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Apple Hospitality REIT, Inc. (NYSE:APLE) Q1 2024 Earnings Conference Call May 7, 2024 10:00 AM ET Company Participants Kelly Clarke - Vice President, Investor Relations Justin Knight - Chief Executive Officer and Director Liz Perkins - Senior Vice President and Chief Financial Officer Conference Call Participants Austin Wurschmidt - KeyBanc Capital Markets Anthony Powell - Barclays Michael Bellisario - Baird Chris Darling - Green Street Operator Greetings, and welcome to the Apple Hospitality REIT First Qua ...

Apple Hospitality REIT (APLE) came out with quarterly funds from operations (FFO) of $0.34 per share, in line with the Zacks Consensus Estimate. This compares to FFO of $0.34 per share a year ago. These figures are adjusted for non-recurring items.A quarter ago, it was expected that this hotel-owning real estate investment trust would post FFO of $0.31 per share when it actually produced FFO of $0.31, delivering no surprise.Over the last four quarters, the company has not been able to surpass consensus FFO ...

Filing Information [General Information](index=1&type=section&id=General%20Information) Apple Hospitality REIT, Inc. is a large accelerated filer with 242,346,188 common shares outstanding listed on the NYSE under APLE - Apple Hospitality REIT, Inc. is a large accelerated filer, indicating its market capitalization and reporting requirements[3](index=3&type=chunk) General Information Table | Metric | Value | | :----- | :---- | | Trading Symbol | APLE | | Exchange | New York Stock Exchange | | Common Shares Outstanding (as of April 29, 2024) | 242,346,188 | PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited consolidated financial statements for Q1 2024 and 2023, including balance sheets, income statements, equity, cash flows, and detailed notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets and liabilities increased from December 2023 to March 2024, driven by real estate investments and debt, while cash decreased Consolidated Balance Sheets (in thousands) | Metric (in thousands) | March 31, 2024 | December 31, 2023 | | :-------------------- | :------------- | :---------------- | | Total Assets | $5,032,498 | $4,937,298 | | Total Liabilities | $1,698,196 | $1,613,317 | | Total Shareholders' Equity | $3,334,302 | $3,323,981 | | Investment in real estate, net | $4,871,476 | $4,777,374 | | Debt, net | $1,500,698 | $1,371,494 | | Cash and cash equivalents | $4,942 | $10,287 | - Total Assets increased by approximately **$95.2 million**, and Total Liabilities increased by approximately **$84.9 million**, primarily due to increased real estate investments and debt[8](index=8&type=chunk) [Consolidated Statements of Operations and Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) Net income significantly increased in Q1 2024 due to higher revenue and a substantial gain on real estate sales Consolidated Statements of Operations and Comprehensive Income (in thousands, except per share data) | Metric (in thousands, except per share data) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Percent Change | | :------------------------------------------- | :-------------------------------- | :-------------------------------- | :------------- | | Total revenue | $329,512 | $311,454 | 5.8% | | Total expense | $275,663 | $262,207 | 5.1% | | Gain on sale of real estate | $17,766 | $- | N/A | | Operating income | $71,615 | $49,247 | 45.4% | | Net income | $54,050 | $32,923 | 64.2% | | Basic and diluted net income per common share | $0.22 | $0.14 | 57.1% | - The significant increase in net income and EPS was largely attributable to a **$17.8 million** gain on the sale of real estate in Q1 2024, which was absent in Q1 2023[10](index=10&type=chunk) [Consolidated Statements of Shareholders' Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity) Total shareholders' equity increased due to net income and share-based compensation, partially offset by distributions Consolidated Statements of Shareholders' Equity (in thousands) | Metric (in thousands) | March 31, 2024 | December 31, 2023 | | :-------------------- | :------------- | :---------------- | | Total Shareholders' Equity | $3,334,302 | $3,323,981 | | Common Stock Amount | $4,805,504 | $4,794,804 | | Net Income | $54,050 | N/A (for Q1 2024 activity) | | Distributions Declared to Shareholders | $(58,137) | N/A (for Q1 2024 activity) | - Share-based compensation, net of surrendered shares, contributed **$10.971 million** to common stock in Q1 2024[12](index=12&type=chunk) - Distributions declared to shareholders were **$0.24 per share** for both periods, totaling **$58.137 million** in Q1 2024 and **$55.169 million** in Q1 2023[12](index=12&type=chunk)[13](index=13&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash decreased in Q1 2024 due to significant investing activities for hotel acquisitions, partially offset by operating and financing cash Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $54,652 | $51,691 | | Net cash used in investing activities | $(116,947) | $(24,576) | | Net cash provided by (used in) financing activities | $53,257 | $(31,848) | | Net change in cash, cash equivalents and restricted cash | $(9,038) | $(4,733) | | Cash, cash equivalents and restricted cash, end of period | $34,580 | $38,779 | - Investing activities saw a substantial increase in cash outflow, primarily due to **$118.3 million** for acquisition of hotel properties in Q1 2024, compared to none in Q1 2023[14](index=14&type=chunk) - Financing activities shifted from a net cash outflow in Q1 2023 to a net cash inflow in Q1 2024, largely driven by **$180.4 million** in proceeds from the revolving credit facility[14](index=14&type=chunk) [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Detailed explanations and disclosures for the financial statements, covering organization, policies, investments, debt, and subsequent events [1. Organization and Summary of Significant Accounting Policies](index=8&type=section&id=1.%20Organization%20and%20Summary%20of%20Significant%20Accounting%20Policies) Outlines the company's REIT structure, investment focus, financial statement presentation, and impact of new accounting standards - The Company is a self-advised REIT that owns **224 hotels** with **29,886 guest rooms** across 37 states and D.C. as of March 31, 2024[17](index=17&type=chunk) - New accounting standards (ASU 2023-07 on Segment Reporting and ASU 2023-09 on Income Tax Disclosures) are expected to impact only disclosures, not the consolidated financial statements[19](index=19&type=chunk)[20](index=20&type=chunk) [2. Investment in Real Estate](index=10&type=section&id=2.%20Investment%20in%20Real%20Estate) Details the real estate portfolio, including composition, recent acquisitions, and outstanding purchase commitments for future hotel properties Investment in Real Estate (in thousands) | Investment in Real Estate (in thousands) | March 31, 2024 | December 31, 2023 | | :--------------------------------------- | :------------- | :---------------- | | Land | $844,560 | $828,868 | | Building and improvements | $5,029,149 | $4,917,105 | | Investment in real estate, net | $4,871,476 | $4,777,374 | - The company acquired one AC Hotel in Washington, D.C. for **$116.8 million** in Q1 2024, using proceeds from property sales and revolving credit facility borrowings[25](index=25&type=chunk)[27](index=27&type=chunk) - As of March 31, 2024, the company had commitments to potentially purchase two hotels (Madison, WI and Nashville, TN) for a combined **$177.5 million**, with expected completions in mid-2024 and late 2025, respectively[28](index=28&type=chunk)[30](index=30&type=chunk) [3. Dispositions](index=11&type=section&id=3.%20Dispositions) The company sold two hotels for approximately $33.5 million, realizing a combined gain of $17.8 million, with a portion of proceeds used for a like-kind exchange - Two hotels (Hampton and Homewood Suites in Rogers, AR) were sold on February 9, 2024, for a gross sales price of approximately **$33.5 million**[31](index=31&type=chunk)[32](index=32&type=chunk) - The sales resulted in a combined gain of approximately **$17.8 million**, net of transaction costs, and a deferral of taxable gains of **$15.1 million** through a like-kind exchange[31](index=31&type=chunk)[32](index=32&type=chunk) [4. Debt](index=12&type=section&id=4.%20Debt) Comprehensive overview of the company's debt structure, including credit facilities, term loans, senior notes, and mortgage debt, totaling $1.5 billion Debt (in thousands) | Debt Type (in thousands) | March 31, 2024 | December 31, 2023 | | :----------------------- | :------------- | :---------------- | | Revolving credit facility | $131,000 | $- | | Term loans and senior notes, net | $1,089,402 | $1,088,904 | | Mortgage debt, net | $280,296 | $282,590 | | Total Debt, net | $1,500,698 | $1,371,494 | | Weighted-average interest rate of debt | 4.56% | 4.26% | - As of March 31, 2024, **78%** of the company's debt was fixed-rate (including hedged variable-rate debt), and **22%** was variable-rate[36](index=36&type=chunk) - The company was in compliance with all applicable financial and restrictive covenants under its credit facilities as of March 31, 2024[49](index=49&type=chunk) [5. Fair Value of Financial Instruments](index=17&type=section&id=5.%20Fair%20Value%20of%20Financial%20Instruments) Discusses the fair value of debt and derivative instruments, including interest rate swaps used to manage variable-rate debt risk - The carrying value and estimated fair value of the company's debt were approximately **$1.5 billion** as of March 31, 2024[53](index=53&type=chunk) Derivative Instruments (in thousands) | Derivative Instrument (in thousands) | March 31, 2024 | December 31, 2023 | | :----------------------------------- | :------------- | :---------------- | | Notional Amount of Active Swaps | $770,000 | N/A | | Fair Value (Asset) | $24,112 | $20,290 | | Net Unrealized Gain Reclassified to Interest and Other Expense, net (Q1) | $6,001 | $5,015 | | Net Unrealized Gain (Loss) Recognized in Other Comprehensive Income (Loss) (Q1) | $9,709 | $(3,091) | - Approximately **$15.2 million** of net unrealized gains from interest rate derivatives are expected to be reclassified as a decrease to interest and other expense within the next 12 months[57](index=57&type=chunk) [6. Related Parties](index=19&type=section&id=6.%20Related%20Parties) Details transactions with related parties, primarily Apple Realty Group, Inc., for cost-sharing and aircraft use - The company provides support services to ARG and is reimbursed for costs, totaling approximately **$0.3 million** in Q1 2024 (vs. $0.2 million in Q1 2023), reducing general and administrative expenses[61](index=61&type=chunk) - Amounts due from ARG for reimbursements totaled approximately **$0.4 million** as of March 31, 2024[62](index=62&type=chunk) - The company did not use aircraft owned by an entity of its Executive Chairman during Q1 2024, compared to less than **$0.1 million** in Q1 2023[63](index=63&type=chunk) [7. Shareholders' Equity](index=21&type=section&id=7.%20Shareholders'%20Equity) Covers distributions to shareholders, share issuance activities, and the share repurchase program, with $335.4 million remaining available Distributions Paid | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----- | :-------------------------------- | :-------------------------------- | | Distributions Paid per Common Share | $0.29 | $0.32 | | Total Distributions Paid (in millions) | $70.2 | $73.4 | - The company established a new **$500 million** at-the-market (ATM) offering program in February 2024 but did not sell any common shares under it or the prior program during Q1 2024[65](index=65&type=chunk) - No common shares were repurchased in Q1 2024; approximately **$335.4 million** remained available under the Share Repurchase Program as of March 31, 2024[66](index=66&type=chunk) [8. Compensation Plans](index=22&type=section&id=8.%20Compensation%20Plans) Describes incentive plans for executive management based on operational performance and shareholder return metrics, including share-based awards - The 2024 Incentive Plan bases executive compensation **50%** on operational performance goals (RevPAR growth, Adjusted Hotel EBITDA margin, Adjusted EBITDAre, MFFO per share, capital expenditures) and **50%** on shareholder return metrics[67](index=67&type=chunk) - Approximately **$3.7 million** was accrued as a liability for potential executive incentive compensation payments under the 2024 Incentive Plan as of March 31, 2024[67](index=67&type=chunk) Share-Based Compensation | Share-Based Compensation | 2023 Incentive Plan (Q1 2024 issuance) | 2022 Incentive Plan (Q1 2023 issuance) | | :----------------------- | :------------------------------------- | :------------------------------------- | | Common shares earned | 1,110,664 | 935,189 | | Common shares issued, net of tax withholding | 804,318 | 672,163 | | Total share-based compensation earned (in millions) | $18.1 | $15.6 | [9. Subsequent Events](index=23&type=section&id=9.%20Subsequent%20Events) Reports on post-balance sheet events, specifically the payment and declaration of monthly cash distributions - On April 15, 2024, the company paid **$19.4 million** (**$0.08 per common share**) in distributions[72](index=72&type=chunk) - On April 18, 2024, a monthly cash distribution of **$0.08 per common share** was declared, payable on May 15, 2024[72](index=72&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's perspective on Q1 2024 financial condition and operating results, covering KPIs, portfolio activities, and liquidity [Overview](index=24&type=section&id=Overview) Apple Hospitality REIT, Inc. is a self-advised REIT owning 224 hotels across 37 states and D.C., primarily under Marriott or Hilton brands - The company operates as a self-advised REIT, investing in income-producing real estate within the U.S. lodging sector[77](index=77&type=chunk) - As of March 31, 2024, the portfolio comprised **224 hotels** (**29,886 guest rooms**) predominantly under Marriott or Hilton brands, managed by 16 unaffiliated hotel management companies[77](index=77&type=chunk) [Recent Hotel Portfolio Activities](index=24&type=section&id=Recent%20Hotel%20Portfolio%20Activities) The company acquired one hotel for $116.8 million and sold two for $33.5 million in Q1 2024, with commitments for two more under development - Acquired an AC Hotel in Washington, D.C. for **$116.8 million** in Q1 2024, funded by property sales and revolving credit facility borrowings[78](index=78&type=chunk) - Sold two hotels for approximately **$33.5 million** in Q1 2024, resulting in a **$17.8 million** gain, with proceeds used for a like-kind exchange for the D.C. acquisition[81](index=81&type=chunk) - Outstanding contracts for two hotels under development (Madison, WI and Nashville, TN) for a combined **$177.5 million**, with expected completions in mid-2024 and late 2025[79](index=79&type=chunk) - Terminated an operating lease for a non-hotel property in New York due to payment failure and commenced legal proceedings to remove the tenant[83](index=83&type=chunk) [Hotel Operations](index=26&type=section&id=Hotel%20Operations) Total revenue increased by 5.8% and net income by 64.2% in Q1 2024, largely due to real estate sales, with stable RevPAR for Comparable Hotels Hotel Operations (in thousands, except statistical data) | Metric (in thousands, except statistical data) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Percent Change | | :------------------------------------------- | :-------------------------------- | :-------------------------------- | :------------- | | Total revenue | $329,512 | $311,454 | 5.8% | | Net income | $54,050 | $32,923 | 64.2% | | Adjusted Hotel EBITDA | $109,793 | $106,749 | 2.9% | | Number of hotels owned at end of period | 224 | 220 | 1.8% | | ADR | $153.18 | $152.01 | 0.8% | | Occupancy | 72.0% | 72.0% | 0.0% | | RevPAR | $110.25 | $109.46 | 0.7% | Comparable and Same Store Hotels Operating Results **Comparable Hotels Operating Results:** | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Percent Change | | :----- | :-------------------------------- | :-------------------------------- | :------------- | | ADR | $154.10 | $154.08 | 0.0% | | Occupancy | 72.1% | 72.1% | 0.0% | | RevPAR | $111.09 | $111.14 | 0.0% | **Same Store Operating Results:** | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Percent Change | | :----- | :-------------------------------- | :-------------------------------- | :------------- | | ADR | $151.86 | $152.31 | -0.3% | | Occupancy | 71.9% | 72.0% | -0.1% | | RevPAR | $109.23 | $109.73 | -0.5% | - RevPAR growth and operating results for Comparable Hotels are expected to improve for the full year 2024, despite negative impacts in Q1 from Super Bowl comparison and Easter holiday timing[91](index=91&type=chunk)[92](index=92&type=chunk) [Revenues](index=29&type=section&id=Revenues) Total revenue increased by 5.8% to $329.5 million, driven by acquisitions and strong leisure/corporate demand, while Comparable Hotels' RevPAR remained stable Revenues (in millions) | Revenue (in millions) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Percent Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :------------- | | Total Revenue | $329.5 | $311.5 | 5.8% | **Comparable Hotels Operating Statistics:** | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----- | :-------------------------------- | :-------------------------------- | | Occupancy | 72.1% | 72.1% | | ADR | $154.10 | $154.08 | | RevPAR | $111.09 | $111.14 | - Revenue growth was led by hotels acquired in 2023 and supported by strong leisure transient, small group, and corporate business demand[94](index=94&type=chunk) - Markets with above-average growth in Q1 2024 included Las Vegas, Washington, D.C., Houston, Seattle, Richmond, Tucson, Anchorage, and Pittsburgh[94](index=94&type=chunk) [Hotel Operating Expense](index=29&type=section&id=Hotel%20Operating%20Expense) Hotel operating expense increased by 6.5% to $197.3 million, primarily due to higher labor, maintenance, and sales/marketing costs from inflation Hotel Operating Expense (in millions) | Expense (in millions) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Percent Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :------------- | | Hotel Operating Expense | $197.3 | $185.2 | 6.5% | | % of Total Revenue | 59.9% | 59.5% | 0.4 pp | - Increased labor costs, repairs and maintenance, and sales and marketing costs, driven by inflationary pressures, were the main contributors to the expense increase[95](index=95&type=chunk) - The company is working with management companies to achieve operational efficiencies and mitigate cost pressures from inflation, shortages, and staffing challenges[95](index=95&type=chunk) [Property Taxes, Insurance and Other Expense](index=29&type=section&id=Property%20Taxes,%20Insurance%20and%20Other%20Expense) Property taxes, insurance, and other expenses rose by 6.7% to $21.0 million due to increased insurance premiums and property tax reassessments Property Taxes, Insurance and Other Expense (in millions) | Expense (in millions) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Percent Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :------------- | | Property Taxes, Insurance and Other | $21.0 | $19.7 | 6.7% | | % of Total Revenue | 6.4% | 6.3% | 0.1 pp | - The increase was mainly due to higher insurance premiums and property tax increases from reassessments in certain areas[96](index=96&type=chunk) [General and Administrative Expense](index=29&type=section&id=General%20and%20Administrative%20Expense) General and administrative expense decreased by 7.7% to $10.6 million, mainly due to lower accruals for executive incentive compensation General and Administrative Expense (in millions) | Expense (in millions) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Percent Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :------------- | | General and Administrative Expense | $10.6 | $11.5 | -7.7% | | % of Total Revenue | 3.2% | 3.7% | -0.5 pp | - The decrease was mainly driven by reduced accruals for executive incentive compensation, partially offset by higher payroll and benefit costs[97](index=97&type=chunk) [Depreciation and Amortization Expense](index=29&type=section&id=Depreciation%20and%20Amortization%20Expense) Depreciation and amortization expense increased by 2.0% to $46.8 million due to new hotel acquisitions and completed renovations Depreciation and Amortization Expense (in millions) | Expense (in millions) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Percent Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :------------- | | Depreciation and Amortization Expense | $46.8 | $45.9 | 2.0% | - The increase of approximately **$0.9 million** was mainly attributable to recent hotel acquisitions and renovations[99](index=99&type=chunk) [Interest and Other Expense, net](index=31&type=section&id=Interest%20and%20Other%20Expense,%20net) Interest and other expense, net, increased by 8.2% to $17.3 million due to higher average borrowings and increased interest rates on variable-rate debt Interest and Other Expense, net (in millions) | Expense (in millions) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Percent Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :------------- | | Interest and Other Expense, net | $17.3 | $16.0 | 8.2% | - The increase was due to higher average borrowings and interest rates on variable-rate debt[101](index=101&type=chunk) - Interest expense is expected to be higher for the remainder of 2024 due to increased Revolving Credit Facility borrowings and the maturity of several interest rate swaps, which will reduce the proportion of fixed-rate debt[101](index=101&type=chunk) [Non-GAAP Financial Measures](index=32&type=section&id=Non-GAAP%20Financial%20Measures) Defines and reconciles key non-GAAP measures like FFO, MFFO, EBITDA, and Adjusted Hotel EBITDA, used to evaluate operating performance [FFO and MFFO](index=32&type=section&id=FFO%20and%20MFFO) FFO increased by 5.5% to $82.3 million and MFFO by 5.4% to $83.2 million in Q1 2024, reflecting adjustments to GAAP net income FFO and MFFO (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net income | $54,050 | $32,923 | | Funds from operations | $82,343 | $78,065 | | Modified funds from operations | $83,240 | $78,959 | - FFO increased by **$4.278 million** (**5.5%**) and MFFO increased by **$4.281 million** (**5.4%**) year-over-year[105](index=105&type=chunk) [EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA](index=32&type=section&id=EBITDA,%20EBITDAre,%20Adjusted%20EBITDAre%20and%20Adjusted%20Hotel%20EBITDA) Adjusted Hotel EBITDA increased by 2.9% to $109.8 million in Q1 2024, indicating improved property-level operational performance EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net income | $54,050 | $32,923 | | EBITDA | $118,540 | $95,250 | | EBITDAre | $100,774 | $95,250 | | Adjusted EBITDAre | $100,810 | $95,288 | | Adjusted Hotel EBITDA | $109,793 | $106,749 | - Adjusted Hotel EBITDA, which isolates property-level operational performance, increased by **$3.044 million** (**2.9%**) year-over-year[111](index=111&type=chunk) - The non-hotel property in New York, leased to a third-party operator, is excluded from Adjusted Hotel EBITDA starting in the second half of 2023[111](index=111&type=chunk) [Hotels Owned](index=34&type=section&id=Hotels%20Owned) The company's portfolio comprises 224 hotels with 29,886 guest rooms across 37 states and D.C., diversified by Hilton and Marriott brands - The company's portfolio consists of **224 hotels** with **29,886 guest rooms** as of March 31, 2024[112](index=112&type=chunk) Number of Hotels and Guest Rooms by Brand | Brand | Number of Hotels | Number of Rooms | | :-------------------- | :--------------- | :-------------- | | Hilton Garden Inn | 40 | 5,593 | | Hampton | 36 | 4,831 | | Courtyard | 35 | 4,982 | | Residence Inn | 30 | 3,694 | | Homewood Suites | 29 | 3,291 | | SpringHill Suites | 10 | 1,544 | | Fairfield | 10 | 1,213 | | Home2 Suites | 10 | 1,146 | | TownePlace Suites | 9 | 931 | | AC Hotels | 4 | 702 | | Embassy Suites | 3 | 508 | | Hyatt Place | 3 | 411 | | Marriott | 2 | 619 | | Hyatt House | 2 | 264 | | Aloft Hotels | 1 | 157 | | **Total** | **224** | **29,886** | - **14 properties** are subject to ground leases, and **15 hotels** are encumbered by mortgages[116](index=116&type=chunk) [Related Parties (MD&A)](index=45&type=section&id=Related%20Parties%20(MD%26A)) The company continues to engage in related party transactions with Apple Realty Group, Inc., as detailed in Note 6 to the financial statements - Transactions with related parties, such as Apple Realty Group, Inc., are ongoing and may not be at arm's length[125](index=125&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses the company's liquidity strategy, capital resources, and anticipated uses of capital, including operating cash flows and credit facilities [Capital Resources](index=45&type=section&id=Capital%20Resources) Primary short-term liquidity sources are operating cash flows and the Revolving Credit Facility, with $519 million unused capacity as of March 31, 2024 - Principal short-term liquidity sources are operating cash flows and the Revolving Credit Facility[126](index=126&type=chunk) Capital Resources (in millions) | Metric (in millions) | March 31, 2024 | | :------------------- | :------------- | | Total Outstanding Debt | $1,500 | | Corporate Cash on Hand | $4.9 | | Unused Revolving Credit Facility Capacity | $519 | - The company has a **$500 million** at-the-market (ATM) offering program for common shares, with no shares sold in Q1 2024[129](index=129&type=chunk) [Capital Uses](index=47&type=section&id=Capital%20Uses) Anticipated capital uses include shareholder distributions, share repurchases, capital improvements, debt service, and hotel acquisitions - The company's current annual distribution rate is **$0.96 per common share**, payable monthly at **$0.08 per share**[132](index=132&type=chunk) - Approximately **$335.4 million** remained available for purchase under the Share Repurchase Program as of March 31, 2024[134](index=134&type=chunk) - Anticipated capital expenditures for 2024 are **$75 million to $85 million**, including comprehensive renovations for approximately 20 properties[135](index=135&type=chunk) [Upcoming Debt Maturities and Debt Service Payments](index=49&type=section&id=Upcoming%20Debt%20Maturities%20and%20Debt%20Service%20Payments) Approximately $184.9 million in principal and interest payments are due over the next 12 months, including two term loans maturing in Q3 2024 - Approximately **$184.9 million** in principal and interest payments are due on debt over the next 12 months[136](index=136&type=chunk) - An **$85.0 million** term loan and a **$20.1 million** mortgage loan are maturing in Q3 2024[136](index=136&type=chunk) - Interest expense is expected to increase over the next 12 months due to higher market interest rates on variable-rate debt and the maturity of **$235.0 million** in interest rate swaps[136](index=136&type=chunk) [Purchase Contract Commitments](index=49&type=section&id=Purchase%20Contract%20Commitments) Outstanding contracts for two hotels totaling $177.5 million, with expected completions in mid-2024 and late 2025, contingent on closing conditions - Outstanding contracts for two hotels (Madison, WI and Nashville, TN) for a combined purchase price of approximately **$177.5 million**[137](index=137&type=chunk) - Expected completion and acquisition dates are mid-2024 for Madison, WI, and late 2025 for Nashville, TN[137](index=137&type=chunk) - Acquisitions are contingent on sellers meeting closing conditions, and funding is planned through available cash or unsecured credit facilities[137](index=137&type=chunk)[138](index=138&type=chunk) [Cash Management Activities](index=51&type=section&id=Cash%20Management%20Activities) Cash management with related parties allows for advances or deferrals up to $1 million, settled quarterly, to optimize cash flow - Cash management with related parties allows for advances or deferrals up to **$1 million**, settled quarterly, to optimize cash flow and reduce costs[139](index=139&type=chunk) [Impact of Inflation](index=51&type=section&id=Impact%20of%20Inflation) The company relies on hotel operators to adjust room rates to offset inflation, but competitive conditions may limit this ability - Hotel operators can adjust room rates daily to reflect inflation, but competitive pressures may limit this ability[140](index=140&type=chunk) [Business Interruption](index=51&type=section&id=Business%20Interruption) The company is exposed to natural disasters, and while insured, there's no assurance against material adverse financial effects - The company is exposed to natural disasters, and while insured, there's no assurance against material adverse effects on financials[141](index=141&type=chunk) [Seasonality](index=51&type=section&id=Seasonality) The hotel industry is seasonal, with higher occupancy and revenues in Q2 and Q3, requiring cash management for lower revenue periods - Hotel occupancy and revenues are generally higher in Q2 and Q3 compared to Q1 and Q4[142](index=142&type=chunk) - The company plans to use cash on hand or available financing to meet cash needs during seasonal fluctuations[142](index=142&type=chunk) [Critical Accounting Policies and Estimates](index=51&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) No material changes to critical accounting policies or estimates have occurred since the 2023 Annual Report on Form 10-K - No material changes to critical accounting policies or estimates have occurred since the 2023 Form 10-K[143](index=143&type=chunk) [Subsequent Events (MD&A)](index=51&type=section&id=Subsequent%20Events%20(MD%26A)) Post-quarter-end, the company paid a $0.08 per common share distribution and declared another $0.08 distribution payable in May 2024 - Paid **$0.08 per common share** distribution on April 15, 2024[144](index=144&type=chunk) - Declared **$0.08 per common share** distribution payable on May 15, 2024[144](index=144&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate fluctuations on variable-rate debt, with 22% of total debt being variable-rate - The company's main market risk is interest rate risk on its variable-rate debt[146](index=146&type=chunk) Market Risk Metrics | Metric | Value | | :------------------------------------------------ | :---- | | Variable-rate debt outstanding (as of March 31, 2024) | $331.0 million | | % of total debt outstanding | 22% | | Impact on annual net income per 100 bps interest rate change | $3.3 million | | Notional amount of variable-rate debt fixed by swaps | $770.0 million | - The company uses 13 interest rate swap agreements to effectively fix interest payments on approximately **$770.0 million** of its variable-rate debt[147](index=147&type=chunk) [Item 4. Controls and Procedures](index=52&type=section&id=Item%204.%20Controls%20and%20Procedures) Senior management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal controls - Disclosure controls and procedures were effective as of March 31, 2024, as evaluated by senior management[150](index=150&type=chunk) - No material changes to internal control over financial reporting occurred during the last fiscal quarter[150](index=150&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) No current or threatened litigation is expected to materially adversely affect the company's financial position or operations - No current or threatened legal proceedings are expected to have a material adverse effect on the company's financial position or operations[152](index=152&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=53&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No shares were repurchased in Q1 2024, but 310,404 common shares were surrendered for tax withholding, with $335.4 million remaining for repurchases Share Repurchase Activity | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :----- | :------------------------------- | :--------------------------- | | January 1 - January 31, 2024 | - | - | | February 1 - February 29, 2024 | - | - | | March 1 - March 31, 2024 | 310,404 (surrendered for tax) | $16.27 | | **Total** | **310,404** | **N/A** | - No shares were repurchased under the Share Repurchase Program in Q1 2024[153](index=153&type=chunk) - Approximately **$335.4 million** remained available under the Share Repurchase Program as of March 31, 2024[153](index=153&type=chunk) [Item 5. Other Information](index=53&type=section&id=Item%205.%20Other%20Information) No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers in Q1 2024 - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers in Q1 2024[154](index=154&type=chunk) [Item 6. Exhibits](index=54&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with the Form 10-Q, including corporate governance documents, certifications under the Sarbanes-Oxley Act, and financial statements formatted in iXBRL - Exhibits include Amended and Restated Articles of Incorporation and Bylaws, certifications (302 and 906) from CEO, CFO, and CAO, and iXBRL formatted financial statements[155](index=155&type=chunk) Signatures [Signatures](index=55&type=section&id=Signatures) The Form 10-Q report was duly signed on May 6, 2024, by the CEO, CFO, and CAO, affirming compliance with Securities Exchange Act requirements - The report was signed by the Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer on May 6, 2024[157](index=157&type=chunk)[158](index=158&type=chunk)

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) Apple Hospitality REIT reported strong Q1 2024 financial and operational results, with strategic acquisitions, a robust balance sheet, and consistent shareholder distributions [First Quarter 2024 Performance Overview](index=1&type=section&id=First%20Quarter%202024%20Performance%20Overview) Apple Hospitality REIT reported strong financial and operational results for Q1 2024, with significant increases in net income and operating income, alongside stable comparable hotel metrics. The company also highlighted strategic transactional activity and a robust balance sheet | Metric | 2024 ($ thousands) | 2023 ($ thousands) | % Change | | :---------------------------------------------- | :----------------- | :----------------- | :-------- | | Net income | $54,050 | $32,923 | 64.2% | | Net income per share | $0.22 | $0.14 | 57.1% | | Operating income | $71,615 | $49,247 | 45.4% | | Operating margin % | 21.7% | 15.8% | 590 bps | | Adjusted EBITDAre | $100,810 | $95,288 | 5.8% | | Comparable Hotels Adjusted Hotel EBITDA | $111,672 | $115,399 | (3.2%) | | Comparable Hotels Adjusted Hotel EBITDA Margin %| 33.7% | 35.3% | (160 bps) | | Modified funds from operations (MFFO) | $83,240 | $78,959 | 5.4% | | MFFO per share | $0.34 | $0.34 | 0.0% | | Average Daily Rate (ADR) (Actual) | $153.18 | $152.01 | 0.8% | | Occupancy (Actual) | 72.0% | 72.0% | 0.0% | | Revenue Per Available Room (RevPAR) (Actual) | $110.25 | $109.46 | 0.7% | | Comparable Hotels ADR | $154.10 | $154.08 | 0.0% | | Comparable Hotels Occupancy | 72.1% | 72.1% | 0.0% | | Comparable Hotels RevPAR | $111.09 | $111.14 | 0.0% | | Distributions paid | $70,156 | $73,399 | (4.4%) | | Distributions paid per share | $0.29 | $0.32 | (9.4%) | | Cash and cash equivalents | $4,942 | | | | Total debt outstanding | $1,506,734 | | | | Total debt outstanding, net of cash and cash equivalents | $1,501,792 | | | | Total debt outstanding, net of cash and cash equivalents, to total capitalization | 27.4% | | | [CEO Commentary](index=2&type=section&id=CEO%20Commentary) CEO Justin Knight noted that Q1 2024 Comparable Hotels RevPAR was seasonally stable, despite challenging year-over-year comparisons. Preliminary April 2024 results show RevPAR growth above the full-year guidance range, driven by continued strength in leisure demand, recovery in corporate demand, and limited near-term supply growth. The company also highlighted a strategic acquisition and a resilient investment strategy - Comparable Hotels RevPAR remained seasonally stable in Q1 2024, consistent with industry trends, despite challenging YoY comparisons due to the Super Bowl and Easter holiday shift[3](index=3&type=chunk) - Preliminary results for April 2024 indicate Comparable Hotels RevPAR growth above the high end of the full-year guidance range, supported by growth in both weekday and weekend occupancies[3](index=3&type=chunk) - The company acquired the AC Hotel Washington DC Convention Center, which is expected to be meaningfully additive to the portfolio by increasing exposure to high-growth markets and driving incremental profitability[3](index=3&type=chunk) [Key Highlights](index=2&type=section&id=Key%20Highlights) The company achieved strong operating and bottom-line performance in Q1 2024, with stable comparable hotel metrics and increased Adjusted EBITDAre and MFFO. Strategic transactional activity included an acquisition and a disposition, with two more hotels under contract. The balance sheet remains strong, and the company continued its monthly distribution program - Strong operating performance: Comparable Hotels ADR, Occupancy, and RevPAR were **flat YoY in Q1 2024**, with occupancy and RevPAR exceeding industry averages. Preliminary April 2024 data shows approximately **80% occupancy** and growth in ADR[5](index=5&type=chunk) - Strong bottom-line performance: Adjusted EBITDAre increased by **6% to approximately $101 million**, and MFFO increased by **5% to approximately $83 million** for Q1 2024[5](index=5&type=chunk) - Transactional activity: Acquired AC Hotel by Marriott Washington DC Convention Center for **$116.8 million** and sold two hotels in Rogers, Arkansas, for **$33.5 million**. Two additional hotels are under contract for purchase for an anticipated **$177.5 million**[5](index=5&type=chunk) - Capital markets: Entered into an ATM Program to sell up to **$500 million of common shares**. No shares were sold in Q1 2024[6](index=6&type=chunk) - Balance sheet: Total debt to total capitalization, net of cash and cash equivalents, was approximately **27%** as of March 31, 2024[6](index=6&type=chunk) - Monthly distributions: Paid **$0.29 per common share** in Q1 2024, including a **$0.05 special cash distribution**. The current annualized regular monthly cash distribution of **$0.96 per common share** represents an annual yield of approximately **6.5%**[6](index=6&type=chunk) [Financial Performance](index=8&type=section&id=Financial%20Performance) The company's Q1 2024 financial performance showed increased total assets and debt, alongside significant growth in total revenue, operating income, and net income, partly due to a gain on real estate sale [Consolidated Balance Sheets](index=8&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2024, the company's total assets increased to $5.03 billion, primarily driven by an increase in investment in real estate. Total debt, net, also increased, while cash and cash equivalents decreased compared to December 31, 2023 | Asset/Liability/Equity | March 31, 2024 (unaudited, $ thousands) | December 31, 2023 ($ thousands) | | :----------------------------------------------------------------------------------------------------------------- | :-------------------------------------- | :------------------------------ | | Investment in real estate, net | $4,871,476 | $4,777,374 | | Assets held for sale | - | 15,283 | | Cash and cash equivalents | 4,942 | 10,287 | | Due from third-party managers, net | 63,048 | 36,437 | | Total Assets | $5,032,498 | $4,937,298 | | Debt, net | $1,500,698 | $1,371,494 | | Total Liabilities | 1,698,196 | 1,613,317 | | Common stock, issued and outstanding | 4,805,504 | 4,794,804 | | Total Shareholders' Equity | 3,334,302 | 3,323,981 | [Consolidated Statements of Operations and Comprehensive Income](index=9&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) For the three months ended March 31, 2024, total revenue increased by 5.8% year-over-year, driven by growth in room, food and beverage, and other revenues. Operating income saw a substantial 45.4% increase, and net income rose by 64.2%, partly due to a significant gain on the sale of real estate | Metric | Three Months Ended March 31, 2024 ($ thousands) | Three Months Ended March 31, 2023 ($ thousands) | | :----------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Room Revenue | $298,746 | $285,520 | | Food and beverage Revenue | $15,062 | $12,949 | | Other Revenue | $15,704 | $12,985 | | **Total revenue** | **$329,512** | **$311,454** | | Total hotel operating expense | $197,264 | $185,165 | | Property taxes, insurance and other | $20,992 | $19,675 | | General and administrative | $10,584 | $11,461 | | Depreciation and amortization | $46,823 | $45,906 | | **Total expense** | **$275,663** | **$262,207** | | Gain on sale of real estate | $17,766 | - | | **Operating income** | **$71,615** | **$49,247** | | Interest and other expense, net | $(17,309) | $(16,004) | | Income before income taxes | $54,306 | $33,243 | | Income tax expense | $(256) | $(320) | | **Net income** | **$54,050** | **$32,923** | | Basic and diluted net income per common share | $0.22 | $0.14 | | Weighted average common shares outstanding - basic and diluted | 242,408 | 229,398 | [Operational Performance](index=10&type=section&id=Operational%20Performance) The company's Q1 2024 operational performance showed stable comparable hotel metrics but a slight decline in Adjusted Hotel EBITDA, while same store hotels experienced a marginal decrease in RevPAR and a contraction in EBITDA margin [Comparable Hotels Operating Metrics](index=10&type=section&id=Comparable%20Hotels%20Operating%20Metrics) Comparable Hotels metrics for Q1 2024 showed stable RevPAR, ADR, and Occupancy year-over-year. While total revenue increased, Adjusted Hotel EBITDA for comparable hotels saw a slight decrease, indicating some margin pressure. Monthly data revealed fluctuations, with March 2024 showing a decline in RevPAR compared to the previous year Comparable Hotels Operating Metrics (Q1 2024 vs Q1 2023) | Metric | 2024 ($ thousands) | March 31, 2023 ($ thousands) | % Change 2023 | | :--------------------------------------- | :----------------- | :--------------------------- | :------------ | | Comparable Hotels Total Revenue | $331,580 | $326,688 | 1.5% | | Comparable Hotels Total Operating Expenses | $219,908 | $211,289 | 4.1% | | Comparable Hotels Adjusted Hotel EBITDA | $111,672 | $115,399 | (3.2%) | | Comparable Hotels Adjusted Hotel EBITDA Margin % | 33.7% | 35.3% | (160 bps) | | ADR (Comparable Hotels) | $154.10 | $154.08 | 0.0% | | Occupancy (Comparable Hotels) | 72.1% | 72.1% | 0.0% | | RevPAR (Comparable Hotels) | $111.09 | $111.14 | 0.0% | Comparable Hotels Monthly Performance (Q1 2024 vs Q1 2023) | Metric | January 2024 | February 2024 | March 2024 | Q1 2024 | January 2023 | February 2023 | March 2023 | Q1 2023 | % Change January 2023 | % Change February 2023 | % Change March 2023 | % Change Q1 2023 | | :----------------------------------- | :----------- | :------------ | :--------- | :------ | :----------- | :------------ | :--------- | :------ | :-------------------- | :--------------------- | :------------------ | :--------------- | | ADR (Comparable Hotels) | $144.42 | $154.71 | $161.58 | $154.10 | $141.32 | $156.48 | $162.35 | $154.08 | 2.2% | (1.1%) | (0.5%) | 0.0% | | Occupancy (Comparable Hotels) | 64.6% | 74.1% | 77.8% | 72.1% | 63.8% | 73.4% | 79.3% | 72.1% | 1.3% | 1.0% | (1.9%) | 0.0% | | RevPAR (Comparable Hotels) | $93.24 | $114.61 | $125.65 | $111.09 | $90.17 | $114.86 | $128.76 | $111.14 | 3.4% | (0.2%) | (2.4%) | 0.0% | | Comparable Hotels Adjusted Hotel EBITDA ($ thousands) | $24,001 | $37,284 | $50,387 | $111,672| $24,258 | $37,510 | $53,631 | $115,399| (1.1%) | (0.6%) | (6.0%) | (3.2%) | [Same Store Hotels Operating Metrics](index=12&type=section&id=Same%20Store%20Hotels%20Operating%20Metrics) Same Store Hotels, defined as 217 hotels owned since January 1, 2023, experienced a slight decline in RevPAR, ADR, and Occupancy in Q1 2024 compared to Q1 2023. Total revenue increased marginally, but Adjusted Hotel EBITDA decreased by 4.0%, and the margin contracted by 180 bps, indicating operational cost pressures Same Store Hotels Operating Metrics (Q1 2024 vs Q1 2023) | Metric | 2024 ($ thousands) | March 31, 2023 ($ thousands) | % Change 2023 | | :--------------------------------------- | :----------------- | :--------------------------- | :------------ | | Same Store Hotels Total Revenue | $310,620 | $306,902 | 1.2% | | Same Store Hotels Total Operating Expenses | 207,827 | 199,823 | 4.0% | | Same Store Hotels Adjusted Hotel EBITDA | $102,793 | $107,079 | (4.0%) | | Same Store Hotels Adjusted Hotel EBITDA Margin % | 33.1% | 34.9% | (180 bps) | | ADR (Same Store Hotels) | $151.86 | $152.31 | (0.3%) | | Occupancy (Same Store Hotels) | 71.9% | 72.0% | (0.1%) | | RevPAR (Same Store Hotels) | $109.23 | $109.73 | (0.5%) | Same Store Hotels Quarterly Performance (Q1 2023 to Q1 2024) | Metric | Q1 2023 ($ thousands) | Q2 2023 ($ thousands) | Q3 2023 ($ thousands) | Q4 2023 ($ thousands) | Q1 2024 ($ thousands) | | :--------------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Same Store Hotels Total Revenue | $306,902 | $355,920 | $351,343 | $300,565 | $310,620 | | Same Store Hotels Total Operating Expenses | 199,823 | 216,173 | 221,182 | 202,562 | 207,827 | | Same Store Hotels Adjusted Hotel EBITDA | $107,079 | $139,747 | $130,161 | $98,003 | $102,793 | | Same Store Hotels Adjusted Hotel EBITDA Margin % | 34.9% | 39.3% | 37.0% | 32.6% | 33.1% | | ADR (Same Store Hotels) | $152.31 | $160.79 | $159.36 | $149.56 | $151.86 | | Occupancy (Same Store Hotels) | 72.0% | 78.2% | 77.1% | 69.7% | 71.9% | | RevPAR (Same Store Hotels) | $109.73 | $125.69 | $122.88 | $104.19 | $109.23 | [Portfolio Activity & Capital Management](index=2&type=section&id=Portfolio%20Activity%20%26%20Capital%20Management) The company actively managed its hotel portfolio through acquisitions and dispositions, invested in capital improvements, maintained a strong balance sheet, engaged in capital markets activities, and continued shareholder distributions [Hotel Portfolio Overview](index=2&type=section&id=Hotel%20Portfolio%20Overview) As of March 31, 2024, Apple Hospitality REIT owned a diversified portfolio of 224 hotels, totaling 29,886 guest rooms across 87 markets in 37 states and the District of Columbia - The company owned **224 hotels** with **29,886 guest rooms** as of March 31, 2024[4](index=4&type=chunk) - The portfolio is diversified across **87 markets** in **37 states** and the District of Columbia[4](index=4&type=chunk) [Acquisitions and Dispositions](index=3&type=section&id=Acquisitions%20and%20Dispositions) In Q1 2024, Apple Hospitality acquired one hotel for $116.8 million and sold two hotels for $33.5 million, resulting in a $17.8 million gain on sale and deferring $15.1 million in taxable gains through a 1031 exchange. The company also has two additional hotels under contract for future acquisition - Acquired the 234-room AC Hotel by Marriott Washington DC Convention Center for approximately **$116.8 million** in March 2024[9](index=9&type=chunk) - Sold two hotels (Hampton Inn by Hilton and Homewood Suites by Hilton in Rogers, Arkansas) for a combined gross sales price of approximately **$33.5 million** in February 2024[12](index=12&type=chunk) - The sale resulted in a combined gain of approximately **$17.8 million**, with **$15.1 million** in taxable gains deferred through a 1031 exchange[12](index=12&type=chunk) - Two additional hotels are under contract for purchase: an Embassy Suites by Hilton in Madison, Wisconsin (**$79.3 million**, mid-2024 acquisition) and a Motto by Hilton in Nashville, Tennessee (**$98.2 million**, late 2025 acquisition)[10](index=10&type=chunk)[11](index=11&type=chunk) [Capital Improvements](index=4&type=section&id=Capital%20Improvements) The company invested approximately $20 million in capital expenditures during Q1 2024 and plans to invest $75 million to $85 million for the full year 2024, including comprehensive renovations for about 20 hotels - Invested approximately **$20 million** in capital expenditures during the three months ended March 31, 2024[13](index=13&type=chunk) - Anticipates investing approximately **$75 million to $85 million** in capital improvements during 2024, including comprehensive renovation projects for approximately **20 hotels**[13](index=13&type=chunk) [Balance Sheet and Liquidity](index=4&type=section&id=Balance%20Sheet%20and%20Liquidity) As of March 31, 2024, Apple Hospitality maintained a strong and flexible balance sheet with approximately $1.5 billion in total outstanding debt at a weighted-average interest rate of 4.6%. The company had $5 million cash on hand and $519 million available under its revolving credit facility, with a total debt to total capitalization of approximately 27% - Total outstanding debt was approximately **$1.5 billion** with a weighted-average interest rate of approximately **4.6%** as of March 31, 2024[14](index=14&type=chunk) - Cash on hand was approximately **$5 million**, and availability under its revolving credit facility was approximately **$519 million**[14](index=14&type=chunk) - Total debt to total capitalization, net of cash and cash equivalents, was approximately **27%**[14](index=14&type=chunk) - The company had **209 unencumbered hotels** in its portfolio[14](index=14&type=chunk) [Capital Markets Activity](index=4&type=section&id=Capital%20Markets%20Activity) The company has a Share Repurchase Program with $335 million remaining, though no shares were repurchased in Q1 2024. Additionally, an At-The-Market (ATM) Program was established in February 2024, allowing for the sale of up to $500 million in common shares, with no shares sold under this program in Q1 2024 - Approximately **$335 million** remained under the Share Repurchase Program as of March 31, 2024, with no shares repurchased in Q1 2024[15](index=15&type=chunk) - Entered into an ATM Program in February 2024, allowing for the sale of up to **$500 million of common shares**. No shares were sold under this program in Q1 2024[16](index=16&type=chunk) [Shareholder Distributions](index=5&type=section&id=Shareholder%20Distributions) During Q1 2024, the company paid total distributions of $0.29 per common share, including a $0.05 special cash distribution. The current annualized regular monthly cash distribution of $0.96 per common share represents an annual yield of approximately 6.5% - Paid total distributions of **$0.29 per common share** in Q1 2024, which included a special cash distribution of **$0.05 per common share**[17](index=17&type=chunk) - The current annualized regular monthly cash distribution of **$0.96 per common share** represents an annual yield of approximately **6.5%** based on the May 3, 2024 closing price[17](index=17&type=chunk) [2024 Outlook](index=5&type=section&id=2024%20Outlook) Apple Hospitality REIT updated its 2024 outlook, increasing the midpoint for Net Income, Adjusted EBITDAre, and Comparable Hotels Adjusted Hotel EBITDA Margin %, primarily driven by a strategic acquisition, while maintaining Comparable Hotels RevPAR Change guidance [Updated Guidance](index=5&type=section&id=Updated%20Guidance) Apple Hospitality REIT updated its 2024 outlook, increasing the midpoint for Net Income by $16 million, Adjusted EBITDAre by $9 million, and Comparable Hotels Adjusted Hotel EBITDA Margin % by 20 bps. Comparable Hotels RevPAR Change guidance was maintained. These increases are primarily driven by the acquisition of the AC Hotel Washington DC Convention Center - Net Income midpoint increased by **$16 million**, Adjusted EBITDAre by **$9 million**, and Comparable Hotels Adjusted Hotel EBITDA Margin % by **20 bps**[18](index=18&type=chunk) - Comparable Hotels RevPAR Change guidance was maintained[18](index=18&type=chunk) - The increases in outlook are primarily driven by the acquisition of the AC Hotel Washington DC Convention Center in March 2024[18](index=18&type=chunk) Updated 2024 Outlook Ranges | Metric | Low-End ($ millions) | High-End ($ millions) | | :------------------------------------------- | :------------------- | :-------------------- | | Net income | $207 | $233 | | Comparable Hotels RevPAR Change | 2.0% | 4.0% | | Comparable Hotels Adjusted Hotel EBITDA Margin % | 34.8% | 35.8% | | Adjusted EBITDAre | $461 | $483 | | Capital expenditures | $75 | $85 | [Non-GAAP Financial Measures Reconciliation](index=14&type=section&id=Non-GAAP%20Financial%20Measures%20Reconciliation) The company provides comprehensive reconciliations of GAAP net income to various non-GAAP financial measures, including EBITDA, EBITDAre, Adjusted EBITDAre, Adjusted Hotel EBITDA, FFO, and MFFO, to offer investors supplemental insights into operating performance and facilitate comparisons [EBITDA, EBITDAre, Adjusted EBITDAre, and Adjusted Hotel EBITDA Reconciliation](index=14&type=section&id=EBITDA%2C%20EBITDAre%2C%20Adjusted%20EBITDAre%2C%20and%20Adjusted%20Hotel%20EBITDA%20Reconciliation) The company provides reconciliations for EBITDA, EBITDAre, Adjusted EBITDAre, and Adjusted Hotel EBITDA, emphasizing their utility for investors in evaluating operating performance by adjusting for capital structure, asset base, and non-cash expenses. Adjusted Hotel EBITDA specifically isolates property-level operational performance - EBITDA is used to evaluate ongoing operating performance by removing the impact of capital structure and asset base[44](index=44&type=chunk) - EBITDAre, defined by Nareit, further adjusts EBITDA for gains/losses from real estate sales, impairments, and unconsolidated affiliates[45](index=45&type=chunk) - Adjusted EBITDAre excludes non-cash straight-line operating ground lease expense[45](index=45&type=chunk) - Adjusted Hotel EBITDA further excludes corporate-level general and administrative expense and Adjusted EBITDAre from non-hotel property to focus on property-level operational performance[46](index=46&type=chunk) Reconciliation of Net Income to EBITDA, EBITDAre, Adjusted EBITDAre and Adjusted Hotel EBITDA (Q1 2024) | Metric | Q1 2024 ($ thousands) | | :---------------------------------------------- | :-------------------- | | Net income | $54,050 | | Depreciation and amortization | 46,823 | | Amortization of favorable and unfavorable operating leases, net | 102 | | Interest and other expense, net | 17,309 | | Income tax expense | 256 | | **EBITDA** | **118,540** | | Gain on sale of real estate | (17,766) | | **EBITDAre** | **100,774** | | Non-cash straight-line operating ground lease expense | 36 | | **Adjusted EBITDAre** | **100,810** | | General and administrative expense | 10,584 | | Adjusted EBITDAre from non-hotel property | (1,601) | | **Adjusted Hotel EBITDA** | **$109,793** | [FFO and MFFO Reconciliation](index=15&type=section&id=FFO%20and%20MFFO%20Reconciliation) The company reconciles net income to Funds from Operations (FFO) and Modified FFO (MFFO), which are key supplemental measures for real estate companies. FFO adjusts for real estate-related depreciation, amortization, and gains/losses on sales, while MFFO further refines FFO by excluding certain non-cash lease expenses to better reflect ongoing operating performance - FFO, as defined by Nareit, is considered helpful in evaluating a real estate company's operations by excluding certain non-cash items like depreciation and gains/losses from real estate sales[48](index=48&type=chunk) - MFFO further adjusts FFO by excluding amortization of finance ground lease assets, amortization of favorable and unfavorable operating leases, net, and non-cash straight-line operating ground lease expense to provide a clearer view of underlying hotel performance[49](index=49&type=chunk) Reconciliation of Net Income to FFO and MFFO (Q1 2024 vs Q1 2023) | Metric | March 2024 ($ thousands) | 31, 2023 ($ thousands) | | :---------------------------------------------- | :----------------------- | :--------------------- | | Net income | $54,050 | $32,923 | | Depreciation of real estate owned | 46,059 | 45,142 | | Gain on sale of real estate | (17,766) | - | | **Funds from operations** | **82,343** | **78,065** | | Amortization of finance ground lease assets | 759 | 759 | | Amortization of favorable and unfavorable operating leases, net | 102 | 97 | | Non-cash straight-line operating ground lease expense | 36 | 38 | | **Modified funds from operations** | **$83,240** | **$78,959** | [2024 Guidance Reconciliation of Non-GAAP Measures](index=16&type=section&id=2024%20Guidance%20Reconciliation%20of%20Non-GAAP%20Measures) The company provided a reconciliation of its 2024 GAAP net income guidance to various non-GAAP measures, including EBITDA, EBITDAre, Adjusted EBITDAre, Adjusted Hotel EBITDA, and Comparable Hotels Adjusted Hotel EBITDA. This reconciliation helps investors understand the components of the forward-looking financial targets 2024 Guidance Reconciliation (Low-End to High-End) | Metric | Low-End ($ thousands) | High-End ($ thousands) | | :---------------------------------------------- | :-------------------- | :--------------------- | | Net income | $206,544 | $232,944 | | Depreciation and amortization | 190,000 | 187,000 | | Amortization of favorable and unfavorable leases, net | 408 | 408 | | Interest and other expense, net | 81,000 | 79,000 | | Income tax expense | 700 | 1,100 | | **EBITDA** | **$478,652** | **$500,452** | | (Gain) loss on sale of real estate | (17,766) | (17,766) | | **EBITDAre** | **$460,886** | **$482,686** | | Non-cash straight-line operating ground lease expense | 135 | 135 | | **Adjusted EBITDAre** | **$461,021** | **$482,821** | | General and administrative expense | 37,500 | 42,500 | | AEBITDAre from non-hotel property | (1,500) | (3,500) | | **Adjusted Hotel EBITDA** | **$497,021** | **$521,821** | | AHEBITDA from acquisitions prior to ownership | 1,882 | 1,882 | | AHEBITDA from dispositions | (3) | (3) | | **Comparable Hotels Adjusted Hotel EBITDA** | **$498,900** | **$523,700** | [Debt Summary](index=17&type=section&id=Debt%20Summary) As of March 31, 2024, Apple Hospitality REIT had total debt outstanding of approximately $1.507 billion, with a weighted-average debt maturity of 3.4 years. The debt portfolio is comprised of both variable-rate and fixed-rate debt, with varying maturities and average interest rates Debt Maturities and Average Interest Rates (as of March 31, 2024) | Maturity Period | Total Debt ($ thousands) | Average Interest Rate | | :----------------------- | :----------------------- | :-------------------- | | April 1 - December 31, 2024 | $111,329 | 4.8% | | 2025 | $295,140 | 5.1% | | 2026 | $205,649 | 5.4% | | 2027 | $278,602 | 5.3% | | 2028 | $334,066 | 4.7% | | Thereafter | $281,948 | 3.9% | | **Total Debt** | **$1,506,734** | | | **Variable-rate debt total** | **$1,101,000** | | | **Fixed-rate debt total** | **$405,734** | | - The company's weighted-average debt maturities were **3.4 years** as of March 31, 2024[14](index=14&type=chunk) [Detailed Operating Metrics by Segment](index=18&type=section&id=Detailed%20Operating%20Metrics%20by%20Segment) The company's Q1 2024 operating metrics varied across markets, regions, chain scales, and locations, with top markets and the South Atlantic region being significant Adjusted Hotel EBITDA contributors, and performance fluctuations observed across different segments [By Market](index=18&type=section&id=By%20Market) The top 20 markets contributed 64.9% of Comparable Hotels Adjusted Hotel EBITDA in Q1 2024, with Phoenix, AZ, being the largest contributor at 11.6%. Performance varied across markets, with some experiencing RevPAR declines (e.g., Phoenix, Fort Worth/Arlington) and others showing strong growth (e.g., Washington, DC, Las Vegas, Alaska) Comparable Hotels Operating Metrics for Top 20 Markets (Q1 2024) | Market | of Hotels | Occupancy Q1 2024 | % Change | ADR Q1 2024 | % Change | RevPAR Q1 2024 | % Change | % of Adjusted Hotel EBITDA Q1 2024 | | :--------------------- | :---------- | :---------------- | :------- | :---------- | :------- | :------------- | :------- | :--------------------------------- | | Phoenix, AZ | 10 | 88.1% | (1.7%) | $206.66 | (7.0%) | $181.99 | (8.5%) | 11.6% | | San Diego, CA | 7 | 74.2% | 0.1% | $177.69 | 2.4% | $131.83 | 2.5% | 5.1% | | Los Angeles, CA | 8 | 79.9% | (0.4%) | $176.86 | (0.7%) | $141.24 | (1.2%) | 4.9% | | Washington, DC | 5 | 73.3% | 5.3% | $174.96 | 5.9% | $128.28 | 11.5% | 3.2% | | Las Vegas, NV | 1 | 76.1% | 4.4% | $238.08 | 9.6% | $181.16 | 14.5% | 2.4% | | Alaska | 2 | 88.1% | 12.7% | $198.18 | 8.3% | $174.65 | 22.1% | 1.8% | | **Top 20 Markets Total** | **91** | **78.6%** | **0.4%** | **$173.47** | **0.6%** | **$136.33** | **0.9%** | **64.9%** | | **All Other Markets** | **133** | **66.9%** | **(0.4%)**| **$136.00** | **(0.8%)**| **$91.02** | **(1.2%)**| **35.1%** | [By Region](index=19&type=section&id=By%20Region) In Q1 2024, the South Atlantic region contributed the largest share of Adjusted Hotel EBITDA at 26.9%, followed by the Mountain region at 21.1% and Pacific at 20.6%. Performance varied by region, with New England showing strong occupancy growth (13.0%) and Alaska (within Pacific region) showing significant RevPAR growth Comparable Hotels Operating Metrics by STR Region (Q1 2024) | STR Region | of Hotels | Occupancy Q1 2024 | % Change | ADR Q1 2024 | % Change | RevPAR Q1 2024 | % Change | % of Adjusted Hotel EBITDA Q1 2024 | | :----------------- | :---------- | :---------------- | :------- | :---------- | :------- | :------------- | :------- | :--------------------------------- | | East North Central | 16 | 57.0% | (0.2%) | $127.57 | 0.3% | $72.71 | 0.1% | 1.9% | | East South Central | 27 | 74.2% | (0.9%) | $141.20 | 0.0% | $104.71 | (1.0%) | 9.8% | | Middle Atlantic | 12 | 64.1% | (1.8%) | $138.60 | 3.1% | $88.85 | 1.3% | 2.9% | | Mountain | 25 | 79.5% | (1.1%) | $179.58 | (2.4%) | $142.71 | (3.5%) | 21.1% | | New England | 6 | 62.4% | 13.0% | $132.62 | (7.8%) | $82.72 | 4.2% | 1.1% | | Pacific | 33 | 76.5% | 2.0% | $173.02 | 0.5% | $132.31 | 2.5% | 20.6% | | South Atlantic | 54 | 75.2% | (0.8%) | $160.16 | 1.0% | $120.39 | 0.1% | 26.9% | | West North Central | 17 | 59.8% | (4.8%) | $130.74 | 2.5% | $78.14 | (2.4%) | 3.0% | | West South Central | 34 | 73.9% | 1.4% | $136.11 | (0.4%) | $100.52 | 0.9% | 12.7% | | **Total Portfolio**| **224** | **72.1%** | **0.0%** | **$154.10** | **0.0%** | **$111.09** | **0.0%** | **100.0%** | [By Chain Scale](index=20&type=section&id=By%20Chain%20Scale) Upscale hotels accounted for the largest portion of Adjusted Hotel EBITDA (70.7%) in Q1 2024, with Courtyard, Hilton Garden Inn, and Residence Inn being significant contributors. Upper Midscale and Upper Upscale segments contributed 24.7% and 4.6% respectively. Performance varied by brand, with some showing strong RevPAR growth (e.g., Aloft, SpringHill Suites, Marriott) and others experiencing declines (e.g., Hyatt House, Hilton Garden Inn) Comparable Hotels Operating Metrics by Chain Scale/Brand (Q1 2024) | Chain Scale/Brand | of Hotels | Occupancy Q1 2024 | % Change | ADR Q1 2024 | % Change | RevPAR Q1 2024 | % Change | % of Adjusted Hotel EBITDA Q1 2024 | | :---------------- | :---------- | :---------------- | :------- | :---------- | :------- | :------------- | :------- | :--------------------------------- | | **Upscale Total** | **154** | **72.0%** | **(0.1%)**| **$155.10** | **0.4%** | **$111.72** | **0.4%** | **70.7%** | | AC Hotels | 4 | 70.2% | 4.2% | $192.18 | 3.3% | $134.86 | 7.5% | 3.2% | | Courtyard | 35 | 68.3% | 0.0% | $154.96 | 1.6% | $105.88 | 1.7% | 16.8% | | Hilton Garden Inn | 40 | 67.8% | (2.2%) | $144.10 | (2.0%) | $97.63 | (4.3%) | 14.3% | | Residence Inn | 30 | 74.8% | 1.6% | $160.15 | 0.9% | $119.75 | 2.6% | 14.6% | | SpringHill Suites | 10 | 73.5% | 1.9% | $161.34 | 3.1% | $118.57 | 5.1% | 6.1% | | **Upper Midscale Total** | **65** | **72.0%** | **(0.6%)**| **$147.24** | **(1.5%)**| **$106.02** | **(2.1%)**| **24.7%** | | Hampton | 36 | 69.8% | 0.0% | $153.74 | (2.5%) | $107.29 | (2.5%) | 13.8% | | **Upper Upscale Total** | **5** | **73.8%** | **3.9%** | **$184.37** | **1.5%** | **$136.12** | **5.6%** | **4.6%** | | Marriott | 2 | 67.9% | 11.1% | $172.00 | 1.2% | $116.84 | 12.6% | 2.0% | [By Location](index=21&type=section&id=By%20Location) Suburban locations generated the largest share of Adjusted Hotel EBITDA (46.2%) in Q1 2024, followed by Urban (30.2%) and Airport (9.1%). Interstate locations showed the highest RevPAR growth (10.2%), while Airport and Resort locations experienced slight RevPAR declines Comparable Hotels Operating Metrics by STR Location (Q1 2024) | STR Location | of Hotels | Occupancy Q1 2024 | % Change | ADR Q1 2024 | % Change | RevPAR Q1 2024 | % Change | % of Adjusted Hotel EBITDA Q1 2024 | | :--------------- | :---------- | :---------------- | :------- | :---------- | :------- | :------------- | :------- | :--------------------------------- | | Airport | 18 | 80.1% | (2.0%) | $153.20 | (1.1%) | $122.71 | (3.0%) | 9.1% | | Interstate | 4 | 68.9% | 5.7% | $119.64 | 4.3% | $82.39 | 10.2% | 1.0% | | Resort | 11 | 75.2% | (2.5%) | $179.43 | 1.0% | $134.95 | (1.5%) | 7.4% | | Small Metro/Town | 9 | 84.6% | 3.3% | $166.40 | (3.3%) | $140.80 | (0.1%) | 6.1% | | Suburban | 128 | 71.0% | (1.0%) | $146.95 | 0.8% | $104.35 | (0.2%) | 46.2% | | Urban | 54 | 70.0% | 2.2% | $163.21 | (1.1%) | $114.24 | 1.0% | 30.2% | | **Total Portfolio**| **224** | **72.1%** | **0.0%** | **$154.10** | **0.0%** | **$111.09** | **0.0%** | **100.0%** | [Company Information & Disclaimers](index=5&type=section&id=Company%20Information%20%26%20Disclaimers) This section provides essential company information, including details on the Q1 2024 earnings call, an overview of Apple Hospitality REIT, explanations of non-GAAP financial measures, forward-looking statement disclaimers, and contact information [Earnings Conference Call](index=5&type=section&id=Earnings%20Conference%20Call) Apple Hospitality REIT hosted a conference call on May 7, 2024, to discuss its Q1 2024 earnings. Details for accessing the live call and replay were provided - The company hosted a quarterly conference call on Tuesday, May 7, 2024, at 10 a.m. Eastern Time[20](index=20&type=chunk) - Access to the call was available by telephone and live webcast, with a replay available until May 21, 2024[20](index=20&type=chunk)[21](index=21&type=chunk) [About Apple Hospitality REIT, Inc.](index=6&type=section&id=About%20Apple%20Hospitality%20REIT%2C%20Inc.) Apple Hospitality REIT, Inc. is a publicly traded real estate investment trust (REIT) that owns one of the largest and most diverse portfolios of upscale, rooms-focused hotels in the United States, primarily under Marriott, Hilton, and Hyatt brands - Apple Hospitality REIT, Inc. (NYSE: APLE) is a publicly traded REIT[22](index=22&type=chunk) - The company owns one of the largest and most diverse portfolios of upscale, rooms-focused hotels in the U.S., consisting of **224 hotels** with approximately **29,900 guest rooms**[22](index=22&type=chunk) - The portfolio is concentrated with industry-leading brands: **101 Marriott-branded**, **118 Hilton-branded**, and **five Hyatt-branded hotels**[22](index=22&type=chunk) [Non-GAAP Financial Measures Explanation](index=6&type=section&id=Non-GAAP%20Financial%20Measures%20Explanation) The company utilizes several non-GAAP financial measures, including FFO, MFFO, EBITDA, EBITDAre, Adjusted EBITDAre, Adjusted Hotel EBITDA, Comparable Hotels Adjusted Hotel EBITDA, and Same Store Hotels Adjusted Hotel EBITDA, to provide investors with supplemental insights into its operating performance. These measures are presented as alternatives to GAAP measures and are useful for period-over-period and peer comparisons - The company uses non-GAAP financial measures such as FFO, MFFO, EBITDA, EBITDAre, Adjusted EBITDAre, Adjusted Hotel EBITDA, Comparable Hotels Adjusted Hotel EBITDA, and Same Store Hotels Adjusted Hotel EBITDA[23](index=23&type=chunk) - These measures are considered useful supplemental indicators of operating performance for investors, aiding in comparisons between periods and with other REITs[23](index=23&type=chunk) - Reconciliations of these non-GAAP measures to net income (loss) are provided in the report[23](index=23&type=chunk) [Forward-Looking Statements Disclaimer](index=6&type=section&id=Forward-Looking%20Statements%20Disclaimer) The report contains forward-looking statements subject to known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from expectations. These factors include economic conditions, travel disruptions, real estate market changes, financing risks, and regulatory impacts. The company disclaims any obligation to update these statements - The press release contains forward-looking statements identified by terms like "may," "believe," "expect," and "anticipate"[24](index=24&type=chunk) - Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from those expressed or implied[24](index=24&type=chunk) - Key risk factors include the ability to acquire/dispose of properties, economic conditions (inflation/recession), reduced travel, adverse changes in real estate markets, financing risks, and regulatory changes[25](index=25&type=chunk)[26](index=26&type=chunk) - The company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law[26](index=26&type=chunk) [Contact Information](index=7&type=section&id=Contact%20Information) Contact details for investor relations are provided for inquiries regarding Apple Hospitality REIT, Inc - Contact: Kelly Clarke, Vice President, Investor Relations, at **804-727-6321** or kclarke@applereit.com[27](index=27&type=chunk)

RICHMOND, Va.--(BUSINESS WIRE)--Apple Hospitality REIT, Inc. (NYSE: APLE) (the “Company” or “Apple Hospitality”) today announced that its Board of Directors declared a regular monthly cash distribution of $0.08 per common share. The distribution is payable on April 15, 2024, to shareholders of record as of March 28, 2024. Based on the Company’s common stock closing price of $16.18 on March 15, 2024, the annualized distribution of $0.96 per common share represents an annual yield of approximately 5.9%. In ...

Core Insights - The hospitality real estate market is recovering as global travel and tourism rebound, with hotel REITs, particularly Apple Hospitality, performing well [1][2] - Apple Hospitality REIT has a significant portfolio of upscale hotels and has shown steady growth and value to shareholders [4][5] Group 1: Company Overview - Apple Hospitality REIT, Inc. is a leading publicly traded hotel REIT with over 220 hotels and nearly 30,000 guest rooms across 37 states [2][4] - The portfolio includes 99 Marriotts, 119 Hiltons, and five Hyatt hotels, emphasizing a broad consumer appeal and high ESG standards [4] Group 2: Financial Performance - In Q4 2023, Apple Hospitality reported a 2% increase in revenue per available room and a total revenue of $315 million, marking a 3% increase from the previous year [6] - For the entirety of 2023, total revenue reached $1.4 billion, reflecting a 7% increase compared to the previous year [6] Group 3: Expansion Strategy - The company plans to continue expanding, having recently re-entered the Las Vegas market by acquiring a 299-room hotel for approximately $75 million [7] - The CEO highlighted the limited competition in Las Vegas, suggesting a strategic advantage for future growth [7] Group 4: Market Outlook - The hospitality sector is expected to grow, with Apple Hospitality estimating a 2% to 4% increase in revenue from rooms in 2024 and an EBITDA margin between 34.6% and 35.6% [8] - The company aims to pursue opportunistic acquisitions, benefiting from favorable prices due to limited financing options for many hotel operators [8] Group 5: Dividend Information - Apple Hospitality REIT offers a regular monthly dividend payment, with a dividend yield of 5.69% as of March 2024 [9]

Financial Data and Key Metrics Changes - Comparable Hotels total revenue was $315 million for Q4 2023 and $1.4 billion for the full year, representing increases of 3% and 7% compared to the same periods in 2022 [19] - Comparable Hotels' RevPAR grew by 2% for Q4 and 7% for the full year, reaching $105 and $116 respectively [19] - Comparable Hotels' adjusted hotel EBITDA was $104 million for the quarter and $500 million for the year, down 2% and up 5% compared to the same periods of 2022 [23] Business Line Data and Key Metrics Changes - Comparable Hotels' ADR increased by nearly 3% for Q4 and 5% for the full year, reaching $151 and $157 respectively [19] - Comparable Hotels' occupancy was essentially flat for Q4 and up approximately 2% for the full year compared to 2022 [19][20] - Adjusted hotel EBITDA margin was 32.9% for Q4 and 36.4% for the full year, down 160 basis points and 90 basis points respectively compared to the same periods of 2022 [23] Market Data and Key Metrics Changes - January 2024 saw a Comparable Hotels' occupancy increase of just over 1% year-over-year, with ADR growing over 2% [8] - The company noted favorable travel trends with limited near-term supply growth, which is expected to support revenue growth [8] Company Strategy and Development Direction - The company plans to continue acquiring high-quality branded, rooms-focused hotels in urban and high-density suburban markets [14] - In 2023, the company acquired six hotels for approximately $290 million, enhancing its presence in business-friendly markets [11] - The company aims to maintain financial flexibility with low leverage while pursuing additional accretive opportunities [6][14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the trajectory of the industry and the company's portfolio, citing strong leisure demand and improvements in business travel [18] - The company anticipates continued strength in demand with limited new supply, which is expected to positively impact overall performance [17] - For 2024, the company expects net income to be between $191 million and $217 million, with RevPAR growth projected between 2% and 4% [27] Other Important Information - The company sold approximately 12.8 million shares under its ATM program, receiving net proceeds of approximately $216 million, which were used to fund acquisitions [10][25] - The company invested approximately $77 million in capital expenditures over the past year and plans to spend between $75 million and $85 million in 2024 [17] Q&A Session Summary Question: Can you remind us of your math on equity issuance and targeted returns for acquisitions? - Management stated they are mindful of the spread and only issue equity when confident it will drive incremental value for shareholders [32] Question: What needs to happen to achieve the high end of RevPAR guidance? - Management indicated that continued recovery in business travel and stable leisure demand are necessary to reach the high end of guidance [37] Question: How much pricing power does the company have today? - Management confirmed that pricing power is closely tied to occupancy, with opportunities primarily in midweek business travel [40] Question: What is the impact of property tax and insurance increases? - Management acknowledged that they have assumed higher growth rates for property taxes and insurance in their guidance for 2024 [81] Question: What is the rationale for entering the Vegas market? - Management highlighted the unique demand for non-casino hotel rooms in Vegas and the potential for development on acquired land [74]

For the quarter ended December 2023, Apple Hospitality REIT (APLE) reported revenue of $312.46 million, up 4.5% over the same period last year. EPS came in at $0.31, compared to $0.01 in the year-ago quarter.The reported revenue compares to the Zacks Consensus Estimate of $304.17 million, representing a surprise of +2.72%. The company has not delivered EPS surprise, with the consensus EPS estimate being $0.31.While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- ...

Financial Performance - The Company's ADR for the year ended December 31, 2023, was $156.55, a 4.6% increase from $149.62 in 2022[17] - Comparable Hotels RevPAR rose by approximately 7.0% to $116.23 for the year ended December 31, 2023, compared to $108.67 in 2022[17] - Hotel occupancy increased to 74.2% in 2023, up from 72.6% in 2022, representing a 2.2% improvement[17] - The annualized distribution rate was $0.96 per common share as of December 31, 2023, with a combined distribution of $0.13 per common share approved for January 2024[39] Acquisitions and Investments - The Company acquired six hotels and one parking garage in 2023 for a total purchase price of approximately $289.8 million[20] - As of December 31, 2023, the Company had contracts for the potential purchase of two hotels for a combined price of approximately $177.5 million[21] - The Company plans to invest approximately $75 million to $85 million in capital improvements during 2024, including renovations for about 20 properties[31] Debt and Financing - The Company's total outstanding debt as of December 31, 2023, was approximately $1.4 billion, with a weighted average interest rate of about 4.26%[33] - The unused borrowing capacity under the Revolving Credit Facility was $650 million as of December 31, 2023[34] - The Company sold approximately 12.8 million shares under its ATM Program at a weighted-average market sales price of approximately $17.05 per share, generating gross proceeds of approximately $218.6 million in 2023[37] - The Company has approximately $335.4 million remaining available for share repurchases under its program as of December 31, 2023[24] Property Dispositions - The Company did not dispose of any properties in 2023 but has a contract to sell two hotels for approximately $33.5 million in February 2024[22] - The Company may struggle to complete hotel dispositions due to market conditions and property-specific factors, limiting portfolio flexibility[72] Operational Risks - The company operates substantially all of its hotels under Marriott or Hilton brands, which subjects it to risks associated with brand concentration[60] - The company faces various risks including over-building of hotels, competition, and economic downturns that could adversely affect occupancy rates and revenue[55] - Operating expenses are relatively fixed, meaning that during economic downturns, the company may struggle to reduce costs while revenues decline[56] - The company is dependent on third-party hotel managers for operations, which limits its control over hotel management and could impact financial performance if managers do not perform effectively[63] Economic and Market Conditions - Economic conditions in the U.S. and local markets can adversely affect the company's financial performance and operating results[54] - The hotel industry is highly cyclical and sensitive to government and consumer spending, which can lead to fluctuations in demand and revenue[55] - Competition from alternative lodging options and increased hotel supply in local markets could negatively affect occupancy and revenue per available room (RevPAR)[62] Cost and Profitability Challenges - Inflation and rising operating costs, including labor and energy expenses, may not be offset by increases in room rates, affecting profitability[53] - Labor shortages and rising labor costs could significantly increase operating costs and decrease revenues, potentially affecting hotel capacity[65] - Ongoing renovations and capital improvements are necessary but may reduce profitability due to increased costs and potential disruptions[68] Environmental and Regulatory Risks - The Company is committed to enhancing sustainability practices, including energy and water management, across its hotel portfolio[42] - The Company is subject to various environmental laws that could impose significant cleanup costs and liabilities, affecting profitability and property values[91] - Compliance with environmental, health, and safety regulations incurs costs and could result in fines for non-compliance, impacting financial performance[92] - The Company faces risks related to government regulations and potential litigation concerning environmental matters, which could materially affect its financial condition[90] REIT Compliance and Taxation - The Company's ability to maintain its REIT status is contingent on compliance with complex regulations, and any failure could have adverse consequences for shareholders[106] - The Company must distribute at least 90% of its REIT taxable income annually to avoid U.S. federal corporate income tax on distributed earnings[112] - If the Company fails to qualify as a REIT, it could face substantial additional tax liabilities, adversely affecting net earnings and cash available for distribution[108] Interest Rate and Financial Management - The Company is exposed to interest rate risk due to possible changes in short-term interest rates[232] - Every 100 basis points change in interest rates will impact the Company's annual net income by approximately $1.5 million, all other factors remaining the same[232] - The Company had 14 interest rate swap agreements that effectively fix interest payments on approximately $820.0 million of its variable-rate debt[233] - The average interest rate for variable-rate debt was 5.2% as of December 31, 2023[235] Cybersecurity and Operational Resilience - Cybersecurity risks pose a threat to the Company's operations, potentially leading to system disruptions and liability claims[86] - The Company maintains comprehensive insurance coverage for various risks, but potential uninsured losses could adversely affect its financial condition[87] - Climate change poses risks including severe weather events that could impact hotel demand and operational capabilities, potentially leading to increased costs for insurance and renovations[88]