The coronavirus pandemic has been wreaking havoc across the globe. In view of the same, government and health official mandates in many markets have led to elimination of hotel demand, compelling Lodging REITs to withdraw their 2020 guidance.
RLJ Lodging Trust (RLJ - Free Report) too has withdrawn its first-quarter and full-year 2020 outlook. Management has slashed its dividend and recently updated on the company’s efforts to mitigate the operational and financial impacts.
The company and its operators have temporarily suspended operations at more than 50% of hotels in response to the demand contraction. Moreover, it expects to cut the 2020 capital expenditure program by more than 80% by deferring all capital investments, excluding completion of projects that are significantly in progress and are on the verge of completion. Apart from this, the company has reviewed all 2020 ROI efforts and decided to suspend 90% of these projects.
In addition, strengthening of liquidity position is essential and the company has taken proactive steps apart from reducing its dividend. It has opted to draw $400 million under its $600-million corporate line of credit, adding to the existing cash balance of roughly $800 million. The company has no debt maturities slated until 2022. Also, lowering operating expenses and preserving liquidity is on RLJ Lodging Trust’s agenda and therefore, asset managers are working with hotel management partners.
The virus outbreak has hit the travel, airline, lodging, tourism and event industries hard besides affecting several other industries and the economy. Meetings and conferences have been called off, while travel restrictions have been imposed in places reeling under this health crisis.
This led to massive business tour cancellations and vacation trips, weighing on Lodging REITs, particularly, compelling Host Hotels & Resorts Inc. (HST - Free Report) , Ryman Hospitality Properties (RHP - Free Report) , Pebblebrook Hotel Trust (PEB - Free Report) and several others to withdraw their outlook for the current year. Also, total returns from the same sector have been down 60% so far this year.
Nevertheless, RLJ Lodging Trust’s latest efforts on preserving liquidity and increase cash as well as lower operating expenses amid these uncertain times will likely offer some support and help sail through.
Shares of this Zacks Rank #3 (Hold) company have plummeted 61.8% compared with the industry’s decline of 24.3% year to date. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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