Sotherly Hotels(US:SOHO)2023-08-10 19:36Financial Data and Key Metrics Changes - For the second quarter, RevPAR was $131.16, driven by an occupancy of 70.6% and an ADR of $185.82, representing a 5% increase over the same period in 2022 [4][16] - Adjusted FFO for the quarter was approximately $7 million, a 12.9% increase year-over-year, while year-to-date adjusted FFO was approximately $11.7 million, reflecting a 56.5% improvement [9] - Total revenue for the second quarter was approximately $49 million, up 3.9% from the same quarter in 2022, and year-to-date total revenue was approximately $92.5 million, an 8.2% increase [20] Business Line Data and Key Metrics Changes - The portfolio's RevPAR for the same-store portfolio increased by 11.9% year-to-date, driven by a 5.8% increase in both occupancy and rate [16] - The Hyatt Centric Arlington outperformed last year's RevPAR by nearly 25%, fueled by a recovery in group and business demand [18] - The DeSoto Savannah improved RevPAR by nearly 25% compared to 2019, with significant rate growth of nearly 19% [34] Market Data and Key Metrics Changes - Demand softened in South Florida markets due to increased competition from international destinations and cruise lines, impacting group bookings in Atlanta due to the Hollywood writers and actors strike [13] - The Washington, D.C. market hotels are nearing full recovery, while Houston, Philadelphia, and Atlanta have significant upside potential as corporate travel remains below pre-pandemic levels [6] - Forward bookings continue to trend positively despite recession concerns, with group revenue pacing 24% ahead of last year and business transient segment pacing 18% ahead [26][42] Company Strategy and Development Direction - The company aims to unlock potential in urban locations that are more dependent on corporate transient and group demand, with a focus on stabilizing margins as staffing and amenity levels normalize [14][19] - The company announced a catch-up payment for preferred shareholders, reducing unpaid cumulative preferred dividends by approximately $1.9 million, indicating a priority on managing dividend obligations [14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the portfolio's performance, noting that RevPAR is expected to range between 103% and 109% of Q3 2022's RevPAR [42] - The company anticipates capital expenditures to align with historical norms, estimating approximately $7.4 million for 2023 [22] - Management highlighted the importance of strong rates in driving RevPAR growth and overall profitability, with occupancy showing sequential improvement [25] Other Important Information - The company had total cash of approximately $32.2 million as of June 30, 2023, with outstanding debt of approximately $322.7 million [21] - Insurance premiums increased by over $2 million year-over-year, representing about a 50% change, primarily due to property coverage for coastal properties [29][30] Q&A Session Summary Question: Is the portfolio back to a normalized level? - Management indicated that there is still growth potential in certain markets, particularly in Philadelphia, Houston, and Atlanta, which have not yet fully normalized [43] Question: What is the outlook for insurance premiums? - Management noted that while there was a significant increase this year, they expect to have a clearer picture after hurricane season regarding future premium changes [46] Question: What is the current unpaid balance for preferred dividends? - The current unpaid balance is $20 million, with management expressing a cautious approach to future payments [49]