RLJ Lodging Trust increased its full-year 2026 outlook on the back of a better-than-anticipated second quarter driven by an acceleration in business travel and urban leisure demand.
Leslie Hale, president and CEO of the Bethesda, Maryland-based real estate investment trust, said on the company's second-quarter earnings call that its revenue per available room growth outperformed the industry by 110 basis points in the quarter. She said RLJ's out-of-room spend outpaced its RevPAR growth, and it had high single-digit growth in earnings before interest, taxes, depreciation and amortization.
"The broad-based nature of the growth across markets and demand segments year to date is demonstrating that the strength we are seeing is durable and not reliant on any individual market or event," she said.
Urban markets in particular are seeing the best performance, Hale said, which benefits RLJ's urban-centric portfolio. Hotel performance driven by the 2026 FIFA World Cup in the host markets was in line with its expectations, but it was the non-World Cup markets that really shone.
RLJ's non-World Cup market hotels achieved RevPAR growth of 6.2% in the quarter, with Chicago and Austin, Texas, leading the way at 17% and 15% growth, respectively.
Business transient revenues increased 10% at RLJ's hotels in the second quarter. Hale attributed this growth to "elevated levels of business investment and earnings growth broadly across many industries, including tech, finance, healthcare and defense."
RLJ's four high-impact hotel renovations completed last year showed a return on investment in the second quarter, Hale said. Those hotels posted a 22% revenue growth and 50% EBITDA growth year over year in the quarter.
In June, RLJ completed the conversion of the former Renaissance Pittsburgh to The Atterbury Hotel, Autograph Collection. The conversion included a comprehensive renovation that reimagined all of the public spaces and guestrooms while adding revenue-generating spaces such as a signature restaurant and bar and a premium function space, Hale said.
There are more conversions on the way for RLJ. Hale said the company has made progress toward the renovation of its Wyndham Boston property, which will join Hilton's Tapestry Collection, and its Fairfield Inn & Suites Key West that will be converted to a Compass by Margaritaville, set to be completed in 2027.
"With each of these conversions, we continue to increase our exposure to the lifestyle segment and evolving consumer trends," she said. "These repositionings are also consistent with our broader strategy of creating opportunities to drive high-margin out-of-room spend with thoughtful execution that allows us to attract customers beyond our hotel guest."
RLJ sold one hotel in the second quarter, the 151-room Hyatt Place Fremont/Silicon Valley, for $13.2 million.
Upgraded outlook
RLJ upgraded its full-year 2026 outlook on comparable RevPAR growth and adjusted EBITDA even amid "considerable geopolitical uncertainty and limited visibility," Hale said.
"Our outlook for the remainder of the year assumes the continuation of tailwinds that have supported our performance thus far, including sustained momentum and the recovery of business travel, leisure demand remaining healthy — especially in urban markets — positive group revenue pace and continued strength of in the quarter for the quarter bookings, and additional tailwinds from the ramp of our conversions," she said.
RLJ is now anticipating comparable RevPAR growth of 3.5% to 4.5% and adjusted EBITDA of $336 million to $356 million.
Hale said RLJ's setup for 2027 is "favorable," citing positive business transient trends, an advantageous holiday calendar, and major sporting events such as the Super Bowl, NCAA basketball tournament, NFL draft, Formula 1 and pre-Olympic activity heading to its markets.
By the numbers
According to RLJ's second-quarter earnings release, comparable hotel revenue per available room increased in the quarter 6.8% year over year to $167.15. Comparable average daily rate increased 4.9% to $217.18 and comparable occupancy was up 1.8% to 77%.
Adjusted earnings before interest, taxes, depreciation and amortization increased 6.1% to $110.4 million in the second quarter. RLJ's net income was up 9.4% year over year at $31.3 million.
As of press time, RLJ's stock was trading at $11.18 a share, up 46.1% year to date. The NYSE Composite is up 10.5% year to date.