Pebblebrook Hotel Trust reported third-quarter results for 2026 ending September 30 that outperformed the high end of its outlook for the third consecutive quarter. Same-property hotel EBITDA grew by 15.1% year over year to $115.2 million, while adjusted funds from operations (FFO) reached $0.63 per diluted share, exceeding guidance by $0.11. Same-property revenue per available room (RevPAR) increased 8.3%, with a 7% rise in average daily rate (ADR) and a slight occupancy increase above 1%.
Segment Performance and Key Properties
Growth was driven by transient demand and resort operations. Transient ADR rose 8.5%, producing a 9.1% gain in transient room revenue. Corporate transient ADR increased
9.4%, supported by growth in the higher-priced consortia channel and declines in discount channels. Group room nights advanced over 3%, with group ADR increasing 1.2%. Monthly RevPAR progression showed a 10.1% rise in July, 5.3% in August, and 9.4% in September, with one-time events contributing 40 basis points to quarterly RevPAR growth.
Resort markets posted an 8.4% RevPAR increase and 9.2% total resort RevPAR growth. Food and beverage revenues increased 11.2%, boosted by demand across outlets, banquets, and catering. Eight of 13 resorts recorded hotel EBITDA increases of 20% or more, with EBITDA margins expanding by 250 basis points to
32.6%. Newport Harbor Island Resort led with over 14% RevPAR growth, nearly 20% ADR growth, and a $2 million (19%) hotel EBITDA rise. Additional resorts showing improved profitability included L’Auberge Del Mar, Paradise Point Resort & Spa, and Estancia La Jolla.
Urban markets saw an 8.3% jump in RevPAR, generating nearly $7 million of incremental hotel EBITDA. San Francisco recorded a 14.5% RevPAR increase, highlighted by 1 Hotel San Francisco’s 21% gain. Boston’s RevPAR rose 10.6%, while Los Angeles grew 10.7% alongside a 60% hotel EBITDA increase. Downtown San Diego experienced a 4.5% RevPAR decline and a $1.6 million hotel
EBITDA loss, attributed to a soft convention calendar in September. Pebblebrook anticipates improved convention activity in San Diego in 2027.
Financial Metrics and Operational Efficiency
The company converted 58% of a $26 million same-property total revenue increase into $15.2 million of incremental hotel EBITDA. Operating expenses rose 4% compared to approximately 7% revenue growth, expanding hotel EBITDA margins by 205 basis points to 28.8%. Lower property taxes and insurance costs contributed approximately $2.6 million in quarterly savings, with $1 million from property taxes and $1.6 million from insurance premiums. These cost reductions are expected to continue benefiting 2027 performance.
Free cash flow increased 24% to
$55.6 million for the quarter and rose 45% year-over-year to $143 million through September after capital expenditures and dividends. Capital investments totaled $14.8 million in Q3, prompting a $5 million reduction in full-year capital expenditure guidance to a range of $60 million to $70 million, primarily due to project timing.
Portfolio Activity and Capital Management
After the quarter ended, Pebblebrook completed the sale of The Hotel Zags in Portland for $10 million. The property had reported negative EBITDA of $600,000 over the prior 12 months. The company recorded $77.3 million in non-cash impairment charges related to this sale and updated valuations of other assets.
Over
the past year, Pebblebrook sold nearly $170 million of hotel assets at a 17.4-times trailing EBITDA multiple and a 3.9% net operating income capitalization rate. The estimated net asset value range increased by $1 per share to between $23.50 and $27.50. The company repurchased about 1.2 million common shares at an average price of $18.12, and retired $7.2 million of preferred shares at a 23% discount to liquidation preference. Net debt to trailing 12-month corporate EBITDA improved from 5.9 times at year-end to 5.1 times at quarter-end. Cash and restricted cash totaled $298 million with $641 million available on the
revolver and $90 million in undrawn term-loan capacity.
Market Outlook and Management Commentary
Pebblebrook’s Chairman and CEO Jon Bortz reported strengthened lodging demand during the third quarter, supported by an accelerating economy and limited new hotel supply. For the fourth quarter of 2026, the company anticipates same-property RevPAR growth between 4% and 6%, same-property hotel EBITDA of $73 million to $77 million, adjusted EBITDA of $66 million to $70 million, and adjusted FFO ranging from $0.26 to $0.30 per diluted share. October’s RevPAR was tracking for growth of 6% or higher, although fewer peak occupancy days are expected in November and December due to seasonal
effects.
Pebblebrook raised its full-year 2026 outlook to forecast same-property RevPAR growth of 7.6% to 8%, same-property hotel EBITDA growth of 12.9% to 14.1%, and adjusted FFO between $1.88 and $1.92 per diluted share. Looking ahead to 2027, management expects continued urban market recovery, stronger convention calendars in San Diego, Boston, and Washington, D.C., and robust demand driven by major events. The company’s group and transient revenue pace currently runs nearly 5% ahead of 2026 levels, though first-quarter 2027 revenue is expected to decline due to calendar and convention shifts.
Pebblebrook is assessing potential investments in small- and medium-sized properties,
including additional lodging units at Skamania and solar energy projects. The company emphasized capital allocation that enhances shareholder value and cash flow per share.
