Service Properties Trust(US:SVC)2023-05-09 20:01Financial Data and Key Metrics Changes - For Q1 2023, normalized FFO was $37.1 million, or $0.23 per share, compared to negative FFO of $0.02 per share in the prior year quarter [26] - Adjusted EBITDAre increased by 30% to $116.8 million compared to the prior year [26] - Comparable hotel EBITDA saw a 251% increase year-over-year, driven by improved hotel performance [15][27] Business Line Data and Key Metrics Changes - Comparable hotel RevPAR increased by 22% year-over-year, with ADR up 13.9% and occupancy increasing by 3.8 percentage points [10] - Full-service portfolio RevPAR grew by 30.6%, with significant contributions from group demand and business transient travel [11] - Select service portfolio RevPAR increased by 27.2%, driven by a 21.7% increase in transient business [16] - Extended stay portfolio RevPAR increased by 9%, led by Sonesta Simply Suites, which outperformed industry growth [17] Market Data and Key Metrics Changes - Urban market hotels experienced the highest RevPAR increase at 38.9%, while resort hotels saw a more moderate growth of 20% [11] - The net lease portfolio was 97% leased with a weighted average lease term of 9.4 years [13] - Aggregate coverage of net lease portfolios minimum rents was 2.98 times on a trailing 12-month basis, an increase from the prior year [21] Company Strategy and Development Direction - The company is focused on enhancing its corporate sustainability practices and advancing ESG goals [24] - There is an interest in pursuing strategic acquisitions in underexposed markets like Miami and Los Angeles [46] - The company plans to evaluate opportunities for capital recycling into other areas or geographies in the future [62] Management's Comments on Operating Environment and Future Outlook - Management noted signs of moderation in inflationary factors, particularly in labor costs, with a decrease in contract labor expense per occupied room [12] - The company expects an uptick in contract labor costs as demand increases in Q2 and Q3 [12] - Preliminary April 2023 RevPAR was projected at $96.21, with Q2 hotel EBITDA expected in the range of $93 million to $103 million [32] Other Important Information - The company sold 18 hotels for a total price of $157.8 million during the first quarter [35] - A regular quarterly common dividend of $0.20 per share was announced, representing a 46% normalized FFO annualized payout ratio [36] - The company expects to receive $379.3 million in additional liquidity from the BP transaction upon closing [37] Q&A Session Summary Question: Thoughts on 2024 and 2025 maturities and potential financing options - Management is considering the impact of the TA transaction on financing options for upcoming maturities, with a focus on maintaining flexibility [41][42] Question: Potential savings from enhanced credit via BP transaction - Management indicated that the enhanced credit could provide significant savings, although exact figures are uncertain [43][44] Question: Current thoughts on growth and potential acquisitions - Management is evaluating opportunities in strategic markets and sees potential for acquisitions without secured financing [46][48] Question: Recent demand trends and any areas of weakness - Overall strong year-over-year growth is noted, with a softening in leisure resort hotels but an uptick in group and business travel [56][57] Question: Impact of regional bank issues on lender conversations - Management reported no noticeable changes in lender conversations due to regional bank issues, as they primarily deal with larger financial institutions [58]