Big beats mark opening of 2Q earnings season

Big earnings beats mark headlines on Wednesday as giants such as Hilton, Wyndham Hotels & Resorts and Pebblebrook Hotel Trust report second quarter earnings.

For Hilton, RevPAR growth was -2.1% versus the 2019 benchmark, beating estimates that were in the -4% range. Adjusted earnings per share came in at US$1.29 versus Street estimates of US$1.05. Adjusted EBITDA was US$679 million versus average US$607 million estimates with full year adjusted EBITDA projected to be between US$2,400 million and US$2,500 million.

Systemwide comparable RevPAR for Hilton increased 54.3% compared to a year ago with full year systemwide comparable RevPAR now expected to increase between 37% and 43%. In Q3, RevPAR is expected to exceed 2019 levels.

Hilton approved 23,400 new rooms for development during the second quarter, bringing Hilton’s development pipeline to 413,000 rooms as of June 30, 2022. It added 14,400 rooms in the second quarter, a net of 13,300 rooms. R.W. Baird analysts noted that signings were ~18% below the average 2Q signings in 2018-2019, and rooms under construction declined to 195,000 (-5,000 versus 1Q22; now approximately in line with the number of rooms under construction throughout 2019).

Hilton also repurchased 3.6 million common stock shares during the second quarter, bringing total capital return, including dividends, to US$521 million for the quarter and US$812 million year to date through July. Full year capital return is projected to be between US$1.5 billion and US$1.9 billion.

Wyndham Hotels & Resorts also reported late on Tuesday and raised its full-year outlook, while growing its global development pipeline by 9% to a record 208,000 rooms.

Global RevPAR growth beat 2Q 2019 by 3%. U.S. RevPAR was +9%, while international RevPAR was only -6%.

Adjusted earnings per share of US$1.07 beat the Street’s estimate of US$0.94, while US$175 million of adjusted EBITDA beat consensus estimate of US$162 million.

Wyndham was also busy repurchasing shares – 1.9 million for UDS$142 million during the quarter, which was almost double of R.W. Baird’s expectation.

Wyndham said it also signed 187 new development contracts in the quarter, including 22 for the company’s new extended-stay brand, Project ECHO, bringing the total number to 72 since launch in March. Wyndham added 5,600 net rooms during the quarter, and 1H22 net unit growth was +1.1%.

Franchising revenues for Wyndham increased 18% year-over-year to US$335 million primarily due to the global RevPAR increase and higher license and other fees.  Franchising adjusted EBITDA increased 11% to US$185 million, reflecting the growth in revenues, partially offset by a 340-basis point unfavorable timing impact from the marketing fund.

Pebblebrook Hotel Trust also exceeded consensus expectations in 2Q22 with strong performance in June with R.W. Baird writing that July metrics indicate continued fundamental momentum.

Same-property total revenues were -3.1 versus 2019, solidly beating consensus estimates. Again, Baird reported that net transaction activity during the quarter appears to have added ~100 bps of growth versus its model.

Adjusted FFO/share was US$0.72 versus US$0.65 estimates; adjusted EBITDA was US$128.8 million versus Street expectations of US$123 million.

As part of an ongoing strategy to sell more asset than it buys, Pebblebrook also reported that it is selling three more assets for combined proceeds of US$183.9 million. Several other assets are being marketed for sale, and the company expects to offer for sale additional assets later this year.

Analysts at Truist Securities noted that Pebblebrook termed the business recovery “vigorous” with urban occupancies averaging 72% in June and ADR +10% versus June 2019.