RBC lodging analysts say Q1 results generally came in ahead of expectations.

NEW YORK CITY—According to RBC Capital Markets, the first-quarter operating results for lodging were led by just a few markets. “RevPAR growth for the industry was a modest 2.7% but the results varied widely amongst the various markets with Los Angeles and San Francisco producing outsized growth and many markets producing negative growth,” the firm says.

Most of RBC's coverage produced RevPAR growth between 0% to 4%, but Chesapeake Lodging Trust and Pebblebrook Hotel Trust produced 10.1% and 8%.

RevPAR growth respectively, due to high exposure to San Francisco/Los Angeles and easier comps is due to less renovation disruption. Fortunately, the firm says, most companies had factored in a soft lodging environment and most of the companies covered by RBC exceeded expectations.

But things are expected to improve. The firm says that part of the first quarter softness was due to the Easter holiday shift and softer citywides in major cities. “The group picture remains the most constructive part of lodging demand with pace very healthy for group focused companies,” the firm says.

In addition, the groups are spending once at the property and there has been no noticeable increase in group cancellations, RBC says. Domestic leisure also appears to be a stable demand driver whereas international inbound travel remains mixed. Business transient demand stabilized but overall remains weak with ADR growth very soft. “Management teams were overall cautious regarding business transient demand though there were some with a constructive outlook now that recession fears that were elevated in 4Q15 and early 1Q16 have abated.”

And from a geographic perspective, RevPAR growth will likely broaden due to better citywides with notable strength in the second and third quarter, the firm says. “Companies with broader footprints are likely to have the best visibility in our view.”

Most of RBC's coverage produced RevPAR growth between 0% to 4%, but Chesapeake Lodging Trust and Pebblebrook Hotel Trust produced 10.1% and 8%.

Instant Insights /

Lodging Waiting for Improved Transient Demand

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