Pebblebrook Hotel Trust announced third-quarter 2026 financial results that surpassed the top range of its forecast for the third consecutive quarter, driven by higher room rates, increased transient demand, resort spending, and disciplined cost management.
Strong Financial Performance Driven by Increased Rates and Occupancy
For the quarter ended September 30, 2026, the company reported same-property hotel EBITDA of $115.2 million, a 15.1% rise year over year, exceeding its outlook by $10.7 million. Adjusted EBITDA reached $107.9 million, while adjusted funds from operations (FFO) stood at $0.63 per diluted share, $0.11 above the high end of guidance. Same-property revenue per available room (RevPAR) improved 8.3%, supported by a 7% increase
in average daily rate (ADR) and slightly more than 1% growth in occupied room nights.
Growth Fueled by Transient Demand and Resort Performance
Transient average daily rate increased 8.5%, resulting in 9.1% growth in transient room revenue, with corporate transient ADR rising 9.4%. Group room nights increased over 3%, accompanied by a 1.2% rise in group ADR. Monthly RevPAR growth for July, August, and September was 10.1%, 5.3%, and 9.4%, respectively, with about 40 basis points attributed to one-time events. Resort properties showed strong results, with resort RevPAR rising 8.4% and total resort RevPAR rising 9.2%. Food and beverage revenue increased by 11.2%, driven by outlet, banquet, and
catering demand. Eight out of 13 resorts posted hotel EBITDA growth of at least 20%, expanding resort EBITDA margins by 250 basis points to 32.6%.
Property-Level and Market Highlights
Newport Harbor Island Resort experienced RevPAR growth exceeding 14%, ADR growth near 20%, and a 19% increase in hotel EBITDA, adding over $2 million. Profitability gains were also reported at L’Auberge Del Mar, Paradise Point Resort & Spa, and Estancia La Jolla. Urban market RevPAR rose 8.3%, generating nearly $7 million in incremental hotel EBITDA. Markets including San Francisco, Boston, and Los Angeles together accounted for an $8.5 million increase in hotel EBITDA compared to
the previous year. San Francisco RevPAR increased 14.5%, with the 1 Hotel San Francisco achieving a 21% increase. Boston RevPAR grew by 10.6%, while Los Angeles saw a 10.7% rise and a 60% increase in hotel EBITDA.
Downtown San Diego diverged from these trends, with a 4.5% decline in RevPAR and a $1.6 million fall in hotel EBITDA caused by a weak convention calendar in September. Pebblebrook projects a stronger convention schedule in San Diego in 2027 will support market recovery.
Operational Efficiencies and Capital Actions
The company converted 58% of a $26 million increase in same-property total revenue into $15.2 million of incremental hotel
EBITDA. Expenses rose 4%, while revenue grew nearly 7%, expanding hotel EBITDA margin by 205 basis points to 28.8%. Lower property taxes by approximately $1 million and $1.6 million in reduced insurance costs benefited the quarter. Free cash flow increased over 24% to $55.6 million in Q3, reaching $143 million through September, a 45% rise year over year after capital investments and dividend payments. Capital expenditures totaled $14.8 million during the quarter, with the full-year 2026 capital investment outlook lowered by $5 million to a range of $60 million to $70 million primarily due to timing.
After quarter-end, Pebblebrook completed
the sale of The Hotel Zags in Portland for $10 million. The hotel had generated $600,000 negative EBITDA in the prior 12 months. The company recorded $77.3 million in non-cash impairment charges related to this sale and updated valuations of other properties. Over the past year, Pebblebrook sold nearly $170 million in hotels at a combined 17.4-times trailing EBITDA multiple and a 3.9% net operating income cap rate. The estimated net asset value was increased by $1 per share to a range of $23.50 to $27.50.
During Q3, Pebblebrook repurchased approximately 1.2 million common shares at $18.12 each and retired
$7.2 million of preferred shares at an average 23% discount to liquidation preference. Net debt to trailing 12-month corporate EBITDA decreased from 5.9 times at year-end to 5.1 times in September. The company held $298 million in cash and restricted cash, $641 million of revolver availability, and $90 million of undrawn term-loan capacity at quarter-end.
Raised Outlook and 2027 Market Expectations
For the fourth quarter of 2026, Pebblebrook expects same-property RevPAR growth between 4% and 6%, same-property hotel EBITDA ranging from $73 million to $77 million, adjusted EBITDA between $66 million and $70 million, and adjusted FFO of $0.26 to $0.30 per share. October RevPAR grew
by approximately 6% or more, though seasonal occupancy declines are anticipated in November and December. Full-year 2026 guidance was raised to 7.6% to 8% same-property RevPAR growth, 12.9% to 14.1% same-property hotel EBITDA growth, and adjusted FFO of $1.88 to $1.92 per share.
Looking ahead to 2027, Pebblebrook anticipates ongoing urban market recovery, stronger convention calendars in San Diego, Boston, and Washington, D.C., and demand supported by significant events in multiple locations. Total group and transient revenue pace stands about 5% ahead of this year, although first-quarter 2027 revenue remains negative due to calendar and convention timing shifts. Management plans
to evaluate selected small- and medium-sized property investments including potential lodging additions at Skamania and solar initiatives, prioritizing capital allocation to maximize shareholder value and cash flow per share.
