RLJ Lodging Trust (RLJ) Q3 2026 earnings review
RLJ hotel profits jump, and management raises its full-year plan
RLJ Lodging Trust, the owner of 84 city hotels, filled more rooms at higher nightly rates and turned that revenue into wider profit margins. Comparable room revenue per available room jumped 10% from a year ago, lifting cash profit per share excluding one-offs by 26%. Chief executive Leslie Hale raised the full-year outlook for a third time, though by our math the plan still has fourth-quarter room growth slowing to about 3%.
| Comparable room revenue per available room (RevPAR) | +9.7% from a year ago (+6.8% in Q2) |
|---|---|
| Comparable Hotel EBITDA margin | 26.5% +1.9 percentage points from a year ago |
| Cash profit per share (Adjusted FFO), excluding one-offs | $0.34 +26% from a year ago |
| Full-year RevPAR growth outlook | Raised 2 pts middle of the range: 6.0% growth |
⚖️ Verdict: 🟢 Bullish
The story got better because rising room rates finally expanded hotel profit margins, easing concern that staff wages and utility bills would eat up the recovery. Unlike the first two outlook raises of 2026, management also lifted its view for the fourth quarter on strong October bookings. One caution: food and beverage sales grew much slower than room revenue, and management still bought back zero shares despite selling seven Chicago hotels for $110 million.
The question now is whether the fourth-quarter slowdown in the outlook is management being cautious again or a real drop after summer events and a shifted September convention. If it is caution, fourth-quarter corporate profit will top last year's $80 million; if the drop is real, profit will fall as the plan implies. Fourth-quarter results in February will settle it.
🐂 Bull Case
Urban Business Travel Lifted Room Revenue
RLJ Lodging Trust owns 84 city hotels and relies on weekday corporate travellers and convention groups to fill rooms. Chief executive Leslie Hale said operating trends sped up during the third quarter, with "business travel leading the way alongside sustained strength in leisure and group, which disproportionately benefited our urban markets". That rebound lifted both room rates and occupancy across the portfolio.
- Revenue per available room (RevPAR, a hotel's room revenue divided by its total rooms) at comparable hotels: $153.36, up 9.7% from a year ago
- Average daily room rate (ADR): $203.35, up 6.4% from a year ago
- Occupancy: 75.4%, up 2.3 percentage points from a year ago
- Comparable hotel revenue: $354.5 million, up 9.1% from a year ago
Part of the 9.7% jump came from comparing against a weak third quarter last year, when hotel remodeling and a closed convention center in Austin hurt room sales. Even so, growth stepped up from 4.8% in the first quarter and 6.8% in the second, and Hale also credited "the ramp of our conversions and renovations" for adding momentum.
What to watch: the conference call breakdown of business travel revenue growth and Northern California results, which the press release does not include. Another quarter of double-digit business travel growth would show that corporate demand is strong enough to carry 2027 after this year's one-off events pass.
Tight Property Costs Lifted Hotel Margins
Rising wages, utility bills and the cost of servicing more occupied rooms have squeezed hotel profit margins over the past year, leaving second-quarter margins up just 0.1 percentage points despite nearly 7% room revenue growth. This quarter Hale said top-line growth and "disciplined cost control efforts, allowed us to expand margins and grow Hotel EBITDA at nearly twice the pace of revenues".
Comparable Hotel EBITDA — property profit before interest, taxes, depreciation and corporate overhead — rose 17.5% to $93.9 million, and the margin widened by 1.9 percentage points to 26.5%. By our math, property taxes and insurance fell by 1.1 percentage points of total revenue to 7.0%, while room-cleaning and front-desk expenses fell by 0.6 percentage points to 22.1%, because higher room rates flowed through to profit.
What to watch: fourth-quarter hotel operating expense growth on the earnings call. Keeping cost growth near management's 3% second-half target while RevPAR slows would preserve the full-year margin gain.
Third Straight Outlook Raise Lifts Q4
In the first two quarters of 2026, RLJ raised its full-year targets by roughly the size of each quarterly beat, leaving the rest of the year untouched. This time the hotel owner raised its outlook to "incorporate its third quarter outperformance and improved outlook for the fourth quarter", backed by "strong preliminary results for October".
Adjusted EBITDA — corporate profit before interest, taxes, depreciation and one-offs — beat what the prior plan implied for the third quarter by $6.6 million at the middle of the range, by our math. Yet the full-year Adjusted EBITDA target rose by $9 million at the middle of the range to $355 million, even after removing seven Chicago Midway hotels sold in October that generate about $8 million a year.
What to watch: fourth-quarter Adjusted EBITDA against the $78.6 million implied by the new full-year outlook, by our math. A finish above $80.4 million would mean fourth-quarter profit grew from a year ago despite the tougher conference calendar.
🐻 Bear Case
Food and Beverage Lagged Room Growth
RLJ is remodeling properties into lifestyle hotels with upgraded bars, restaurants and meeting spaces so guests spend more outside their rooms. Hale said "the ramp of our conversions and renovations provided additional momentum, which contributed to continued growth in non-room revenues". For six straight quarters through June, that extra spending grew faster than room revenue.
In the third quarter that streak ended, because comparable non-room revenue grew 6.5% against 9.7% RevPAR growth. Reported food and beverage sales rose just 3.5% from a year ago to $38.2 million, while food and beverage costs rose 4.7% to $30.7 million. That matters because food and beverage carries much thinner margins than hotel rooms, so slower bar and banquet sales limit the payoff from lifestyle remodelings.
What to watch: fourth-quarter food and beverage revenue and margin when group events slow down. A second quarter where non-room spending trails room growth would challenge the return targets on the lifestyle conversions.
Share Count Rose Without Any Buybacks
The board approved a $250 million share buyback programme in April 2026, after management repeatedly called buybacks a priority. Yet the real estate trust has not bought back a single share since the third quarter of 2025, and in October it sold seven Chicago hotels for $110 million while providing $20 million of loans to the buyer.
Instead of shrinking, the diluted share and unit count used to calculate funds from operations (FFO, a real estate cash profit measure) rose 2.1% from a year ago to 153.3 million. RLJ also raised its full-year share count assumption from 151.5 million to 151.7 million and noted that share repurchases are not included in its outlook, so stock compensation continues to dilute shareholders.
What to watch: how management deploys the $90 million of net cash from the Chicago Midway sale. Holding the cash without buying back shares would show the $250 million authorization remains unused.
Risks this quarter didn't answer
Five standing concerns from earlier quarters either remain ahead on the calendar or require details not in the press release.
- Tough 2027 comparisons and softer Q4 bookings: by our math, the full-year plan implies Q4 RevPAR growth slows to about 3% and Adjusted EBITDA dips 2.3% from a year ago, before World Cup host cities face tough comparisons in 2027.
- Higher borrowing costs after refinancing: net interest expense rose 5.5% from a year ago to $26.2 million, and the average interest rate on gross debt rose to 5.05% from 4.78% in June after replacing 3.75% notes with term loans.
- Renovation disruption in Boston and Key West: construction starts in the second half of 2026, and the release does not state how many rooms were out of service.
- Short booking windows and government travel: transient guests book days ahead, leaving urban hotels exposed to sudden travel pullbacks.
👓 Other Themes
Chicago Midway Sale Shrinks the Portfolio
In October, RLJ sold seven hotels near Chicago Midway Airport for $110 million, trimming its portfolio from 91 to 84 hotels. The price equals 13.8 times the hotels' forecasted 2026 Hotel EBITDA — about $8 million of annual profit by our math — or 16.1 times when including required renovations, and the trust lent the buyer $20 million to help finance the deal.
Corporate Investment Supports Urban Hotel Demand
Hale said that "against a backdrop of muted supply, demand continues to be supported by a favorable macro backdrop, including healthy corporate earnings and elevated levels of business investment". Few new city hotels are under construction because building costs and financing rates remain high, so rising corporate travel flows into existing urban properties rather than competing against new hotel openings.
💲 Other KPIs
Up 20.3% from a year ago and up 5.9% ($2.7 million) from June, reversing last quarter's 10.5% drop when summer event deposits were used. Advance deposits are cash guests and convention groups pay ahead of their stays, so the rebound shows group and event bookings refilled after the summer.
Down 18.4% ($499.2 million) from June. On June 30 the trust drew $494 million of term loans and held the cash over quarter-end before paying off $500 million of expiring notes on July 1. With that repayment complete, RLJ has over $1.0 billion of liquidity and no debt coming due until 2029.
🔮 Guidance
Raised. The middle of the range moved up 2 percentage points to 6.0% growth, excluding the seven sold Chicago Midway hotels. By our math, with nine-month RevPAR up 7.0%, the full-year plan leaves about 3.0% growth for the fourth quarter. It is the third raise this year, and each step has grown larger: +0.75 points, +1.5 points, +2.0 points.
Raised. The middle of the range rose $1 million to $380 million, but the new figure excludes about $8 million of full-year profit from the seven Chicago Midway hotels sold in October. On a like-for-like 84-hotel basis, the target rose by about $9 million. Third raise this year: +$9M, +$11M, +$1M (+$9M before the hotel sale).
Raised. The middle of the range moved up $9 million to $355 million, or 6.1% growth from 2025. By our math, after $276.4 million in the first nine months, that leaves $78.6 million for the fourth quarter — down 2.3% from a year ago, improved from the 5% drop implied last quarter. Third raise in three quarters: +$9M, +$10M, +$9M.
Raised. The middle of the range increased by $0.055 to $1.49 per share, up 7.2% from $1.39 in 2025. By our math, after $1.19 in the first nine months, the plan leaves $0.30 for the fourth quarter, down 6.3% from $0.32 a year ago. Third raise this year: +$0.06, +$0.065, +$0.055.
Raised. Corporate overhead moved up $1 million at the middle of the range to $35.0 million. It is the second $1 million increase in two quarters as stronger hotel results lift employee bonus accruals.
Unchanged. The plan holds net interest cost at $102.0 million at the middle of the range for afourth straight quarter. After $75.8 million in the first nine months, that leaves $26.2 million for the fourth quarter, matching the third quarter run rate.
Unchanged. Renovation spending stays at $85.0 million at the middle of the range, where it has sat all year, covering the upcoming hotel brand conversions in Boston and Key West.
Raised. The full-year share count assumption rose by 0.2 million shares, following a 0.7 million increase last quarter, and assumes no share buybacks in the fourth quarter.
❓ Key Questions
How fast did business travel and renovated hotels grow?
In the first half, management gave exact growth rates for business travel (+10% in Q2) and completed hotel conversions (+12% EBITDA in Q2). The press release omits both numbers; the call needs to show whether they beat the 9.7% portfolio average.
Why lend $20 million to the Chicago buyer over buybacks?
RLJ sold seven Chicago Midway hotels for $110 million, provided $20 million of seller financing, and still bought back zero shares under its $250 million authorization while the diluted share count rose 2.1%.
How much did one-off summer events boost third-quarter RevPAR?
World Cup matches, America-250 events and the shift of the Salesforce conference from October into September all helped the third quarter. Sizing their exact lift is necessary to know how tough next year's third-quarter comparison will be.
What is the 84-hotel profit base for the fourth quarter?
The updated full-yearComparable RevPAR and Hotel EBITDA targets remove the seven Chicago Midway hotels sold in October, but the release only gives 91-hotel figures for the first nine months. Investors need the 84-hotel history to measure fourth-quarter performance.