based in New York, Chatham Lodging Trust became a publicly traded company on the New York Stock Exchange in 2010.

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