Service Properties Trust(SVC) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Normalized FFO for Q4 2022 was $73.3 million or $0.44 per share, a 162% increase year-over-year [59] - Adjusted EBITDA for the quarter was $150.5 million, reflecting a 26.5% increase compared to the prior year [59] - Hotel EBITDA increased by 98.3% year-over-year, driven by strong performance in premier destination hotels [31][49] Business Line Data and Key Metrics Changes - Full-service hotel RevPAR increased by 31.1% from 2021 levels, with aggregate ADR of $174.48, 14.5% above Q4 2021 [29] - Extended stay hotels generated $21 million in hotel EBITDA, while select service hotels improved to $7 million, an increase of $3.7 million year-over-year [60] - The scaled-down portfolio of Sonesta Select branded hotels saw a 25% increase in RevPAR compared to the same quarter last year [51] Market Data and Key Metrics Changes - The aggregate coverage of the net lease portfolio's minimum rents was 3.0 times on a trailing 12-month basis, up from 2.88 times in the previous quarter [32] - TA, the largest tenant, reported a site-level coverage of 2.74 times, an increase from 2.4 times last quarter [32] Company Strategy and Development Direction - The company is focused on increasing brand awareness for Sonesta, which has expanded significantly in recent years, now being one of the largest hotel brands in North America [22][10] - The company plans to invest in selective assets, particularly in markets like Miami and Los Angeles, while also evaluating opportunities in the net lease sector [16] - A multimillion-dollar advertising campaign for Sonesta is expected to enhance brand visibility and drive revenue growth [22] Management's Comments on Operating Environment and Future Outlook - Management noted that inflationary pressures are impacting hotel-level operating expenses, particularly in labor and utilities, but they expect to offset some of these costs through increased permanent staffing [52] - The company anticipates improvement in hotel margins as they aim to close the gap from pre-pandemic levels [70] - Management expressed optimism about the ongoing recovery in travel and the performance of their hotel portfolio [28] Other Important Information - The company successfully completed a secured financing of $610.2 million with a 5.6% coupon, which will help retire $500 million of senior notes maturing in June [40][41] - The acquisition of TA by BP is expected to enhance the credit quality of the core travel center tenant and provide significant liquidity [33][58] Q&A Session Summary Question: Can you share details about the asset securitization completed? - The assets pledged were a mix of single-tenant net lease properties, excluding travel centers, with a focus on quick-service restaurants and fitness centers [86] Question: What are the expectations for hotel margins in 2023? - Management indicated that while margins are still lagging behind 2019 levels, they expect to see improvements as the year progresses [70] Question: How is Sonesta performing in terms of brand awareness and market share? - Sonesta has launched a digital marketing campaign and is seeing increased business from its website, which is expected to enhance brand awareness and revenue [92]