Pebblebrook Hotel Trust reported third-quarter 2026 earnings exceeding the high end of its outlook for the third straight quarter. Same-property hotel EBITDA increased 15.1% year over year to $115.2 million, surpassing company guidance by $10.7 million, driven by elevated room rates and rising transient demand according to MarketBeat.
Higher Room Rates and Demand Lift Revenue per Available Room
Same-property revenue per available room (RevPAR) climbed 8.3% in Q3, reflecting a 7% rise in average daily rate (ADR) and slightly more than 1% growth in occupied room nights. Transient ADR increased 8.5%, with transient room revenue up 9.1%. Corporate transient ADR grew 9.4%, benefiting from more room nights in higher-priced consortia
channels, despite declines in discount channels. Group room nights expanded over 3% alongside a 1.2% increase in group ADR. Monthly RevPAR growth was 10.1% in July, 5.3% in August, and 9.4% in September, with approximately 40 basis points attributed to one-time events.
Strong Resort and Urban Market Performance
Resort properties posted an 8.4% RevPAR increase, contributing to a 9.2% rise in total resort RevPAR. Food and beverage revenue grew 11.2%, spurred by demand in outlets, banquets, and catering services. Eight out of 13 resorts achieved at least 20% hotel EBITDA growth, expanding resort EBITDA margins by 250 basis points to 32.6%. Newport Harbor Island Resort recorded
over 14% RevPAR growth and nearly 20% ADR uplift, with hotel EBITDA rising 19% or more than $2 million. Profitability gains were also reported at L’Auberge Del Mar, Paradise Point Resort & Spa, and Estancia La Jolla.
Urban markets saw an 8.3% RevPAR increase, adding close to $7 million in incremental hotel EBITDA. San Francisco, Boston, and Los Angeles markets collectively contributed $8.5 million in additional hotel EBITDA year over year. San Francisco RevPAR grew 14.5%, including a 21% increase at 1 Hotel San Francisco. Boston’s RevPAR rose 10.6%, while Los Angeles posted a 10.7% RevPAR gain with a 60%
increase in hotel EBITDA.
Downtown San Diego diverged from this trend, with RevPAR declining 4.5% and hotel EBITDA decreasing by $1.6 million, impacted by a soft convention calendar, especially in September. The company expects a stronger citywide convention schedule in 2027 to aid market recovery.
Margin Expansion, Cash Flow Growth, and Portfolio Adjustments
Pebblebrook converted 58% of a $26 million same-property total revenue increase into $15.2 million of additional hotel EBITDA. Operating expenses rose 4% while revenue grew nearly 7%, expanding hotel EBITDA margins by 205 basis points to 28.8%. The quarter benefited from about $1 million in lower property taxes and $1.6 million in reduced property insurance
costs, with further insurance savings expected in 2027.
Free cash flow rose over 24% to $55.6 million for the quarter and reached $143 million through September, a 45% increase year over year after capital investments and dividends. Capital expenditures amounted to $14.8 million in Q3, while the full-year capital investment outlook was trimmed by $5 million to $60 million-$70 million, primarily due to timing.
Post-quarter, Pebblebrook sold The Hotel Zags in Portland for $10 million. The property had generated negative EBITDA of $600,000 over the prior 12 months. This sale contributed to $77.3 million in non-cash impairment charges related to
the property and other revaluations.
Over the last year, the company sold nearly $170 million of hotels at an aggregate 17.4-times trailing EBITDA multiple and a 3.9% net operating income capitalization rate. Net asset value estimates were increased by $1 per share to a range of $23.50-$27.50 per share. Additionally, approximately 1.2 million common shares were repurchased at $18.12 per share, and $7.2 million of preferred shares were retired at a 23% average discount.
Net debt to trailing 12-month corporate EBITDA fell to 5.1 times from 5.9 times at year-end. The company ended September with $298 million in cash and
restricted cash, $641 million in revolving credit availability, and $90 million in undrawn term-loan capacity.
Raised Guidance and Market Outlook for Late 2026 and 2027
Pebblebrook anticipates fourth-quarter 2026 same-property RevPAR growth between 4% and 6%, with hotel EBITDA expected to range from $73 million to $77 million. Adjusted EBITDA guidance for Q4 stands between $66 million and $70 million, while adjusted funds from operations (FFO) are projected at $0.26 to $0.30 per diluted share. October RevPAR is tracking toward growth of 6% or higher, although fewer compression days are expected in November and December due to seasonal occupancy declines.
For the full year 2026, the company increased its outlook
to same-property RevPAR growth of 7.6% to 8%, hotel EBITDA growth of 12.9% to 14.1%, and adjusted FFO of $1.88 to $1.92 per diluted share.
Chairman and CEO Jon Bortz noted that industry demand strengthened in Q3 supported by accelerating economic growth, higher occupancy, and limited new hotel supply. The company forecasts an improved convention calendar in 2027, particularly in San Diego, Boston, and Washington, D.C., along with demand from major events in multiple markets.
Total group and transient revenue pace for 2026 is nearly 5% ahead of the prior year, although a negative first-quarter revenue pace is expected due
to calendar and convention scheduling shifts. The company is evaluating selective investments in small- and medium-sized properties, including potential additional lodging units at Skamania and solar projects.
