Summit Hotel Properties(INN) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In 2024, the company achieved a full year AFFO per share growth of nearly 6% [5] - Pro forma RevPAR growth increased by 1.8% for the year, surpassing the industry average for the third consecutive year [6][24] - Pro forma hotel EBITDA increased by 2% year-over-year, despite a low RevPAR growth environment [6] - Adjusted FFO for full year 2024 was $119.2 million, an increase of nearly 6% versus 2023, with AFFO rising to$ 0.96 per share from $0.92 per share [28] Business Line Data and Key Metrics Changes - Urban and suburban portfolios saw RevPAR increases of nearly 3% and 4% respectively, outpacing the total industry by 100 and 220 basis points [24] - Resort and small-town metro assets experienced a modest decline in RevPAR, primarily due to Hurricane Helene and ongoing renovations [26] - Pro forma hotel EBITDA for the fourth quarter was$ 60.4 million, representing a modest decline compared to the previous year [32] Market Data and Key Metrics Changes - Key markets such as New Orleans, Indianapolis, Chicago, Houston, Minneapolis, and Tampa significantly outpaced the pro forma portfolio in the fourth quarter [29] - The company identified six markets poised for outsized growth, including Baltimore, Louisville, Minneapolis, New Orleans, San Francisco, and San Jose, with five markets achieving over 13% RevPAR growth [9][10] Company Strategy and Development Direction - The company continues to focus on disciplined acquisitions and dispositions, acquiring two hotels for $96 million with an attractive capitalization rate of 8.8% [11][12] - A strategic capital investment approach has improved the overall quality of the portfolio, with a RevPAR market share index increasing nearly 300 basis points over the last three years [14] - The company anticipates continued top-line growth in 2025, driven by robust group demand and the recovery of business transient travel [18][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in controlling operating expenses despite more challenging year-over-year comparisons in 2025 [21] - The lodging sector is expected to benefit from a long-term consumer shift towards experiences over material goods, reinforcing a stable demand outlook [22] - The company expects RevPAR growth of 1% to 3% for 2025, with adjusted EBITDA projected between$ 184 million and $198 million [39] Other Important Information - The company has a total liquidity of approximately$ 350 million and a leverage ratio nearly a full turn lower than when it initiated its disposition activity [36] - A quarterly common dividend of $0.08 per share was declared, representing a yield of approximately 5% [37] Q&A Session Summary Question: Booking pace and business-oriented demand outlook - Management noted that January was impacted by weather disruptions, but February showed strong RevPAR growth due to Super Bowl demand and catch-up bookings [44][46] Question: Future acquisition strategy - The company plans to remain active in transactions, focusing on high-quality assets and being opportunistic in capital recycling [49][51] Question: RevPAR guidance for 2025 - Management expects continued strength in urban and suburban markets, with a more balanced growth profile compared to 2024 [55] Question: Management company changes and expense management - Changes were made to improve operational efficiency, and management is pleased with the current performance of management companies [60][61] Question: Acquisitions and underwriting returns - The company is excited about recent acquisitions, expecting higher unlevered IRRs compared to pre-pandemic levels [64] Question: Corporate customer trends - Gradual changes in business travel patterns were noted, with a return of larger national accounts [70] Question: Labor market stability - Management indicated that labor markets remain stable, with expectations for continued effective expense management [76][77] Question: Disposition strategy - The company balances capital needs and brand considerations when deciding on asset sales [79][81] Question: GIC joint venture growth - The joint venture continues to perform well, with an appetite for further growth in 2025 [85] Question: Capital markets environment for transactions - The capital markets are improving, making financing accessible for acquisitions [88]