Pebblebrook Swings to Profit and Raises Outlook
Same-property RevPAR rose 6.5% as stronger resort and transient demand offset weakness in several urban markets.
Pebblebrook Hotel Trust (PEB), the hotel real-estate investment trust, swung to second-quarter net income of $24.9 million from a first-quarter loss of $18.4 million as higher room rates and occupancy lifted property results.
The quarter extended Pebblebrook’s recovery while signaling a slower pace ahead. Same-property RevPAR growth eased from 11.8% in the first quarter, and the company forecast a further moderation in the third quarter.
Net income rose 29.2% from $19.3 million a year earlier. Adjusted funds from operations increased 4.6% to $0.68 a diluted share, compared with 100% growth in the first quarter, while free cash flow rose 24.4% to $0.56 a diluted share.
Same-property revenue increased 4.8% and expenses rose 3.8%, helping Hotel EBITDA climb 7.1% to $123.3 million and expanding the margin by 67 basis points. Adjusted EBITDAre declined 0.7% to $116.2 million, reversing a 29.5% first-quarter increase.
Higher-rated transient demand drove the room gains, with transient revenue rising nearly 10% on a 7% increase in average daily rate. Group revenue slipped and urban banquet and catering revenue fell 20%, leaving Total RevPAR growth of 4.7% below room RevPAR growth. Resort RevPAR accelerated to 12.0%, and resort Hotel EBITDA rose 18.5%.
Urban performance was uneven. San Francisco RevPAR growth slowed to 16.0% and Los Angeles eased to 8.6%, while Pebblebrook’s urban San Diego hotels posted a 9.1% decline because of a weaker convention calendar. Washington, D.C., RevPAR fell 9.9% amid continued weakness in government-related demand.
Pebblebrook now expects 2026 same-property Total RevPAR growth of 4.1% to 5.3%, raising the midpoint by 70 basis points from its previous outlook. It projects Adjusted EBITDAre of $345 million to $353 million and adjusted FFO of $1.69 to $1.76 a share. Third-quarter same-property RevPAR is expected to rise 1.0% to 3.0%.
The company also cut property-insurance premiums 27%, generating $6.1 million of annual savings through May 2027. Net debt fell to 5.3 times trailing corporate EBITDA from 5.5 times after the first quarter, while cash and restricted cash increased to $270.4 million.