BETHESDA, MD—RLJ Lodging Trust has reported results for the three months ended March 31, 2020, and has provided a business update on its COVID-19 action plan.
Although RLJ suffered significant decreases in revenue and RevPAR this quarter, Leslie D. Hale, president/CEO of RLJ Lodging Trust, expects the company to be early to recover given its portfolio. “Eighty percent of our portfolio is leisure-oriented,” Hale said in an earnings call, noting that she expects this to be the first travel group to recover. Additionally, 10% of RLJ’s assets are considered resorts. “Our portfolio is well-positioned to benefit.”
RLJ is also taking the necessary operating steps to stay afloat.
“Our dedicated team of asset managers worked incredibly hard with our operating partners to suspend operations at more than 50% of our portfolio, and to significantly cut expenses at hotels that remain open, thereby drastically reducing our hotel operating costs,” Hale said. “With a focus on further bolstering liquidity, we reduced our dividend to $0.01 per share, decreased spending on a number of growth projects, and suspended share buybacks. Although difficult, these timely actions have materially reduced our cash burn, and combined with our solid balance sheet prior to entering this catastrophe, have positioned us with $1.2 billion of liquidity to sustain an extended period of uncertainty.”
Among the highlights (decrease % compared to the same period in 2019):
- Total revenue of $265.5 million, a decrease of 33.5%
- Pro forma RevPAR of $106.5, a decrease of 24.5%
- Pro forma ADR of $176.2, a decrease of 5.1%
- Pro forma occupancy of 60.5%, a decrease of 20.5%
“While we cannot predict the timing or the magnitude of a recovery, we are thoughtfully working with our operators to reopen hotels as appropriate in a socially and financially responsible manner,” Hale said. “With a flexible balance sheet, a lean operating model and an orientation toward the transient segment, which should be the first to recover, we believe that not only will we be able to effectively navigate through this crisis, but also be positioned to realize our embedded growth opportunities over the longer term.”
The company has a net loss of $30.8 million; $1.2 billion of unrestricted cash and $200 million undrawn on line of credit; no debt maturities until 2022; temporarily suspended operations at 57 hotels due to the ongoing COVID-19 pandemic; Adjusted EBITDA of $41.4 million; and Adjusted FFO per diluted common share and unit of $0.10.
COVID-19 Action Plan Update
In response to the significant and ongoing impact from COVID-19 to public health and the broader industry, the company is providing an update on the wide-ranging actions it has taken at both the property and corporate-level to preserve liquidity:
- Suspension of hotel operations: The company has suspended operations at 57 of its hotels, where carrying costs of operating with low occupancies, exceeded the cost of suspending operations.
- Cost containment initiatives: At the hotels remaining open, the company’s asset managers continue to work closely with its hotel management partners to manage its hotels under aggressive operating cost containment plans. These plans include significantly reduced staffing, elimination of nonessential amenities & services and the closure of several floors and all food & beverage outlets at properties.
- Capital investment reduction: The company’s 2020 capital expenditure program has been reduced by more than 80%. All nonessential capital investments have been deferred. The company will continue to make investments to protect and preserve its properties and expects to re-evaluate future capital plans when there is improved economic visibility.
- ROI projects: The company reviewed all 2020 ROI initiatives and suspended 90% of these projects. The company expects to re-evaluate all ROI projects when there is improved economic visibility.
- Common stock dividend reduction: The company’s Board of Trustees reduced its first quarter common dividend to $0.01 per common share. The company will continue to monitor its financial performance and the economic outlook to assess when it is appropriate to resume a regular quarterly common dividend at a level determined to be prudent based on the economic outlook.