Extended Stay America Reports Revenue Dip, Pipeline Growth in Q2

CHARLOTTE, NC—Extended Stay America Inc. and ESH Hospitality Inc. have consolidated results for the three and six months ended June 30, marking income and revenue decreases, but steady pipeline growth.

Extended Stay America President/CEO Jonathan Halkyard said, “We are pleased with the significant progress in our growth plans during the quarter with our total hotel pipeline increasing by 18% in the second quarter to 8,700 rooms, or approximately 13% of existing supply, and successfully opening our first franchise conversion hotel.”

Among the Q2 highlights:

  • Net Income of $59.7 million, compared to $65.6 million in the same period in 2018, a decrease of 9%
  • Total revenues of $323.7 million, a decrease of 3.8% over the same period in the prior year due to asset dispositions in 2018
  • Comparable system-wide RevPAR increased 0.1%, over the same period in 2018 to $53.94
  • RevPAR Index gain of 1.5% excluding hurricane-related markets and renovation disruption
  • Adjusted EBITDA of $153.6 million, a decline of 8.2% compared to the same period in 2018
  • Adjusted Funds from Operations (Adjusted FFO) of $0.53 per diluted Paired Share
  • Adjusted Paired Share Income of $0.32 per diluted Paired Share
  • Franchise pipeline expands 21% to 52 hotels in the second quarter
  • Increased Share Repurchase authorization by $150 million
  • Update to Corporate Structure Review

Halkyard continued, “After extensive exploration of a variety of possible transformative transactions to which our boards of directors have been, and remain, open, our boards have concluded that the terms currently available for such transactions do not presently provide a superior alternative to the opportunity presented by the aggressive pursuit of our ESA 2.0 strategy, including steps to accelerate the franchising portion of that strategy.”

Capital Expenditures
The company invested $57.6 million in capital expenditures during the second quarter of 2019. This includes $9.3 million in renovation capital, $9.2 million in IT capital and $13.9 million in capital for ESA 2.0 hotel development and land acquisitions. The company invested $112.9 million in capital expenditures during the first half of 2019.

Hotel and Development Pipeline
As of June 30, the company had a pipeline of 71 hotels representing approximately 8,700 rooms.

Lastly, Halkyard said, “We believe our shares are significantly undervalued at recent trading prices and have asked our boards to increase the company’s remaining authorization to more than $260 million, which they have approved. With the review concluded, we expect to return a significant amount of capital to shareholders in the second half of 2019 and in 2020.”