Braemar Hotels Q1 2025 slides: Record RevPAR achieved amid expense pressures

Braemar Hotels & Resorts (BHR) reported a net loss of $2.5 million in Q1 2025, beating EPS expectations, while achieving a record RevPAR of over $400 driven by its luxury and resort properties, which offset weaker performance from urban locations. The company's EBITDA increased 5.3% year-over-year to $70.8 million, and AFFO reached $0.40 per diluted share, supported by strategic refinancing efforts to extend debt maturities and reduce interest costs. Looking ahead, Braemar anticipates continued growth in the luxury segment and is considering asset sales to further optimize its capital structure, despite ongoing challenges with expense management.

Analysis

Braemar Hotels & Resorts Inc. (BHR) reported a resilient Q1 2025, achieving a record portfolio RevPAR exceeding $400 despite a net loss of $2.5 million, or $0.04 per diluted share, which significantly outperformed analyst expectations of a $0.15 loss per share. This performance was largely driven by the company's strategic focus on luxury and resort properties, particularly as the luxury segment is forecasted to lead industry RevPAR growth at 5.3% in 2025. Comparable Hotel EBITDA rose 5.3% year-over-year to $70.8 million, and Adjusted Funds From Operations (AFFO) stood at $0.40 per diluted share. A notable divergence in performance was observed, with resort properties generating seven times the EBITDA of urban properties; however, urban locations demonstrated strong recovery potential with over 11% year-over-year RevPAR growth. Despite these operational strengths, revenue of $218.41 million slightly missed analyst forecasts of $221.68 million, and the company continues to navigate expense pressures and higher interest rates. Braemar has actively managed its liabilities, completing refinancing for a $293.2 million CMBS loan and a $62 million mortgage loan, extending maturities and resulting in a net debt to gross assets ratio of 42.3% with a weighted average interest rate of 7.07%. The company plans $75 million to $95 million in capital expenditures for 2025, including significant renovations and a brand conversion, following a $15.3 million investment in Q1. Management is considering asset sales of one to two upper upscale properties to potentially redeem preferred equity, repurchase shares, or retire debt, and expects improved performance from the Sofitel Chicago following its May conversion to a franchise model. The addition of Kellie Sirna to the board aims to enhance hospitality and design expertise. The stock's 2.86% rise in after-hours trading post-earnings suggests investor optimism regarding these operational improvements and strategic initiatives.

Key Decisions for Investors

• Investors should closely monitor the performance trajectory of Braemar's luxury resort segment, which contributed 69% of total EBITDA and aligns with favorable industry forecasts, while also assessing the pace of recovery in its urban hotel portfolio.
• Consider the impact of Braemar's proactive liability management, including recent debt refinancing, and potential capital recycling from planned asset sales on its balance sheet strength and capacity for shareholder returns, against the backdrop of ongoing expense pressures and a 7.07% weighted average interest rate.
• Evaluate the return on investment from the planned $75-$95 million in capital expenditures for 2025 and the anticipated benefits from the Sofitel Chicago's franchise conversion, as these are key to future RevPAR and AFFO growth amidst a competitive environment.