Yahoo Finance Apple Hospitality REIT Inc (APLE) Q1 2024 Earnings Call Transcript Highlights: Steady ...
Adjusted EBITDA RE: $101 million, up 6% year-over-year
Modified Funds from Operations (MFFO): $83 million, up 5% year-over-year
Comparable Hotels RevPAR: $111, consistent with Q1 2023
ADR (Average Daily Rate): $154, stable year-over-year
Occupancy Rate: 72%, unchanged from Q1 2023
Total Revenue: $332 million, increased by 1.5% from Q1 2023
Comparable Hotels Adjusted Hotel EBITDA: $112 million, down 3% year-over-year
Comparable Hotels Adjusted Hotel EBITDA Margin: 33.7%, down 160 basis points from Q1 2023
Dividend Yield: Annualized regular monthly cash distribution of $0.96 per share, yielding approximately 6.5%
Net Income Guidance for 2024: $207 million to $233 million
RevPAR Guidance for 2024: Change of 2% to 4%
Adjusted EBITDA RE Guidance for 2024: $461 million to $483 million
Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Adjusted EBITDA RE increased by 6% year-over-year to $101 million, and modified funds from operations rose by 5% to $83 million.
Comparable hotels RevPAR for Q1 2024 was up approximately 8% relative to Q1 2019, indicating strong performance ahead of pre-pandemic levels.
Recent acquisitions, including the AC Hotel Washington DC, are expected to be significantly contributive to long-term performance with a 7.7% cap rate and an EBITDA yield of 8.5%.
The company maintains a strong balance sheet with ample liquidity for further acquisitions, enhancing its scalable platform.
Apple Hospitality REIT Inc continues to provide an attractive dividend yield, with a regular monthly cash distribution representing an annual yield of approximately 6.5%.
Negative Points
Comparable hotels adjusted hotel EBITDA for Q1 2024 was down 3% compared to the same period in 2023.
The portfolio performance for Q1 was below the low end of the guidance range, influenced by a shift in Super Bowl venues and an unfavorable calendar shift with the Easter holiday.
Ongoing inflationary pressures and wage increases continue to impact operating expenses, although efforts are being made to manage these effectively.
The company faces challenges from new competition in certain markets, such as the 15% supply growth in Rogers, Arkansas, leading to strategic asset disposals.
Despite strong performance indicators, there are concerns about potential softening in leisure demand, which could impact future occupancy and rate growth.
Q & A Highlights
Q: Thanks, and good morning, everybody. Liz, you highlighted some of the negative impact that the Easter holiday shift had on 1Q and how much of a benefit that shift on April's performance, how April is kind of compared versus budget? I recall last year you're talking about really strong midweek strength in late. I'm just curious when you remove some of that holiday noise maybe from the April performance, what did you see towards the latter half? A: Liz Perkins - Apple Hospitality REIT Inc - Senior Vice President and Chief Financial Officer: Yes, good morning, Oscar. And it's a good question trying to isolate trends between March and April. Given the calendar shift, we were pleased with April overall, when we look at the day of week trends for the full months, seeing growth in both weekday and weekend occupancies and RevPAR. It was heavily weighted, particularly from a growth rate perspective on the first two weeks of the month. But as we rounded out towards the end and potentially had cleaner weeks to look at. We saw continued strength in midweek and demand. And, you know, one of the trends, I think that we may see and may be experiencing is some normalization between a pickup in midweek potentially offsetting some leisure on the weekends when we look year to date were slightly positive, driven by that midweek demand and some know some weak softening on the leisure side. But overall, the midweek amid weak growth, this is resulting in a positive result.
Q: Helpful. And then wanted to hit one on the transaction landscape. Given kind of the evolving interest rate environment or interest rate expectations, maybe have you seen any changes in seller expectations and sort of the volume of opportunities that are coming to the transaction. A: Justin Knight - Apple Hospitality REIT Inc - Chief Executive Officer, Director: And really from a total transaction volume, we've seen very little change in that area. We are on We continue the bulk of the deals that we're underwriting today are with groups who are exploring a potential sale, either because of pending financing, either specific to the asset or some of their larger portfolio or in some cases, upcoming renovations that has been less of a driver to date than we had anticipated would be how we continue to feel that that will bring additional assets to market in the near term. But, you know, total transaction volume continues to be low across the industry. I think if you look at our performance over the past 12 months, we've we've and we've taken more than our fair share of total transactions. And certainly and we continue to view ourselves as well positioned relative to potential competition. And those I highlighted in my prepared remarks, I think with the pullback in our share price and yes, and the relative valuations that we're doing, we also see value there. I think looking forward, as I highlighted, we continue to add to underwrite a number of potential transactions and assets. I think that we feel will be meaningfully additive to our portfolio. And I think we'll continue to see how that plays out as the year progresses. And we're fortunate, I think, given our strategy to have a broad and I have palette to paint with that, and I think there are a lot of markets where we have interest and a lot of assets that would fit our investment criteria. So given at the appropriate cost of capital, I think we could continue to be meaningfully acquisitive in the current environment.
Q: Helpful. And then just last one for me on the ACDC., can you remind us given when that was completed where relative to kind of stabilization versus a comp set of hotels in the DC market. A: Justin Knight - Apple Hospitality REIT Inc - Chief Executive Officer, Director: Some so that the hotel was stabilized from when we acquired it on the bulk of the growth. And I see that hesitancy only because as you know, the DC market was slower to recover. And so a significant portion of the growth that we have seen year to date and that we expect to continue to see will come from continued growth in the market. That said, this is one of the assets where we transitioned management and the new management team has done an exceptional job, both in driving top line performance for the asset and you know, flowing the top line performance to the bottom line. And so I think despite the hotel haven't been open for a period of time and ramping within the market, we see incremental opportunity both as the market continues to grow, bolstered by a strong convention calendar and increasingly a return of government workers to the city. And I know improvement in our share and the efficiency of our property level operations with the management transition absorbing.
Q: Hi, good morning. A question on the overall, I guess, David or other consumer in your eyes Yes, we've heard a lot about kind of leisure, I guess hesitancy or softness of other calls. You seem to be pretty optimistic there. So what are you seeing from your leisure customers or small groups and social groups and maybe your SMBs, they're wanting to travel. A: Liz Perkins - Apple Hospitality REIT Inc - Senior Vice President and Chief Financial Officer: And good morning, Anthony comp, generally, I would say that what the industry has seen and what we've seen doesn't immediately point to a weaker consumer note specifically around leisure, broadly, whether traveling domestically or internationally, the consumer still appears to be preferencing travel, which as a positive for the industry overall, we've said on past calls and I mentioned in response to one of Austin's questions that as people begin picking up midweek corporate travel and normal travel patterns materialize, there could be a potential, a partial offset to leisure on the weekends. Now again, when booking year to date through April at our trends, that's what we're seeing broadly and we've also said on past calls that Q1 is a really tough time to draw broad conclusions about how the strongest travel quarters for our portfolio and the industry may play out especially with our Super Bowl comp and the Easter shift. And it just makes it makes drawing broad conclusions a little tricky. And we did assume guidance at the beginning of the year and still feel that we'll have the most opportunity to drive incremental RevPAR and our strongest occupancy quarter here in the second.
Q: Thanks. Good morning, everyone. Running rate has been just one more on the leisure commentary vis a vis the softer trends that come on the demand side? Or was it really related to some pricing sensitivity and adjust? And you said big variances across markets, but any particular market that you can point to that were surprisingly weak. A: Justin Knight - Apple Hospitality REIT Inc - Chief Executive Officer, Director: And I don't think the variances are within a fairly narrow band. And I would say on the occupancy and rate dynamic is somewhat related. And I think we've commented for some time that pre pandemic leisure was our most rate sensitive segment, and we've been incredibly pleased.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
