RLJ Lodging Trust (RLJ) stock intrinsic value fair value estimate & owner earnings analysis

RLJ Lodging Trust owned 93 hotels with about 20,800 rooms in 23 states and the District of Columbia at the end of 2025. Revenue is mostly room revenue, plus food and beverage and other hotel revenue. Northern California and Southern California were its two largest areas in 2025 (about $170 million and $165 million of revenue), followed by South Florida. The company says its Northern California, Southern California, South Florida, Chicago and Houston hotels are a high concentration of its portfolio. How we measured earnings. We start from operating cash flow, remove the swing from working capital, subtract stock compensation (a real cost to owners, which cash flow adds back), and subtract the part of hotel renovation spending that only keeps the hotels competitive. We do not deduct debt, because cash flow is already after interest paid. Depreciation is a non-cash charge and is not deducted; the renovation spending is the ongoing cost of keeping the buildings up. On this basis owner earnings per share were $1.90 in 2016, $1.36 in 2017 (the year of the FelCor merger), $1.44 in 2018, $1.41 in 2019, then a loss in 2020 (-$0.97) and 2021 (-$0.11) during the pandemic, and $0.77 in 2022, $1.33 in 2023, $0.88 in 2024 and $0.68 in 2025. Owner earnings fell about 25% in total dollars in 2025 (from $135 million to $102 million), on revenue that slipped 1.4% to $1.35 billion, while renovation spending stayed near $126 million. We did not establish from the filing data we pulled why cash flow weakened in 2025, so we treat it as an open question rather than assume it is temporary. Base case: $10.61 per share. We use $0.83 of owner earnings per share, the median of 2022 through 2025. Those years reflect the hotels as they are operated today, after the pandemic; 2020 and 2021 are excluded as pandemic years, and years before 2022 describe a larger portfolio. The 2025 result of $0.68 is below this level, so the base case assumes a return to what the business earned across 2022-2025, not growth beyond it. Year-one growth is assumed to be zero versus an actual decline of about 23% per share in 2025; the reason for expecting the level to hold is the 2022-2025 record itself, which includes $1.33 in 2023, and that is a judgement, not a contract. We credit no growth: there are no acquisitions, contracts or repeatable expansion programs in the filings that we could treat as secured. We also give no credit for share buybacks, although the diluted share count fell from about 164 million in 2021 to about 150 million in 2025. Flat earnings are credited for 25 years and nothing after, because we cannot name evidence for earning power beyond that, and renovation spending is already charged in each year. Bear case: $4.86 per share. Owner earnings drift down a further 27% to $0.50 per share, continuing the fall from $1.33 in 2023 to $0.68 in 2025, and stay there for 15 years, after which we credit nothing. Leverage supports the caution: at the end of 2025 about $1.2 billion of debt, 53.5% of the total, carried variable rates averaging 5.13%, and 69.2% of total debt was fixed or effectively fixed after interest rate swaps. Bull case: $15.14 per share. Owner earnings return to $1.10 per share, the median across 2018, 2019 and 2022-2025, held for 30 years. This is a level the company has reached before, not a new peak. What would make this wrong. If the 2025 decline continues below $0.50 per share, or if renovation needs rise faster than revenue, even the bear case is too high. If the 2023 level of $1.33 proves to be the true recovered run rate, the base case is too low. Debt is not subtracted from any case, since owner earnings are already after interest, but debt raises the risk in the bear case. The margin-of-safety price is $6.00, a large margin below the base case because the business is leveraged, cyclical and its cash flow was falling in the latest year.