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Pebblebrook Hotel: Disappointing Guidance And High Uncertainty In 2020

Ploutos Investing profile picture
Ploutos Investing


  • Pebblebrook Hotel delivers an okay Q4 2019 with same-property RevPAR growth.
  • However, its 2020 outlook is uncertain due to the outbreak of coronavirus.
  • The company has a list of redevelopment projects to grow its EBITDA in 2020 and 2021.
  • Pebblebrook Hotel pays a 7.5%-yielding dividend.

Investment Thesis

Pebblebrook Hotel Trust (NYSE:PEB) delivered an okay Q4 2019 with positive same-property revenue per available room ("RevPAR") growth. The REIT has a list of renovation projects that should help grow its EBITDA in 2020 and 2021. However, due to the outbreak of coronavirus, we think there is a substantial risk for investors if the virus cannot be contained quickly. This will negatively impact its revenue in Q2 and Q3. The company currently pays a 7.5%-yielding dividend and has the potential to deliver a return of 24% for investors. However, uncertainty remains very high at this moment and we think this is a stock that is only suitable for investors with a high risk tolerance.

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Recent Developments: Q4 2019 Highlights

Pebblebrook Hotel reported an okay Q4 2019 as it saw its same-property RevPAR increased by 2.8% to $196.34. The increase was driven by a healthy growth of 2.7% of its average daily rate and an improvement of occupancy rate of 2.5 percentage points. However, due to higher same-property expenses growth rate of 3.4%, its same-property EBITDA margin declined to 28.9% in Q4 2019 from 29.4% in Q4 2018.

Source: Q4 2019 Earnings Release

Earnings And Growth Analysis

A rich pipeline of redevelopment projects

Pebblebrook plans to perform some renovations in several of its hotels in 2020. The company’s 2020 renovation projects are listed in the summary table below. Total investment for these projects is expected to be $93 million. These projects have the potential to grow its EBITDA by about $11.8 million.

Source: Q4 2019 Presentation

The company also plans to renovate 9 hotels in 2021. These renovation projects will cost about $169 million and have the potential to grow its EBITDA by $17.4 million. This implies an EBITDA yield of 10.3%.

Source: Q4 2019 Presentation

This article was written by

Ploutos Investing profile picture
I am a value focused investor. Stocks rise and fall for many different reasons that we often cannot predict. Eventually, it is those companies with a wide moat and the ability to generate cash flow that prevail. Therefore, my investment focus is to find value stocks that are able to generate cash flow, with sustainable dividends and provide growth over time. I focus my attention on analyzing large-capped dividend growth stocks, REITs and ETFs. I aim at providing a quarterly update and insights on stocks I follow. Please feel free to browse the articles that I wrote and provide any comments.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This is not financial advice and that all financial investments carry risks. Investors are expected to seek financial advice from professionals before making any investment.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (4)

Rob G. in Vegas profile picture
A little surprised that even the preferred stocks of hotel REITs with good balance sheets like PEB are getting crushed.

Do investors truly believe that hotel REITs will cut their common and preferred dividends to zero over this virus?

Citizens will eventually travel again. We are NOT all going to cocoon in our homes for months on end and live on water, canned goods, and rice.
BeaBaggage profile picture
remember these pfds are in pfd ETFs and income ETFs that have been hit w selling so they disgorge the components and mutual funds that are getting hit by redemptions.. build your watch list and soon may be time to nibble.. PEB.PD and .PF are on mine..
Panzerman profile picture
Likely further down to go. How much? As long as the virus paranoia lasts, anything tourism related is going to suffer. But..... at some point there will be a great opportunity to purchase. At what point will that be?
Their going to get hit hard as they have a lot of exposure to the west coast
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