Apple Hospitality REIT(APLE) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Comparable hotels total revenue was $319 million for the quarter and $1.4 billion for the full year 2025, down approximately 2% and 1% compared to the same periods of 2024 [22] - Comparable hotels adjusted hotel EBITDA was approximately $99 million for the quarter and $474 million for the year, down approximately 8% and 6% compared to the same periods of 2024 [22] - Comparable hotels RevPAR for the full year was $118, down 1.6%, with ADR at $159, down only 10 basis points, and occupancy at 74%, down 1.6% compared to 2024 [23] Business Line Data and Key Metrics Changes - Comparable hotels RevPAR for the fourth quarter was $107, down 2.6%, with ADR at $152, down 90 basis points, and occupancy at 70%, down 1.7% compared to the fourth quarter of 2024 [22][23] - Variable hotel expenses increased only 0.5% in the fourth quarter, while total hotel expenses increased by only 1% for the quarter and 1.9% for the year compared to the same periods of last year [29][30] Market Data and Key Metrics Changes - STR reports industry RevPAR of $100 and average occupancy of 62% for 2025, highlighting the relative strength of the company's portfolio demand despite year-over-year disruption [23] - Top RevPAR performing hotels included the Embassy Suites in Anchorage, Alaska, which was up almost 42%, and the Homewood Suites in Tukwila, Washington, which was up 33% [24] Company Strategy and Development Direction - The company aims to optimize its portfolio by consolidating management and enhancing operational efficiencies, particularly through the transition of 13 Marriott-managed hotels to franchise [8][9] - The long-term goal is to grow the portfolio while maintaining a strong balance sheet and capitalizing on market opportunities, with a focus on disciplined capital allocation [9][14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for incremental leisure travel related to the FIFA World Cup 2026 and acknowledged that the guidance for 2026 could prove conservative [20][35] - The company remains confident in the long-term outlook for the hospitality industry and its ability to drive profitability despite macroeconomic headwinds [21][36] Other Important Information - The company paid distributions totaling approximately $240 million for the full year, or $1.01 per share, with an annual yield of approximately 7.8% based on the closing stock price [17] - Capital expenditures for the year totaled approximately $88 million, with expectations to reinvest between $80 million and $90 million in 2026 [15][16] Q&A Session Summary Question: What was the total drag on RevPAR in 2025 from Liberation Day and the government shutdown? - Management indicated that government-related room nights were down about 12% for the full year, with a potential recovery of about a point in occupancy expected [39][40] Question: Can you take us through some of the building blocks on the expense side? - Management provided that variable expenses are expected to be just under 3% for the full year, with fixed expenses around 4.5% at the midpoint [41] Question: Does the RevPAR growth guidance assume any volatility? - Management noted that the guidance does not reflect much benefit from special events, with expectations for the highest growth in the fourth quarter due to the government shutdown last year [46] Question: How are you thinking about the potential upside to your portfolio from the World Cup? - Management expressed excitement about the potential for incremental business related to the World Cup, emphasizing the need for early bookings and maximizing rates as the event approaches [91][92] Question: How much is conservatism impacting your EBITDA guidance? - Management acknowledged that a portion of the conservatism is due to sold assets, but emphasized that the guidance is primarily revenue-driven [97] Question: How do you expect the Marriott franchise transitions to impact profitability? - Management believes the transitions will enhance marketability and profitability through cost savings and increased operational focus [98][99]