High Expense Growth Overshadows Pebblebrook's Revenue Growth in Q4 Results and First-Quarter Outlook

Fourth-quarter results for Pebblebrook were below our expectations, though we didn’t see anything in the quarter that would materially change our $27.50 fair value estimate. The company reported occupancy of 60.1% for the quarter, which is better than the 53.0% level reported in the fourth quarter of 2021 but still significantly below the 77.2% level reported in the fourth quarter of 2019. The average daily rate grew 10.8% year over year and 18.4% over the fourth quarter of 2019. As a result, revenue per available room grew 25.6% year over year, which was slightly below our estimate of 29.7% growth. However, operating expenses grew 29.2% in the quarter, leading to EBITDA margins falling 80 basis points to 21.0%, which was well below our estimate of EBITDA margins of 25.6%. Therefore, Pebblebrook reported adjusted funds from operations of $0.20 per share in the fourth quarter that was an improvement over the $0.08 figure reported in the fourth quarter of 2021 but missed our $0.31 estimate for the current quarter.