High Yield Lodging: Room Service: Initiation of Coverage on the High Yield Lodging Sector

Research evidence excerpt

High Yield Lodging: Room Service: Initiation of Coverage on the High Yield Lodging Sector

enue and Adj EBITDAre of $2.8bn and $885m,

respectively. Our top line projection is underpinned by ~10% growth in Hospitality and

~5% growth in Entertainment. Our year-end leverage estimate is mid 4x gross/low 4x

net. Following Q1 outperformance management raised full-year guidance to reflect the

upside, but did not increase the rest of year run rate, citing forward macro uncertainty.

That said, leading business indicators remain resilient; attrition rates are down y/y and

group bookings continue to trend meaningfully higher. We note that booked 2027 same-

store group revenues are up over 3% vs. the same time last year, though 2028 is

currently pacing down 1%. This is part of a deliberate shift in group mix towards higher

profit groups; highlighted by ADR growth for both periods pacing up mid-single digits.

Net/net, we view the shift in inventory management to higher yielding customers

constructively. Importantly, RHP remains on track to achieve their 2027 targets of

$900m to $1bn of Adj EBITDAre.

Capital Structure/Financial Policy

The company targets net leverage of 4.0x to 4.5x. Leverage as of 03/30/26 is 4.9x

gross/4.4x net ( net 4.3x PF JW Desert Ridge). The REIT structure requires distribution

of at least 90% of taxable income (RHP intends to distribute 100% in FY26) leaving

limited retained cash available for debt reduction. Deleveraging is primarily an

EBITDA-growth story rather than a debt-paydown story. Notably, RHP has not been a

buyer of its own equity, but rather a seller for the right M&A opportunities; ~30% of the

Desert Ridge and ~50% of the Hill Country acquisitions were funded with equity. While