Summit Hotel Properties President and CEO Jonathan Stanner stressed leisure demand remains strong for his firm’s hotels, but the expansion of group and business demand were the primary drivers of stronger-than-expected performance in the first quarter.
During the company’s earnings call Thursday, Stanner noted strong rate growth pushed overall performance up even in March, when the company’s portfolio was no longer benefiting from weak year-over-year comparisons.
“In fact, March [average daily rate] was the highest in the history of the company and drove the highest [revenue per available room] for our portfolio since the onset of the pandemic,” he said.
The rebound has expanded both in terms of segments and geography, Stanner noted.
“While leisure demand remained robust during the first quarter and nearly all leisure-oriented markets and metrics continue to meaningfully exceed 2019 levels, the recovery in our business is increasingly driven by non-leisure demand segments, most notably business transient and group demand, particularly in urban and suburban markets,” he said.
The company is projecting full-year RevPAR growth between 6% and 11%.
Executive Vice President and Chief Financial Officer Trey Conkling said urban hotels were the clear leader of the quarter, which is good news because they make up roughly half of the portfolio.
RevPAR at the company’s urban hotels was up 25% in the quarter, followed closely by suburban hotels, which were up 21%.
In addition to the top-line growth, Stanner noted the company is off to “a healthy start to the year” in terms of profitability, with margins up roughly 200 basis points in the first quarter.
He said the improved profitability is also a function of an improving labor environment.
“We’re at a more normalized [full-time equivalent] count generally across the portfolio, and we do think there’s continued opportunities to reduce our reliance on contract labor going forward and shift some of that into traditional [full-time employees], which should ultimately help generate better margins,” Stanner said.
Summit’s portfolio recorded 19.3% year-over-year RevPAR growth in the first quarter, exceeding the company’s projected range of 17% to 19%.
The growth in the quarter was attributed largely to rate growth, with Stanner noting hotels in the portfolio have retained strong pricing power even amid worrisome economic news. ADR in the quarter represented an 11% year-over-year increase, while occupancy was up 7%.
Summit still posted a net loss for the quarter of $5.2 million. That was down from $12.4 in the same quarter in 2022.
As of press time, Summit’s stock was trading at $6.61 a share, down 0.45% year to date. The NYSE Composite was down 0.24% for the same period.
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