Summit Hotel Properties (NYSE:INN) reported second-quarter results that exceeded its expectations, citing broad-based demand growth, stronger pricing and continued expense controls. The company raised its full-year guidance for RevPAR, adjusted EBITDAre and adjusted funds from operations after reporting improving trends through July.
President and Chief Executive Officer Jon Stanner said pro forma revenue per available room, or RevPAR, rose 5% year over year in the second quarter, led by a 7.1% increase in average daily rate. Pro forma hotel EBITDA increased 7.8%, producing nearly 90 basis points of margin expansion.
Urban, Higher-Rate Segments Drive Growth
Stanner said business-transient and group demand strengthened during the quarter, especially in midweek periods and urban markets. Average daily rate in Summit’s urban portfolio rose 9%, contributing to an 8% increase in urban RevPAR and a 12% increase in hotel EBITDA.
The company said its urban portfolio represents approximately half of its rooms and hotel EBITDA. Cleveland, Washington, D.C., Indianapolis, Chicago, Charlotte and New Orleans were among the stronger urban markets during the quarter.
Higher-rated customer segments led performance. Retail RevPAR increased 10%, corporate-negotiated RevPAR rose 7.5%, and group RevPAR grew nearly 15%. In urban locations, retail, negotiated and group RevPAR each increased by more than 15%, according to the company.
Government-related demand also improved. Transient government revenue increased 8.3% from a year earlier, though Stanner said the segment remained below historical levels. During the question-and-answer session, he said government business had declined 20% to 25% beginning in March 2025, creating easier year-over-year comparisons as demand recovers.
Stanner said corporate travel, including smaller corporate and SMERF groups, remains an opportunity for the company. He also cited technology-sector growth and AI-related development as contributors to business-transient demand.
World Cup Boosted June, Though Demand Was Broad-Based
World Cup-related travel contributed to June results, particularly through premium pricing around match days. Across Summit’s six FIFA host markets, June RevPAR increased nearly 19% year over year. Atlanta, Dallas and San Francisco each delivered RevPAR growth of more than 20% during the month, while their combined hotel EBITDA rose 43%.
Summit estimated that World Cup demand added approximately 100 basis points to its second-quarter RevPAR growth. However, Stanner emphasized that performance extended beyond those markets: RevPAR in non-FIFA markets increased 4.2% during the quarter and nearly 5% in June.
Nine company markets recorded RevPAR growth of at least 10% in the second quarter. April RevPAR rose 4.5%, May increased 1%, and June grew nearly 10%.
The company also reported a longer booking window. Bookings made more than 30 days in advance increased 6% from a year earlier and 18% from the first quarter, while shorter-term bookings declined. Stanner said the trend occurred in both FIFA and non-FIFA markets and could be an indicator of more durable demand.
Preliminary July RevPAR growth was expected to be approximately 6%. For the third quarter, the company was pacing at roughly mid-single-digit growth, with August softer and September stronger, Stanner said.
Expenses, Portfolio Actions and Balance Sheet
Pro forma total revenue rose 5.2% in the second quarter, including a 4.9% increase in non-room revenue from resort and destination fees, parking, and food and beverage. At the renovated Oceanside Fort Lauderdale Resort, total revenue increased 31% and hotel EBITDA increased nearly 80% from the prior-year quarter.
Total operating expenses increased 4%. Labor costs rose 4.3%, reflecting wage increases, higher incentive compensation and employee benefit costs, while contract labor declined 4%. Summit expects full-year hotel operating expenses to rise approximately 3%.
In June, the company refinanced its primary corporate credit facility with a $650 million senior unsecured facility maturing in June 2031. The refinancing reduced borrowing costs by 20 basis points at its current leverage level. Summit also amended the mortgage loan on its AC and Element Miami Brickell hotels, reducing the interest-rate spread by 30 basis points.
Stanner said the company had no borrowings outstanding on its revolving credit facility and no debt maturities until 2028. Approximately 50% of pro rata debt was fixed-rate when accounting for swaps, rising above 60% when preferred stock is included.
Summit sold the Courtyard and Residence Inn Dallas Arlington South hotels in late July for a combined $19 million. The sale represented a 5.4% capitalization rate based on trailing 12-month net operating income through May 31 and eliminated $7.6 million of near-term capital requirements. The hotels posted combined June RevPAR growth of more than 45% and EBITDA growth of nearly 85% before their sale.
Since 2023, Summit has sold 15 hotels for nearly $220 million, at a blended capitalization rate below 5%, and eliminated nearly $70 million of capital requirements, Stanner said.
Guidance Raised
Summit raised its full-year outlook to pro forma RevPAR growth of 1.75% to 3.25%, adjusted EBITDAre of $175 million to $182 million, adjusted FFO of $95.5 million to $103 million, and adjusted FFO per share of $0.79 to $0.85.
The revised guidance excludes expected contributions from the recently sold Arlington hotels. After accounting for the dispositions, the midpoint of adjusted EBITDAre guidance increased by $3.5 million and adjusted FFO per-share guidance increased by $0.02. About $2 million of the EBITDA guidance increase reflected stronger-than-expected second-quarter results, while $1.5 million reflected improved expectations for the second half.
The company expects full-year hotel EBITDA margins to range from a 25-basis-point decline to a 25-basis-point increase, including an estimated 25-basis-point headwind from higher property taxes. Its outlook assumes no additional acquisitions, dispositions, share repurchases or capital-markets activity beyond actions reflected as of Aug. 5.
About Summit Hotel Properties (NYSE:INN)
Summit Hotel Properties is a real estate investment trust (REIT) that acquires, owns and operates branded select-service hotels and extended-stay properties across the United States. The company focuses on upper-midscale and upscale lodging segments, targeting established national brands to combine the operational efficiencies of limited-service properties with strong franchise affiliation.
The company’s portfolio comprises over thirty hotels carrying well-known flags such as Marriott, Hilton, Hyatt and IHG.
