Service Properties Trust (SVC) Q2 2024 earnings summary

Executive summary

• RevPAR growth was led by group and contract segments, with urban hotels outperforming the market by 4.1% RevPAR increase year-over-year.

• Net loss of $73.9 million for Q2 2024, compared to a net loss of $11.3 million in Q2 2023; six-month net loss of $152.2 million versus net income of $14.7 million year-over-year.

• Portfolio performance was affected by revenue displacement from hotels under renovation; excluding these, RevPAR increased 1.6% year-over-year, driven by a 1.7 percentage point occupancy improvement.

• Full service hotels saw RevPAR gains in group and contract segments, offset by a 3.5% decline in transient RevPAR due to market softness and renovation impact.

• Net lease portfolio remained strong, with 97.3% leased and a weighted average lease term of 8.4 years.

Financial highlights

• Normalized FFO for Q2 2024 was $73.8 million ($0.45/share), down from $0.58/share in the prior year quarter.

• Adjusted EBITDARE declined 7.4% year-over-year to $171.5 million.

• Gross operating profit margin fell by 170 basis points to 32.7%; gross operating profit decreased by $5.9 million year-over-year.

• Q2 2024 hotel operating revenues rose 2.0% to $412.5 million; rental income up 1.0% to $100.5 million.

• Q2 2024 loss on asset impairment was $34.9 million, up from $9.0 million in Q2 2023; six-month impairment loss $37.3 million.

Outlook and guidance

• Q3 2024 RevPAR is projected at $94-$97, with hotel EBITDA expected between $65 million and $69 million.

• 21 hotels are expected to be under renovation in Q3, with major renovations at 34 hotels for the full year.

• Full-year capital expenditures are expected to be $300 million-$325 million.

• Management expects sources of funds to be sufficient for operating expenses, capital expenditures, debt service, and distributions for the next twelve months and beyond.

• Plans to fund $195 million in hotel capital improvements in the second half of 2024 using cash and revolving credit facility.