RLJ Lodging Trust (NYSE: RLJ) is a self-advised and self-administered Maryland real estate investment trust (REIT) that owns primarily premium-branded, rooms-oriented, high-margin, focused-service and compact full-service hotels located within heart of demand locations. The company's strategic focus on urban markets has enabled it to deliver strong financial results, even amidst the challenges posed by the pandemic.

Business Overview

RLJ's urban-centric portfolio, with a focus on premium-branded, rooms-oriented hotels, has been a key driver of its outperformance. The company's hotels are strategically located in high-growth urban markets that exhibit multiple demand generators and attractive long-term growth prospects. This positioning has allowed RLJ to capitalize on the recovery in business travel, group demand, and urban leisure, which have all contributed to the company's strong performance.

Portfolio Performance

During the first quarter of 2024, RLJ continued to demonstrate its resilience, reporting a 1% increase in RevPAR (Revenue per Available Room) compared to the prior year period. This growth was driven by a 1.2% increase in occupancy, which was slightly offset by a 0.1% decline in ADR (Average Daily Rate). The company's first quarter revenue grew 3.1% year-over-year, benefiting from a 7.7% increase in out-of-room spend.

In the first quarter, RLJ's business transient revenues grew 11.6% year-over-year, driven by a 5% increase in ADR and a 7% increase in occupancy. The company's midweek RevPAR also grew 2.4% during the quarter, reflecting the strength in business travel. Additionally, RLJ's group demand remained robust, with the company's group pace at 106% for the full year, and the third and fourth quarters expected to be the strongest.

The company's urban leisure segment also performed well, with revenues increasing 3% in the first quarter. RLJ's suite product, which represents 50% of its portfolio, has been particularly attractive to leisure travelers during the spring break season, contributing to the strong performance.

Strategic Investments

RLJ's strategic investments in its portfolio have also been a key driver of its success. The company's conversions in Charleston, Mandalay Beach, and Santa Monica achieved a 26.5% RevPAR growth in the first quarter, further bolstering the company's confidence in its ability to unlock significant value through its next wave of conversions.

Financials

In the latest fiscal year, RLJ reported annual revenue of 1,325,577,000 and net income of 76,405,000. The company's annual operating cash flow reached 315,142,000, while its free cash flow stood at 182,793,001. These robust financial metrics underscore RLJ's ability to generate consistent cash flows and create value for its shareholders.

Outlook

Looking ahead, RLJ remains optimistic about the trajectory of lodging fundamentals, which should benefit from growth in all segments of demand, given the ongoing consumer preferences towards experiences and the backdrop of limited new supply. The company's urban-centric portfolio is well-positioned to capitalize on these trends, with the company expecting RevPAR growth to strengthen further in the second half of the year due to favorable citywide calendars and the location of many large-scale events.

For the full year 2024, RLJ is reaffirming its guidance, expecting comparable RevPAR growth between 2.5% and 5.5%, comparable hotel EBITDA between 395 million and 425 million, corporate adjusted EBITDA between 360 million and 390 million, and adjusted FFO per diluted share between 1.55 and 1.75.

Liquidity

The company's balance sheet remains well-positioned, with 400 million available under its corporate revolver, a weighted average maturity of approximately 3.4 years, and 88 of its 96 hotels unencumbered by debt. RLJ's weighted average interest rate stood at 4.29% at the end of the first quarter, with 82% of its debt either fixed or hedged.

Conclusion

RLJ's strategic focus on urban markets, its ability to drive growth through conversions and ROI initiatives, and its strong balance sheet position the company well to navigate the evolving market conditions and continue to deliver value to its shareholders. As the lodging industry continues to recover, RLJ's resilient urban-centric portfolio is poised for continued outperformance.