Pebblebrook Earnings: Company Reports Occupancy Gains, Strategic Dispositions, and Share Repurchase

Pebblebrook reported first-quarter results that were slightly better than our expectations, leading us to reaffirm our $27 fair value estimate for the no-moat company. Occupancy improved to 58.0% in the first quarter from 48.5% in the first quarter of 2022. However, same-store average daily rate fell 0.8% year over year. Daily rate almost never declines for hotels except when the economy is in a recession and hotels are forced to cut rates to stem occupancy losses. Management explained that resort properties are no longer able to achieve the rate premiums they were charging in 2022 due to softer leisure demand but that urban properties continue to see strong rate growth. Still, the occupancy gains were enough to drive revenue per available room growth of 18.5%, slightly better than our estimate of 17.7%. EBITDA margins improved 30 basis points year over year to 20.5%, leading to same-property EBITDA growth of 25.3% that beat our estimate of 21.4% growth. Therefore, Pebblebrook reported adjusted funds from operations of $0.18 per share in the first quarter that beat our $0.12 estimate.