Pebblebrook Takes a Cautious Stance on 2025 as Economy and Markets Navigate Uncertainty

Insights from the Earnings Call: Pebblebrook Hotel Trust (PEB) First Quarter 2025

Management View

CEO Jon Bortz emphasized that the first quarter of 2025 saw better-than-expected outcomes, thanks to enhanced operational efficiency, high resort occupancy rates, and improvements in formerly sluggish market segments. Even with difficulties, the earnings before interest, taxes, depreciation, and amortization (EBITDA) for comparable properties amounted to $62.3 million, while the adjusted EBITDA stood at $56.6 million, and the adjusted funds from operations came to $0.16 per share.
Chief Financial Officer Ray Martz highlighted that their success in exceeding performance forecasts was largely due to effective cost management. He explained that expenses increased much less than anticipated, despite revenues staying within the predicted range.
In San Francisco, the firm saw a significant recovery, with Revenue Per Available Room (RevPAR) rising by 13%. This growth was fueled by a better schedule of conventions and a resurgence in travel. Similarly, Washington D.C. demonstrated impressive metrics, as RevPAR climbed by 14.7%, largely attributed to events surrounding the presidential inauguration.
The firm allocated $16.7 million for capital initiatives, which encompassed finishing a $15 million refurbishment of the Hyatt Centric Delfina Santa Monica. Maintaining robust liquidity, they held onto $218 million in cash along with having access to an additional $640 million via their unsecured credit line.

Outlook

The management team updated their forecast for the entire year 2025, adjusting downward and broadening the predicted range as a result of ongoing economic uncertainties. They expect possible strain on demand during the latter part of next year and have adopted a careful stance toward projected income and earnings before interest, taxes, depreciation, and amortization (EBITDA).
CEO Bortz indicated that the forecasts for the latter half of the year are affected by worries regarding an economic downturn and decreased governmental and cross-border travels. He highlighted that the firm continues to concentrate on managing expenses and boosting efficiency.

Financial Results

The same-property total RevPAR rose by 2.1% compared to the previous year, with resorts reporting an increase of 8.2%. However, urban hotels experienced a drop of 2.2%, largely because of interruptions caused by the Los Angeles wildfires and ongoing renovations.
The adjusted EBITDA surpassed forecasts by reaching $56.6 million, which is $4.1 million higher than the middle point of their forecast range. Similarly, the adjusted funds from operations per share stood at $0.16, exceeding the midpoint of projections by $0.05.
The LaPlaya resort in Naples saw impressive results, recording a 22% jump in total RevPAR along with an almost 30% rise in overall hotel EBITDA compared to the previous year.

Q&A

Jay Kornreich from Wedbush asked for insights into the latter half of the year’s prospects and how a decline in demand might affect things. CEO Bortz responded by highlighting decreased governmental travel and financial instability as major worries. However, he also stressed their ability to maintain operations despite these challenges.
Shaun Kelley from Bank of America raised questions about the present factors driving demand in Washington D.C. The CEO, Mr. Bortz, pointed out advantages stemming from the inauguration events, busy legislative calendars, as well as an upturn in business-associated tourism.
Duane Pfennigwerth of Evercore asked about the signs of recovery in Los Angeles. According to CEO Bortz, there has been a steady increase in booking numbers and an anticipated rise in demand due to reconstruction activities following the wildfires.

Sentiment Analysis

Experts showed doubt regarding the forecasts for demand in the latter half of the year and looked for more information on how economics and decreased government travel could affect things. The general sentiment leaned towards being somewhat pessimistic.
The management kept an upbeat yet cautious stance, highlighting operational improvements and the strength of crucial markets such as San Francisco and Washington D.C. The optimism from CEO Bortz shone through in his remarks about the possible long-term rebound in the market and efforts toward better cost containment.
In comparison to the prior quarter, the management’s stance reflected greater wariness stemming from economic ambiguities.

Quarter-over-Quarter Comparison

Management’s confidence in outlook decreased due to new challenges, including reduced government travel and softening international demand. Guidance language was more conservative compared to the previous quarter.
This quarter, analysts paid closer attention to economic obstacles and industry-related hurdles, highlighting increased worries regarding sluggish bookings and reduced demand.
The key distinctions in the financial outcomes were the significant upturn in San Francisco alongside the persistent difficulties faced in Los Angeles, contrasting with the wider recovery patterns noted in the fourth quarter of 2024.

Risks and Concerns

The firm pointed to disrupted demand in Los Angeles because of wildfires and continued recovery in city areas as major hurdles.
Experts expressed worries over financial unpredictability, cuts in government-funded travel, and the possible effects of trade tariffs on operating expenses.
Management is reducing risks via cost control, improved operational efficiency, and focused investments in building resilience.

Final Takeaway

In the first quarter of 2025, Pebblebrook Hotel Trust demonstrated robust performance, surpassing important financial benchmarks even as it faced significant hurdles such as the Los Angeles wildfires and various economic instabilities. The management team continues to prioritize reducing costs and enhancing operations; however, they have taken a more reserved stance toward the latter part of 2025 due to ongoing economic worries and anticipated pressure on guest numbers.

Review the complete earnings call transcript here.

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Pebblebrook Hotel Trust (PEB) First Quarter 2025 Earnings Call Transcripts
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