Summit Hotel Properties(US:INN)2019-11-06 20:51Financial Data and Key Metrics Changes - The company reported pro forma RevPAR growth of 0.2% for Q3 2019, driven by a 1% increase in occupancy, partially offset by a 0.8% decrease in rate [7] - Year-to-date RevPAR growth of 1.7% in the pro forma portfolio compares favorably to industry growth of 1% and upscale growth of negative 0.5% [19] - Adjusted EBITDAre decreased 8.8% to $45.2 million, and adjusted FFO per share decreased 10.1% to $0.31 per share, primarily driven by year-to-date disposition activity [27][28] Business Line Data and Key Metrics Changes - The same-store portfolio posted a RevPAR decline of 0.1%, driven by a 0.9% increase in occupancy and a 1% decrease in rate [10] - The company’s hotels were successful in growing group business, with group night room demand up 18.6% compared to Q3 2018 [16] Market Data and Key Metrics Changes - Strongest performing markets included Phoenix, Louisville, Indianapolis, and Boulder, with Phoenix hotels posting a combined RevPAR increase of 26.7% [11] - In Louisville, the two hotels posted combined RevPAR growth of 21.5%, driven by a shift towards higher-rated group and retail business [13] - Indianapolis hotels posted average RevPAR growth of 10.6%, outpacing the overall market by 470 basis points [15] Company Strategy and Development Direction - The company continues to focus on capital recycling to support external growth, closing on the acquisition of five hotels for a total purchase price of $276.9 million [21] - The company plans to invest $23 million in renovation capital over the next couple of years for newly acquired assets [56] - The company aims to maintain a net debt to trailing adjusted EBITDAre ratio of approximately 4.7 times, focusing on recycling capital for growth [34][42] Management's Comments on Operating Environment and Future Outlook - Management expressed satisfaction with the portfolio's relative outperformance compared to the broader industry, despite a challenging operating environment [6] - The company anticipates a headwind of about 40 basis points for the full year of 2019 due to the recent acquisitions, but expects these acquisitions to be a tailwind in 2020 [90] - Management noted that property tax increases are expected to be mid-single digits for the upcoming year [97] Other Important Information - The company declared a quarterly common dividend of $0.18 per share for Q3 2019, resulting in an AFFO payout ratio of approximately 58% [35] - The company invested $14.1 million into its portfolio during Q3 2019, with a year-to-date investment of $46.7 million [22][23] Q&A Session Summary Question: How should the balance between growing the joint venture and managing leverage levels be viewed? - Management indicated a focus on maintaining a leverage range of 3.5 to 4.5 times, with capital growth funded through recycling [42] Question: What is the growth profile for the newly acquired assets? - Management believes the assets are well-located and will benefit from significant capital investment, projecting considerable upside post-renovation [56] Question: How is the company achieving attractive valuations on the Birmingham assets? - Management clarified that the assets have performed well and the buyer's profile allows for different value perceptions compared to public companies [62] Question: What are the trends in demand drivers for leisure and business segments? - Management noted that weekday RevPAR outperformed weekend RevPAR by about 250 basis points, with some weaknesses observed in the leisure segment [67] Question: How does the company view supply in its markets for the next year? - Management expects supply growth to remain consistent with the current year, around 2% for the industry [57] Question: What is the impact of the new acquisitions on overall RevPAR growth? - Management indicated a potential negative impact of about 40 basis points for 2019 but expects the acquisitions to contribute positively in 2020 [90]