Apple Hospitality REIT(APLE) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In the first quarter, total revenue for comparable hotels was $324 million, down 0.4% year-over-year, while adjusted hotel EBITDA was $105 million, down approximately 5% [9][16] - Comparable hotels RevPAR was $111, down 0.5%, with ADR at $157, up 1%, and occupancy at 71%, down 1.5% compared to the same period last year [9][10] - MFFO for the quarter was approximately $76 million, or $0.32 per share, down approximately 6% on a per share basis compared to the first quarter of the previous year [17] Business Line Data and Key Metrics Changes - Comparable hotels total hotel expenses increased by 2.2% year-over-year, with total payroll per occupied room at $42, up 4% [15][16] - Comparable hotels adjusted hotel EBITDA margin was 32.3%, down 180 basis points year-over-year, indicating effective cost management despite revenue challenges [16] Market Data and Key Metrics Changes - Government demand represented approximately 5% of the occupancy mix, down from 7% earlier in the year, with a decline in government room nights of about 15% in March [11][34] - Houston properties saw RevPAR growth of almost 8% due to a strong convention calendar, while Los Angeles hotels experienced over 20% RevPAR growth [12][13] Company Strategy and Development Direction - The company plans to reinvest between $80 million and $90 million in hotel renovations in 2025, focusing on maintaining competitiveness in the market [6][7] - The company has completed approximately $338 million in hotel sales since the pandemic began, optimizing its portfolio and reducing capital investment needs [4][5] Management's Comments on Operating Environment and Future Outlook - Management anticipates a challenging transaction market but remains confident in executing selective asset sales to optimize portfolio concentration [2][5] - The company expects net income for the full year to be between $167 million and $195 million, with a comparable hotels RevPAR change projected to be between negative 11% [18][19] Other Important Information - The company has approximately $1.5 billion in total outstanding debt, with a weighted average interest rate of 4.8% and a significant portion of debt fixed or hedged [17] - The company is closely monitoring potential impacts from tariffs on project costs and timelines, although no known delays are currently affecting planned projects [7] Q&A Session Summary Question: Can you provide more color on the RevPAR guidance? - Management indicated that the booking position has declined by 200 basis points since late February, with Q2 expected to be the worst quarter, implying about 1% RevPAR growth for the second half of the year [22][23] Question: How is the transaction market looking moving forward? - The transaction market remains largely unchanged, with uncertainty keeping larger transactions on the sidelines, but opportunities for smaller asset sales continue to exist [25][26] Question: What is the company's philosophy on CapEx spending? - Historically, the company has spent between 5% to 6% of revenues on CapEx, with plans to spend $80 million to $90 million this year on renovations and other needs [39][40] Question: How is the company managing cost mitigation? - The company is focused on productivity and reducing contract labor, achieving a reduction to 7% of total wages, while maintaining strong occupancy levels [65][66] Question: How does the company view its position in a potential recession? - Management believes the lack of new supply in their markets positions the company favorably, limiting downside risk and enhancing upside potential [68][69]