Pebblebrook Hotel Trust reported third-quarter 2026 results surpassing the high end of its outlook for the third consecutive quarter, driven by higher room rates, increased transient demand, resort spending, and operating-cost controls. Same-property hotel EBITDA rose 15.1% year over year to $115.2 million, exceeding forecasts by $10.7 million. Adjusted EBITDA reached $107.9 million, while adjusted funds from operations (FFO) totaled $0.63 per diluted share, beating guidance by $0.11.
Same-property revenue per available room (RevPAR) grew 8.3%, fueled by a 7% rise in average daily rate (ADR) and a modest increase of just over 1% in occupied room nights. Monthly RevPAR
growth was 10.1% in July, 5.3% in August, and 9.4% in September. One-time events contributed approximately 40 basis points to quarterly RevPAR gains.
Transient and Resort Segments Drive Revenue Growth
Transient average daily rate advanced 8.5%, contributing to a 9.1% increase in transient room revenue, with corporate transient ADR improving 9.4%. Group room nights rose over 3%, while group ADR grew 1.2%. Resort RevPAR increased 8.4%, with total resort RevPAR up 9.2%. Food and beverage revenue climbed 11.2%, supported by outlet, banquet, and catering demand.
Eight of Pebblebrook’s 13 resorts recorded hotel EBITDA growth of at least 20%, leading to a 250 basis-point expansion in resort EBITDA
margins to 32.6%. Newport Harbor Island Resort posted more than 14% RevPAR growth and close to a 20% ADR increase, with hotel EBITDA increasing over $2 million, or 19%. Improved profitability was also recorded at L’Auberge Del Mar, Paradise Point Resort & Spa, and Estancia La Jolla.
Urban Markets Show Mixed Performance
Urban market RevPAR rose 8.3%, generating nearly $7 million in incremental hotel EBITDA. The San Francisco, Boston, and Los Angeles markets collectively contributed $8.5 million more hotel EBITDA year over year. San Francisco’s RevPAR increased 14.5%, driven by a 21% jump at 1 Hotel San Francisco. Boston’s RevPAR jumped 10.6%, while Los Angeles
experienced a 10.7% RevPAR increase alongside a 60% gain in hotel EBITDA.
Downtown San Diego was an outlier, with a 4.5% RevPAR decline and a $1.6 million drop in hotel EBITDA due to a weak convention calendar, especially in September. Pebblebrook anticipates a stronger citywide convention schedule in 2027 to support recovery in San Diego.
Margin Expansion, Cash Flow Growth, and Portfolio Actions
The company converted 58% of a $26 million revenue increase into $15.2 million of incremental hotel EBITDA. Expenses rose 4% compared to nearly 7% revenue growth, expanding EBITDA margins by 205 basis points to 28.8%. The quarter benefited from about $1 million in reduced property
taxes and $1.6 million in lower property insurance costs. Management noted that similar fixed-cost savings should not be expected regularly.
Free cash flow increased more than 24% to $55.6 million for the quarter and reached $143 million through September, a 45% rise from the prior year after capital expenditures and dividends. Capital investments totaled $14.8 million in the quarter, with the full-year capital spending forecast trimmed by $5 million to a range between $60 million and $70 million due mainly to timing adjustments.
After quarter-end, Pebblebrook sold The Hotel Zags in Portland for $10 million; the property had incurred negative
EBITDA of $600,000 over the previous 12 months. The company recorded $77.3 million in non-cash impairment charges related to this sale and valuation updates for other assets. Over the past year, it sold hotels generating nearly $170 million at an aggregate 17.4-times trailing EBITDA multiple and a 3.9% net operating income cap rate.
Pebblebrook raised its estimated net asset value range by $1 per share to $23.50 to $27.50. During the third quarter, approximately 1.2 million common shares were repurchased at $18.12 each, and $7.2 million of preferred shares were retired at an average 23% discount to liquidation preference. Net
debt to trailing 12-month corporate EBITDA decreased 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 available on its revolver, and $90 million in undrawn term-loan capacity.
Raised Outlook for Q4 2026 and 2027
Pebblebrook expects fourth-quarter 2026 same-property RevPAR growth of 4% to 6%, same-property hotel EBITDA between $73 million and $77 million, adjusted EBITDA from $66 million to $70 million, and adjusted FFO per share of $0.26 to $0.30. October RevPAR tracked at a growth rate above 6%. However, fewer compression days are anticipated in November and December due to seasonal occupancy
declines.
The company raised its full-year 2026 guidance to same-property RevPAR growth between 7.6% and 8%, same-property hotel EBITDA growth of 12.9% to 14.1%, and adjusted FFO of $1.88 to $1.92 per share. For 2027, Pebblebrook anticipates ongoing urban segment recovery, stronger convention calendars in San Diego, Boston, and Washington, D.C., and demand from major events across several markets.
Total group and transient revenue bookings are nearly 5% ahead of the prior year. The first quarter of 2027 is expected to show negative revenue growth due to calendar and convention shifts. Pebblebrook may pursue small- and medium-sized property investments, including
potential additional lodging units at Skamania and solar projects, focusing on capital allocation aimed at increasing shareholder value and cash flow per share.
