CHARLOTTE, NC—Extended Stay America Inc. (ESA) and its lodging REIT, ESH Hospitality Inc., reported that total revenues for the first quarter ended March 31, 2020, were $266.3 million, a decrease of 4.1% over the same period in the prior year due to the impact in March from the COVID-19 pandemic. Comparable systemwide RevPAR declined 5.8% over the same period in 2019 to $43.98, driven by a 6.5% decline in ADR, partially offset by a 60 basis point increase in occupancy to 71.9%.
Comparable systemwide RevPAR growth for the first two months of 2020 was 2.6% prior to the impact of COVID-19 in March. March’s RevPAR declined approximately 19% over March 2019. Depressed levels of RevPAR continued into Q2 2020, although they have shown preliminary signs of moderation.
“Thanks to the hard work of our nearly 8,000 employees and our franchisee partners, every single Extended Stay America hotel has remained open through the pandemic,” said Bruce Haase, ESA’s CEO/president. “We have maintained relatively healthy overall occupancy levels, and we have not been forced to enact any widespread furloughs or staff reductions as seen by others in the industry.”
He continued, “We believe that our positive RevPAR performance relative to the industry during this difficult time period demonstrates the resiliency of our extended-stay business model and the unique characteristics of our business compared to traditional transient lodging brands. We are also pleased to see improved RevPAR and occupancy trends during the last few weeks compared to earlier in the nationwide response to the virus. We believe the company is in a strong financial position to navigate through this crisis and well positioned as the economy reopens.”
CFO Brian Nicholson broke down the revenue figures by month and by visitor.
“After a strong start to the year through February, RevPAR slowed throughout the month of March as the COVID-19 crisis deepened, with the sharpest drops from a prior week coming immediately following various stay-at-home orders in the U.S.,” he said. “Our extended-stay business significantly outperformed with revenue from guests staying weeks or longer, decreasing approximately 3%, while our transient revenues declined 17% in the first quarter.”
He added, “In the month of March, our extended-stay business declined approximately 5% primarily from guests staying from seven to 29 nights, while our transient six-night business declined 41.8%.”
Financial and Operating Results
Hotel operating margin for the first quarter was 45.7% compared to 50.1% in the same period in 2019. The decline was driven primarily by a decrease in comparable systemwide RevPAR and increased hotel payroll expenses. Hotel operating expenses declined approximately 2.4% in March 2020 compared to March 2019. Net income was $7.8 million compared to $28.4 million year-over-year (YOY), a decrease of 72.4%. Adjusted EBITDA was $97.7 million, a decline of 16.0% YOY.
The company invested $54.6 million in CapEx during the first quarter. This includes $8.9 million in renovation capital and $20 million in capital for ESA 2.0 hotel development and land acquisitions.
Hotel and Development Pipeline
As of March 31, the company had a pipeline of 73 hotels representing approximately 8,800 rooms with two hotels opened through the end of the quarter. The pipeline consisted of 59 third-party hotels (7,068 rooms) and 14 company-owned properties (1,170 rooms). Since the end of the first quarter, one new franchise-built hotel and one new company-owned hotel have opened.
“Extended Stay America is far different from the standard transient lodging brands,” said Haase. “We believe that our performance through this pandemic has demonstrated what we believe is a distinct and often underappreciated source of shareholder value, our business model. Not only is that true now, but it will also be true when we return to a more normal economic environment.”