Second quarter brings losses, some hope for hotel companies

Hersha Hospitality, Hilton, Hyatt and Choice all reported their mid-year performance

Hersha Hospitality Trust, Hilton Worldwide Holdings, Hyatt Hotels Corp., Choice Hotels International all reported significant losses for the second quarter. They also reported some month-to-month improvements in performance.

SEVERAL PUBLICALLY TRADED hotel companies announced their second quarter performance this week. Each showed losses reflecting the impact of the COVID-19 pandemic that is expected to continue for the rest of 2020 at least.

Hersha Hospitality Trust, Hilton Worldwide Holdings, Hyatt Hotels Corp., Choice Hotels International all released their results. Despite the losses in revenue compared to last year that most reported, each also saw some improvement in performance and were able to keep most of their hotels open.

Hersha holding steady

Hersha saw $67.5 million net loss during the quarter, or $1.75 per diluted common share, compared to a net loss of $400,000, or 2 cents a share, in the second quarter of 2019, according to the company’s earnings statement. The steep drop is the result of “the unprecedented impact on the travel industry from the COVID-19 pandemic.”

On a positive note, the company’s corporate cash loss for the quarter was $26.9 million, approximately 13 percent better than forecasted at the beginning of the quarter. Monthly occupancy levels also improved with its New York City hotels seeing 61 percent occupancy.  Also, though the company had to close several hotels in March at the beginning of the COVID-19 shutdown, 33 of its 48 hotels remain open.

“The hotel industry continues to be significantly impacted by the pandemic, but we saw encouraging relative performance from the portfolio as a result of the immediate and aggressive measures implemented in collaboration with our operating partners to limit our losses,” said Jay Shah, Hersha’s CEO. “We remain focused on liquidity preservation and minimizing our cash burn rates through attentive corporate and hotel level operating strategies that were executed at the onset of the crisis.  Our relationship with our independent franchise operators allowed us to enact cost-saving initiatives in real-time to maintain operations at 21 comparable hotels with a nominal staff in the initial months following the demand shock.  Our unique owner-operator relationship allowed us to immediately kickstart reopening strategies in our markets as demand trends improved over the balance of the second quarter and July.”

Shah also said Hersha’s drive-to hotels and resorts, which account for 25 percent of its portfolio EBITDA, have shown improved performance.

“We are happy to have this asset mix in our portfolio during this challenging period, but we remain confident in the long-term fundamentals of our purpose-built clusters in core gateway markets,” Shah said.

Hilton remains hopeful

Hilton’s net loss for the quarter was $432 million as its system-wide comparable RevPAR decreased 81 percent from the same period in 2019. Its adjusted EBITDA was $51 million for the quarter.

The company did approve 18,400 new rooms for development during the second quarter, increasing its development pipeline to 414,000 rooms as of June 30, 11 percent more from June 2019. Hilton opened 6,800 rooms in the quarter. Along with InterContinental Hotels Group and Marriott International, Hilton dominated the U.S. construction pipeline in the second quarter, according to Lodging Econometrics.

Also, 96 percent of Hilton’s system-wide hotels were open. The company announced a new partnership with Country Garden to develop 1,000 Home2 Suites by Hilton in China.

“Our second quarter results reflect the challenges that our business has experienced as a result of the pandemic,” Christopher Nassetta, Hilton president and CEO said. “However, as restrictions are lifting and properties around the world are reopening, we are seeing improved occupancy. While we have a long journey in front of us, we are on the road to recovery and look forward to the opportunities ahead.”

Hyatt follows uncertain path

Hyatt’s income decreased 376 percent for a net loss of $236 million while comparable system-wide RevPAR decreased 89.4 percent. The company’s adjusted EBITDA decreased 154.6 percent to approximately $117 million and it held more than $1.4 million in cash and cash equivalents. Its total debt is $2.5 million.

The company saw 5.8 percent net rooms growth during the quarter. Its pipeline of executed management or franchise contracts stood at approximately 101,000 rooms, an increase of approximately 9.8 percent compared to the second quarter 2019.

“During these unprecedented times, we are unwavering in our commitment to living our purpose to care for our colleagues, guests, owners and communities across the globe. Our purpose guides us to focus on health and safety and to drive policies and programs that create opportunity for all as we reimagine how we operate during the COVID-19 pandemic,” said Mark Hoplamazian, Hyatt’s president and CEO. “There remains uncertainty regarding the full return of hotel demand to pre-COVID-19 levels. We are encouraged by the demand progression we have seen in China and also in certain markets in the U.S. and other parts of the world. Our teams are prepared for varied recovery scenarios sustained by continuously evolving new ways of operating that reduce the occupancy levels that are required to break even at the hotel operating level. Our balance sheet, including nearly $3 billion of liquidity, is a great source of strength as is the support and partnership of our hotel owner community. We continue to navigate this dynamic situation, and expect to emerge stronger when the pandemic subsides and demand returns.”

Choice does better than average

Choice saw a net loss of $2.4 million for the quarter, representing a diluted net loss per share of $0.04. Total revenues decreased 52 percent from last year to $151.7 million. Its domestic royalties decreased 52 percent to $48.3 million.

The company’s domestic systemwide RevPAR declined 49.6 percent for the quarter.  Its adjusted net income decreased 90 percent to $6.7 million compared to last year and its EBITDA for the quarter was $41.1 million, a 60 percent decrease from second quarter 2019. Adjusted earnings per share were $0.13, an 89 percent decrease from the same time last year.

Choice’s RevPAR decline was more than 20 percentage points less than the total industry levels and the chain scale segments in which the company competes. The company also signed 93 new domestic franchise agreements in the quarter

Nearly 100 percent of the company’s 5,917 domestic hotels were operating as of July. In April, the accepted valley of the COVID-19 decline for the industry, more 90 percent of Choice’s domestic hotels remained open as did 96 percent of its more than 1,200 international hotels.

“The resilience of our asset-light, franchise-focused business model, combined with our winning strategy to grow the right brands in the right markets, has allowed us to capture an outsized share of demand as Americans continue to return to travel,” said Patrick Pacious, Choice’s president and CEO. “We believe that our predominantly leisure focus and strength in domestic drive-to markets will allow us to continue to outperform the overall industry during the recovery phase. We are optimistic that our long-term view, strong balance sheet, disciplined capital allocation strategy, proven brands and compelling franchisee value proposition will help us emerge from the crisis in a position of strength.”

The company’s extended-stay portfolio expanded to 414 domestic hotels as of June 30, an 8 percent increase over the same month las year. Choice’s domestic extended-stay pipeline grew to nearly 300 hotels awaiting conversion, under construction or approved for development. Since June 30, 2019, the WoodSpring Suites brand grew the number of open domestic hotels by 7 percent and its domestic pipeline by 22 percent. The extended-stay brands, including WoodSpring, Suburban Extended Stay, MainStay Suites and the recently launched Everhome Suites have outperformed industry trends during the pandemic.

Wyndham Hotels & Resorts announced its second quarter results in late July. It saw a net loss of $174 million with some improvement in occupancy and EBITDA.