RLJ Lodging (NYSE:RLJ) released first-quarter financial results and hosted an earnings call on Monday. Read the complete transcript below.
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Summary
RLJ Lodging reported a strong start to 2026, with a 4.8% RevPAR growth in Q1, outperforming the industry by 100 basis points, driven by urban markets and recent renovations.
The company achieved high single-digit EBITDA growth, margin expansion, and significant non-room revenue growth, emphasizing ROI initiatives and conversions.
RLJ Lodging remains optimistic about future performance, citing strong business travel demand, especially in technology and finance sectors, and expects continued growth despite macroeconomic uncertainties.
Strategic capital allocation includes completing major renovations and conversions, with a focus on ROI-driven projects, and maintaining a strong balance sheet by addressing debt maturities through 2029.
Management noted significant events like the World Cup and America’s 250th anniversary as potential tailwinds for urban market performance in 2026.
Full Transcript
OPERATOR
Greetings and welcome to the RLJ Lodging Trust first quarter 2026 earnings conference call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press Star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John Paul Austin, Director of Investor Relations, RLJ Lodging Trust. Thank you sir. You may begin.
John Paul Austin (Director of Investor Relations)
Thank you operator. Good morning and welcome to RLJ Lodging Trust’s 2026 first quarter earnings call. On today’s call, Leslie Hale, our President and Chief Executive Officer, will discuss key highlights for the quarter. Nikhil Bala, our Chief Financial Officer, will discuss the Company’s financial results. Tom Bardinette, our Chief Operating Officer, will also be available for Q&A. Forward looking statements made on this call are subject to numerous risks and uncertainties that may lead the Company’s actual results to differ materially from what has been communicated. Factors that may impact the results of the company can be found in the company’s 10-Q and other reports filed with the SEC. The company undertakes no obligation to update forward looking statements. Also, as we discuss certain non-GAAP measures, it may be helpful to review the reconciliations to GAAP located in our press release. Finally, please refer to our schedule of supplemental information which includes pro forma operating results for our current hotel portfolio. I’ll now turn the call over to Leslie Hale.
Leslie Hale (President and Chief Executive Officer)
Thanks John Paul Good morning everyone and thank you for joining us today. We are encouraged to see the lodging industry off to a strong start this year benefiting from the underlying strength of fundamentals with the acceleration of business transient demand, being a key driver. We are particularly pleased with our first quarter results as our urban centric portfolio outperformed the industry. Our favorable footprint with exposure to many top performing markets such as Northern California and South Florida among others allowed us to capture the broad based momentum in all segments of demand. Along with the ramp from our recent high impact renovations and conversions driving solid results ahead of our expectations. During the first quarter we achieved RevPAR, growth of 4.8% outperforming the industry by 100 basis points. We delivered robust non room revenue growth which exceeded our REVPAR performance by more than 300 basis points and we drove high single digit year over year EBITDA, growth and margin expansion. We also advanced our conversion pipeline and addressed all of our maturities through 2029. Our solid first quarter performance demonstrates the momentum in our urban markets and the growth embedded in our portfolio. While the ongoing execution of Our capital allocation and balance sheet initiatives position us to continue to drive outperformance relative to the industry and create long term shareholder value. Turning to our operating results, our first quarter RevPAR, growth of 4.8% was balanced between occupancy and ADR gains. Trends improved sequentially throughout the quarter with RevPAR, in February and March achieving healthy year over year growth of 6% and 9% respectively. Following January’s RevPAR, decline, both February and March were aided by a robust calendar of events as well as the favorable timing of holidays which bolstered demand. We were pleased to see this positive momentum carry into April. Our urban markets have been consistently performing well, disproportionately benefiting from positive trends across all demand segments. We were pleased to see our urban footprint outperform the broader industry urban markets with a number of our markets delivering high single digit RevPAR, growth. Notably, Northern California achieved outstanding RevPAR, growth of 27%, benefiting not only from the super bowl and the favorable shift of the RSA Conference to March this year, but also from the continued expansion of of the AI industry which is driving significant corporate investment and business travel demand broadly across this market. In addition to a better overall environment, New York City, was another noteworthy market during the quarter with our properties achieving over 8% RevPAR, growth driven by healthy corporate and leisure transient demand, a favorable events lineup and the ramp of our high occupancy renovations that we completed last year. As it relates to segmentation, business travel saw robust growth during the first quarter with our business transient revenues growing by 9% which was largely demand driven with room nights increasing by nearly 700 basis points. The momentum in business travel accelerated throughout the quarter underpinned by strong growth in business investment driven by AI related spending as well as record corporate profits. This is specifically fueling the ongoing strength in sectors such as technology, finance, aerospace and life sciences which is amplifying overall business travel (BT) demand. Leisure trends were strong across our portfolio with revenues growing by 5%. Demand remained resilient and we were encouraged to see rate growth of 3%. The leisure segment benefited from a compressed spring break as well as elevated demand at a number of our hotels as winter storms across the country drove additional leisure travel during peak season. Our urban leisure once again saw stronger relative performance as our hotels and live workplace submarkets are capturing robust demand around sports, concerts, dining, festivals and entertainment. Importantly, our geographically diversified portfolio continues to benefit year after year from the rotation of signature events within our footprint relative to our group segment, even with difficult comparisons from the inauguration in D.C. and the Austin Convention center booking trends remained healthy evidenced by our in the quarter for the quarter revenue pace increasing by 900 basis points and ADR increasing by 3% over last year. We were especially pleased to see a meaningful pickup in group bookings for the second quarter which saw pace improve by 400 basis points. We are encouraged by the increasing share of corporate bookings within our group mix which has positive implications for ADR and out of room spend. Our portfolio also generated outsized non room revenue growth of 8.2%, once again underscoring the momentum behind our ROI initiatives and the investments we have made in expanding ancillary revenue channels. These initiatives allowed us to increase our total revenues by 5.4%. This top line growth combined with disciplined cost management and a lean operating model contributed to our significant EBITDA, outperformance relative to our initial expectations and our margins expanding by 45 basis points over the prior year. Now, turning to capital allocation, our transformative renovations from last year as well as our completed conversions are delivering tangible results and contributed meaningfully to our outperformance relative to the industry. This is demonstrated by our four major renovations at high occupancy hotels completed last year achieving 9% RevPAR, and 10% EBITDA, growth during the quarter. Our conversions continue to deliver solid results with our seven completed conversions generating EBITDA, growth of 16%. Additionally, we made further progress towards our Renaissance Pittsburgh conversion and remain on track to relaunch the property under Marriott’s autograph collection. This summer we advanced preparation of our conversion of the Wyndham Boston Hotel which will join Hilton’s Tapestry collection, and we are on pace to begin construction later this year and we look forward to announcing our next conversion in the coming quarter. Collectively, these capital allocation initiatives supported by our strong balance sheet, position us for multiple years of growth in 2026 and beyond. Looking ahead, we recognize that the macro environment remains uncertain, driven by an evolving geopolitical backdrop which is giving rise to shorter booking windows and limiting visibility beyond the near term. To date, however, we have not observed a noticeable impact on our results. Our first quarter outperformance on both the top and bottom line is encouraging and we believe the setup continues to favor urban markets for the remainder of the year, supported by sustained strength in business, transient and robust demand for urban leisure experiences, trends that should disproportionately benefit our portfolio overall. We had already anticipated these healthy trends in our original guidance for the remainder of the year. However, given the current uncertainty, we will continue to monitor any shifts in demand. Our outlook assumes the continuing broad based strength in business travel (BT) supported by healthy corporate profits and growth across a number of industries, reinforcing our view that the recovery in this segment has further room to grow the resiliency of leisure demand and expectations for continued rate growth as we approach the peak summer travel season, especially in our urban markets which have an extensive lineup of events, sports, concerts and entertainment A positive group pace for the remainder of the year with ADR demonstrating pricing power and our expectations that even with a shortened booking window we will continue to see strong in the quarter for the quarter bookings a favorable footprint to capture upcoming catalysts including the World cup and America’s 250th anniversary the ongoing momentum in Northern California across all demand segments further validating the sustainability of this market’s recovery. Continued growth of non room revenues from our ROI initiatives as well as tailwinds from the ramp of our four significant renovations completed last year and our recently completed conversions which are well positioned to drive multiple years of growth. Our strong results are a direct outcome of the strategic repositioning of our portfolio over the past several years through asset recycling, targeted acquisition and high impact conversion. As we look ahead, we remain cautiously optimistic about the long term durability of the demand trends we are seeing and believe our well positioned portfolio will support continued strong relative performance and the creation of long term value for our shareholders. With that I will turn the call over to Nikhil.
Nikhil Bala (Chief Financial Officer)
Thanks Leslie to start, our comparable numbers include our 92 hotels owned at the end of the first quarter. Our reported corporate adjusted EBITDA and AFFO include operating results from all sold hotels during RLJ’s ownership period. Our first quarter results came in ahead of our expectations with Occupancy increasing by 2.6% to 70.8%, average daily rate increasing by 2.1% to $210 and our RevPAR of $149 increasing by 4.8% versus the prior year. Fundamentals strengthened throughout the quarter following January’s 1.9% RevPAR decline with growth accelerating to a robust 6.1% in February and 8.9% in March. These healthy trends carried into April which achieved preliminary RevPAR growth of approximately 4%. During the quarter we saw meaningful strength within our urban markets which achieved 4.4% RevPAR growth outperforming STR’s comparable markets by 110 basis points. This growth was broad based and balanced between approximately a 2 point increase in occupancy and a 2 point increase in ADR. Our strong urban portfolio performance was bolstered by double digit RevPAR growth in markets such as South Florida which grew RevPAR by approximately 10% and Houston and Denver which each achieved 14% RevPAR growth, additionally demonstrating that our portfolio benefits from seven days a week demand both weekdays and weekends saw mid single digit RevPAR growth. Our urban markets benefited from improvements in all segments of demand, notably business travel. The acceleration in BT demand that we are seeing has positive implications for the momentum in out of room spend which was evident in the robust growth of 8.2% in our non room revenues that we saw during the first quarter. We were especially pleased to see the strong revenue growth come on the heels of the robust 7.2% growth we achieved during the prior quarter. Our non room revenues generate strong margins which improved by 130 basis points during the quarter, underscoring the success of our ROI initiatives aimed at profitably growing food and beverage reconcepting underutilized spaces and growing other ancillary revenues. Overall, non room revenue growth led our first quarter total revenues to grow by 60 basis points ahead of our RevPAR growth. Turning to bottom line results, total operating expenses were up 2.1% on a PER occupied room basis, underscoring the benefits of our lean operating model and our disciplined approach to managing costs which allowed for strong flow to the bottom line. Although energy expenses were elevated due to the winter storms as well as disruption in the energy markets due to the war, these were more than offset by improvements in fixed costs driven by a double digit decline in property insurance due to a favorable renewal last year and other cost control initiatives. During the first quarter our portfolio achieved Hotel EBITDA of $89.9 million representing year over year growth of $6.1 million or 7.2% and Hotel EBITDA margins of 26.4% which expanded by 45 basis points over the prior year. These results translated to adjusted EBITDA of $80.9 million and adjusted FFO per diluted share of $0.33 for the first quarter with respect to our balance sheet. As previously announced, during the first quarter we executed a series of refinancing transactions which expanded our undrawn capacity by $500 million and created additional flexibility. We intend to use the additional capacity created by these refinancings to pay off our $500 million senior notes that mature on July 1 this year. Following this payoff, we will have no maturity due until 2029 and our weighted average maturity will be over four years. Our balance sheet remains well positioned with over $950 million of liquidity, including undrawn capacity of $600 million on our corporate revolver, 84 of our 92 hotels unencumbered by debt, an attractive weighted average interest rate of 4.6% and 75% of debt either fixed or hedged. We ended the first quarter with $2.2 billion of debt. In addition to proactively addressing our maturities, we continue to demonstrate our steadfast commitment to returning capital to shareholders by paying an attractive and well covered quarterly dividend of $0.15 per share. Now, turning to our full year outlook, we are pleased with the strong start to the year. At the same time, we remain mindful of the uncertainty in the overall macro environment. We have incorporated our strong first quarter outperformance into our revised guidance while keeping our expectations for the remainder of the year unchanged from our prior outlook for 2026. We now expect Comparable RevPAR growth to range between 1.5% and 3.5%, Comparable Hotel EBITDA between $356 million and $380 million, Corporate Adjusted EBITDA between $324 million and $348 million and Adjusted FFO per diluted share to be between $1.29 and $1.45. Our outlook assumes no additional acquisitions, dispositions or balance sheet activity beyond what has been completed to date. We continue to estimate capital expenditures will be in the range of $80 million to $90 million, cash GNA will be in the range of $32.5 million to $33.5 million and expect net interest expense will be in …
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