Pebblebrook Earnings: Hotel EBITDA Declines Due to Tough 2022 Comparison

While hotel operations for Pebblebrook declined year over year in the second quarter, the decline was smaller than we had anticipated, leading us to reaffirm our $27 fair value estimate. Occupancy improved to 73.2% in the second quarter compared with 70.0% in the second quarter of 2022. However, the average daily rate fell 4.5% year over year. As a result, revenue per available room remained flat in the second quarter, slightly worse than our estimate of 2.8% growth. However, same-store operating expenses increased 8.0% in the quarter, leading to EBITDA margins falling 370 basis points to 30.1%, in line with our estimate. Same-store EBITDA for the hotel portfolio was down 12.9% in the second quarter, slightly better than our estimate of a 14.8% decline. The company repurchased an additional 3.6 million shares in the second quarter. Therefore, while the decline in hotel operations led to adjusted funds from operations falling 13.9% to $0.62 per share in the second quarter, the lower share count led to the company beating our $0.56 estimate.