On a second-quarter earnings call, which was the company’s inaugural call, CorePoint Lodging executives outlined the real estate investment trust’s strategy and integration with the management arm of Wyndham Hotels & Resorts.
IRVING, Texas—Nearly two months into the creation of the company, officials on a second-quarter earnings call for CorePoint Lodging said the midscale and upper midscale-focused real estate investment trust is repositioning hotels affected by hurricanes and working on integration with Wyndham Hotels & Resorts, which manages their hotels.
The company did not conduct a questions-and-answers session with analysts on its first call since completing the spinoff of La Quinta Holdings’ franchise and management businesses to Wyndham on 30 May. CorePoint began trading as a standalone public company on the New York Stock Exchange on 31 May.
La Quinta had a three-pronged strategy to grow business prior to the spin, which Keith Cline, president and CEO of CorePoint, said the company will continue to follow. Through the strategy, the company will drive consistency in product, the delivery of the guest experience and will drive customer engagement.
“The first two components of this strategy drove the intended outcomes as illustrated by one, significant increase in (revenue per available room) index share, and two, higher net promoter scores driven by both service quality and product quality,” he said.
“We believe that in order to unlock the (potential) of our 316-hotel initial portfolio … as well as the value the La Quinta system brings to those hotels, there needed to be a consolidation transaction that would give the La Quinta brand scale, distribution, loyalty and reach so it could drive improved results for our hotels.”
He added that CorePoint will continue to benefit from strategic initiatives put in place at La Quinta in the second half of the year.
John Cantele, EVP and COO of CorePoint, said the company is working on getting the full benefits of the Wyndham platform.
“The institutional knowledge that transferred to Wyndham, and the fact that we are working with one management company, allows us to focus our asset-management resources more strategically, more closely with them to ensure CorePoint is reaping the full benefits of the Wyndham platform,” he said.
Prior to the spin, “La Quinta put in place an initiative to add approximately 25 people to its salesforce to increase the focus on local markets, especially at the 54 hotels being renovated and repositioned upward,” Cantele said.
“These repositioned hotels are seeing a significant improvement in market share, driven in part by the additional sales resources,” he said, adding that CorePoint expects this trend to continue as hotels continue to ramp.
Repositioning efforts are nearing completion, he said.
“At the close of the second quarter, 48 hotels completed their construction phase and are now in the process of being reintroduced within their markets,” Cantele said, adding that five more hotels are expected to come out of renovation, “leaving just one, Los Angeles Airport, scheduled to be completed in 2019.”
According to the company’s earnings release, disruption from hurricanes continued to have an effect on business in the second quarter.
“The company estimates that the impact of the hurricanes on second quarter 2018 results was a reduction of approximately $3 million, net of approximately $1 million of business interruption proceeds received, in adjusted (earnings before interest, tax, depreciation and amortization) as compared to the same period in 2017,” the release states, while noting a majority of the losses will be recouped via business interruption insurance.
For the second quarter, comparable RevPAR hit $63.29, which is a 5.6% increase from the same period the previous year, according to the release.
Comparable RevPAR growth is expected to range between 3% and 4.25% for the full year. According to the release, “the company currently estimates the impact of the ongoing disruption caused by Hurricanes Harvey and Irma to result in a reduction of approximately $18 million to $22 million of pro forma Adjusted EBITDA for the full-year 2018, which is captured in its outlook range.”
On the earnings call, Cline said he looks “forward to the third quarter where it should be a much cleaner representation of CorePoint Lodging.” He added that the REIT’s team is “focused on the impact of the Wyndham transition and integration into their system, as well as driving results at our hotels.”
As of press time, CorePoint’s stock was trading at $25.22, down 8.4% since the spin. The Baird/STR Hotel Stock Index was down 5.6% for the same period.