Braemar Hotels (BHR) Q4 2023: Group Revenue Up 15%, Urban Recovery Drives 2024 Growth Narrative

March 1, 2024 | By EarningsIQ Research

Braemar Hotels’ Q4 marked a decisive pivot toward urban hotel growth and group bookings, as urban assets delivered outsized EBITDA gains and group revenue climbed 15% year over year. Luxury resort demand moderated off historic highs, but EBITDA and ADR resilience underscore portfolio quality, while refinancing progress and asset management discipline position BHR for capital flexibility into 2024. With group pace up for both 2024 and 2025, and urban hotels leading recovery, the portfolio’s earnings mix is poised to shift further toward city assets and group-driven upside.

Summary

• Urban Hotel Momentum: Urban assets delivered strong EBITDA gains and are set to drive portfolio growth in 2024.
• Group Revenue Foundation: Group bookings rose sharply, with 2025 pace up 22%, anchoring forward visibility.
• Capital Flexibility Emphasis: Management extended or refinanced nearly all 2024 maturities, prioritizing liquidity and optionality.

Business Overview

Braemar Hotels & Resorts is a real estate investment trust (REIT) specializing in luxury hotel and resort ownership, with a portfolio spanning high-end urban and resort destinations. The company generates revenue primarily through hotel operations, including room, group, and ancillary services, across 16 hotels and nearly 4,000 rooms. Key segments include urban hotels, luxury resorts, and recently acquired trophy assets such as the Four Seasons Scottsdale and Ritz-Carlton Reserve Dorado Beach.

Performance Analysis

Braemar’s Q4 performance was defined by a strategic shift in earnings mix, as urban hotels outperformed with $11 million EBITDA, and group revenue initiatives gained traction. While overall portfolio RevPAR (revenue per available room, a core hotel profitability metric) declined 4% year over year, this must be viewed in the context of historic 2022 highs for luxury resorts and industry-wide normalization. Notably, urban assets saw total hotel revenue exceed prior year by 2%, and hotel EBITDA climb 4%, signaling both demand recovery and operating leverage in city markets.

Group revenue was a standout, with 2023 group bookings up 15% year over year, and 2024 group pace up 4%, including a 14% jump in Q3, traditionally the softest quarter. Resort properties continued to outperform 2019 baselines, maintaining premium ADR (average daily rate) and EBITDA margins despite softer leisure demand. New acquisitions, particularly the Ritz-Carlton Reserve Dorado Beach, delivered robust RevPAR and yield on cost, outpacing underwriting and supporting Braemar’s luxury focus.

• Urban Outperformance Signal: Urban hotels’ EBITDA growth and group business mix are reshaping portfolio earnings drivers.
• Group Booking Resilience: Group revenue grew 15% in 2023, with 2025 pace up 22% and ADR up 14%.
• Luxury Resort Normalization: Resort RevPAR declined from record 2022 levels but remains well above 2019, with EBITDA and ADR holding firm.

Capital deployment remained disciplined, with $77 million spent on targeted renovations in 2023 and $90–100 million planned for 2024, focused on high-ROI projects and property repositioning. Cash and liquidity positions were stable, and nearly all 2024 maturities were addressed through refinancing or extensions, limiting near-term balance sheet risk.

Executive Commentary

Strategic Positioning

1. Urban Hotel Recovery as Growth Engine

Braemar’s urban properties are now positioned as the portfolio’s primary growth lever, with strong group and corporate transient demand driving EBITDA and revenue gains. Management signaled that the urban segment’s recovery will anchor 2024 earnings expansion, aided by citywide event calendars and a rebound in corporate business travel.

2. Group Business Foundation and Booking Window Expansion

Group revenue is becoming a structural earnings pillar, with 2023 bookings up 15% and 2025 pace up 22%. The team’s proactive mix management and short-term booking strength have allowed Braemar to smooth seasonal volatility and hedge against leisure normalization, while higher ADRs in future bookings point to sustained pricing power.

3. Luxury Resort Asset Quality and Capital Allocation

Resort assets remain high-quality cash generators, with EBITDA and RevPAR still exceeding pre-pandemic levels. The focus remains on maintaining rate discipline over occupancy, optimizing ancillary revenue, and deploying capital into high-impact renovations and new amenities (such as spa retail and villa programs) to protect margins and drive long-term value.

4. Balance Sheet Flexibility and Refinancing Discipline

Management executed on nearly all 2024 debt maturities, favoring short-term extensions to preserve optionality in a volatile rate environment. The preference for floating-rate debt and a laddered maturity schedule provides both cost flexibility and the ability to capitalize on market improvements or asset sales as opportunities arise.

5. Asset Monetization and Portfolio Focus

Selective disposition strategy is under active consideration, particularly for non-core or non-luxury assets like Hilton La Jolla Torrey Pines. Proceeds are earmarked for debt paydown, reinvestment in core assets, or new development, with management emphasizing a long-term shift toward wholly owned, luxury-focused holdings.

Key Considerations

This quarter’s results highlight a decisive transition in Braemar’s earnings drivers, with urban hotels and group business replacing leisure resort outperformance as the primary source of upside. Management’s capital allocation and portfolio strategy are increasingly focused on optimizing asset mix and maintaining flexibility in a shifting macro environment.

Key Considerations:

• Urban Asset Recovery Trajectory: Urban hotels’ EBITDA gains and group demand are set to drive outsized growth in 2024 and beyond.
• Group Revenue as Earnings Base: Significant group booking growth and higher forward ADRs provide earnings visibility and margin leverage.
• Luxury Resort Normalization Risk: Resort RevPAR has moderated but remains above pre-pandemic levels, with management focused on rate discipline and ancillary revenue optimization.
• Balance Sheet and Capital Allocation Discipline: Refinancing activity has reduced near-term risk, while CapEx is targeted at high-return projects and new development opportunities.
• Asset Sale Optionality: Dispositions of non-core assets (notably Torrey Pines) could unlock capital for debt reduction or reinvestment, aligning with the luxury-focused strategy.

Risks

Key risks include leisure demand normalization, as luxury resort RevPAR reverts from peak 2022 levels, and ongoing cost inflation, particularly labor. Urban recovery is not guaranteed if macro or corporate travel falters, and refinancing short-term extensions leaves BHR exposed to potential interest rate volatility. Disposition execution and development timelines also present capital allocation risk, while competitive pressures in luxury and urban markets remain elevated.

Forward Outlook

For Q1 2024, Braemar expects:

• Continued urban hotel EBITDA growth and group revenue expansion
• Stable resort performance with focus on rate and margin management

For full-year 2024, management emphasized:

• Group revenue pace up 4% for 2024 and up 22% for 2025
• Planned CapEx of $90–100 million, targeting high-impact renovations and new development

Management highlighted several factors that will shape results:

• Urban hotel recovery and group business mix as primary growth drivers
• Capital flexibility through refinancing and asset sales to support reinvestment and balance sheet strength

Takeaways

Braemar’s Q4 confirms a strategic pivot toward urban and group-driven growth, with management executing on refinancing, asset optimization, and targeted CapEx. The company’s ability to sustain rate and margin discipline in resorts, while building a robust group booking base, positions it for resilient earnings in 2024.

• Urban and Group Upside: Urban hotels and group bookings are now the dominant earnings levers, with forward pace supporting visibility and margin expansion.
• Capital and Portfolio Flexibility: Refinancing progress and selective asset sales provide optionality to redeploy capital into high-ROI projects and core luxury assets.
• Future Watchpoint: Monitor sustainability of group pace, urban demand normalization, and execution on asset dispositions and development timelines as key drivers for 2024 and beyond.

Conclusion

Braemar’s Q4 results underscore a shift in portfolio dynamics, with urban hotel and group business recovery now at the center of the growth narrative. Disciplined capital management, asset optimization, and a luxury-focused strategy position BHR for resilient performance, but execution on group pace and capital allocation will be critical to unlocking further upside.

Industry Read-Through

Braemar’s urban recovery and group booking surge reflect broader trends in the luxury hospitality sector, where corporate and group travel are rebounding and leisure normalization is underway. Peers with urban exposure and group sales capabilities may see similar tailwinds, while those reliant on leisure-only demand could face more pronounced normalization headwinds. The shift toward flexible refinancing and targeted asset sales also signals that capital discipline and portfolio optimization are increasingly necessary for sector resilience in a volatile rate and demand environment. Operators with strong asset management and revenue optimization teams are best positioned to capture incremental margin and defend ADR, especially as cost inflation and competitive pressures persist.

BHR Real Estate Hotels Luxury Urban Group Bookings Refinancing Asset Management