Summit Hotel Properties (INN) 5 Nov 242024 Q3 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Summit Hotel Properties Q3 2024 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Adam Wudel, EVP of Corporate Development. Please go ahead.

Thank you, and good morning. that by Stanner; Properties' and statements and Officer, Conkling. Please today Executive and Chief as joined comments Trey Jon our securities Officer, Executive note defined am by Summit considered laws. President Hotel Chief Financial today federal I are of forward-looking many Vice President our risks These to both and filings. and statements are unknown, SEC known uncertainties, subject as described in

update make today, undertake we that today later. to November no XXXX, statements only of are Forward-looking as we X, and duty them effective

You to referenced filings website contain call can Jon Hotel our earnings and Officer, SEC our Executive Summit Stanner. find copies non-GAAP of Properties' release, which Chief President at on on reconciliations www.shpreit.com. Please welcome measures and financial this

for quarter Adam, conference call. earnings our third you and us Thanks, thank XXXX all for today joining

quarter fundamentals of was of despite in growth current financial highlighted proud adjusted quarter on commentary industry by what our operating consecutive will more are Trey our the for our broadly of quarter results, and third We I specifically. Today, provide FFO additional markets several a challenging third an San the the balance Airport effects made sheet. sale environment, for our of outlook recently and of Four our year, the recent significant year the progress Points hurricanes, we the of into and announced of the Hotel, next including updated strengthening balance review our Francisco have

of trends we've industry the experienced quarter third many past the results operating several the of Our quarters. continuation reflect over

our X.X% offset X.X% the in which of average that midweek increase realized quarter, of the X% occupancy. demand, the normalization driven markets, recovery partially performance for of demand the gains segments. suburban group increased business a and other in better travel which a in was urban and Overall, of in rate decline by by strength leisure portfolio some same-store RevPAR offsetting ongoing continued the patterns, in is travel, Specifically, driving relative is ongoing

XX% with representing the X hotels, growth quarter growth, urban reflecting in during trends. X.X% exhibit location and Wednesday improving RevPAR suburban respectively, the nights particularly experienced increased nearly urban and X.X% RevPAR to of room and group as and transient our RevPAR continue mix. our hotels business strong Weekday strongest of our nearly and quarter, X.X%, those grew Third in X% which total types suburban Tuesday

moderating our hybrid RevPAR place, opportunities As which often remained schedules drive least disruption though be revenue have we when any month. We approximately urban EBITDA these was compressed $XXX,XXX basis later which material path fortunately did basis, into expected also Labor seen summer markets, in Hurricane lost optimistic line displaced markets by nearly XX year-over-year, rates compounded in demand the points RevPAR will physical with next were portion grew in revenue, of as $XXX,XXX year. peak some own in X% the Orlando are line remain increased over the XX Hurricanes of quarter driven remainder and as and and midweek X.X%, the softness and Milton created the RevPAR a into remained the sustain the third operating work Day months September was of leisure on at fully holiday going to around monthly X.X% by the respectively, we've quarter and generally the expectations occupied. On travel month larger August again that occupancy We beginning short-term recovered was reduction at from the October, growth by hotels quarter. Tampa early storms of early in Francine in storms, the top of July a not in and once fourth growth particularly to Helene and a entirely of disruption in that the higher nights declined damage. pressure reducing estimate in open and of all rates.

Our year-over-year. that with preliminary recover of approximately in XXXX the October growth, and expected RevPAR better have the reacceleration beginning top beyond. to we X% results believe profiles increase to reflect several October At markets slower growth a in year, line modest we identified

significantly in hotels our these expected, markets have As continued metrics. industry outperform to

Specifically, favorable our Minneapolis continued basis are outsized year. we and which million. approximately closing total These $XX.X in hotel rooms on remains those for combined EBITDA hotel guest these hotels XXX-guestroom and Louisville, next of convention year-over-year. markets, deal the as outlook of EBITDA had as XX% year. San the announced San inbound office sale with Francisco XX% X The Points has by represent limited release quarter in forecasted XX% calendar, RevPAR Jose, growth the a this in remains a to yesterday, our our more increased San RevPAR Orleans, and Sheraton of continues markets Broadly, in and travel of market XX%, in the Baltimore New the Francisco portfolio, lack compelling Airport Hotel respectively. to In growth weaker outlier essentially into in X% third year-to-date the the international metrics Four negative attendance. and breakeven of even press EBITDA for was notable a

$XX, nearly blended $XXX the The in sales hotels of activity external the capacity average trailing million remainder our was in reduction for and significantly portfolio, the our sale at rate needs With be RevPAR discount have profile growth of capital has nearly accounting the totality debt-to-EBITDA for of our and completion XX quality now generating less avoided of this requirements will near-term facilitated a capitalization to we $XX growth. of a nearly than as over reduced gross that net ratio, the XX sale, nearly the XX-month last turn enhanced our of million XX% our near-term hotels a full prices reflect result of months, of these sold X% time proceeds. The when The portfolio. a increased capital disposition sale. for

year let XXXX. a Trey, provide remainder for me over few and thoughts to of into outlook our the call Before I on turn the the

in growth operating expected positive of persist top line is broadly currently to are the a through that slightly end the environment We year.

and our demand and have special quarter, there's optimism X the better became month been cycles. There comparisons in XX% of positive demand X to the start a demand meaningful in this the years. top and of driven transient driven trends line that approximately X the travel next in October business were more markets potential our drove locations. Industry-wide than growth strength specifically fall and to recovery growth the trends, continued line urban, year headwind positive and trends reflect suburban moderate previous the EBITDA we in resumption for Southeast. portfolio see see of broadly months the the some weaker top as trends year longer-term that a We a U.S. ease fourth total from in subdued for potential pleased return in in outbound to international narrative, and storm outlook the are event of on in in facilitate a of the past fourth contributes to results growth efforts meaningful expectations quarter, of timing group in swings in quarter the in airport season year, demand, the the reasons and travel. inbound, of Taylor some concerts by revenue for and more fundamental could our by dependent more namely holiday our leisure continue first in Swift normalization and leisure of believe for same the dollar We

have that and expense again some As favorable we pressures expand is key room fully of before, into XXXX moderated. largely strong Thursday pricing The and nights nights. to for The those more outlook demand availability occupied in Tuesday we urban the in potential mentioned as and Wednesday constrained. have wage shoulder markets, are Monday broadly power on more nights as becomes exists

is the growth, prospects and that, more CFO, for in external continue elongated the little improve the Summit we that particularly conducive growth the are period see rate longer-term we Finally, capital conditions very reflect for summary, transaction and supply I'll more optimistic current to our more outlook to over now environment and a be properly believe environment. In about Trey we an with industry, to remain is as call yields interest what turn to in-place markets operating likely specifically. With the Conkling. beginning to

good Thanks, everyone. Jon, morning, and

serve increased quarter RevPAR and of combined in was New RevPAR Swift Houston the XXXX. Hillsboro, be XXX basis benefited portfolio over hosted portfolio portfolio by company's Orleans, In in which by also XXXX of third Dallas, such suburban total Corridor, located and RevPAR for quarter primary through faced our of our X% catalyst outsized generated as comparison well continuation our combined, and a outperformance as particular, demand X% X.X% difficult outpaced urban notable represented our positioned With as continued Taylor Cleveland. last as this third year, performance driven our quarter concerts portfolio respectively, more moving This San driven urban portfolio for was respectively. Strength had submarket so our even in the by which suburban robust RevPAR X.X% believe urban year-over-year and the XX% year-to-date. and and generated a rooms within rooms in growth portfolios outside Jose, by the and in suburban but in portfolio X industry continued third first we the hotels, Belt, the by a of business prior Sun RevPAR for third Chicago, quarter. located trends growth our Frisco operating X XX% and Denver, suburban the that strength within of versus industry quarter transient led Louisville nearly X.X%, within the by Our urban in increase our as again group the XX% as markets hotels markets the our It markets year Summit's from group Portland of for which nearly demand is which cities to urban was increased year. Growth Energy urban back, none hotels urban growth quarter. Stepping compared group Belt for in once the have Sun points forward. which XXX in of basis markets third of and Houston of guest of was growth have increases such suburban our the should noted quarters demand portfolio and guest and driven of portfolio points XX%

in quarter transformative year-over-year as company's ongoing of resort Asheville, incurred to markets renovations expense impacted well the the quarter. due Fort the as increased year-over-year normalization by quarter town continued structure. Beach. Moderating have displacement growth representative adjusted Hurricane results stabilized a expenses such declined onetime Courtyard Lauderdale small X% and metro in of revenue also RevPAR from continued expenses that a as third approximately the quarter While as exhibited assets items our from represents when such hotels consecutive This were leisure-related patterns, quarter more demand cadence, third the fifth cost for for as at Helene in third normalized

have reliance on modest hotel and Given our focused contract management employee labor revenue team reducing retention. hotel successfully growth, asset improving on managers and

quarter points labor our now represents on XX% above basis labor versus but peak nominal which levels, levels, room points basis occupied a year costs, era the Third basis suggesting XXX declined XX% a for COVID improvement. and basis of labor contract Contract the XX% prior total further is on XXXX XXX below per opportunity period.

ago, XX-month XXX in average continue rolling also to hotels down costs. reduced results retention, from employee in which nearly compared improved in to productivity and the improvement training basis We a quarter see a points

only modest wages wages pro rightsizing been forma the a operating increased quarter have mostly on increased X.X% per expenses Third or occupied versus X.X% as absorbed. Year-to-date, X.X% have room year basis. force prior a labor of

of and trends for We modest EBITDA be forma revenue hurricane $XX.X by points cost and last FFO. current Suites XXXX. From Lauderdale Tech EBITDA the Courtyard the the our quarter X% capital Pro on future growth basis in Downtown $XX.X rata encouraged disruption EBITDA the year over third growth a third over House-Denver over basis to company average the in XXX was portfolio the occupancy basis. for efficient was has primarily portfolio decrease reduced of a it resulted basis on Adjusted $XX.X contracted a company's to the full compared third have a million a Despite balance of continue well million sales, for versus positions Year-to-date, a invested interest FFO AFFO. years. leverage $X.XX we the quarter year, Courtyard the of rata Dallas line activity hotel years, nearly structure corporate models. and EBITDA benefited a bottom has positioned on our to the compared by million, due investment consecutive comprehensive XX approximately from was part spend XXXX, This in ago. lower of third quarter to Grapevine, our average adjusted the million per to leverage an months maturity in ago. Year-to-date, hotels' X.X% third at adjusted net has our X rate months quarter, for quarter Fort portfolio standpoint, has positions SpringHill of $XXX XXXX. The growth, how length pro by the million, X% our XX adjusted to effective is on a in continued and quarter increased This growth. future. The capital of in versus year the liquidity of increased in adjusted than that expense turn a to Center. The increased baseline share. and allocation nearly quarter highlighting trailing XXXX RevPAR X.X% consolidated million pro of in of which third or company and our quarter, Hyatt asset year-over-year over our ending a by ratio from success decrease with Year-to-date, in X% hotel approximately average total driven represents less million on drive profitability CapEx consolidated $XX.X ensures an of index of the be forma was X expenditure we the X% hotel X a primarily an $XX.X million, activity. Year-to-date, for points pro has Beach, the decisions, benefits expanded than portfolio this X% margin X.X%. disposition basis and turn first $XX.X age the year a and particular, basis. $XXX September third XX RevPAR as of quality In $XX.X driven continues FFO EBITDA sheet increased renovations has the in of X recent million is accretive operating to invested the

after our updated of that $X.XX F declared end. managed On approximately X% of achieve As profile, for of structure, Z staggered The result of our capital be efforts, the and to revised guidance as are of at maturities rate management's represent rate reflect $X.XX liquidity unexpected current does well average This XXXX, metrics the interest accounting consideration a midpoint rata continues well year liquidity RevPAR swap not outlook, strong for debt a at our company's than current significant dividend has nonoperational objectives. last rate and account of XX% our fixed returning operating as rate growth last the we Included modest annualized XX% With over fixed company an is our pro to activity. a it hurricane for per capital the of between were in per press to current interest to from swaps. When the with share. prioritize XXXX for range our share, ample future management year-to-date shareholders, leverage view maturity the future is Series SOFR recent changes items. we normalization X% AFFO dividend an XX% believe impacts guidance, time, activity any and effectively payout E, our interest preferred nor results and exposure to to quarter evening, positioned approximately represents no an schedule of portfolio leisure within the for corporate announced environment, the X.X% over continued is continues its growth October a to appropriate which operating on share equity release striking XX, until year balance and full certain our material of include portfolio, rate of dividend changes quarterly environment. The based does well leaving our no Directors or a evening. Based common increases the as any a to as our full based current of Board on the of to reducing operating outlook on opportunities. other the transaction and we maintaining future ratio yield sale of for potential providing approximately X% investing company's assuming dividend room in company growth demand capital a continues markets operational we

tempered a midpoint. EBITDA to our RevPAR growth in very for we adjusted our FFO and adjusted modest midpoint, we made outlook Although have maintaining our XXXX, have we are revision

EBITDA $X the $XXX this our approximately adjusted basis. a adjusted revised we on midpoint a adjusted results an initial a million that adjusted of an unchanged that million activity, beginning of X.X% EBITDA over guide midpoint. EBITDA million in of foregone EBITDA sold Our of have midpoint $XXX providing estimate is range $XXX to at XXXX the effectively million, We result represents assets. at $XXX same-property since as of of the which decline disposition XXXX million included Since guidance

to the significant year-over-year, basis fourth implies related EBITDA the contraction comparisons, of the appeal property difficult would in the company FFO points, given per primarily Importantly, the success dispositions recent continued accretive margin at to from realized expect share guidance benefit midpoint range, maintaining share hotel XXXX. and the share midpoint fourth in basis XXX RevPAR we to to of per are our $X.XX quarter XX and approximately our to adjusted quarter of continues which At $X.XX range contract we $X.XX deleveraging. per narrowing as tax points year-over-year

estimated EBITDA margin basis EBITDA for a improvement year points. meaningful XX of year hotel basis full February to outlook our guidance compared current contraction contraction Our of margin which points full in initial XX XXXX, represents hotel

We of million, $XX the expect deferred to Series $XX pro million, and Series to rata pro distributions from to capital rata $X.X interest be $XX amortization dividends preferred range be million. F $XX.X E and be excluding Series approximately million, financing costs, expense, to expenditures E preferred to million

distributions expense, that, As corporate GIC for income back the Summit increased to the call to remarks. annual year. And nearly earn I'll previously any the may excluding size promote the payable fee during of of the G&A with given turn joint now over covers mentioned, XX% venture, closing cash Summit Jon

Thanks, Trey.

storms. questions, Before open Several for brief of to the for of that I'm provide hurricanes. thank a affected And members able company the by our all team valuable We to through management who call our open many the the best as the the those their are and support management financial the weeks call we we've a to personally Foundation, long your few now our proud I recovery. We'll companies moment associates to want in navigating difficult efforts those to difficult during work recent and they take wish them questions. very affected. were of publicly Summit been through our of

Instructions] with KeyBanc Austin Wurschmidt comes first [Operator Markets. question from Our Capital

you've the thoughts focus specific year, to to economic you What and these appreciate perspective the has I above-average recovery, they that get or to that Jon, growth those on do from just we deliver for a backdrop. have this on gives sense specific, changed a kind those the meaningfully you growth could specifically in going the demand a markets continue year? of X XX X confidence markets slow but hotels markets that guess, seen again, they're RevPAR to what of remain growth kind wanted the think really in XX really in on of continue lagged to sort early and next if trajectory that

outsized to question. one those But this appreciate to a markets. next of believe little likely Yes. see continue Austin, a year the Look, I in we're balance into bit growth those story very through markets and year. the for each we of it's going do different of

concert in had New Taylor example, October. Orleans, a Swift for

the you're Super Bowl lift a be that it big So midweek next convention Orleans market. we'll return year, business 'XX there. broadly New calendar quarter And in will San a huge the in better have speaking, Silicon tech-driven was Jose, transient which the host is in starting to demand. fourth of than Valley, 'XX. In They some just see the to center of

I again in the we second driving and full Wednesday is largely market, recovery back amongst ex are all trends nights of of the those I of has we're Tuesday, where markets that year, of base. better the That next one a trends better element this demand got was this of maybe year. And core just then, kind common really So, take Francisco into low And in very which to is continue kind a year-over-year X to San started think in 'XX. off expect we on the growth. XX-month don't everything think, hold half

period. in XX-month enough bar think do next to in growth additional we a to All the there's performing of still still back they're to much is -- expect turn we there's we performed all low significant get those as room pretty a where that don't year. the for performing pre-pandemic. markets those better, are of markets that gap while XX- calendar effectively that Again, they to But

of anything in a we year perspective? the very the today? And that 'XX have I it you I from you expense a fourth you'd That's as quarter. Is recognize see it's comp relatively you ahead out providing then, should think in helpful. of do there tough Or be guess, stable you call Trey, aware guidance out, called comp that else formal

that we given focused to perspective. obviously headwinds given a we're the from in the Look, fourth Yes. saw XXXX tax on of quarter, some going rebate that the face, positives property we've

cleaner been expense year a to year. code. year. dynamics As will that, for in The expense be up a of have year it lot that talked this I an from sets kind X% so ZIP I comp a we've the We've incurred hope growth year-over-year traditional of about kind think, to from XXXX, And comparable been we that, that look next perspective. play standpoint we has well kind in more labor X.X% this of through think that far

add, working that I to I normalized not Yes. look full midpoint kind provide through X.X% and at environment now, a right guidance XX imply of for the you think expense and next of in if might bottom. and XXXX, budgets guidance. margin our again, RevPAR year way But we're we're position the on year the implied contraction throughout the top range points a on basis the of growth do

did kind reflection seeing in this the moderated team of and the work you're lower a environment, has I about is think RevPAR able when we to expenses breakeven the gave of guidance but that wage manage continued a the to more X.X% And growth margins. talked labor we than also initially expenses at great year, the in RevPAR manage environment, on beginning that. we growth Clearly, which to on part that for to X% growth of needing normalization what were efficiently much the us. expense

Yes.

guidance now think I sits And of it's at wage and growth initial think point. most kind the X.X% now be to beginning to it's X% growth would X% to evident the probably of this expense to X%, in going that's Xs. we low Jon's when is gave thought we -- we year,

year. cost about for that structure us we some kind next gives And so think the as of conviction

And with our next Bellisario Michael Baird. comes question from

to transactions. Jon, I go just to want

more sounded capital optimistic acquisitions. You potential about the for redeployment

going ago? resort much you versus yields that have moved differentiate how would How Maybe down? seller Is yields. potential kind leisure expectations then, And those they have acquisitions because today? you are a come urban referenced quarter think in versus acquisitions? of higher or what X I

would XX and step generated Well, a through kind question, take transaction Yes. now, in the that me better environment proceeds, it like let assets. us where a of And slow been generally. I very as we've and the gone and felt we've I because we to think process appreciate million XX look, approach did a aware, that took methodical for has talked get we well everybody we've environment the $XXX is targeted about that, we a execution of back, we did result. Mike. months very sold We've an

We assets. and sold than rate, $XX including capital. excluding of basis, a than less to cap On those a $XXX eliminated less of million we So cap a blended needs X% about million in assets. capital that capital rate X% even equates

lower-margin quality some think significant -- we're signs net I we things to went thoughtful we we with assets transaction said maybe about and full the started to we capital lower condition last RevPAR, sale, thawed rates business targeting has in overall It a in completely, in days. to, And And seller I were adjusted do it seen was hotels think for XX more to EBITDA, we've it needs. That market of lower beginning debt balance remarks, growth. even has markets our given the while process. that is improved of you've for the market XX of capital portfolio. transactions. The uncertainty see where dramatically. it the and did are the that improved One, speaking, markets us So some very alluded lower turn us. sheet. to do capacity growth for for couple think prepared the a as external of that's we how We expectations, And in when conducive than the do as the of have the quality the the broadly a that fundamental the think have today hasn't delevered

to always sure we've in we are have But active executed We date. we the be try to good we -- an make so, always try feel always market. transactions to -- we again, pipeline. we were that active And about the

resorts specific leisure side? anything on the And urban versus on then, transaction

market of talked kind being we've about always No. Look, agnostic.

since the you pandemic acquired I think if we've at the where assets. acquired about billion of -- $X since of pandemic, you and end the go we've acquired look we've back

been those in And have assets in Sun very, either performed Belt has markets. very the well. Mountain that of All or

kind where we've where being near seen Wednesday outlook the group play do urban in strength in to kind transient described. better markets. continue growth we've creates fundamental of term the to interesting those some business of better think really It's Tuesday that I I will the higher of markets by medium We over I this think some potentially we're is trends in on the as nights. is that and seeing those and better think think grind kind some out business opportunities in helped to of near near-term of medium-term, of and growth. And these demand the

helpful. cycle where there. sold venture of point, some a those I a deals? the you motivation some of promotes then, of assets understand or are But you've it. sort me. assets, And selling the for That's all of sheet Got on and flip of maybe balance those, on side, the And that's the related wholly-owned eventually in some life joint realizing potentially on

Yes.

sold handful We And to of out NCI going we I'll the related holds. assets to-date. call joint to be portfolio, not identified, it, long-term particularly that of a the X have venture assets were

often, got us, the where For material to we to very assets. a into we those capital trigger when for sales put was the point point needed

that much place. think in still I very is thesis

next ultimately months. us margin to some surprised sell that the assets in XX continue joint lower portfolio lower to capital of over be the need XX the shouldn't You to will for RevPAR, venture

Woronka Chris Our with Deutsche question from next comes Bank.

at read your back in the markets, exposure know of I concerns into maybe done, some of that do Jon, is some But that outcomes labor all? again of any these getting spill of kind about of very to urban direction that your opposite as small. over concern negotiations costs the you have guess, union more markets the and I you come deals

have alluded Look, very Yes. that union operate exposure the think pressure where in do in as wage is. you hotels do today. But mindful only markets. to, assets have And we those portfolio of I X we we're

that of some we've that employee relationships place that the of ours right something relations right seen in it's that so, a some there's And disruption maintaining very we've X/X where of think right the continuing that it's have generally make the competitive that. in employee activity. make maintaining the programs that industry to of a or sure activity over insulated the remained some pretty in Sun the priority the and seen the sure we've to I we're presence. of of from manage Belt, generally And of is quarter union headlines mindful to and I around wages. we despite the and union last so, And we're say, just portfolio of course less programs we're will our XX%, the

companies is to think have going Okay. may they you are there looking kind relief been expecting some then the things some to owners. we talk filter on or And that that can respect then, I I more was said heard from about anything know through hoping reduction mandate? or to full a or but or of also from with little they not, bit of don't their if control for targets service that yesterday brand reference and costs at Marriott company, expense some to

how share it Yes. We kind don't that's tangible would of It welcomed, read the that. on affect any but that certainly that you same did, into be I anything would could thing Chris. -- I nothing us. that insight have

welcome lower certainly a we'd cost program. So

One Sure. Got you. if I Yes. can. more,

just kind is think need? at has that? a correct. an I I anything you Hyatt might to thought think more looking kind guys Place any purpose-built, And those. of of about where going outsized us newer legacy, are process of is said Hyatt any there still like of math if relative -- and or to Hyatt of XX did selling I Places, stand there the be any through Or Can them but any some them to that you capital overview be going they're give kind of probably I have think your of

for at we've outsized back if has Hyatt been historically. you the in and acquisitions go company made completed. good X has And had been to company us. Look, brand historically, look exposure that the a of fact, Place acquisitions the It's best the Yes. ever it's

right And the really can with the in markets RevPARs. so, I right work brand think the

again, we going that have we've of part We of pencil. to say sold time And all there been we're kind needed had thread sold I strategic There's hotels Places. Hyatt Hyatt significant have to our no as months. last initiative RevPAR, these making think over that And the the been, a X sell common lower-margin of XX capital. Places math hard assets has internally XX the lower that kind

of them. number fair a renovated we've fact, In

be I objective with always that selling be to around We opportunistic and go broadly what Place assets, happy remaining in really respective try renovate and the generally way have. the discussion. brand-driven good sell, of around markets. We'll think to but to that condition, speaking, when we in we them we we've been we're continue Hyatt like to isn't that they portfolio the Places remainder a a is like the Hyatt looks decided hotel. their our sit Again, number there's of a ROI

concludes Thank conference and This today's participating. call. for question-and-answer our session you

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