Summit Hotel Properties(INN) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Second quarter pro forma RevPAR increased approximately 54% from the second quarter of last year, driven by a 12.5% increase in occupancy and a 37% increase in ADR [6] - Hotel EBITDA recapture in the portfolio was 89% of 2019 second quarter results, with pro forma gross operating profit margins reaching just under 48%, representing 125 basis points of margin expansion over June of last year [7][11] - Pro forma hotel EBITDA for the second quarter was $70.7 million, a 94% increase from the second quarter of 2021, resulting in a 38% margin, the highest quarterly hotel EBITDA margin during the pandemic era [31] Business Line Data and Key Metrics Changes - The urban portfolio produced a second quarter RevPAR of $125, the highest quarterly RevPAR since the onset of the pandemic, surpassing first quarter 2022 urban RevPAR by approximately $34 or 38% [23] - Non-urban hotels achieved a second quarter RevPAR of $119, an increase of over 13% relative to first quarter 2022 and a 33% increase compared to the second quarter of 2021 [25] - The group segment's recovery was notable, with group room night contribution reaching 15% of the total portfolio mix, essentially flat to pre-pandemic levels [10] Market Data and Key Metrics Changes - Weekday pro forma RevPAR increased 26% from the first quarter and 67% from the same period last year, with weekday occupancy exceeding 71% for the quarter [9] - September RevPAR is pacing 14% ahead of August in the pro forma portfolio, positioning the company to achieve recapture rates to 2019 that are in line or potentially above the highest experienced in June [13] - Booking windows expanded, with same-day bookings declining from 19% to 15% of total bookings, indicating a return to pre-pandemic norms [27] Company Strategy and Development Direction - The company reinstated a quarterly common dividend of $0.04 per share, reflecting confidence in the cash flow profile and business outlook [14] - The company remains bullish on the long-term outlook for the NewcrestImage portfolio, expecting to realize benefits from recently implemented asset and revenue management strategies [19] - The company is focused on thoughtful transactions and executing its operating plan to enhance earnings and share price over time [50] Management's Comments on Operating Environment and Future Outlook - Management noted that the consumer remains healthy, with no signs of softness in leisure travel demand despite inflation concerns [102] - The company is optimistic about the recovery in urban markets, particularly as business transient travel continues to improve [47] - Management expects stabilization in the Newcrest portfolio to occur in 2023 or 2024, with benefits starting to show in the fall [75] Other Important Information - The company invested approximately $15 million in its portfolio during the second quarter, with expectations to spend $60 million to $80 million on a consolidated basis for the full year [33] - The overall liquidity position remains robust at more than $480 million, with ample liquidity to repay all maturing debt through 2024 [34] - The company has entered into two $100 million interest rate swap agreements to manage interest rate risk, extending the average duration of its swap portfolio [35] Q&A Session Summary Question: Insights on ADR for business travelers - Management indicated that historically, their portfolio has run higher rates than negotiated channels, and as business travel returns, there is significant upside potential for ADR [42][44] Question: Stock performance and catalysts for growth - Management expressed frustration with stock performance, noting that it does not reflect the quality of the portfolio and the transactions completed since the pandemic [46][48] Question: Urban vs. resort market performance - Management acknowledged that while leisure travel remains strong, there has been a shift of some leisure travel to urban markets, particularly those with leisure attractions [56] Question: Recent investment performance and future expectations - Management stated that recent acquisitions are trending ahead of underwriting, with expectations for stabilization in 2023 and 2024 [66][75] Question: Changes in buyer-seller expectations in the current market - Management noted that asset prices have trended lower, but there remains a deep buyer pool for high-quality assets, and they are open to evaluating seller financing if it makes sense [78][79]