On August 4, Chatham Lodging Trust (NYSE:CLDT) reported second-quarter results that showed a hotel operator squeezing more profit out of nearly every room it owns. Revenue per available room climbed past $158, an all-time high for a second quarter, while adjusted funds from operations per share jumped 22% year over year. The extended stay and select service specialist also flagged an even stronger start to the third quarter, with July RevPAR up 10%.
Margins Widen As Deals Pay Off
RevPAR rose more than 3% to $158 in the quarter, topping the 1.5% pace built into the company’s own guidance, and June alone hit $175, an all-time high for that month. The six hotel Hilton-branded portfolio Chatham bought in March for $92 million is already outrunning its own underwriting, with RevPAR up 9% to $135 in the quarter and July RevPAR up 13%. Occupancy at those hotels rose 4 points to 83%, and margins came in at 49% gross operating profit and 44% Hotel EBITDA.
The profitability gains showed up everywhere. Gross operating profit margin widened 50 basis points to 47%, and Hotel EBITDA margin jumped 220 basis points to 41%, pushing adjusted EBITDA up 15% to $32.7 million and net income to common shareholders to $6.2 million from $3.4 million a year earlier. Chatham also kept buying back its own stock, repurchasing 0.3 million shares in the quarter at an average of $9.07 and 2.5 million shares since the program began at an average of $7.29, a price the company says equates to a 10% capitalization rate on its 2026 net operating income guidance.
The Guidance Still Points To A Loss
The RevPAR gain came almost entirely from pricing power rather than fuller hotels. Occupancy actually slipped 50 basis points to 81% even as average daily rate climbed 390 basis points to $195, meaning Chatham charged more for a slightly smaller share of filled rooms. And despite the strong quarter, full-year guidance still calls for a net loss to common shareholders of between $1.6 million and $4.7 million, with diluted earnings per share landing between a loss of $0.03 and $0.10.
The balance sheet carries real exposure to interest rates. Chatham had $418 million in total debt at quarter-end, including a $200 million term loan and $75 million drawn on its revolving credit facility, both tied to floating SOFR rates, on top of $143 million in fixed-rate mortgage debt at 7.2%. Net debt stood at $407 million. Performance also leaned heavily on a handful of markets, with Silicon Valley alone contributing 17% of trailing twelve-month EBITDA, while San Diego RevPAR fell 9% on a lighter convention calendar and the Coastal Northeast slipped 6%. Chatham is also sinking $45 million into a new Home2 Suites in Portland that will not open until the second quarter of 2028.
Money Quietly Piles In
Hedge fund ownership of Chatham Lodging rose to 18 funds from 16 the prior quarter, a modest but real uptick in institutional conviction. Short interest sits at just 2.85% of the float, a level that points to little organized skepticism weighing on the stock. Together, the two figures describe a name that smart money is slowly warming to without a crowded bet against it building on the other side. That combination leaves relatively little tension for now between how funds are positioning and how bears are betting.
Where The Story Goes From Here
Chatham’s quarter makes the case that a small-cap lodging REIT can grow profits faster than revenue through cost discipline and a well-timed acquisition. For the bullish case to keep playing out, occupancy needs to catch up to the pricing gains so growth is not resting on rate alone, and the six-hotel portfolio needs to keep beating its own underwriting into next year.
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