CorePoint positions portfolio to maximize value
 
CorePoint positions portfolio to maximize value
22 MARCH 2019 7:53 AM

As the company accomplished a number of goals it set for itself during the last half of 2018, CorePoint Lodging’s leadership shared the company’s two strategic initiatives for its portfolio in 2019.

IRVINE, Texas—The reopening of Hurricane Irma-affected hotels and the repositioning of several properties helped CorePoint Lodging’s portfolio to perform better than expected, said executives during the company’s fourth-quarter and full-year 2018 earnings call.

The company’s key priorities for the second half of the year were to drive revenue per available room and market share growth, said president and CEO Keith Cline. Through accomplishing its other goals of reopening hurricane-affected hotels in Florida ahead of schedule and repositioning a collection of hotels, RevPAR grew 9.9% year over year during the fourth quarter, and its RevPAR index market share grew by 1,220 basis points for the same period, he said.

In looking at full-year results, CorePoint’s portfolio grew comparable RevPAR by 4.7% and its RevPAR index market share by 360 basis points, he added.

Its full-year gains were the result of the repositioning of the hotels, which included assets in Western Texas, Cline said.

The company reported adjusted earnings before interest, taxes, depreciation and amortization for real estate of $180 million for the full-year, he said, adding this number came in at the high end of the company’s most recent guidance. The company continues to see pressure from expenses, namely payroll and benefits, supplies, property insurance and online travel agency commissions, he said.

As of press time, CorePoint stock was trading at $14.13 a share, up 16.8% year to date. The Baird/STR Hotel Stock Index was up 13.1% for the same time period.

Looking ahead
CorePoint is to focus on two strategic initiatives in 2019 to unlock the potential of its diverse portfolio, Cline said.

Its first goal is executing an aggressive asset-management strategy by working closely with Wyndham Hotels & Resorts to improve operations at its hotels, particularly its underperforming hotels, he said. The second initiative is an ongoing strategic review of its portfolio to determine which hotels fit into its core portfolio and which will be candidates for strategic disposition, he said.

In its asset-management strategy, the company will create value by leveraging Wyndham’s distribution network, Cline said. The portfolio will fully transition in early April, giving the hotels the benefit of a broader distribution network and creating the opportunity to drive traffic through direct channels, he said. Wyndham also offers a rewards program with more than 60 million members who will have access to La Quinta Inn & Suites, he said.

There are several areas where CorePoint hopes to partner with Wyndham to achieve lower costs, such as payroll and benefits, insurance, OTA commissions and savings through Wyndham’s procurement programs at the hotel level, he said.

Though CorePoint’s ongoing strategic review of its portfolio, the company will determine which hotels do not fit in with its strategic focus, Cline said. The review began during the fourth quarter to improve operating performance and results, he said. The company is looking at its lowest performing hotels to evaluate opportunities to increase gross margin, net cash flow and return on investment, Cline said.

Cline identified 237 hotels as his core assets, a portfolio delivering $723 million in annual revenue.

These hotels comprise 26% of the hotel level adjusted EBITDA for real estate margins, he said.

There’s another subset of 76 non-core hotels that “significantly underperform” the core portfolio, he said. These hotels generate about $138 million in annual revenue and deliver, on average, 8% of the hotel level adjusted EBITDA for real estate margins, he said.

During its review process, CorePoint will look at market conditions, ages of the assets, their capital requirements and revenue and margin performance, Cline added.

During the fourth quarter of 2018, the company sold two non-core properties for a combined price of about $4 million, according to the company release. 

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