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

Financial Data and Key Metrics Changes - Comparable hotels total revenue was $319 million for Q4 2025 and $1.4 billion for the full year, down approximately 2% and 1% compared to 2024 [22] - Comparable hotels adjusted hotel EBITDA was approximately $99 million for Q4 and $474 million for the year, down approximately 8% and 6% compared to the same periods in 2024 [22] - Comparable hotels RevPAR for the full year was $118, down 1.6%, with an ADR of $159, down only 10 basis points [23] Business Line Data and Key Metrics Changes - Comparable hotels EBITDA margin was 31.1% for Q4 and 34.3% for the year, down 210 basis points and 190 basis points compared to 2024 [30] - Variable hotel expenses increased only 0.5% in Q4, while total hotel expenses increased by 1% for the quarter and 1.9% for the year [29] - 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] 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 [23] - Market performance varied significantly, with some markets showing strong RevPAR gains while others faced headwinds due to demand shifts [24] - Preliminary results for January 2026 indicated a comparable RevPAR decline of approximately 1.5% compared to January 2025, impacted by travel disruptions [26] Company Strategy and Development Direction - The company aims to optimize its portfolio and capitalize on market dislocations while managing expenses to maximize shareholder value [5] - The transition of 13 Marriott-managed hotels to franchise is expected to drive operational synergies and increase marketability [8] - The company plans to reinvest between $80 million and $90 million in its portfolio for 2026, with major renovations planned for approximately 21 hotels [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term outlook for the hospitality industry and the company's ability to drive profitability [21] - The guidance for 2026 anticipates comparable hotels RevPAR to be flat at the midpoint, with potential benefits from the FIFA World Cup 2026 [18][35] - Management acknowledged the challenges posed by policy-related demand disruptions but remains confident in the company's strategy and adaptability [36] Other Important Information - The company sold seven hotels for a combined gross sales price of approximately $73 million and repurchased 4.6 million common shares for about $58 million [9] - The company paid distributions totaling approximately $240 million for the full year, representing an annual yield of approximately 7.8% [17] - The balance sheet as of December 31, 2025, showed approximately $1.5 billion of total outstanding debt, with a weighted average interest rate of 4.7% [32] 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 details on variable and fixed expenses, with variable expenses expected to be just under 3% and fixed expenses around 4.5% for the full year [41] Question: Does the RevPAR growth guidance assume any volatility? - Management noted that the guidance does not contemplate much benefit from special events, with expectations for growth primarily in the second half of the year [45][46] Question: How are you approaching business mix this year? - Management expressed satisfaction with the team's ability to bring group business into hotels at attractive rates, expecting a shift towards more group and less government business [48] Question: Can you discuss the impact of the Marriott franchise transitions? - Management highlighted that the transitions would enhance marketability and drive cost savings, improving profitability [99][100]