Apple Hospitality REIT(US:APLE)2023-11-08 17:43Financial Data and Key Metrics Changes - Comparable hotels total revenue for Q3 2023 was $356 million, up 4% year-over-year, and over $1 billion for the first nine months, up 9% compared to the same periods in 2022 [18] - Comparable hotels RevPAR was $123, a 3% increase over Q3 2022, with ADR of $159, up 1%, and occupancy of 77%, up 2% year-over-year [18] - Adjusted EBITDA for Q3 was approximately $132 million, a 1% improvement year-over-year, with a comparable hotels adjusted hotel EBITDA margin of 37.1%, down 110 basis points from Q3 2022 [24][26] Business Line Data and Key Metrics Changes - Leisure travel remained strong with weekend occupancies at 82%, up 1% compared to Q3 2022, while average weekday occupancies improved to 75%, an increase of 2% year-over-year [19] - The company achieved a comparable hotels adjusted hotel EBITDA margin of 37.1% for Q3, reflecting a focus on cost controls amid inflationary pressures [24] Market Data and Key Metrics Changes - Preliminary results for October indicated comparable hotels occupancy at 78%, with continued growth in ADR [6] - The company noted that nearly half of its hotels do not have new supply under construction within a 5-mile radius, allowing for potential benefits from incremental demand [15] Company Strategy and Development Direction - The company has acquired four hotels since the beginning of the year and has three additional hotels under contract, actively pursuing further opportunities [8][13] - The strategy focuses on maintaining a diversified portfolio of high-quality, rooms-focused hotels with low leverage, positioning the company to capitalize on market opportunities [7][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the trajectory of the industry and the company's portfolio, citing favorable travel trends and limited near-term supply growth [15][31] - The company has adjusted its annual guidance to reflect strong performance through the first nine months and preliminary results for October, expecting RevPAR growth between 5.5% and 7.5% for the year [29][30] Other Important Information - The company paid distributions totaling $0.24 per share during the quarter, representing an annual yield of approximately 5.7% based on the closing stock price [14] - The balance sheet remains strong with total outstanding debt of $1.3 billion, approximately 3.1 times trailing 12-month EBITDA, and a weighted average interest rate of 4.3% [26][27] Q&A Session Summary Question: Can you help us understand the revised guidance for hotel EBITDA margin change? - The revised guidance assumes a 50 basis point change for the existing comparable hotels, with a 30 basis point benefit from new acquisitions [34][35] Question: What is the expectation for hotel EBITDA contribution from acquisitions set to close this year? - The annualized contribution from new properties is estimated to be around $16 million [42] Question: How do you view the market for larger transactions and troubled refinancing portfolios? - The company is active in underwriting potential acquisitions, focusing on individual assets and small to medium-sized portfolios, with expectations for continued opportunities due to financing issues in the market [45][46] Question: How much of your occupancy is booked in advance for the last two months of the year? - Typically, about 50% of occupancy is on the books as the month begins, with the remaining realized in the month [68] Question: What is the company's view on permanent financing and current market pricing? - The company balances fixed versus floating rates, currently being about 20% variable, and has lower borrowing costs compared to competitors [76][78] Question: How do you see leisure-focused markets stabilizing as we enter 2024? - The company remains bullish about long-term prospects for leisure markets, expecting stabilization and growth from pre-pandemic levels [80][82]