Extended Stay America posts Q4 net income of $65.7M

Extended Stay America Inc. and ESH Hospitality Inc. reported net income of $65.7 million for the three months ended Dec. 31, 2020. Comparable systemwide RevPAR was $42.46, while occupancy was 73.7%.

“We are pleased with another strong quarter as we continue to outperform every industry benchmark, improving our RevPAR index by 40% against our closest competition during the fourth quarter,” said Bruce Hasse, ESA’s president/CEO. Through [the third week of February], Extended Stay America has now had 65 consecutive weeks of RevPAR index gains dating back to well before the pandemic, demonstrating the growing strength of our model relative to the overall lodging industry.”

He continued, “As we move into 2021, we are very excited about our growth prospects and opportunities. We unveiled our new brand segmentation strategy with the launch of the Extended Stay America Premier Suites brand, in addition to our core hotels to be branded as Extended Stay America Suites. And, we continue to see opportunities for growth from improvements to our commercial engine and operating performance as well as unlocking value in our REIT through accretive asset transactions.”

Q4 2020 highlights

  • Net income of $65.7 million
  • Total revenues of $259.3 million
  • Comparable systemwide RevPAR declined 9.4% to $42.46
  • Comparable systemwide occupancy of 73.7%
  • Adjusted EBITDA of $89.3 million
  • Adjusted FFO of $0.36 per diluted paired share
  • Comparable systemwide RevPAR index of 140, a 40-point increase

Financial and operating results
Total revenues for the fourth quarter were $259.3 million, a decrease of 8.8% over the same period in 2019 due to the impact of the COVID-19 pandemic. For full-year 2020, total revenues declined 14.4% to $1,042.3 million driven by the decrease in hotel revenues as a result of the impact of the COVID-19 pandemic.

Comparable systemwide RevPAR for the fourth quarter declined 9.4% over the same period in 2019 to $42.46, driven by a 7.3% decline in ADR and a 170 basis point decrease in occupancy to 73.7%. Comparable systemwide RevPAR for full-year 2020 decreased 15.0% over 2019 to $42.91, driven by a 11.6% decline in ADR and a 300 basis point decrease in occupancy to 73.8%.

Fourth-quarter hotel operating margin was 42.5% compared to 48.3% in the same period in 2019 due a decrease in RevPAR caused by the COVID-19 pandemic and a slight increase in hotel operating expenses. Hotel operating expenses during the fourth quarter of 2020 increased by 2.5% from the same period in 2019 and were approximately flat on a comparable basis. Hotel operating margin for full-year 2020 was 44.5% compared to 51.8% in the same period of 2019, driven by a decrease in RevPAR due to the COVID-19 pandemic.

Net income for the fourth quarter was $65.7 million compared to net income of $23.8 million for the same period in 2019. The increase in net income was due to a gain on an asset sale, a decrease in corporate overhead expense and an income tax benefit, partially offset by a decline in comparable systemwide RevPAR. Net income for full-year 2020 was $96.3 million, compared to net income of $165.1 million for the same period in 2019. The full-year 2020 decrease in net income was driven by a decline in comparable system-wide RevPAR, partially offset by a gain on an asset sale and an income tax benefit.

Adjusted EBITDA for the fourth quarter was $89.3 million, a decline of 17.9% compared to the same period in 2019. The decline in adjusted EBITDA was due to a decline in comparable systemwide RevPAR. Adjusted EBITDA for the quarter excludes a $52.5 million gain on an asset sale, non-cash equity-based compensation expense of $1.9 million, $2.7 million in loss on disposal of assets and $0.2 million in other expenses. Adjusted EBITDA for full-year 2020 was $374.1 million compared to $535.0 million in the same period of 2019.

Capital expenditures and balance sheet
The company invested $47.7 million in capital expenditures during the fourth quarter of 2020. This included $7.3 million in renovation capital and $13.9 million in capital for new hotel development. For full-year 2020, it invested $192.7 million in capital expenditures, including $20.9 million in renovation capital and $72.4 million for new hotel development.

As of Dec. 31, the company had $409.9 million in cash and equivalents, including $13.2 million in restricted cash, and total debt outstanding was $2.72 billion.

Hotel and development pipeline
As of Dec. 31, the company had a pipeline of 56 hotels representing approximately 6,800 rooms. Two company-owned hotels and seven franchised hotels opened during the fourth quarter, resulting in a total of 17 systemwide hotels opened for full-year 2020.

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