Service Properties Trust (SVC) Q3 2024 Earnings Call Highlights: Strategic Asset Sales and ...

In This Article:

  • Normalized FFO: $52.9 million, or $0.32 per share, down from $0.56 per share in the prior year quarter.

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

  • RevPAR for Comparable Hotels: Decreased by 80 basis points.

  • Gross Operating Profit Margin: Declined by 380 basis points to 27.5%.

  • Hotel EBITDA: $60.1 million, a decline of $15.4 million from the prior year.

  • Debt Outstanding: $5.7 billion of fixed-rate debt with a weighted average interest rate of 6.4%.

  • Total Liquidity: Over $700 million, including full availability of a $650 million revolving credit facility.

  • Capital Expenditures: $82 million during the third quarter, with a full-year expectation of around $300 million.

  • Dividend Reduction: Quarterly common dividend reduced from $0.20 per share to $0.01 per share, resulting in $127 million of annual savings.

  • Hotel Sales: Plans to sell 114 hotels with 14,925 keys, targeting proceeds of approximately $1 billion.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Service Properties Trust (NASDAQ:SVC) announced a significant reduction in its quarterly dividend, resulting in approximately $127 million of annual savings, which will enhance liquidity and accelerate deleveraging.

  • The company plans to sell 114 focused service hotels, expecting proceeds of approximately $1 billion, which will be used to repay debt and reduce capital expenditures.

  • SVC's net lease portfolio remains strong, with a 97.6% lease rate and a weighted average lease term of 8.3 years, providing stable cash flows.

  • The company has successfully sold several hotels and net lease properties, generating significant proceeds, which supports its strategy to optimize the balance sheet.

  • SVC's strategic focus on retaining higher-performing hotels and enhancing brand loyalty through the Sonesta Travel Pass program is expected to drive future revenue growth.

Negative Points

  • The company's normalized FFO and adjusted EBITDAre have declined year-over-year, impacted by higher interest expenses and lower hotel EBITDA.

  • Renovation activities have caused revenue displacement and operational disruptions, negatively affecting RevPAR and hotel profitability.

  • Rising wage rates and increased labor costs continue to weigh on hotel profitability, particularly in the full-service portfolio.

  • The reduction in the dividend to $0.01 per share reflects the challenging operating environment and extensive capital expenditure requirements.

  • SVC's hotel portfolio has experienced a decline in transient business, with a shift towards group revenues, which may impact overall revenue stability.

Waiting for permission
Allow microphone access to enable voice search

Try again.