Pebblebrook Hotel Trust's 2025 Earnings Call: Active Asset Sales vs. Paused Market, Los Angeles Outlook Shifts from Optimism to Caution

Date of Call: Feb 26, 2026

Financials Results

• Revenue: Same-property total RevPAR increased 2.9% in Q4; full year RevPAR growth not specified.
• EPS: Adjusted FFO per share was $0.27, up $0.07 and 35% higher than Q4 2024.
• Gross Margin: Not explicitly provided.
• Operating Margin: Not explicitly provided; expenses grew 2.6% vs. 2.9% revenue growth in Q4, supporting modest margin expansion.

Guidance:

• Q1 RevPAR growth expected at 7.5% to 9%, with total RevPAR growing 6% to 7.5%.
• Full year RevPAR growth forecast at 2% to 4%, with total RevPAR growth of 2.25% to 4.25%.
• Same-property EBITDA expected to increase 2.1% to 6% (midpoint at 4%).
• 2026 capital investments forecast at $65 million to $75 million.
• LaPlaya Beach Resort EBITDA forecast at $28 million to $30 million.
• Corporate cash G&A expected to decline modestly.

Business Commentary:

Strong Financial Performance Despite Disruptions:

• Pebblebrook Hotel Trust reported same-property total RevPAR increased 2.9% and same-property hotel EBITDA grew 3.9% to $64.6 million in Q4 2025, exceeding expectations despite government shutdown disruptions.
• The growth was driven by continued strength in San Francisco and better-than-expected performance in Boston, Chicago, and recently redeveloped resorts.

Out-of-Room Revenue and Strategic Management:

• Non-room RevPAR climbed 5.5%, contributing to total RevPAR growth of 2.9% in Q4.
• This was achieved through a revenue management strategy prioritizing occupancy, particularly at resorts, which drives incremental profit from food and beverage, banquets, and catering.

Resort and Urban Market Recovery:

• Resort occupancy increased by 160 basis points, driving total RevPAR up 4.9% and same-property resort EBITDA up 17.4%.
• San Francisco led with a more than 32% increase in total RevPAR, supported by recovery across business, group, convention, and leisure segments.

Cost Control and Efficiency:

• Same-property expenses rose only 2.6% in Q4, supporting modest margin expansion.
• This was due to intense focus on operating efficiencies, including energy cost growth held to roughly 2% and reductions in corporate staffing levels by about 10%.

Capital Investments and Strategic Dispositions:

• Pebblebrook invested $74.6 million in 2025, with weather resiliency improvements and renovations, and expects $65 million to $75 million in 2026.
• The company completed two strategic dispositions for $116 million, using proceeds for debt reduction and share repurchases at attractive discounts.

Sentiment Analysis:

Overall Tone: Positive

• Management expressed excitement about a 'favorable transition point' and 'setup for Pebblebrook for 2026.' They noted stronger-than-expected Q4 growth, urban recovery traction, especially in San Francisco, and a 'robust' 35% FFO per share increase. The outlook is described as 'cautiously optimistic' with 'positive' trends and a 'very strong start' to the year.

Q&A:

• Question from Bennett Rose (Citigroup Inc.): Could you talk about what you're seeing on the group side and the composition of those groups?
  Response: Group room nights are down 0.6% for the year, with softness in government-related segments, but pace is widespread and more realistic due to higher attrition rates compared to last year.

• Question from Richard Hightower (Barclays Bank PLC): What unlevered cash returns are anticipated on the resort portfolio renovations, and what's the ultimate stabilized target?
  Response: Recent resort redevelopments are realizing a 22% to 26% annual cash-on-cash ROI, with the strategic reinvestment program averaging 16% to 17%.

• Question from Cooper Clark (Wells Fargo Securities): Can you walk through the puts and takes in guidance for Q2-Q4 given strong calendar events?
  Response: The conservative guidance for the last three quarters (1% to 2% RevPAR growth) does not account for benefits from events like the World Cup and America250, reflecting caution from last year's disruptions.

• Question from Aryeh Klein (BMO Capital Markets): What are you seeing in the transaction market, and is there potential for more asset sales this year?
  Response: The market is becoming more constructive, with more trades expected as buyer confidence improves; Pebblebrook will continue to sell assets where there is a public-private arbitrage opportunity.

• Question from Michael Bellisario (Robert W. Baird): How do you balance positive performance with potential asset sales and deleveraging?
  Response: Strategy is a dual approach: capitalize on public-private arbitrage by selling assets and using proceeds for debt paydown and share repurchases, while organic EBITDA growth will naturally improve leverage ratios.

• Question from Gregory Miller (Truist Securities): Where do you see Boston's EBITDA growth coming from, given its high occupancy already?
  Response: Boston has significant upside from ancillary and out-of-room revenues, with properties historically running at higher levels than San Francisco, offering substantial operating leverage.

• Question from Chris Darling (Green Street Advisors): How do you balance lower CapEx with potential deferred maintenance or market share loss?
  Response: No deferred capital; ongoing infrastructure and interior investments are maintained regularly, with customer reviews and rankings indicating continued competitive strength and share gains.

Contradiction Point 1

Transaction Market Outlook and Asset Sales Strategy

Contradiction on the market's readiness and the timing for executing asset sales.

Aryeh Klein (BMO Capital Markets Equity Research) - Aryeh Klein (BMO Capital Markets Equity Research)

2025Q4: Will remain an active participant. - Thomas C. Fisher(CFO) & Jon Bortz(CEO)

How are transaction market conditions influencing your portfolio strategy and potential asset sales this year? - Bennett Rose (Citigroup Inc.)

2025Q3: The transaction market is currently paused due to macro uncertainty and government shutdown impacts. - Thomas C. Fisher(CFO)

Contradiction Point 2

Los Angeles Market Performance and Outlook

Contradiction in the expected trajectory and performance drivers for the Los Angeles market in 2026.

Cooper Clark (Wells Fargo Securities, LLC) - Cooper Clark (Wells Fargo Securities, LLC)

2025Q4: Outlook is conservative, especially for the last 9 months of the year, assuming only 1%-2% RevPAR growth. - Jon Bortz(CEO)

Can you explain the trade-offs in Q2-Q4 guidance considering strong calendar events but lower RevPAR, including key factors like leisure trends or group pickup? - Cooper Clark (Wells Fargo Securities, LLC)

2025Q3: Los Angeles is expected to be a better performer in 2026 due to easy comps and a projected recovery in TV/film production. - Jon Bortz(CEO)

Contradiction Point 3

Capital Allocation and Debt Strategy Regarding Asset Sales

Contradiction on the company's reliance and strategy regarding using asset sale proceeds for balance sheet deleveraging.

Michael Bellisario (Robert W. Baird) - Michael Bellisario (Robert W. Baird)

2025Q4: Strategy is dual-fold: create shareholder value via asset sales at discounts and use proceeds for debt paydown and share repurchases. - Jon Bortz(CEO)

How do you balance asset sales and organic growth in achieving balance sheet deleveraging by 2026? - Cooper Clark (Wells Fargo Securities)

2025Q2: The company is actively involved in efforts to influence legislation in both cities (e.g., collecting signatures for a Los Angeles ballot measure to overturn certain laws). The goal is to promote more rational legislation that doesn't unfairly target specific industries. - Jon Bortz(CEO)

Contradiction Point 4

Outlook for Group Demand and Second-Half Economic Uncertainty

Contradiction on whether group demand is already slowing or if the slowdown is a forward-looking concern.

What are your thoughts on the recent earnings results, Bennett Rose of Citigroup? - Bennett Rose (Citigroup Inc.)

2025Q4: Group room nights are down 0.6% for the year... Group bookings are more washed than last year, reflecting attrition trends better. - Jon Bortz(CEO)

Can you discuss the composition of the groups and provide details regarding new participants or demographics? - Jay Kornreich (Wedbush)

2025Q1: The second half outlook adjustment is related to two main factors: 1) The **potential for a pullback in demand** across all segments in response to an economic slowdown... - Jon Bortz(CEO)