Apple Hospitality REIT(APLE) - 2021 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a significant recovery in full-year operating results, with comparable total revenue up more than 62% relative to 2020 [10] - Adjusted EBITDA for 2021 was $279 million, with modified funds from operations (MFFO) at $211 million or $0.93 per share [10][26] - For Q4 2021, adjusted hotel EBITDA was approximately $85 million, with a comparable adjusted hotel EBITDA margin of approximately 34% [25][26] Business Line Data and Key Metrics Changes - Average Daily Rate (ADR) for Q4 was over $131, nearly equal to the same period in 2019, while occupancy was 68%, down just over 5 percentage points [18] - RevPAR for Q4 was $88, down less than 8% compared to the same period in 2019 [18] - Weekend occupancy remained strong, with October and November weekend occupancies at 85% and 80% respectively, while December weekend occupancy was 67%, in line with 2019 [20] Market Data and Key Metrics Changes - Demand for suburban hotels outpaced urban hotels, with occupancy at 69% compared to 62% for comparable urban hotels [23] - 38% of hotels had RevPAR for the quarter exceeding the same period in 2019, indicating strong performance in certain markets [22] - The company noted that new supply has declined significantly, with projects under construction near all-time lows [16] Company Strategy and Development Direction - The company is focused on strategic acquisitions and dispositions to optimize its portfolio, having acquired 12 hotels for approximately $473 million and sold 24 hotels for approximately $245 million since the pandemic began [11] - The company plans to invest an additional $55 million to $65 million in capital improvements in 2022, including major renovations at 20 to 25 hotels [12] - The strategy emphasizes maintaining a diversified portfolio of high-quality, select-service hotels with low leverage [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strong leisure demand and increasing business travel as COVID-19 cases decline and restrictions ease [9][15] - The company anticipates that total demand for its portfolio will exceed pre-pandemic levels as business transient travel returns [15] - Management highlighted the importance of market diversification and the benefits of operating in markets with favorable conditions for both leisure and business travel [16] Other Important Information - The company reinstated monthly dividends for shareholders, with a March payment of $0.05 per share, representing a 3.4% yield on the closing share price [15][30] - Total outstanding debt as of December 31, 2021, was $1.4 billion, with a weighted average interest rate of 3.4% [27][28] Q&A Session Summary Question: Can you discuss the transaction environment and pricing expectations? - Management noted that the transaction environment remains competitive, with pricing for most assets at or above 2019 levels, and they are focused on markets with anticipated outsized growth [34][36] Question: How is the demand from corporate accounts evolving? - Management indicated that negotiated business bookings are increasing, with improvements in both local and corporate negotiated business despite the impact of Omicron [41] Question: What factors contributed to the dividend reinstatement decision? - The decision was based on the portfolio's performance during the pandemic and confidence in the recovery, with a payout ratio of approximately 65% relative to MFFO [46] Question: What are the current trends in occupancy and ADR? - Management reported that occupancy levels have increased in February, with strong booking trends and expectations for continued rate growth in March and April [48][49] Question: How is the labor and hiring environment affecting operations? - The company is operating at approximately 70% to 75% of full-time employees relative to 2019, with plans to adjust staffing levels as occupancy grows [59][60] Question: What is the outlook for new supply and replacement costs? - Management highlighted a significant pullback in new construction starts, which is expected to create a multi-year window with below-average supply in most markets [65][66]