Pebblebrook Earnings: Reopening LaPlaya Beach Resort Leads to Better-Than-Anticipated Results

First-quarter results for no-moat Pebblebrook Hotel Trust were slightly better than we anticipated, giving us confidence in our $26 fair value estimate. Same-store occupancy was up 3.2% year over year to 61.3%, though that is still far below the 74% reported for the same portfolio in the first quarter of 2019. Average daily rate declined for the fifth straight quarter, down 1.5% year over year, as renovations across many resort properties have negatively affected performance. However, nearly all of the renovations are complete, and performance should be better as business ramps back up for the hotels. As a result, revenue per available room was up 1.7%, in line with our 1.9% growth estimate, and revenue was up 2.5% for the same-store portfolio. Hotel operating expenses were up slightly more, growing 3.8%. This led to operating margin falling 90 basis points to 20.3%, though that was in line with our estimate for the quarter. Pebblebrook reopened the LaPlaya Beach Resort & Club in March; operating results were better than we anticipated, and the company also received $4 million in business interruption proceeds for the hotel. This helped drive adjusted funds from operation to $0.21 per share for the first quarter, $0.06 better than our $0.15 estimate.