RLJ Lodging Trust saw revenue per available room decline 2.1% during the second quarter, in line with prior expectations.
During the hotel real estate investment trust’s second-quarter earnings call, RLJ President and CEO Leslie Hale said the drop was constrained largely by a reduction in room nights due to ongoing renovations at its high-occupancy properties in South Florida, Waikiki and New York as well as the planned closure of the Austin Convention Center for an expansion project.
Without these factors, RevPAR growth for RLJ's portfolio was slightly positive and outperformed the industry, she said. The company’s hotels also gained 140 basis points of market share.
“Our urban hotels continue to be the key driver of our portfolio, with RevPAR outperforming our portfolio by 140 basis points,” she said, pointing to its hotels in San Francisco’s central business district achieving 20% RevPAR growth.
The ongoing recovery in Northern California has been encouraging, Hale said, pointing to improving citywide calendars and positive local business climates.
“We believe that the scale and trajectory of [artificial intelligence] investments should drive sustained economic expansion in the region and support further improvement in lodging fundamentals over the next several years,” she said.
The completion of the REIT’s seven conversion projects led to collective achievement of 10% RevPAR growth during the quarter, she said.
RLJ's portfolio saw strong growth in leisure revenue, up 5% year over year, helped by the shift of Easter into April as well as a longer spring break, Hale said. The portfolio also benefited from the U.S. Open in Pittsburgh, Formula One race in Miami, Club World Cup soccer games in several markets and strong concert attendance in several cities.
“These events especially benefited our urban leisure segments, which outperformed, achieving 7% revenue growth,” she said. “These results also reinforce our conviction around urban leisure as another leg that will continue to drive outperformance in our urban markets.”
Underlying trends in business travel remain healthy as large corporate accounts drive momentum in the segment, she said. This is especially true in consulting, technology and defense, with return-to-office trends creating incremental demand. When excluding government-related demand, revenue was up 3%.
Softer group demand led to a broader lack of compression during the second quarter, Hale said. Even so, non-room revenue grew by 1.5%.
Outlook update
RLJ’s hotel outlook for the second half of the year is mixed because the broader macro environment remains uncertain, which contributes to shorter booking windows and limited visibility, Hale said.
“These dynamics will weigh heavily on the third quarter, while favorable calendar shifts, easier comps and improved group travel will help support better lodging fundamental trends during the fourth quarter,” she said.
During the third quarter, the REIT's hotel portfolio faces tough citywide comparisons in Chicago, which hosted the Democratic National Convention last year, as well as in Boston, San Diego and New Orleans, she said. Compounding this is the overall softer-than-expected group demand. Executives also expect tougher comparisons for Tampa and Houston because of the demand driven by relief efforts to last year’s hurricanes.
RLJ’s team expects leisure demand to remain stable with continued rate sensitivity, Hale said. Government-related and international travel are likely to remain soft through the rest of the year. Hotel renovations in South Florida and Hawaii will also affect demand as will the closure of the convention center in Austin.
As such, preliminary July RevPAR has been tracking down by mid-single digits year over year, she said.
Hale said RLJ anticipates tailwinds in the fourth quarter form a more favorable holiday calendar, the lapping of the U.S. presidential election, strong citywide calendars in a number of markets and the ramp-up of renovated hotels as they deliver.
“Looking at 2026 and beyond, we see an improving setup for the industry, which should benefit from a positive economic backdrop driven by less regulation, extension of lower tax rates, tariff clarity and the expectation of lower borrowing costs to allow for business leaders to make decisions around capital planning and investment,” she said. “This will occur against an extended period of constrained new supply. With this improving backdrop, our portfolio is especially well-positioned for 2026, given our favorable geographic exposure and our urban footprint, which should allow us to see outsized benefit in an improving demand environment.”
Portfolio management
RLJ’s four most recent conversions in Nashville, Tennessee; New Orleans; Houston Medical Center; and the University of Pittsburgh saw combined RevPAR growth of 26% during the second quarter, Hale said.
“We continue to expect our conversions to generate robust double-digit returns, which should enhance our operating performance,” she said.
RLJ is on track to complete the conversion of its Renaissance Pittsburgh Hotel to an Autograph Collection hotel by the end of the year, she said. Similarly, it is making progress on its Boston conversion and will be able to share the new brand selected during the third quarter.
During the second quarter, RLJ advanced renovations at its four high-occupancy properties in South Florida, Hawaii and New York, Hale said. Those should start ramping up in the fourth quarter as they are delivered.
By the numbers
RLJ reported total revenue of $363.1 million during the second quarter, a 1.7% year-over-year decrease, according to its earnings report. Comparable hotel revenue was $363 million, a 1.4% year-over-year decrease. Net income was $28.6 million, a 23.2% year-over-year decrease.
The company achieved comparable hotel earnings before interest, taxes, depreciation and amortization of $113 million, down 4.2% compared to last year. Comparable hotel EBITDA margin was 31.1%, down 90 basis points. Adjusted EBITDA was $104 million, a decrease of 4.6%.
Comparable average daily rate was $205.27, down 0.5% from last year, while comparable occupancy reached 75.5%, down 1.6%. This resulted in comparable RevPAR of $155.08, a 2.1% year-over-year decrease.
As of June 30, RLJ had approximately $974 million in total liquidity, including $374 million of unrestricted cash and $600 million in its revolving credit facility. It had $2.2 billion in outstanding debt.
In April, the company refinanced its $200 million term loan that would have matured in 2026, upsizing it to $300 million and extending the initial maturity until April 2030.
During the quarter, RLJ repurchased 800,000 of its common shares for $6 million at an average price of $7.14 per share. Year to date, it has repurchased 3.2 million common shares for about $28 million for an average price of $8.67 million. As of Aug. 4, it has $246.3 million remaining in its repurchase program.
As of press time, RLJ’s stock was trading at $6.97 per share, down 30.1% year to date. The NYSE Composite Index was up 13% for the same period.