Shifting Trends In Luxury Travel: Analyst Foresees Challenges For Braemar Amid Economic Concerns And RevPAR Declines

B. Riley Securities analyst Bryan Maher downgraded Braemar Hotels & Resorts Inc. BHR to Neutral from Buy, lowering the price target from $7.00 to $3.50.

The analyst cautioned about the company's prolonged RevPAR (revenue per available room) softness at many of Braemar's ten luxury resort hotels and uncertainty surrounding ~$400.0 million in remaining 2024 debt maturities.

In 2Q23 end, Braemar had total assets of $2.3 billion and $1.1 billion of loans. Braemar finished the quarter with $128.0 million in cash/ equivalents.

In 2Q23, resort RevPAR declined 11.4%, admittedly off of significantly elevated 2H21 and 2022 levels, as post-COVID revenge travel, coupled with difficulty traveling abroad, led to high room demand at Braemar's luxury resort hotels.

Maher notes that some affluent travelers have begun to trim spending due to economic concerns, which does not bode well for the U.S. luxury resort segment. 

While Braemar's six urban hotels have recently seen RevPAR ramp, up 12.2% in 2Q23, the analyst doesn't believe this will be strong enough in 2024 to keep Braemar's RevPAR in the black. The analyst forecasts a 3.4% Y/Y RevPAR decline for 2024.

With RevPAR softening and capital markets headwinds to deal with, the analyst forecasts the shares to be range-bound over the next 12-18 months.

Based on the above, the analyst lowered FY23 adjusted EBITDA estimates from $186.8 million to $183.6 million, FY24 adjusted EBITDA estimates from $177.4 million to $171.0 million, and FY25 adjusted EBITDA estimates from $179.8 million to $171.5 million.

Price Action:  BHR shares are trading lower by 6.19% to $2.73 on the last check Monday.