Pebblebrook Earnings: Despite EBITDA Decline, Occupancy Gains Drive Better-Than-Anticipated Results

Third-quarter results for no-moat Pebblebrook Hotel Trust were slightly better than anticipated, giving us confidence in our $25.50 fair value estimate. Same-store occupancy increased to 78.5% compared with 75.4% in the third quarter of 2023. While average daily rate fell 1.9% year over year, the occupancy gain drove revenue per available room growth of 2.2%, which was better than our estimate of 0.5% growth. However, hotel operating expenses were up 4.3% in the quarter, leading to hotel EBITDA margins falling 100 basis points to 28.2% and hotel EBITDA declining 1.0% year over year, though that is better than our estimate of a 7.9% decline in hotel EBITDA. As a result, Pebblebrook reported adjusted funds from operations of $0.59 per share in the third quarter, and while that is down two cents from the $0.61 figure reported in the third quarter of 2023, it is better than our $0.50 estimate.