With net losses and declining hotel performance, Summit Hotel Properties executives touted well-managed spending, recently closed sales and growing market share while looking forward to major event opportunities in the new year on the real estate investment trust's third-quarter earnings call.
"Our third-quarter operating results were largely in line with the overall demand and [revenue per available room] trends we experienced in the second quarter, as the lodging environment remains generally stable," Summit President and CEO Jonathan Stanner said. "However, performance is mixed across segments. We continue to experience meaningful year-over-year reductions in both government and international inbound travel, which has required some remixing of business to lower-rated demand segments."
Same-store RevPAR and average daily rate both decreased year over year — by 3.7% and 3.4%, respectively — while hotel occupancy remained flat, he said. Stanner pointed to government and international inbound demand, both smaller segments in Summit's demand mix, contributing to the performance decline. Prior to the government shutdown, these segments had stabilized.
"Thankfully, strong midweek demand trends in October have been able to offset much of this softness, and, with a successful resolution to the shutdown, we expect a more stable foundation for next year, when we will benefit from easier year-over-year comparisons," he said.
Stanner also credited Summit's strategy in navigating pricing sensitivity the company has seen since March, which included targeting discount-oriented segments and advanced purchase offers to avoid cancelations and rebookings expected during price softening.
Third-quarter highlights
Another Summit strategy Stanner highlighted as a win for the quarter was an emphasis on generating non-rooms revenue, especially at some of Summit's recently renovated properties, such as the Courtyard by Marriott Oceanside Fort Lauderdale Beach. Stanner expects these revenue streams to continue to outperform.
"Our focus on driving out-of-room spend through food-and-beverage sales, resort amenity fees and parking charges continues to be successful as non-rooms revenue increased 5.6% in the third quarter and has grown 4.3% year to date," he said.
Other recent and ongoing renovations paying off are at the Hyatt Place Scottsdale/Old Town, Residence Inn Atlanta Midtown Peachtree at 17th, the Hampton Inn & Suites Dallas Downtown, the Homewood Suites by Hilton Midland and the Residence Inn by Marriott New Orleans Metairie, said William Conkling, Summit's executive vice president and chief financial officer.
"It is worth noting that over the past three years, we have invested over $260 million in capital expenditures on a consolidated basis, as we are committed to maintaining a best-in-class portfolio," Conkling said. "Furthermore, this capital investment affords us the flexibility to preserve optionality on certain renovations without risking meaningful downward pressure on overall operating results."
On the capital allocation front, Stanner said Summit closed the sales of two non-core hotels at the end of the quarter — the 107-room Courtyard Amarillo Downtown, which was owned via a joint venture with Singapore sovereign wealth fund GIC, and the 123-room Courtyard Kansas City Country Club Plaza Hotel — generating gross proceeds of $39 million.
"The asset sales represent a continuation of our successful capital recycling strategy that has enhanced the overall quality and growth potential of our portfolio, reduced balance sheet leverage, eliminated significant capital expenditure needs and funded our recent accretive share repurchase activity," Stanner said.
Since May 2023, Summit has sold 12 properties and purchased four.
On the call, Conkling highlighted the performance of Summit's hotels in Chicago, Orlando, San Francisco and Nashville.
"Summit has significant exposure to three of the five top 25 U.S. markets that generated positive RevPAR growth in the third quarter — Chicago, San Francisco and Orlando — where we own seven hotels in total," he said.
Chicago has outperformed all year, and Orlando stands out with ongoing robust leisure demand. San Francisco continues to benefit from local efforts to enhance the city overall, Conkling added. Meanwhile, while Nashville overall saw a RevPAR decline of nearly 4%, Summit's properties achieved more than a 6% RevPAR increase and an 11% ADR jump year over year.
However, Summit's properties in Houston faced difficult comparisons due to last year's Hurricane Beryl-driven hotel activity in July 2024.
"RevPAR in our Houston hotels declined 17% in the quarter, which reduced our overall third-quarter RevPAR growth by approximately 50 basis points," Stanner said.
Focused on the future
Summit's outlook for the fourth quarter includes improvement in hotel operating trends, Stanner said.
"As we shift out of the leisure-heavy summer travel months, we are benefiting from relatively stronger business transient trends which have helped to drive mid-week RevPAR growth, particularly in key urban markets," Stanner said. "Fourth-quarter pace for our pro-forma portfolio is tracking approximately 2.5% behind last year, which notably incorporates several difficult special event comparisons that benefited the fourth quarter of 2024 and incremental headwinds driven by the government shutdown."
In 2026, Summit stands to benefit from many of the big events hosted in the company's key markets.
"Looking ahead to 2026, we believe the setup is more favorable than it has been in the past several years," Stanner said.
He called out Atlanta, Boston, Dallas, Houston, Miami and San Francisco, all cities set to host World Cup matches. San Francisco will also host the Super Bowl while Indianapolis will host the Final Four NCAA games and Boston will see an influx of travelers celebrating America's 250th anniversary.
"We do have a portfolio that has a fair amount of exposure to some of the special event-driven demand that we think will be tailwinds to our performance as we look into '26," Stanner said.
By the numbers
Summit Hotel Properties reported total revenue of $177.1 million during the third quarter, according to its earnings release. It reported a net loss of $11.3 million, compared to a net loss of $4.3 million last year.
Summit's same-store hotel earnings before interest, taxes, depreciation, and amortization decreased to $52 million from $59.6 million in the same period in 2024. Adjusted EBITDA for real estate decreased to $39.3 million compared to $45.3 million in the third quarter of 2024.
The REIT reported same-store RevPAR of $115.77, a year-over-year decrease of 3.7%.
Also in the third quarter, Summit closed on a $400 billion senior unsecured term loan to refinance its previous GIC joint-venture term loan that funded the acquisition of the NewcrestImage portfolio in January 2022.
The new term loan has a fully extended maturity of July 2030 with an interest rate of SOFR-plus 235 basis points, which represents a 50-basis-point reduction in spread versus the prior loan. After closing the loan, it entered into two $150 million forward-starting interest rate swaps that fix SOFR at 3.26%, which will replace the $300 million of existing swaps priced at 3.49%. They have an effective date of Jan. 13, 2026, and will terminate on Jan. 13, 2028.
Conkling said that in February, "we intend to fully draw our $275 million delayed draw term loan to retire the $288 million of convertible notes maturing in the first quarter of 2026 pro forma."
As of press time, Summit’s stock was trading at $5.28 per share, down 21.8% year to date. The NYSE Composite Index was up 12% for the same period.