Chatham Lodging Trust (CLDT) 7 Nov 24 2024 Q3 Earnings call transcript

Chatham Lodging Trust's Q3 2024 earnings call painted a picture of a company making strategic moves to enhance its portfolio and financial position while navigating a recovering hospitality sector. The call highlighted key themes of asset sales, liquidity management, and solid financial performance.

Asset Sales and Portfolio Enhancement

Chatham Lodging Trust announced its intent to sell five hotels, with a goal of generating approximately $80 million in proceeds. The hotels, which are among the lower-performing assets in the portfolio, are expected to provide the company with funds to pay down debt and invest in new properties. This strategy of recycling capital to invest in higher-performing assets underscores Chatham's focus on enhancing its portfolio quality and growth profile.

Liquidity and Financial Position

The company reported a strong liquidity position, with a low debt maturity profile and a move towards floating rate debt. This strategy positions Chatham to benefit from declining interest rates, potentially increasing its FFO. The company's FFO is projected to increase by approximately $2.6 million for every 100 basis points decline in SOFR, highlighting the potential financial upside from this move.

Solid Financial Performance

Chatham Lodging Trust reported solid financial performance in Q3 2024, with EBITDA and FFO near the top of its guidance range. The company's RevPAR growth exceeded industry and peer performance, a testament to its ability to outperform despite the ongoing recovery from the pandemic. Chatham's RevPAR growth was driven by a combination of strong ADR and occupancy, with the latter showing particular improvement.

Looking Ahead

The call also shed light on Chatham's outlook for the future, with a focus on continued portfolio enhancement and capital recycling. The company's strategic initiatives, including asset sales and potential acquisitions, are aimed at creating free cash flow and lowering the average age of its portfolio. Chatham's strong financial position, coupled with its strategic focus, positions it well for continued growth and success in the hospitality sector.

In conclusion, Chatham Lodging Trust's Q3 2024 earnings call underscored the company's strategic initiatives and solid financial performance. With a focus on portfolio enhancement, liquidity management, and continued growth, Chatham is well-positioned to navigate the recovering hospitality sector and capitalize on opportunities in the market.