Service Properties Trust (SVC) Nareit REITweek: 2026 Investor Conference summary

Strategic portfolio transition

• Transitioning focus from lodging to net lease, now representing 70% of NOI, with ongoing hotel sales to further this shift.

• $1.6 billion in capital markets activity over 18 months, including a recent large equity raise, to support growth and balance sheet improvement.

• Full-year guidance provided for 2026, reflecting confidence in ongoing initiatives and performance improvements.

• Plan to continue paring back hotel assets over a multi-year period, aiming for a net lease re-rating and long-term stability.

• Investors expected to benefit from EBITDA upside as hotel performance improves and net lease cash flow stabilizes.

Lodging portfolio performance and strategy

• Sold nearly $1 billion in hotels last year, shifting focus to full-service, resort, and urban properties; 15 more hotels targeted for sale in 2024.

• Hotel sales expected to close by year-end, removing $13 million in negative EBITDA and improving portfolio margins.

• Q1 RevPAR growth of 6.5% continues into Q2, aided by renovated properties and strong event-driven demand.

• Margin improvement initiatives include operator changes, labor cost management, and shifting revenue from OTAs to direct channels.

• Expect incremental margin gains, with more material improvement anticipated by 2027 as renovations and asset sales stabilize the portfolio.

Capital expenditure and returns

• $750 million invested in hotel renovations over three years, with CapEx dropping to $120–$140 million in 2024 and stabilizing at $100–$120 million annually.

• Mixed returns on CapEx projects, with some hotels exceeding double-digit EBITDA growth and others lagging.

• Major repositioning project underway in Miami South Beach, expected to deliver outsized returns by fall.

• Maintenance CapEx projected at $80–$90 million, with discretionary renovations making up the remainder.