CHARLOTTE, NC—In an earnings season that has seen a lot of negatives, Extended Stay America Inc. and ESH Hospitality Inc. reported several positives for Q2.
“Our second quarter results clearly demonstrate that Extended Stay America and our business model is far different from the transient lodging brands,” said Bruce Haase, president/CEO, Extended Stay America. “During the second quarter, our comparable systemwide RevPAR declined by 28.7% and that compares to industry declines of 70% and declines of 50% for other mid-price extended-stay hotel brands. In fact, we beat every benchmark in the industry by a large amount in the second quarter. Our performance exceeded the overall industry, competitive mid-price extended-stay hotels, our competitive set, as well the economy and midscale chain scales. Our RevPAR index increased by over 4,600 basis points to 141 in the second quarter.”
The company also saw relatively good occupancy levels. “Today, our company occupancy levels are the envy of the industry,” he said. “Our systemwide occupancy has increased since mid-April. From a low point of the high-50% range in April, we are now operating at an 81% occupancy level in August. This is above our 2019 full-year average and consistent with pre-pandemic levels. We believe that our occupancy is currently the highest of any publicly reporting brand in the U.S. today, including significantly more residential economy extended-stay hotel brands.”
Total revenues for the three months ended June 30, 2020, were $230.8 million, a decrease of 28.7% from the same period in 2019 due to the impact of the COVID-19 pandemic. Total revenues for the first half of 2020 were $497.1 million, a decrease of 17.3% compared to the same period in 2019.
Comparable system-wide RevPAR for the three months ended June 30, 2020, declined 28.7% over the same period in 2019 to $38.38, driven by a 18.3% decline in ADR and a 1,010 basis point decrease in occupancy to 69.6%. Comparable system-wide RevPAR declined 34.7%, 28.2% and 23.9% in the months of April, May and June 2020, respectively, compared to the same periods in 2019. After bottoming in mid-April, RevPAR increased each week for the remainder of the quarter. Comparable system-wide RevPAR for the first half of 2020 declined 18.1% to $41.18.
Hotel Operating Margin for the three months ended June 30, 2020, was 41.7% compared to 54.4% in the same period in 2019 due a decrease in RevPAR caused by the COVID-19 pandemic. Hotel Operating Margin improved from 35.2% in April 2020 to June 2020 to 45.4%. Hotel operating expenses during the second quarter of 2020 declined by 9.2% from the same period in 2019, or approximately 10% on a comparable basis. Hotel Operating Margin for the first half of 2020 was 43.8% compared to 52.4% in the same period of 2019, driven by a decrease in RevPAR due to the COVID-19 pandemic.
Net loss for the three months ended June 30, 2020, was $8.8 million compared to net income of $59.7 million for the same period in 2019. The decline in net income was due to a decline in comparable system-wide RevPAR as a result of the COVID-19 pandemic, an increase in depreciation and amortization expense, and an increase in net interest expense, partially offset by a decrease in income tax expense. Net loss for the first half of 2020 was $0.9 million, compared to net income of $88.1 million for the same period in 2019.
Adjusted EBITDA for the three months ended June 30, 2020, was $74.4 million, a decline of 51.6% compared to the same period in 2019. The decline in Adjusted EBITDA was due to a decline in comparable system-wide RevPAR. Adjusted EBITDA for the quarter excludes non-cash equity-based compensation expense of $1.9 million, $1.6 million in loss on disposal of assets and $1 million in other expenses. Adjusted EBITDA for the first half of 2020 was $172.1 million compared to $270 million in the same period of 2019.
As of June 30, 2020, the company had a pipeline of 69 hotels representing approximately 8,400 rooms. Three company-owned hotels and one franchised hotel opened during the second quarter.
