Overview of Braemar Hotels & Resorts

Braemar Hotels & Resorts is a real estate investment trust (REIT) that invests primarily in high-end hotels and resorts. As of June 30, 2024, the company owned 16 hotel properties with 4,201 total rooms across 7 states, Washington D.C., Puerto Rico, and the U.S. Virgin Islands.

Braemar is externally managed by Ashford Hospitality Advisors LLC, a subsidiary of Ashford Inc. The company does not have any direct employees, with all services provided by Ashford. Four of Braemar’s 16 hotels are managed by Remington Hospitality, another Ashford Inc. subsidiary.

Financial Performance

For the three months ended June 30, 2024, Braemar reported total revenue of $187.6 million, a 0.5% increase from the same period in 2023. This was driven by a 0.8% decrease in rooms revenue, offset by a 1.1% increase in food and beverage revenue and a 9.2% increase in other revenue.

Net loss attributable to the company was $11.6 million in Q2 2024, compared to a $1.8 million loss in Q2 2023. This was primarily due to a $5.2 million decrease in operating income, a $3.7 million increase in interest expense, and a $1.2 million decrease in interest income.

For the first six months of 2024, Braemar reported total revenue of $406.7 million, a 1.2% increase from the same period in 2023. Net income attributable to the company was $4.4 million, down from $14.2 million in the first half of 2023.

The company’s key performance metrics were mixed in the first half of 2024 compared to the same period in 2023:

• Occupancy increased 120 basis points to 69.10%
• Average daily rate (ADR) decreased 2.4% to $479.67
• Revenue per available room (RevPAR) decreased 0.7% to $331.47

Strengths and Weaknesses

A key strength of Braemar is its portfolio of high-end, luxury hotel properties in desirable markets. The company’s focus on upper-upscale and luxury hotels in urban and resort locations has allowed it to generate relatively strong RevPAR compared to the overall industry.

However, Braemar’s reliance on external management through Ashford creates potential conflicts of interest and raises concerns about oversight and alignment of incentives. The company’s net loss in Q2 2024 and decline in profitability in the first half of the year also highlight operational challenges.

Braemar’s balance sheet appears reasonably healthy, with $120.3 million in cash and cash equivalents as of June 30, 2024 and a net debt to gross assets ratio of 40.4%. But the company does have significant variable-rate debt exposure, which could become a concern if interest rates continue to rise.

Outlook and Future Prospects

Looking ahead, Braemar faces a mixed outlook. On the positive side, the company’s focus on high-end hotels in desirable markets should continue to provide some insulation from broader economic headwinds. The planned sale of the Hilton La Jolla Torrey Pines hotel and the refinancing of several other properties also improve the company’s liquidity position.

However, Braemar’s reliance on external management, rising interest rates, and broader macroeconomic uncertainty pose ongoing risks. The company’s ability to maintain profitability and grow shareholder value will depend on its success in navigating these challenges.

Braemar’s recent initiatives, such as the $50 million share repurchase program and preferred stock redemption, suggest a focus on enhancing shareholder value. But the company will need to demonstrate consistent operational and financial improvement to regain investor confidence.

Overall, Braemar appears to be in a transitional period, with both opportunities and risks on the horizon. Prudent management of its hotel portfolio, balance sheet, and external relationships will be critical to the company’s future performance.