Apple Hospitality REIT(APLE) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Comparable hotels total revenue was $329 million for Q4 2024 and$ 1.4 billion for the full year, up approximately 4% and 2.5% compared to the same periods in 2023 [26] - Fourth quarter adjusted EBITDARE increased by approximately 7% and modified funds from operations (MFFO) rose by approximately 6% compared to Q4 2023 [10][36] - Comparable hotels RevPAR for Q4 was $109, up approximately 3%, with ADR at$ 153, up approximately 1%, and occupancy at 71%, up 2% compared to Q4 2023 [27] Business Line Data and Key Metrics Changes - The company achieved comparable hotels RevPAR growth of approximately 3% for Q4 and more than 1% for the full year, driven by improvements in both ADR and occupancy [9] - Comparable hotels occupancy for the full year was 75%, approximately 1% higher than 2023, while comparable hotels ADR was $159, up approximately 1% [27] Market Data and Key Metrics Changes - Approximately 55% of the company's hotels had no new upper upscale, upscale, or upper midscale product under construction within a five-mile radius at the end of Q4 [11] - The company noted that supply-demand dynamics remain favorable, with limited supply growth improving the overall risk profile of the portfolio [11] Company Strategy and Development Direction - The company continues to monitor its distribution rate and timing relative to hotel performance and potential capital uses, maintaining a disciplined approach to capital allocation [12][13] - The company has focused on optimizing its portfolio through strategic acquisitions and dispositions, with recent sales of six hotels for over$ 63 million [14][15] - The company plans to invest between $80 million and$ 90 million in capital expenditures during 2025, focusing on major renovations at approximately 20 hotels [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to produce strong returns for investors over the coming years, citing stable operating fundamentals and favorable supply-demand dynamics [22][23] - The outlook for 2025 includes expectations for net income between $173 million and$ 202 million, with comparable hotels RevPAR change projected between 1% and 3% [39][41] Other Important Information - The company paid distributions totaling $0.24 per common share during Q4, bringing the annual payout to approximately$ 244 million or $1.01 per common share [12][37] - The company has approximately$ 1.5 billion of total debt outstanding, with a weighted average interest rate of 4.7% and a debt maturity profile averaging three years [37][38] Q&A Session Summary Question: What operating expense growth has been assumed in the 2025 guidance? - Management indicated that normalizing for fixed cost hurdles, the assumed increase for total hotel expenses is around 4.2% at the midpoint, with variable expenses outside of fixed costs around 3.5% [49][50] Question: What percentage of the portfolio is considered non-core? - Management stated that between 7% and 10% of the portfolio fits the category of smaller hotels in tertiary markets with outsized CapEx needs [52] Question: How close is the midweek ADR to weekend ADR? - Management noted that midweek ADR continues to lag behind weekend ADR, with approximately 5% to go relative to pre-pandemic levels for meaningful rate growth [60][61] Question: What is the outlook for wage benefit growth this year? - Management expects wage benefit growth to be between 3.5% and 4% [130] Question: What is the company's strategy regarding capital redeployment? - Management highlighted that share repurchases have been the most attractive opportunity for redeployment, while also considering acquisitions based on market conditions [80][81]