5 Hotel REITs Crushing Estimates This Week

After three difficult years beginning with the onset of the COVID-19 pandemic, hotel real estate investment trusts (REITs) are headed to better times. Earnings are improving and hotels have been slowly but surely increasing dividends that were either cut or suspended in 2020.

Hotel REITs, like many other REIT subsectors, touched 2023 lows at the end of October. But since then, many in the hotel subsector have been on fire, with total gains among several of them between 25% and 50%.

This week, several hotel REITs reported fourth-quarter 2023 operating results that beat the estimates on both funds from operations (FFO) and revenue. Take a look at five hotel REITs that caught analysts by surprise and could have more room to appreciate:

Park Hotels & Resorts Inc. PK is a Tysons, Virginia-based hotel REIT with more than 26,000 rooms in 43 hotels and resorts in 25 prime U.S. markets with high barriers to entry. Hawaii properties account for 36% of its portfolio. Park Hotels is a small-cap stock with a market cap of $3.35 billion.

Park Hotels was established as an independent company in January 2017 following its spinoff from Hilton Hotels & Resorts. In September 2019, Park acquired Chesapeake Lodging Trust to add premium-brand hotels and resorts in prime markets such as Miami, Boston, Los Angeles and San Francisco.

On Feb. 27, Park Hotels reported its fourth-quarter operating results. Adjusted FFO (AFFO) of $0.52 per share beat the analyst estimate of $0.49 per share and was 15.56% above AFFO of $0.45 per share in the fourth quarter of 2022. Revenue of $657 million beat the estimate of $648.88 million but was slightly below revenue of $665 million in the fourth quarter of 2022.

Park Hotels also expects full-year (FY)2024 FFO in a range between $2.02-$2.22 per share. That would give it a midpoint of $2.12 per share, above the estimate of $2.10 per share. 

Chatham Lodging Trust CLDT is a West Palm Beach, Florida-based hotel REIT that primarily invests in upscale, extended-stay and premium branded, select-service hotels in major U.S. markets. Chatham's portfolio consists of 38 hotels with 5,735 rooms across 16 states and Washington, D.C.

On Feb. 27, Chatham Lodging reported its fourth-quarter operating results. AFFO of $0.19 per share beat the consensus estimate of $0.15 per share by 26.67% but was slightly below AFFO of $0.20 per share in the fourth quarter of 2022. Revenue of $72.28 million beat the estimate of $70.69 million and topped the revenue of $70.32 million in the fourth quarter of 2022.

But Chatham may fall a bit short on FY 2024 guidance. It expects AFFO of $0.10-$0.14 per share, but the Street was expecting $0.16 per share.

RLJ Lodging Trust RLJ is a Bethesda, Maryland-based hotel REIT that owns 96 premium-branded hotels with approximately 21,200 rooms across 23 states and Washington, D.C. Its brands include Marriott, Hilton Garden Inn, Embassy Suites and Hyatt.

On Feb. 26, RLJ Lodging reported its fourth-quarter operating results. FFO of $0.34 per share beat the estimates of $0.33 per share and was in line with FFO in the fourth quarter of 2022. Revenue of $319.71 million beat the estimates of $314.28 million and was above revenue in the fourth quarter of 2022 of $302.19 million.

RLJ also came in just shy of expectations on FY 2024 FFO, with a range of $1.55-$1.75 per share, with a midpoint of $1.65 per share. The Street was looking for $1.67 per share.

Sunstone Hotel Investors Inc. SHO is an Aliso Viejo, California-based hotel REIT with 6,675 rooms in 14 hotels on both U.S. coasts and Hawaii. Its hotel brands include Hyatt Regency, Marriott, Hilton and Four Seasons.

On Feb. 23, Sunstone Hotel Investors reported its fourth-quarter operating results. FFO of $0.19 per share beat the estimate of $0.17 per share but was below $0.26 per share FFO in the fourth quarter of 2022. Revenue of $219.22 million was ahead of estimates of $216.84 million, but below revenue of $244.41 million in the fourth quarter of 2022.

Sunstone also announced its FY 2024 AFFO in a range from $0.78-$0.90. A Street estimate was not available. 

Ryman Hospitality Properties Inc. RHP is a Nashville, Tennessee-based hotel REIT that specializes in large upscale convention center resorts and entertainment venues.

Its portfolio of nine hotels includes over 11,400 rooms and almost 3 million square feet of meeting spaces. Ryman also has a 70% controlling ownership interest in Opry Entertainment Group, which owns the Grand Ole Opry and other entertainment attractions.

On Feb. 22, Ryman Hospitality reported its fourth-quarter operating results. FFO of $2.08 per share beat the estimate of $1.97 per share. Revenue of $633.06 million was ahead of estimates for $622.44 and was an 11.28% increase from revenue of $568.88 million in the fourth quarter of 2022.

Full-year 2024 AFFO guidance of $7.60-$8.20 per share was announced, with a midpoint of $7.90 per share, well below the Street's estimate of $8.14 per share.

Over the past four months, Ryman Hospitality has surged 44.8%, from a low of $81.09 to its recent close at $117.44. Even with guidance coming in shy, there could still be some rally to come in Ryman shares.

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