Summit Hotel Properties(INN) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Full-year 2023 RevPAR increased by 6.6%, outpacing the broader industry by 170 basis points, resulting in hotel EBITDA and adjusted EBITDA growth of approximately 6% and 5% respectively [92][84] - Average daily rates in the portfolio are more than 5% ahead of 2019 levels, while occupancy continues to trail prior peak levels, indicating potential for continued growth [87][92] - Adjusted FFO for the fourth quarter was $26.9 million or $0.22 per share [100] Business Line Data and Key Metrics Changes - Non-rooms revenue increased by 15% in 2023, primarily driven by a 20% increase in Food & Beverage revenue [89] - RevPAR growth in the Group segment was 12% and 7% in the Negotiated segment, indicating strong demand in urban markets [85][92] - Pro forma Hotel EBITDA for the full year 2023 was $260.5 million, an increase of 6% compared to 2022 [10] Market Data and Key Metrics Changes - Urban and suburban hotels comprise approximately 75% of the pro forma guest room count, with RevPAR increases of 5% and 4% respectively in the fourth quarter [96][118] - Key markets driving growth include Dallas, Atlanta, Boston, and Oklahoma City, which significantly outpaced the pro forma portfolio [11] - Markets such as the Bay Area, New Orleans, and Minneapolis are running about 75% to 80% of 2019 RevPAR levels, indicating potential for future growth [23][25] Company Strategy and Development Direction - The company continues to enhance the quality of its portfolio through strategic acquisitions while disposing of non-core assets with significant capital needs [92][93] - Capital allocation remains a key strategic priority, with a focus on improving portfolio quality through strategic transactions [4][93] - The company expects to be a net seller of assets in the first half of the year, positioning itself for acquisition opportunities later [115][111] Management's Comments on Operating Environment and Future Outlook - Management anticipates continued stabilization in the labor environment in 2024, with opportunities for improved productivity and reduced reliance on contract labor [4][12] - The outlook for 2024 includes a RevPAR growth range of 2% to 4%, reflecting stable demand and continued operating trends [6][15] - Management expressed optimism about the recovery of slower markets, indicating potential for outsized growth relative to the industry [25][39] Other Important Information - The company has successfully refinanced approximately $1 billion in bank debt over the past 10 months, improving its balance sheet [93][101] - The current dividend was increased by 50% throughout the year, reflecting a prudent AFFO payout ratio [103] - The company is actively managing interest rate risk, with approximately 80% of its capital structure being fixed [13][102] Q&A Session Summary Question: What is the outlook for the assets held for sale? - The company has moved several assets into the held for sale category, with a total sale price of $84 million for three additional assets [107] Question: How does the company view the performance of slower recovery markets? - Management noted that markets like the Bay Area and New Orleans are running about 75% to 80% of 2019 RevPAR levels, indicating significant upside potential [23][25] Question: What are the expectations for expense growth in 2024? - The company expects annual operating expense growth of 4% to 5%, with a portion of RevPAR growth driven by occupancy gains [114]