Summary of Service Properties Trust Q2 2026 Earnings Call

1Key Financial Results and Metrics

Normalized FFO: $55 million, down 4.5% year-over-year.

Normalized FFO per Share: $0.43, in line with consensus expectations.

RevPAR for Retained Hotels: Increased 6.6% year-over-year, with preliminary July showing a 7.1% increase.

Adjusted Hotel EBITDA: $57 million, up 4.2% year-over-year.

Net Lease NOI: Increased by $1.3 million year-over-year.

Debt Profile: $4.7 billion in debt with a weighted average interest rate of 5.66%. Redeemed $550 million in unsecured debt, saving $30 million in annual interest.

2Strategic Updates and Business Highlights

Portfolio Optimization: Sold 20 properties for approximately $32 million, including 19 net lease assets and 1 hotel, to enhance cash flow and reduce leverage.

Hotel Performance: RevPAR growth driven by renovations and demand related to events like the World Cup. The retained hotel portfolio showed strong performance despite some disruption from ongoing renovations.

Capital Recycling: Focus on transitioning to a net lease-oriented business model, with $9 million invested in acquisitions and plans for further dispositions.

Governance: Ongoing search for an independent trustee with hospitality experience to strengthen the board.

3Forward Guidance and Outlook

Full Year Guidance: Maintaining normalized FFO range of $124 million to $144 million ($1.20 to $1.35 per share).

Expectations for Hotel EBITDA and Net Lease NOI: Guidance reaffirmed amid ongoing renovations and asset dispositions.

CapEx: Projected between $120 million to $140 million for the year, with a focus on renovations and improvements.

4Bad News, Challenges, or Points of Concern

Declining Metrics: Normalized FFO decreased by $2.6 million year-over-year, primarily due to hotel dispositions.

Renovation Disruption: Significant EBITDA drag from renovations, particularly at the Nautilus property, expected to total around $4.5 million for the year.

Insurance Costs: Increased costs impacting gross operating profit margins, which declined by 60 basis points to 28.7%.

Market Conditions: Mixed market for asset sales, with focused service hotels performing better than luxury segments, indicating potential challenges in selling certain assets.

5Notable Q&A Insights

Renovation Timeline: The Nautilus project is expected to complete by November, with anticipated positive impacts on revenue thereafter.

OTA Bookings: Currently at mid-20% range, with a goal to reduce this to around 20% through improved direct bookings and loyalty programs.

Credit Losses: Positive developments with franchisee bankruptcies, as one is emerging from bankruptcy, which should stabilize rental income.

Asset Sales Timeline: Majority of the 15 hotel dispositions expected to close in Q3 and Q4 2026, with ongoing evaluations for future asset sales. This summary encapsulates the key financial metrics, strategic initiatives, forward guidance, and notable challenges faced by Service Properties Trust during Q2 2026, providing a balanced view of the company's current standing and outlook.