Summit Hotel Properties (NYSE:INN) raised its full-year 2026 outlook after third-quarter revenue and profitability grew on higher room rates, stronger business travel and gains in urban markets.
Pro forma revenue per available room, or RevPAR, rose 7.2% from a year earlier, driven by a 5.3% increase in average daily rate and a 1.8% increase in occupancy. Pro forma hotel EBITDA increased 14.4%, with margins expanding by nearly 200 basis points, President and CEO Jon Stanner said on the company’s Nov. 4 earnings call.
Adjusted EBITDAre rose 12% to $43.9 million, while adjusted funds from operations, or FFO, reached $24.2 million, or $0.20 per share. Stanner said the per-share figure was up 18% from the prior-year quarter.
Business travel and urban hotels drive growth
Stanner said growth was broad-based across markets and demand segments, with business travel contributing to stronger midweek pricing. Corporate negotiated RevPAR, which he described as the company’s best proxy for business transient demand, rose 8.3%, including a 17% increase in urban markets.
Group RevPAR increased 14.4%, while retail RevPAR rose approximately 15%. Weekday RevPAR grew nearly 8%, and urban-market RevPAR increased more than 11%. Urban hotels account for approximately half of Summit’s rooms and hotel EBITDA, Stanner said.
“There is still more opportunity, particularly midweek in some of those higher-rated segments, to continue to drive occupancy,” Stanner told analysts. He said occupancy remains meaningfully below pre-pandemic peaks, leaving room to shift more business toward higher-rated retail, negotiated and group demand.
Performance strengthened as the quarter progressed. RevPAR rose more than 6% in July and approximately 4% in August before climbing more than 11% in September. Stanner estimated World Cup-related demand added 80 to 90 basis points to third-quarter RevPAR growth, roughly half its impact in the second quarter.
Non-room revenue grew approximately 11%, helping lift pro forma total revenue 7.7% to $185.3 million. Pro forma hotel operating expenses rose just over 3% per occupied room, below the rate of revenue growth.
Summit raises full-year outlook
For 2026, Summit now expects pro forma RevPAR growth of 3.5% to 4.5%, a 150-basis-point increase at the midpoint from its prior outlook. The company also raised its forecasts for adjusted EBITDAre and adjusted FFO for the second consecutive quarter.
- Adjusted EBITDAre is projected at $181 million to $186 million.
- Adjusted FFO is expected to range from $102.5 million to $107.5 million, or $0.85 to $0.89 per share.
- Pro forma hotel EBITDA margins are expected to expand 25 to 50 basis points.
- Pro rata capital expenditures are projected at $55 million to $65 million, unchanged from prior guidance.
Stanner said the midpoint of adjusted EBITDAre guidance rose by $5 million, while the midpoint of adjusted FFO per-share guidance increased by $0.05. Preliminary October RevPAR growth was approximately 5.5%, and fourth-quarter booking pace was up approximately 5% from a year earlier, he said.
Summit expects rate growth to remain the primary driver of RevPAR gains in the fourth quarter. Its full-year outlook does not assume additional acquisitions, dispositions, share repurchases or capital-markets activity beyond those reflected as of Nov. 3.
Asset sales and lower borrowing costs
During the quarter, Summit sold two Dallas Arlington South hotels for a combined $19 million. The sale price represented a 5.9% capitalization rate based on trailing 12-month net operating income through June 30, after accounting for approximately $7.6 million in avoided near-term capital expenditures.
Stanner said the company retained the hotels through the World Cup demand period before closing the sale. Since 2023, Summit has sold 15 hotels for approximately $219 million at a blended capitalization rate of about 4.7%, including estimated avoided capital needs.
The company has three additional assets held for sale, although Stanner said the process was not far enough along to provide details. Summit is also underwriting potential acquisitions as improved operating fundamentals bring more sellers to market, he said.
Amendments to term loans and reductions in interest-rate spreads tied to lower leverage are expected to save approximately $2.4 million in annual interest expense. Summit had approximately $350 million in liquidity, nothing outstanding on its revolving credit facility and no debt maturities until 2028, Stanner said.
Early view of 2027
Stanner said Summit expects business travel, urban-market demand and group bookings to remain supportive next year, though some markets will face tougher comparisons against 2026 special events. He also expects hotel supply growth to remain below historical averages.
Excluding special events and calendar effects, he estimated the business had been running at a mid-single-digit growth rate from mid-March through October. It was too early to quantify how that trend would translate into 2027, he said.
Summit also announced leadership changes: Mike Nieves joined as executive vice president and chief financial officer, and Adam Wudel was promoted to executive vice president and chief operating officer.
About Summit Hotel Properties (NYSE:INN)
Summit Hotel Properties, Inc is a real estate investment trust (REIT) focused on owning and investing in premium-branded, select-service hotels in the United States. Its properties generally operate under nationally recognized hotel brands and serve business and leisure travelers.
The company’s portfolio has included hotels affiliated with major hospitality brands such as Marriott, Hilton, Hyatt and InterContinental Hotels Group. Summit emphasizes select-service properties, which typically offer essential lodging amenities while operating with a more streamlined cost structure than full-service hotels.
Summit Hotel Properties was founded in 2003 and became a publicly traded company in 2011.
