Speaking during the company’s second-quarter earnings call, officials with Hospitality Properties Trust said their capital will continue to focus on hotel deals and renovation opportunities.
NEWTON, Massachusetts—Hospitality Properties Trust is a unique company within the universe of hotel real estate investment trusts due to its ownership stake in not just hotels but travel centers around the country.
But officials with HPT said their capital will continue to flow to hotel deals for the foreseeable future because that’s where they believe the best returns reside.
Speaking during the company’s second-quarter earnings call with investors and analysts, President and CEO John Murray said his company’s interest in investing at the moment sits firmly in the hotel space.
“We’re looking to complete hotel renovations and hotel acquisitions to do add-ons and improve our existing portfolios,” he said.
The company discussed two recent acquisitions during the call: the $75-million purchase of the 260-room Radisson Blu in Minneapolis, Minnesota, and the $15.8-million acquisition of the 117-room Staybridge Suites in Baton Rouge, Louisiana. Both of those properties will be brand-managed, by Radisson and InterContinental Hotels Group, respectively.
In providing analysts some color on those acquisitions, Murray noted HPT bought the Radisson at an 8% cap rate based on earnings projections for 2018, and the Staybridge property was bought at a 10.5% cap rate based on actual cash flow from 2017.
Murray said the company is also sinking a significant amount of money into renovations across its portfolio, but perhaps most notably with the recently converted Clift Royal Sonesta in San Francisco. He noted the property is in need of roughly $60 million in work for both guestrooms and public spaces.
“We’re already through planning on that, and we’re in the process of ordering materials and building out model rooms,” he said. “But because of how extensive it is, it probably won’t be completed until sometime in 2020. The permitting process is long and complicated in San Francisco, but that’s currently our best estimate.”
HPT recently regained full control of that property following a prolonged legal battle with SBE Entertainment Group, who gained operational control of the hotel after purchasing Morgans Hotel Group.
Comparable hotel revenue per available room was up 2% year over year during the second quarter, HPT officials noted, driven exclusively by a 2.5% increase in average daily rate as occupancy dipped 0.5%.
Adjusted earnings before interest taxes, depreciation and amortization increased 3% to $226.9 million.
Murray noted their Wyndham Hotels & Resorts portfolio suffered due to dimming on online travel agencies, which he said was associated with the company’s direct booking efforts, and weaker corporate demand. He noted that situation is “largely resolved” and performance should improve moving forward.
As of press time, HPT’s stock was trading at $27.89 a share, a year-to-date drop of 7.1%. The Baird/STR Hotel Stock Index was down 4.6% for the same period.