Pebblebrook's Hotel Portfolio Nears Prepandemic Levels of RevPAR and EBITDA Margins in Q2

Second-quarter results for no-moat Pebblebrook Hotel Trust came in ahead of expectations, though we anticipate materially changing our $26.50 fair value estimate. Occupancy was 69.4% in the second quarter, which is well ahead of the 42.4% figure reported in the second quarter of 2021 but remains below the 86.7% prepandemic level reported in the second quarter of 2019. However, rising demand combined with inflation sent average daily rate up 23.4% year over year and up 18.7% over the second quarter of 2019. As a result, revenue per available room increased 101%, slightly better than our estimate of 79% growth, and is now just 5.0% below the level reported in the second quarter of 2019. EBITDA margins also improved to 35.1%, better than our 25.3% estimate and the 22.0% number reported in the second quarter of 2021. Despite occupancy remaining 20% below prepandemic levels, Pebblebrook has been able to realize enough cost efficiencies over the past few years that EBITDA margins are just 80 basis points below the second quarter of 2019 figure of 35.9%. Pebblebrook reported adjusted funds from operations of $0.72 in the quarter, and while that remains below the $0.87 figure reported in the second quarter of 2019, it is far better than the $0.10 AFFO loss reported in 2021.