Service Properties Trust

Second-quarter 2026 normalized FFO was $55 million, down $2.6 million, or 4.5%, from the prior-year quarter, and normalized FFO per share was $0.43. For the 93 comparable hotels, RevPAR increased 6.5% year over year, gross operating profit margin declined 60 basis points to 28.7%, and adjusted hotel EBITDA was $55 million. The 78 retained hotels generated RevPAR of $135, up 6.6% year over year, and adjusted hotel EBITDA of $57 million, up 4.2%. Net lease NOI increased $1.3 million year over year, while cash-basis NOI rose 2.2% quarter over quarter. Management reaffirmed full-year normalized FFO guidance of $124 million to $144 million, or $1.20 to $1.35 per share, and said full-year guidance also assumes hotel EBITDA, net lease NOI and consolidated adjusted EBITDA outlooks remain unchanged. It expects total CapEx of $120 million to $140 million, midpoint expense of $360 million, G&A of $40 million, and $25 million of capital recycling in the net lease portfolio.

Christopher Bilotto framed the quarter as continued progress on the company’s strategic priorities: improving the retained hotel portfolio, recycling out of lower-return hotels, and strengthening the balance sheet. He emphasized that the retained portfolio is showing clear operating momentum, while the exiting hotels have structurally negative economics, which supports the disposal strategy. He also said the new hotel management team should help uncover additional margin opportunities, with more specific targets likely to be shared later after the team has had time to assess the portfolio.

Brian Donley highlighted that normalized FFO of $55 million was pressured by a $20 million decline in hotel results from disposition activity, partly offset by a $15 million decline in interest expense, a $2.3 million increase in retained hotel performance, and a $1.3 million increase in net lease NOI. He said the company raised $542 million of net proceeds from the equity offering and used the capital to redeem all $450 million of 5.5% unsecured notes due 2027 and the remaining $100 million of 4.95% notes due 2027, creating $30 million of annual cash interest savings. He also said the company ended with $4.7 billion of debt at a 5.66% weighted average rate, no borrowings on the $650 million revolver, $42.5 million of cash flow available for distribution in the quarter, and continued expectations for positive CAD in 2026.

Analysts focused on hotel margins, the timeline for renovation-related drag to fade, and whether guidance was conservative given strong Q2 RevPAR. Management said the Nautilus renovation should be delivered by November, with about $4.5 million of cash drag for the full year and a likely uplift in Q4 and 2027 as the property stabilizes. On hotel margins, management pointed to lower insurance costs, better labor productivity, and operating leverage from renovations and higher occupancy, saying some benefits could show later this year but bigger gains may come in 2027. On asset sales, management said most of the 15 hotel dispositions are already under contract or LOI and expects most to close in Q3 and Q4, while the Atlanta hotel is being brought back to market because the management agreement timing gives a better buyer profile.