RLJ Lodging Trust (RLJ)

RLJ Lodging Trust Q1 2025 Financial Report

Report Date: 2025-05-06
Period Covered: Three months ended March 31, 2025

1. Executive Summary

• Net Income: $3.17 M (vs. $4.75 M in Q1 2024, –33.2%)
• Total Debt (net): $2.22 B (vs. $2.22 B in Dec 2024, +0.06%)
• Revenue: $328.1 M (+1.1% YoY)
• Hotel EBITDA: $85.9 M (–3.3% YoY)

2. Profit & Loss Analysis

• Revenue grew modestly to $328.1 M from $324.4 M, driven by:
  • Room revenue: $267.7 M (+0.4%), reflecting higher ADR and corporate travel;
  • Food & beverage: $37.5 M (+5.1%), led by banquet/catering recovery.
• Expenses rose due to:
  • Property operating costs: $217.1 M (+1.7%), higher wages, marketing, utilities;
  • Depreciation & amortization: $45.8 M (+2.5%), from recent renovations.
• Interest expense increased to $27.6 M (+4.1%), reflecting higher average debt and unhedged exposures.
• Gain on sale of one hotel: $1.3 M.
• Result: Net income of $3.17 M.

3. Debt Analysis

• Total net debt: $2.221 B, up 0.06% QoQ.
• Weighted average interest rate: 5.09% (fixed after hedges: 7.28%).
• Maturities well-staggered through 2029, with ample revolver capacity and extension options.

4. Drivers & Headwinds

Drivers:

• Strong urban demand, corporate travel rebound
• Prudent capital recycling: sale of non-core hotel, refinancing for lower cost
• Active share repurchase program

Headwinds:

• Rising operating costs (labor, insurance)
• Interest rate volatility despite hedges
• Limited group and leisure business relative to full-service peers

5. Pros & Cons

Pros:

• High-margin, premium-branded focused-service model
• Geographic diversification across 23 states/DC
• Strong liquidity and covenant compliance

Cons:

• Exposure to labor and insurance inflation
• Interest expense sensitivity outside hedge bands
• Moderate EBITDA decline vs. prior year

Prepared by Financial Analysis Team

Hotel segment (comparable properties) – Q1: • Room Revenue: $267.7 M vs. $266.6 M
• F&B Revenue: $37.5 M vs. $35.7 M
• Ancillary Revenue (parking, resort fees): $22.9 M vs. $22.1 M
• Total RevPAR: $141.39 vs. $139.13
• Occupancy: 69.2% vs. 69.5%
• ADR: $204.38 vs. $200.17
• Hotel EBITDA: $85.9 M vs. $88.9 M

RLJ Lodging Trust’s compact full-service hotel portfolio continues to benefit from urban business travel and elevated RevPAR trends. The modest revenue growth in Q1 2025, coupled with disciplined cost controls, underpins a stable EBITDA profile despite a slight decline. The balance sheet remains robust, with net debt flat and covenant headroom intact. Looking ahead, further rate-sensitive debt management and selective capital recycling (ongoing asset dispositions and refinancings) should bolster cash flow. Key challenges include managing cost inflation and navigating interest rate shifts beyond current hedges. Opportunities lie in franchise expansions and accretive acquisitions in top-tier markets.