Pebblebrook Hotel Trust reported third-quarter 2026 financial results with same-property hotel EBITDA rising 15.1% year over year to $115.2 million, exceeding projections by $10.7 million for the third consecutive quarter. Adjusted EBITDA reached $107.9 million, and adjusted funds from operations (FFO) were $0.63 per diluted share, surpassing the top guidance by $0.11.
Revenue and Profit Growth Driven by Increased Rates and Demand
Same-property revenue per available room (RevPAR) climbed 8.3%, led by a 7% increase in average daily rate (ADR) and a slight increase above 1% in occupied room nights. Transient ADR rose 8.5%, contributing to a 9.1% growth in transient room revenue, with corporate transient ADR increasing 9.4%. Group
room nights rose by over 3%, and group ADR advanced 1.2%. Monthly RevPAR growth was 10.1% in July, 5.3% in August, and 9.4% in September. One-time events added approximately 40 basis points to third-quarter RevPAR.
Food-and-beverage revenue grew 11.2%, supported by banquet, catering, and outlet demand. Expense growth was contained at 4%, compared with nearly 7% revenue growth, allowing hotel EBITDA margins to expand 205 basis points to 28.8%.
Performance by Market and Property
Resort properties saw RevPAR increases of 8.4%, with total resort RevPAR up by 9.2%. Resort EBITDA margins expanded 250 basis points to 32.6%. Eight of 13 resorts posted at least 20%
hotel EBITDA growth. Newport Harbor Island Resort led with RevPAR growth exceeding 14%, a near 20% increase in ADR, and hotel EBITDA rising by more than $2 million, or 19%. Additional resort profitability improvements occurred at L’Auberge Del Mar, Paradise Point Resort & Spa, and Estancia La Jolla.
Urban-market RevPAR increased 8.3%, generating nearly $7 million of additional hotel EBITDA. San Francisco, Boston, and Los Angeles combined contributed $8.5 million in increased hotel EBITDA year over year. San Francisco’s RevPAR rose 14.5%, boosted by a 21% increase at 1 Hotel San Francisco. Boston’s RevPAR grew 10.6%, and Los Angeles experienced
a 10.7% RevPAR increase, with hotel EBITDA in that market climbing 60%.
Downtown San Diego was an exception, with a 4.5% decline in RevPAR and a $1.6 million drop in hotel EBITDA due to a weak convention calendar in September. Pebblebrook anticipates improved citywide convention schedules in 2027 to facilitate a market rebound.
Capital Management and Portfolio Adjustments
The company converted 58% of a $26 million same-property revenue increase into $15.2 million in incremental hotel EBITDA. Property taxes decreased by roughly $1 million, and property insurance costs fell by about $1.6 million, aiding quarterly earnings.
Free cash flow for the quarter increased 24% to $55.6
million, totaling $143 million year-to-date through September after capital investments and dividends. Capital expenditures during Q3 totaled $14.8 million. The full-year capital investment forecast was lowered by $5 million to a range of $60 million to $70 million, mainly due to timing shifts.
After quarter-end, Pebblebrook sold The Hotel Zags in Portland for $10 million. The property had produced negative EBITDA of $600,000 over the prior 12 months. Related to this transaction and valuation updates on other properties, the company recorded $77.3 million in non-cash impairment charges. Over the past year, Pebblebrook sold nearly $170 million in hotels, averaging a
17.4-times trailing EBITDA multiple and a 3.9% net operating income cap rate.
Common shares repurchased in the third quarter amounted to approximately 1.2 million shares at $18.12 each, while $7.2 million of preferred shares were retired at an average 23% discount to liquidation value. The net debt to trailing 12-month corporate EBITDA ratio improved to 5.1 times from 5.9 times at year-end. Cash and restricted cash totaled $298 million at September-end, with revolver availability at $641 million and undrawn term-loan capacity of $90 million.
Outlook for Q4 2026 and 2027
For the fourth quarter of 2026, Pebblebrook expects same-property RevPAR growth between 4% and 6%, with
hotel EBITDA projected at $73 million to $77 million, adjusted EBITDA at $66 million to $70 million, and adjusted FFO ranging from $0.26 to $0.30 per diluted share. October RevPAR is tracking toward growth of 6% or higher, though fewer compression days are anticipated in November and December due to seasonal occupancy declines.
Full-year 2026 guidance was raised to reflect 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 share. Looking to 2027, the company expects ongoing urban market recovery, stronger convention schedules in San Diego, Boston,
and Washington, D.C., and demand linked to major events across key markets. Group and transient revenue pace for 2027 is nearly 5% ahead of 2026, while first-quarter 2027 revenue pace remains negative due to calendar and convention timing.
Pebblebrook continues to consider selective investments in small and medium-sized properties, potential lodging unit expansions at Skamania, and solar projects to enhance shareholder value and cash flow per share.
