THE SECOND QUARTER of 2018 saw a dip in Hersha Hospitality Trust’s net income compared to the same quarter of 2017, but the previous year’s income had been boosted by $70.9 million from the sale of several properties, according to the company’s earnings statement. At the same time, Hersha’s revenue from operations rose due to increased demand and $6.4 million in insurance payments for business lost to its South Florida hotels after Hurricane Irma.
Hersha’s net income in the second quarter was $6.5 million, compared to $73.9 million in the second quarter of 2017. Funds from operation rose to $36.9 million, or $.86 per diluted common share, this year from $.79 a share last year. Also, RevPAR grew 3.5 percent, with the company’s properties in Miami, Florida, and New York, New York, seeing even higher RevPAR increases, said Hersha CEO Jay Shah.
“Our Miami and New York City portfolios were our best performing clusters for the period, growing RevPAR by 9.5 percent and 5.7 percent, respectively,” Shah said. “We continue to see strong leisure trends in South Florida, while stronger corporate travel allowed us to push ADR and reach record occupancy levels in New York where a combination of strong demand and ADR growth resulted in 300 basis points of EBITDA margin growth.”
Some of Hersha’s properties acquired over the last two years performed well, Shah said, seeing a 7.2 percent increase in RevPAR.
“As we look into the back half of 2018, we remain encouraged by the growth potential of these newly acquired assets,” he said. “Additionally, our outlook for the remainder of the year is further enhanced by the expected reopening of our hurricane disrupted assets and the completion of our renovation projects during the third quarter.”
South Florida’s RevPAR of $143.29 was generated by resurging leisure travel to Miami as fears of the Zika virus waned, the company said. Strong economic growth and a rise in international inbound tourism also helped push demand up, good news for an area hit hard by last year’s hurricanes.
“Our newly revamped Cadillac Hotel & Beach Club is slated to open in the middle of the third quarter, while the Parrot Key Hotel & Resort, our second largest asset in South Florida behind the Cadillac, is on pace to open at the end of the third quarter,” the company said.
RevPAR at Hersha’s nine hotels in five New York City boroughs stood at $238.88, put there by ADR growth of 4.1 percent and occupancy that rose 149 points to 96 percent. The company’s six comparable hotels in the Manhattan market alone saw RevPAR grow 6.1 percent to $266.54 with ADR rising 4.8 percent and occupancy going up 119 points to 95.8 percent.
“The Company’s comparable Manhattan portfolio outperformed the Manhattan market by 180 basis points,” the company said. “This outperformance has occurred in 15 of the previous 18 quarters as a result of a young, well-located and purpose built hotel cluster that appeals to the tastes and preferences of today’s traveler.”
RevPAR for the company’s 38 comparable hotels rose 1.9 percent in the second quarter and those hotels’ ADR rose 3.5 percent to $244.23 as occupancy dropped 137 points to 85.2 percent. The comparable hotels’ EBITDA margins also shrank 80 basis points to 38 percent.
Some of Hersha’s ongoing renovations and ROI projects encountered delays, however, denting the company’s performance during the quarter. “Including these renovation disruptions, we grew comparable portfolio of RevPAR by 1.9 percent,” Shah said. “Despite the short-term drag, these long-term capital projects are high return transformational projects that will meaningfully benefit the portfolio in the coming quarters and years ahead.”