LuxUrban Hotels Inc. (NASDAQ: LUXH) stock plummeted 6.83% after the company reported disappointing second-quarter 2024 financial results and outlined its ongoing turnaround efforts through the Lux 2.0 initiative.

The hotel operator faced significant challenges in the quarter, including a 43% year-over-year decline in net rental revenue to $18.2 million due to a decrease in available units and pre-selling of rooms at relatively low rates. Moreover, cost of revenue soared 86% to $40.4 million, primarily driven by expensing unamortized lease acquisition costs and security deposits for exited properties, as well as increased operational costs.

As a result, LuxUrban Hotels reported a gross profit loss of $22.2 million, compared to a profit of $10.2 million in the same period last year. The company's working capital deficit also widened to $62.6 million as of June 30, 2024, up from $13.4 million at the end of 2023.

However, the company remains optimistic about its future prospects under the Lux 2.0 initiative, which includes the addition of experienced personnel from the hospitality and finance sectors to its management team and Board of Directors. LuxUrban Hotels has also strategically reduced its domestic operations, focusing solely on properties with the potential to generate positive cash flow.

Newly appointed CEO Robert Arigo and CFO Michael James expressed confidence in the company's ability to generate sustainable positive cash flow moving forward, highlighting the expiration of pre-sold rooms at discounted rates by the end of 2024. They anticipate significant increases in average daily room rates and revenue per available room in 2025, driven by the strong demand in the New York market and the company's strategic repositioning.