IRVING, Texas—Despite hurricane-related damages to properties within La Quinta Holding’s portfolio across Texas, Florida, Georgia and South Carolina, executives said the impacts from the storm weren’t all negative.
Speaking during the company’s third-quarter earnings call, executives said eight owned and two franchised hotels are currently closed, accounting for approximately 3,000 rooms out of service, in the affected areas of Hurricane Irma; and two owned hotels are closed in Texas as a result of Hurricane Harvey.
“Our teams are on the grounds, working very hard with our insurance adjusters, contractors and GMs to bring those rooms back online as quickly as possible. Our assessments are ongoing, but we currently expect to have a quarter of these rooms come back into service by the end of 2017 and the vast majority back in service by the end of the first quarter of 2018,” said Keith Cline, president and CEO of La Quinta.
Some positive impact from Irma
Cline said the company’s franchise business in Florida is seeing a jump in demand due to Hurricane Irma.
“Certainly we’ve been seeing an accelerating momentum in the franchise cut of our business as we move throughout the year,” he said.
On the other hand, the 3,000 properties within the regions affected by Harvey are not benefitting from an increase in demand, he added.
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Jim Forson, La Quinta’s EVP and CFO, told investors that even considering effects from the hurricanes, as well as properties under renovation, the overall fleet “is benefiting from our ability to take market share in the form of (revenue per available room) index.”
Forson credited the company’s strategic priorities for its increase in share.
Systemwide RevPAR grew 2.9% year over year for the quarter to $67.76, and Forson said the impact of the storms on overall RevPAR was “fairly neutral.”
Adjusted guidance
Several factors were contemplated in updating the company’s guidance for the quarter, Forson said, including:
• performance throughout first three quarters of the year;
• outperformance of RevPAR expectations in franchise hotels;
• displacement of owned hotels under renovation; and
• hurricane damage.
“All of these things considered, we now expect RevPAR for the year to grow in the range of 2% to 3%, with that growth being driven by the outperformance at our franchise hotels,” Forson said.
La Quinta officials had previously projected full-year RevPAR growth between 0% and 2%.
The company lowered its guidance for total adjusted earnings before interest, taxes, depreciation and amortization to $5 million for the fourth quarter to reflect hotels out of service due to Irma, he said. La Quinta now expects total adjusted EBITDA to be within the range of $320 million to $335 million, down from the original $320 million to $340 million.
CorePoint spinoff
Unlike during the company’s Q2 call, executives did not say much about plans to spinoff owned assets into a new real estate investment trust called CorePoint Lodging. But Cline said the transaction is on track to close in January 2018, once the SEC gives permission.
“Ultimately, we believe we’ll control the timing, and we still expect that spin (to) really go effective sometime in Q1 2018,” he said.
Q3 performance
In addition to the 2.9% increase in RevPAR during Q3, La Quinta saw average daily rate increase 1.3% to $94.69, and occupancy grow 1.6% to 71.6%. Franchise and additional fee-based revenue increased 9.4%.
As part of the company’s repositioning effort, eight hotels were renovated, including its downtown San Antonio location. Ending 30 September 2017, the company had a pipeline of 252 franchised hotels located in the United States, Mexico, Colombia, Nicaragua, Guatemala, Chile and El Salvador, according to the release.
As of press time, La Quinta’s stocks were trading at $16.42 per share, up 15.5% year to date. The Baird/STR Hotel Stock Index was up 31.1% for the same period.