Service Properties Trust (SVC) Q3 2024 earnings summary

Executive summary

• Third quarter 2024 results showed mixed performance in the lodging portfolio due to ongoing hotel renovations, with a reported net loss of $46.9 million for Q3 and $199.1 million for the nine months ended September 30, 2024.

• Announced a reduction in the regular quarterly common dividend from $0.20 to $0.01 per share, saving $127 million annually to enhance liquidity and accelerate deleveraging.

• Plans to sell 114 focused service hotels managed by Sonesta, targeting $1 billion in proceeds and $725 million in avoided capital expenditures over six years.

• Owns 214 hotels with over 36,000 guest rooms and 745 service-focused retail net lease properties as of September 30, 2024.

• Portfolio spans the United States, Puerto Rico, and Canada, managed by The RMR Group with $41 billion in assets.

Financial highlights

• Q3 2024 total revenues were $491.2 million, down 1.1% year-over-year; hotel operating revenues fell 1.2% and rental income decreased 1.0%.

• Normalized FFO for Q3 2024 was $52.9 million or $0.32 per share, down from $0.56 per share year-over-year.

• Adjusted EBITDAre declined 11.6% year-over-year to $155 million.

• Gross operating profit margin dropped 380 basis points to 27.5%, with gross operating profit down $15 million year-over-year.

• Interest expense rose 20.5% year-over-year in Q3 2024 to $99.1 million.

Outlook and guidance

• Q4 2024 guidance projects RevPAR of $82–$85 and hotel EBITDA of $34–$39 million.

• Full-year 2024 capital expenditure expected to be around $300 million, with a lower spend anticipated for 2025.

• Proceeds from planned hotel sales in 2025 will be used to repay debt and improve liquidity.

• Major renovations at 30 hotels expected to be completed in 2024.

• Capital expenditure savings of $725 million expected from hotel sales over six years.