RLJ Lodging (RLJ) Q2 FFO Beats by 77%

Key Points

• Adjusted FFO per share (non-GAAP) of $0.48 beat analyst expectations by $0.37 in Q2 2025, but declined 5.9% compared to the prior year.

• GAAP revenue of $363.1 million missed estimates in Q2 2025 and was down 1.7% year over year.

• The company maintained its quarterly dividend at $0.15 per share and emphasized conservative guidance for fiscal 2025.

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RLJ Lodging Trust (NYSE:RLJ), an urban-centric real estate investment trust (REIT) focused on premium-branded hotels, released its second quarter 2025 earnings on August 7, 2025. The company reported adjusted funds from operations (FFO) per diluted share of $0.48, which was significantly ahead of the analyst estimate of $0.11 (non-GAAP). Revenue (GAAP) was $363.1 million, slightly below the expected $365.3 million (GAAP) and down from $369.3 million (GAAP) in the same period last year. Despite the earnings beat driven by cost controls and capital management, the quarter showed lower hotel operating metrics and profit margins compared to the prior year. Management highlighted both near-term headwinds and the company's continued focus on operational discipline and capital allocation.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

RLJ Lodging Trust’s Business and Key Focuses

The company’s strategy centers on high-growth urban markets where travel demand is steady across business, leisure, and group segments. RLJ focuses on proactive asset management—working to optimize each hotel’s performance and investing in property improvements and conversions. Maintaining a strong, flexible balance sheet and sustainability initiatives are also central. These priorities help the company manage industry cycles, invest in its properties, and support long-term shareholder value.

Quarterly Results and Operational Context

RLJ delivered a strong bottom-line result, with non-GAAP EPS outpacing earnings expectations even as GAAP revenue fell slightly short of estimates in Q2 2025. Adjusted FFO per share exceeded analyst forecasts by $0.37.

Share repurchases totaled $6.0 million for 0.8 million shares.

Year-to-date through August 4, 2025, buybacks reached 3.2 million shares for $28.0 million.

Hotel operating metrics declined compared to the prior year. Comparable RevPAR—a key lodging industry measure that multiplies occupancy rate by average daily rate (ADR)—fell 2.1%, while comparable occupancy dropped to 75.5% and comparable ADR edged down 0.5%. Adjusted EBITDA (non-GAAP) and net income (GAAP) also declined, reflecting a softer demand environment and calendar-related headwinds. Management cited citywide event schedules and property renovations as contributors to this performance, noting that these will continue to impact results, especially in the next quarter.

RLJ continued investing in its portfolio, focusing on premium-brand conversions—a strategy that has delivered double-digit RevPAR growth on prior converted properties, including 14% RevPAR growth for its six initial conversions and 35% RevPAR growth for its three most recent conversions. The company reported ongoing progress in major urban markets such as Houston, New Orleans, Pittsburgh, and Nashville. Cost containment remained a top priority, helping offset some operational pressures. Corporate liquidity stood at $974 million, including $374 million in cash and a $600 million undrawn revolver, supporting both ongoing investment and financial flexibility.

From a capital structure perspective, RLJ proactively managed debt maturities. It upsized and refinanced a $200.0 million term loan to $300.0 million in April 2025, extending the maturity to 2030 and using excess proceeds to pay down revolving debt. The company also exercised extensions on $181.0 million in mortgage loans, eliminating all 2025 maturities, and maintained a weighted average debt interest rate of 4.53%. About 75% of its debt is fixed or hedged.

The company paid a $0.15 per common share dividend and a $0.4875 dividend for Series A preferred shares in July 2025, unchanged from prior periods. No new dividend increases were announced. As of August 4, 2025, $246.3 million remained under the company’s 2025 share repurchase program authorization.

Business Drivers, Products, and Market Insights

RLJ’s hotel assets are primarily rooms-oriented properties in major urban markets.

Its business relies on a mix of business transient (corporate), group, and leisure travel.

Group business is mainly comprised of smaller meetings and events, benefiting from stable demand in key cities.

The company focuses on renovating and converting properties to premium brands. These hotel upgrades are designed to enhance guest experience and drive higher RevPAR. Properties that have undergone conversion projects continue to outperform, with recent conversions in major cities showing double-digit RevPAR gains.

Cost management initiatives remain a central theme, helping to cushion margin pressures from operating expense growth and calendar effects. Despite flat or declining revenue, these measures contributed to adjusted FFO per share (non-GAAP) outpacing expectations. Management also emphasized the growing share of bookings within one week of arrival, now at 58%, up from about 51% before recent uncertainties, reflecting industry-wide trends toward shorter booking windows and limited long-term demand visibility, as discussed on the recent earnings call.

Conference and event calendars in key markets are expected to become more favorable in the fourth quarter. Management highlighted stabilization in government and research-related group bookings, after recent cancellations.

Looking Ahead

RLJ’s management provided updated guidance for FY2025, reflecting a cautious outlook. The company expects comparable RevPAR growth to range from -1.0% to 1.0%, with adjusted EBITDA of $332.5 million to $362.5 million and adjusted FFO per diluted share of $1.38 to $1.58. Revised guidance points to the lower end of the expected range as most likely, citing a softer-than-anticipated Q3 and persistent macroeconomic uncertainty affecting visibility into future travel demand.

No formal guidance was offered for additional acquisitions, dispositions, or share repurchases, though management indicated some flexibility for opportunistic capital allocation. Investors are encouraged to monitor trends in group and business travel demand, citywide events in major markets, and the pace of property renovations and conversions. The company continues to allocate capital toward renovations and repurchases, while maintaining strong liquidity and a balanced debt maturity profile.

RLJ pays a quarterly dividend of $0.15 per common share, unchanged from the prior quarter.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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