Service Properties Trust Reports Decline in Revenues and Net Income, Announces Plans to Sell Hotels and Reduce Cash Distribution

Service Properties Trust (SPT), a Real Estate Investment Trust (REIT), reported its financial results for the third quarter and the nine months ended September 30, 2024. The company experienced a decline in total revenues, reporting $491.2 million for the third quarter, a decrease of 1.1% from $496.8 million in the same period of 2023. For the nine months, total revenues increased slightly to $1.44 billion, up from $1.43 billion year-over-year.

The company's net loss for the third quarter was $46.9 million, a significant increase from a loss of $4.1 million in the prior year. For the nine months, SPT reported a net loss of $199.1 million, compared to a net income of $10.5 million in the same period of 2023. This decline in profitability was attributed to decreased hotel operating revenues, lower revenue per available room (RevPAR), and increased operating expenses, particularly in wages and benefits.

Total expenses for the third quarter rose to $446.5 million, up 4.2% from $428.5 million in 2023. For the nine months, expenses increased to $1.34 billion, compared to $1.27 billion in the previous year. The increase in expenses was driven by higher costs associated with hotel operations and management fees.

SPT's real estate portfolio as of September 30, 2024, included 214 hotels and 745 service-focused retail net lease properties. The total gross value of real estate properties decreased to $9.58 billion from $9.79 billion at the end of 2023. The company also reported a significant drop in cash and cash equivalents, which fell to $48.6 million from $180.1 million at the end of 2023.

In terms of strategic developments, SPT announced plans to sell 114 focused service hotels managed by Sonesta, totaling 14,925 keys, with an expected net carrying value of $850 million. This move is anticipated to save approximately $725 million in capital expenditures over six years. Additionally, the company reduced its quarterly cash distribution from $0.20 to $0.01 per common share, aiming for annual savings of $127,000.

SPT's financial position remains under scrutiny, with total assets decreasing to $7.09 billion from $7.36 billion at the end of 2023. Total liabilities slightly increased to $6.16 billion. The company continues to manage its debt obligations, which include $4.08 billion in senior unsecured notes and $1 billion in senior secured notes, with no amounts outstanding under its revolving credit facility as of September 30, 2024.