CHARLOTTE, North Carolina—On the company’s first quarterly earnings call with analysts since new CEO Gerry Lopez joined the company, Extended Stay America executives continued to promote the success its accelerated renovations program has had on systemwide performance numbers.
In July the company hired Lopez as president and CEO; and in September the company announced the sale of its Crossland Economy Studios brand for $285 million in cash.
In the third quarter, revenue per available room across the portfolio grew 6.5% to $50.83 compared to the same period last year, revenue increased 6.5% to $360.5 million and adjusted earnings before interest, taxes, debt and amortization grew 11.2% to $181.4 million, according to the company’s financial statement.
Lopez outlined four actions he said the company is taking under his leadership to drive results, value to shareholders and support from guests:
- “First, we focus on renovations and upgrading the guest surrounding.”
- “Second, we maintain a friendly and clean environment for our guests, as outstanding friendly customer service and world-class facilities are the key to ensuring guest return.”
- “Third, we emphasize convenience by finding innovative ways to streamline and integrate our services.”
- “Finally, we work hard to increase guest loyalty.”
Lopez said his priority is continuing to execute on previous strategies, “including completing renovations on 75% of our properties by early 2016 and finishing our renovation program entirely by early 2017.”
As of press time, ESA’s stock was up 0.7% year to date. By comparison, the Baird/STR Hotel Stock Index was down 10.6% over the same period.
Renovations
In the third quarter, the company invested $67.1 million in capital expenditures, which included renovations.
Renovations displaced nearly 130,000 room nights this quarter, said CFO Jonathan Halkyard, which was “about five times the amount during the third quarter last year.”
The company completed 31 renovations in the quarter, bringing the total to 413 renovated hotels of the 682 hotels in the portfolio.
Halkyard said renovated properties posted an overall 8.5% increase in RevPAR, driven by an ADR increase of 8% and occupancy increase of 40 basis points. Comparatively, non-renovated properties saw 6.3% RevPAR growth in the quarter.
Renovations cost approximately $1 million per property, executives said.
Moving forward
Lopez assured analysts the company is focused on improving its current roster of properties and not necessarily looking at acquiring additional brands or expanding franchising.
“There is nothing that is off the table,” Lopez said, … “but the model that we’ve developed, the select-service model is worth what we’re doing every day to hone it.”
He said he has no plans to “go off-track or off-lane or try to do things that wouldn’t be what you would expect out of our brand and our positioning.”
He also said the company will continue to own the bulk of its assets—when the Crossland transaction closes, the company will own 629 of its properties.