Chatham Lodging Trust Aims for Q3 FFO of $0.29-$0.33 Amid Buybacks and Sales

Key Highlights from Chatham Lodging Trust's Q2 2025 Earnings Call

During the recent earnings call, Chatham Lodging Trust (CLDT) provided an in-depth overview of its financial performance and strategic direction for the second quarter of 2025. The company reported strong results across several key metrics, including occupancy rates, revenue per available room (RevPAR), and operating margins. Additionally, management shared insights into future plans, such as asset sales, stock buybacks, and development initiatives.

Jeffrey H. Fisher, Chairman, President, and CEO, emphasized the completion of the sale of five hotels with an average age of 25 years. These sales were conducted at an approximate 6% capitalization rate on 2024 net operating income (NOI) levels, generating $83 million in proceeds. Fisher noted that two additional hotels are currently listed for sale, which could represent further opportunistic transactions. The proceeds from these sales will be used to fund the Home2 Portland development, hotel acquisitions, and stock repurchases.

Fisher also mentioned that the Board of Trustees approved a $25 million share buyback plan in May, with approximately 20,000 shares repurchased during the quarter at a weighted average price of $7.02. The company is planning to increase buyback activity in the third quarter. Leverage has been reduced to 21%, with a projected $20 million in free cash flow for 2025 after dividends. Management is also preparing to launch an upsized and recast syndication of its credit facility and term loan to further enhance its financial condition and lower borrowing costs.

Operational Performance and Financial Results

Operationally, the company achieved an 82% occupancy rate in the second quarter, matching the same period last year and marking a post-pandemic high. Additionally, Chatham Lodging Trust set an all-time high in ADR and RevPAR in May, while also growing its operating margins this year. Dennis M. Craven, Executive Vice President and COO, highlighted that RevPAR growth at the company’s four Silicon Valley hotels reached 3%, with hotel EBITDA increasing by an additional 3% to nearly $5 million.

Jeremy Bruce Wegner, Senior Vice President and CFO, reported that Q2 2025 hotel EBITDA was $30.9 million, with adjusted EBITDA at $28.5 million and adjusted FFO at $0.36 per share. The company’s gross operating profit (GOP) margin for the quarter reached 46.3%, up 30 basis points from the prior year. This improvement was attributed to continued strong expense control, moderating inflationary cost pressures, and the benefit of approximately $1.3 million in workers’ compensation insurance and tax refunds.

Outlook and Guidance

Wegner provided guidance for the third quarter, projecting a RevPAR range of -1.5% to +0.5%, adjusted EBITDA between $24.7 million and $26.8 million, and adjusted FFO per share ranging from $0.29 to $0.33. For the full year, the company expects RevPAR growth of flat to +1%, adjusted EBITDA between $89 million and $93 million, and adjusted FFO per share of $0.95 to $1.03.

Fisher added that the company is maintaining its guidance unchanged for the remainder of the year. While growing business travel demand across much of the portfolio is encouraging, it is offset by weakness in convention demand in Austin, Dallas, and San Diego.

Strategic Focus and Development Plans

The company spent approximately $9 million on capital expenditures during the quarter, adding eight rooms to its portfolio. Two more renovations are expected to begin later in 2025. In response to questions about the development timeline for the Portland project, Craven stated that the construction timeline is estimated to be 21 to 24 months, with the goal of starting the project within the next six months. Fisher also mentioned that acquisition opportunities remain limited due to a wide bid-ask gap, but the company continues to focus on its stock buyback program.

Risk Factors and Market Conditions

Analysts raised concerns about weak convention demand in certain markets, particularly in Austin, Dallas, and San Diego. Additionally, reduced Canadian and European travel is impacting some markets, and some Texas hotels are affected by city convention center closures or expansions. Guest acquisition costs have increased by approximately 15%, which has impacted margins by 30 basis points. Commission costs are being closely monitored as well.

Craven noted that one of the two hotels currently listed for sale is an older, lower RevPAR asset, while the other is considered an opportunistic transaction aimed at minimizing capital requirements.

Final Thoughts and Strategic Direction

Chatham Lodging Trust delivered solid Q2 results, hitting the top end of its guidance and maintaining its full-year outlook. The company has made progress in strengthening its balance sheet through asset sales, enhancing financial flexibility, and advancing its share buyback program. Management remains confident in its ability to navigate sector headwinds and capitalize on emerging demand opportunities across its portfolio.

With a continued focus on strategic asset recycling, disciplined expense management, and capital deployment, Chatham Lodging Trust is positioning itself for long-term value creation. The company’s emphasis on operational discipline and financial flexibility underscores its commitment to delivering consistent performance and shareholder value.