What: LaSalle Hotel Properties shares are trading lower by more than 10% after the company beat on earnings expectations but missed on revenue expectations.
So What: LaSalle Hotel Properties now expects to generate $2.87-$2.94 in adjusted FFO per fully diluted share on revenue per available room growth of 3.5-4.5% this year. Analysts were expecting better improvements in revenue per available room for the rest of the year.
The company missed expectations this quarter, as revenue came in at $341.4 million, lower than expectations of $345.1 million. Given the high fixed costs inherent in hotel operators, revenue is a particularly important number for analysts in projecting swings in profitability.
Now what: On its conference call with analysts, the company cited a number of factors that it expected to weigh on its performance for the rest of the year. In particular, the LaSalle expects continued weakness in New York, where growing supply has strained pricing power as hotels compete more aggressively for customers. Notably, revenue per available room fell 2.6% in New York, despite a 4.5% increase in occupancy during the quarter.
In San Francisco, the company expects that a rebranding of three of its hotels will weigh on performance in the third quarter, though in response to an analyst question, there is hope that the issue will ease in the fourth quarter of this year. The quarter was particularly disappointing given that that company is now coming into its seasonally strongest quarter, when business and leisure travel lifts occupancy across the board.
The article Why LaSalle Hotel Properties Stock Dropped 10% originally appeared on Fool.com.
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