Service Properties Trust(US:SVC)2023-11-07 18:44Financial Data and Key Metrics Changes - Adjusted EBITDAre increased by 1% year-over-year to $175.3 million, benefiting from additional interest income and an income tax benefit, partially offset by a decline in hotel results [10][78] - Normalized FFO was $92.1 million or $0.56 per share, compared to $0.54 per share in the prior year quarter [78] - Hotel EBITDA for 221 hotels was $75.5 million, a 1.6% decline from the prior year [11] Business Line Data and Key Metrics Changes - Full-service RevPAR increased by 2.5% year-over-year, while select-service RevPAR declined by 0.2% and extended-stay RevPAR decreased by 1.3% [4][85] - Group revenues increased significantly, with Sonesta's group pace up 32.5% compared to last year [27][72] - The transient revenue percentage of total hotel revenues declined from 78.1% to 75.4%, while group revenue increased from 15.5% to 17.2% [73] Market Data and Key Metrics Changes - Business travel recovery is at 76.1% of 2019 levels, with corporate negotiated revenue increasing by 1.3% year-over-year [74] - The gap between weekend and weekday occupancy is narrowing, with weekend occupancy outpacing weekday by 4.9 percentage points in September [6] - OTA revenues as a percentage of total revenues decreased from 30.8% to 29.4% year-over-year [26] Company Strategy and Development Direction - The company remains focused on increasing brand awareness through advertising and media campaigns, as well as expanding its loyalty program [6][23] - There is a disciplined approach to capital allocation, with a focus on addressing upcoming debt maturities before pursuing acquisitions [16][29] - The company is evaluating various options to manage debt maturities and mitigate the impact of higher interest rates [93] Management Comments on Operating Environment and Future Outlook - Management noted that hotel operating expenses remain elevated, with insurance premiums increasing by 15% year-over-year [75] - The company expects a decline in hotel EBITDA sequentially due to seasonal patterns, typically starting mid-November [32] - Preliminary October 2023 RevPAR was $96.62, with projections for Q4 RevPAR between $76 to $79 [92] Other Important Information - The company has $5.8 billion of fixed-rate debt outstanding with a weighted average interest rate of 5.2% [12] - The net lease portfolio provides dependable cash flows, with 68% of annual minimum rents coming from an investment-grade-rated tenant [9] - The company announced a regular quarterly common dividend of $0.20 per share, representing a 44% normalized FFO annualized payout ratio [13] Q&A Session Summary Question: Can you provide color on October RevPAR and guidance for Q4? - Management indicated that October is typically strong, but demand trends are expected to taper off in Q4 due to seasonal patterns [21] Question: What is the historical mix of group business? - Group business is currently lower than historical levels but is showing strong booking pace for 2024 [22] Question: How is the Sonesta brand resonating with consumers? - The Sonesta brand is seeing increased loyalty program usage and brand recognition, with metrics showing growth year-over-year [23][56] Question: What are the expectations for capital expenditures? - The company expects capital expenditures of $65 to $75 million in Q4, with a multi-year renovation plan underway [15][33] Question: How is the company addressing debt maturities? - The company is evaluating options for refinancing upcoming debt maturities and has significant liquidity available [93]