Braemar Hotels & Resorts (BHR) 5 Nov 222022 Q3 Earnings call transcript

Greetings and welcome to the Braemar Hotels and Resorts, Inc.

Third Quarter 2022 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jordan Jennings, Manager, Investor Relations. Please go ahead.

recent to Resorts to of for to you welcome Braemar results XXXX and update & Hotels the on morning today’s review call for and Good developments. third quarter

will found to of Securities which could not to securities. prospectus, solicitation revise offer is at a could federal over in of of filings be sell a known as a offer information company’s On the remind from are Officer; Internet included conference do this an buy Eubanks, more of well only statements the or in contain forward-looking and the this press made registration publicly provisions release. time, of Vice www.sec.gov. as unknown them. numerous Financial Chief or risks, any securities to or Asset Commission. forward-looking and fully and let and discussed Stockton, subject The listen-only Statements of Executive update accessibility only and the call as and the call and Nixon, and of obligated Chief notice are and Deric At Chris factors yesterday assumptions offered Richard constitute this call regulations. made cause uncertainties Officer; actual anticipated. you company President Exchange me this this These distributed during be those to made statements Such to or call conference upon Harbor by the pursuant are on statement Executive not this to President statements forward-looking that Management. the Securities materially based with basis conference will assumptions, call date in differ results today Head call, were being are certain be The the an results Safe in are which the of means

measures, be filed have www.bhrreit.com. used ahead, earnings on with encouraged XXXX information earnings reconciliations non-GAAP terms release. provided with accompanying which in together Richard. SEC at X-K this and all of reconciliations which Form call and website in provided financial is also been the company’s on Richard provided are turn go the accessed to X, Each are may schedules, release addition, those In I November the review the release certain or in to the other in now through Stockton. will call over company’s Please the listener tables

to quarter management overview Q&A. that, of I provide conference update open welcome for and providing on an morning, then Chris on update the third an our and our of asset our earnings an portfolio. business will and financial our activity. results, a call. Good we begin After call our provide review by Afterward, will will will Deric

themes call. key four have We for today’s

outperform continues First, an our quarter, versus drive help the and for of XXXX. comparable the to portfolio increase XX.X% quarter luxury in hotel million comparable EBITDA resort $XX.X of

portfolio non-traded acquire And our the Scottsdale True during is an to see time Four excited stock to go our offense and allowing about announcement the agreement in recent strong we Seasons to capital on us we an preferred our in continue for at raising Second, regarding Resort are which our cycle. grow our momentum North. during attractive

shape, in seeing Third, recovery in bookings corporate forward continue And leisure top our accelerating of our fourth, we XXXX. is already no remaining strong have their and very to we as in portfolio sheet good is strong business final well segment. with balance outperform on group to debt and positioned the transient now maturities are

quarter our items per Interest spend equity expense some was non-traded for quarter, in the the the to quarter. addressing time our $X.XX our into year impacted AFFO that compared preferred and dividends, diving third I’d prior quarter. Before for AFFO to two hotel $X.XX the performance share like for

recent interest the expense quarter our in higher. was First,

was strategy in the weighted floating the of end utilizing versus X.X% rate result at X.X% our of of rate the average capped This prior interest debt. Our quarter is year a quarter.

stated as floating a we debt our we expense have interest before, as it to obviously utilize primarily has floating cash Fed hedge loans. on we has natural the As that rate provides rates raised our short-term flows interest believe our impacted rate

expense quarter. our prior the compared interest For $X.X the year million quarter, to increased

is appears likely, rate of would would caps highly And burn above you the above Those be our adjusted XX% that LIBOR X%, currently is amount interest X%, our in our million be caps assume XX% time. interest prior over have debt LIBOR fixed. XXXX. increase in. effectively, our would the which expense. over more consolidated QX X.X%, EBITDAre However, debt off which Xx interest stays it effectively is at effectively XX% If QX the Also if year increased fixed as in of with fixed of and rate kicked our $XX.X quarter, than increases XX% LIBOR be debt in

address The increase second We’ve our to in capital an want item I raising. preferred non-preferred that our up ramped we have seen is dividends.

dividends than the year. For same last $X.X the million third quarter higher quarter, were preferred

continue of We is believe to source an this preferred growth capital us. non-traded for attractive

we than investments, As time. more we capital investments the deploy expect the over those offset into the would to on cost hotel returns

regarding at Resort our which, Seasons we about XX Four announcement is recent True acquire at agreement $XXX.X located our is Scottsdale the acres Scottsdale. to and ideally of XXX-room excited This million. Speaking picture resorts in North luxury North are about for

We in with and hotels perfectly to will close transaction fits acquisition. of portfolio. the on to the fourth property This strategy diversifies common our owning equity further and issued luxury our quarter the no resorts with fund cash expect hand, be and

are extremely with to continue compared pleased and results, third record see on we our results XXXX. Moving to quarterly quarter our outperformance to

driven EBITDA million properties. hotel at occupancy $XX.X strong Our the during resort was of levels our comparable quarter by

of XX% represents the the to compared demand. XXXX, quarter of X RevPAR hotels XXXX also our XXXX. Additionally, all in increased third quarter hotels our when approximately approximately positioned are of portfolio from and XX markets compared are hotels have to for total, third destinations. Many in well leisure which the quarter been of In drive-to increase of the considered for persistent resort to of benefit third XX% leisure an

are EBITDA pleased for that of $XX report We delivered combined segment a quarter. million to hotel the this

We continue million be to third encouraged with generated comparable in EBITDA $XX.X of of the ramp-up the urban which hotels, hotel quarter. our

is EBITDA. quickly leisure For corporate positive X to as is the This posted demand includes third as our of quarter, as significant saying continue turnaround properties our cities. quarter, in group corporate all returning This our And well hotel recovery and transient that hotels the growth will the third assets portfolio. exhibit in solid demand. for been growth. urban be to these the next We’ve a phase

on continue been strong fourth weekends, to corporate encouraged demand continues by into these transient rebound corporate start demand. group seen in leisure strong, continued the to quarter. the a While have particularly trends Overall, and we’ve be we

For suggest equated the preliminary of a our by $XXX month for an the of RevPAR XXXX that October, of exceeding with $XXX, month, finished we which figures and XX% to ADR occupancy XX%.

continue of we to an opportunities the in market. acquisition ahead, Looking attractive pipeline see

will on approach disciplined in to to transactions shareholder will return. accretive we and focus only investment be extremely be continue that total believe our We

continue front. shape, schedule we our meet on maturity next good We’ve active the and investment in to the with and been will April go XXXX. to hard the until attractive Investor In attractiveness not we our is months strategy of Braemar. on also road sheet balance to investors ahead, have out Relations Our an maturity the an communicate in

urban the resort and term ahead, and as properties resumes. luxury and the leisure portfolio, markets, business positions in which group well term near perform long segment is our in demand with both Looking in unique and both focused continues us to on travel the

markets the highest We I believe generating level, cash debt the in is and what over the turn solid attractive position balance portfolio that positive sheet at corporate of flow financing have quality to place. a liquidity will Deric. call is now with hotel and public we

Richard. Thanks,

For the XXXX, of share. million $X.XX third per loss to we quarter diluted stockholders or reported $XX.X common attributable net of

is we our make million, including reported EBITDAre convert calculating longer we it will upon Series shares believe with only consistent to the convertible and for included We and performance. per this easier shares our and For those in of AFFO reported stock of XXXX. no XX% quarter, B it and than had for those include as-converted previous preferred $XX In what practice how higher Adjusted we model this AFFO. more notes for Beginning shares diluted investors associated count the third share diluted share quarter the company’s our conversion. was will was purposes which believe with quarters, quarter, are analysts fully we peers we quarter report the the and $X.XX. our of

the is true-up accrual based actual Ashford accrual quarter, the $X.X through split Securities Securities an the company Ashford During and happen Ashford the Braemar, Trust G&A plan in and This contribution is anticipation sometime the true-up raised expects of in be The capital Inc. Ashford XXXX. between booked will million that to expense. of company on for in

previous our joint Torrey of $XX billion. quarter end, was recent consistent to share and which Jolla Hilton the G&A total venture related accrual, Capital million of quarters. loans, billion partner $X.X with Hilton $X.X had on At that had our Pines. assets Excluding we corporate We of loan the of La

loans interest X.X%. Our rate average of a total combined blended at

interest current effectively into floating interest approximately caps, rate is XX% in the XX% fixed the of debt have rate corresponding our caps level LIBOR company’s We Taking place is floating. XX% the of approximately on and rate effectively and debt. of account

represents continue the efforts. majority lender million cash of of of and by hotel net that of deleveraging managers, debt equivalents fund and of assets million available quarter, hotel cash costs. we in $XXX.X managers. accounts. cash due restricted end brand restricted to As million. ended and had to we operating which the vast XX.X% approximately gross of is The $XX.X in is make the held end progress held quarter the This quarter, of also with our to cash $XX.X of cash manager primarily our had also reserve and from one comprised We the At third-party third

on of Seasons the non-traded can ongoing to cash As of fund have hand you see raise the acquisition our we our Four plenty Scottsdale. of preferred, the with cash and announced capital Resort

capital during have attractive next maturity an not we complete financings XXXX. the we the April until with any schedule front, final not maturity quarter, On markets while our did

Ritz-Carlton Yountville Sarasota, on include the Hotel maturities the and XXXX Bardessono. loans Our

refinancings and during these our approximately net X our on As assets you report Series momentum has nature release, an ranges non-traded million of of million end challenges of raising fundraising debt We trailing Series these anticipate strong do we third offering. yield additional million and XX-month that E million quarter, we in XX%. This the with our million X.X of raising million third shares continued. have and not And shares M of I LTVs. these have low outstanding E from proceeds. issued any Therefore, preferred of M the high-quality $XXX.X earnings net quarter, we from Series to XX% loans to currently preferred am stock, have Series since XX.X proceeds stock $XX.X also M in this and net the see Series in given EBITDA preferred proceeds. and approximately pleased Series issued $XXX non-traded the the approximately stock, can raised the shares approximately E non-traded our

growth expect and Series of as primary and flow capital cash stock our the internally sale goals. preferred E to facilitate as the well We our from non-traded our deleveraging source the Series be proceeds to generated of M

portfolio our XXXX, XX, net XX with rooms. September of of X,XXX consisted hotels As

shares comprised This X.X concludes it our currently activities shares of turn which of share to at our million XX.X for common Our financial quarter. over like the asset diluted to million outstanding, stands review. million and OP fully Chris XX.X discuss to stock count now units. I’d is management

the Comparable comparable in XXXX in chain our for evident scale quarter period the Deric. having portfolio third and outperformance increased upscale of The when whole is the XXXX only market the chain increased increased both only luxury U.S. relative RevPAR the X%, same levels. X% you to this portfolio XXXX. during scale to XX% having upper portfolio you, our with Thank during contrast third quarter the over time as a RevPAR

quarter Our our with resort XXXX. resort third grown to by relative the assets comparable are EBITDA hotel having over thriving during XX%

third the full XX%, to recent quarter are lead ability window year by third pleased for with relative results. volume of for rate the above quarter with seeing has quarter XXXX, quarter, ahead pacing a revenue pace, the XXXX. and also portfolio booking room the shorter of by of number comparable the X%, we and the pricing XXXX, for compared XX% every record-setting of ahead a collective strategies. group the We third much portfolio’s XXXX this is bears improved for more which Group acquisitions it year Group are actualizing with to the performance actualized XXXX nimble

seeing also group booked by group are booking XX%. We approximately our during an September, revenue room exceeding with acceleration volume XXXX in

for In fact, this XXXX. during room revenue we the we group already fourth did quarter booked have more time than comparable

Our hotels hotels success. of some entered comparable been our below urban beneficiaries We XXXX urban have accelerated all larger with group the RevPAR of XXXX levels.

now, September, we urban in XXXX ahead As of stand of assets two-thirds the comparable are RevPAR.

hotels a of Mr. One C. those the is acquisition Beverly recent Hills.

our process, which property performance. plan, a the is team created significant During takeover impact XX-point a diligence having on

room the include the comparable has for year such Mr. resort underwriting. variety only XX set near C X the hotels a XXXX during RevPAR third Promisingly, investment seeing quarter, by and by pattern Mr. owned exceeded Beverly the We third of C have heading substantial we group our continue. encouraging, into X third than to we hotel Ritz-Carlton Overall, fourth the quarter assets they that we had highlight performance of XX%. While Lake performing months, Tahoe. More property a of record-breaking Hills RevPAR third the like may already number and signs XXXX these are between quarter, urban their assets RevPAR. quarter. quarter we this revenue outperformed more quickly as Collectively, our also all-time are highest during has driven to X% would by XX% a broken records XXXX. relative that and

room village segment, comparable approximately One a the Hurricane was the had was the quarter hotel, Ian the The off total with local million other with A businesses of history Fiona where approximately quarter the during above the we quarter amongst community. record third for hotels nights, Park large our portfolio Beaver to Hyatt successful seasons the was previous net also third the group in higher has total to an to Creek than X,XXX resort XXXX, revenue. record-breaking of component any revenue year. our in comparable group wide increase XX% finishing which of where that which been in impact like $X.X displacement successful XXXX. promote was collaboration initiating highlight team at would total I and on being events had X%

Dorado our revenue million displacement storms, third largest the Ritz-Carlton approximately damage. with in collectively affected Reserve million $X.X the impact most Ritz-Carlton $X.X and had still Pier within Despite over market increase XXXX and levels the property resorts single Ian, portfolio the experienced Sarasota comparable from approximately Hurricane and total $XXX,XXX in Resort tropical total comparable significant comparable impact Thomas, finished House every still Ritz-Carlton Our Ritz-Carlton revenue. in The XXXX. a whose the Ritz-Carlton Sarasota during St. XX% doubled Beach exceeded the nearly hotel quarter. total all in the with These September revenue, XXXX Sarasota,

their and communities. We resilience are to our portfolio’s proud of incredibly support

addition completed restaurant portfolio are In invested the portfolio competitive office we our we uniquely investments Park into investment, converted capital years several have in our to Ritz-Carlton advantage. Beaver Thomas. the over space seeing heavily XXXX, currently our position last These that recently from at on Moving markets. event Creek to a demand to benefit space the we enhance St. the and at in High underutilized pent-up our patio

the of completion nearing guest at Marriott are We the room Seattle. renovation

pool million approximately million expenditures to $XX meeting San in to the million to the anticipate We expand this spending are we Overall, currently center million in converting and year also an on $XX $XX underutilized XXXX. at Clancy space capital add Francisco. $XX and fitness current approximately

out few, of we Villa complete enhance have remarkable the as at rolled Bardessono of While benefits a we as St. such are Thomas several reaping portfolio. the key already Ritz-Carlton to Ritz-Carlton past, initiatives Sarasota to the rebuild strategic the initiatives are in an that new launching the and we additions name already

land rental developing and programs, with of include Some expanding residential underutilized additions. partnerships key these

Stockton. projects With back we heights. will will to team the drive continue portfolio now underway, new to that call confident turn Richard these the new over to the are I

with of we strong path financial in hotels a continue In strength you, are at for results. leisure to by be luxury summary, properties our and trends our urban properties. our Thank we our demand Chris. driven recovery see clear We seeing in pleased resort continued future the

now forward solid our moving will diversified And we well-positioned a prepared This with in to on call open are We Question-and-Answer quarters our a the sheet Session balance ahead. forward unique and We concludes up look remarks. for Q&A. updating portfolio. you progress the

of Please question We Instructions] ahead. from first with Oppenheimer. Batory Tyler our the line go [Operator have

you Jonathan is Tyler. This morning. Thank on taking questions. for for Good our

me question costs. provide labor and and And on color can margin for this margin one the quarter? how compared on pre-COVID multipart First some versus is to a you FTEs

me, am this I operator, interrupt. to Excuse the is sorry Tyler,

to You the you very you. hear a the to come handset use or can’t may well. want little closer Thank mic. We

did I hear it. enough think we of

I the I is that. respond will have question to And think on I Chris costs. labor think

the for Jonathan. question, Thanks Yes.

there certainly relates of to is right. as So, lot labor margin there, a lot challenges a There is of it pressure costs. and

So, increasing. wages are

wages are XXXX is We challenged. up seeing market XX% very The over to labor levels.

pressures the to more having nearly are The are driving cost we inflationary everything labor we than have the up of bought. in use We contract past.

are seeing there. very We lot is utilities. With that There to a of XXXX. to is up increases EBITDA pleased that our to said, are headwinds see we margin

those to portfolio a XXXX. ADR is our doing so ADR. have rate, And despite really them. at and headwinds, XX% navigate in up driving to able on focus been so has And flows we ADR been in our high very

resorts, when great they offerings that are experience. for area hear us want travel our they ancillary to has for pay focus to and been it. of We want great willing incredible these a customers they from Another They revenues.

had things incur. those margin. and the heavy of ancillary are us highest our costs other per of we preserve focus one hotels the and XX% labor our helped two so models. occupied revenues labor But offerings, And and mirrored and we to our Those staffing have And room on a is have up XXXX. is thing kind

COVID very been of got in staffing have a pulled have our through. diligent in We ensuring model, working efficiencies partners we with the those right lot and management of terms identified

are count the So, it Occupancy FTE sits XX% today, of pre-COVID. for at at to of kind portfolio is we XX%.

we of And number are occupancy so kind a positions. got trailing we And rate. that of have open

So, for we seeing even demand fingers expect. But that we demand staffing hired the the selectively we of if still we we have all levels. be our to be open pre-COVID at XX% could we would are and and are positions up were snap of those tomorrow,

And by that doing staffing very we the models. our so managers job managing are are encouraged our and

labor other you to is our move see labor. on so comes benefit now forward have and lot The have think a markets a that right tough, of had higher hotels is a contract at labor on I than That so the more and tight heavily we we market are much used bring as and the to in reliant cost. are contract lot past. and pay we going

in-house come so we able And are to we towards will from savings. contract and the cost away we stabilizes, move and significant labor more encouraged a be labor that that forward labor will somewhat at as move move market

how how original how I or rate a making switching Okay. little on there or And the you that’s there? and just you term? and obviously should Can I internal thinking that are talk you expectations are gears, mean do better about external target that guys Thank – would preferreds, potential for hear hopefully, the you much excellent progress is new longer the all stack your then say. can now. capital preferred of part me about there you gone color cap and you versus a

it’s Deric. I take Jonathan, that. Hey will

we have expire the look, been raise February So, year. capital The with in of pleased capital raise. will next

$XXX a few it. total It on was So, filed only got raise. it’s months left million for

have just under we $XXX under raised million to-date. said, to-date have that we As

So, we that. have with been very pleased

capital what February, percent capital look raise having I the with structure, said, and And in a where accretive us. And source will allowed reevaluate as believe attractive very have for want preferred like it’s this the and been But that that of shareholders. capital great going go in a ultimately Richard of for of forward. we as capital we very think at it once on our to great capital way are cycle. buy we said to some to we to we terms time believe be finalize an we assets able mean we offense the that, I it’s revisit, in a put our of us work are pleased will source

of And you Can how Okay. that. last one, just to the some I the asset underwriting adjustments hotel, to any that there for anything the I Great. XXXX fruits in And in make? the you to outlook about Thanks get on operational for could, of the performance mean or low-hanging acquisition. there then if assumptions are quick talk timeline of that compares the terms and XXXX? and can

let Happy sure. I and will also some comments. is Chris about Rich that. talk to This make Yes,

sprawling running a the is least in very Four The its that’s such one to resort thing XXXX. higher like Scottsdale high RevPAR is about service thing particularly strong Seasons XX% really a margins, the about such ability at this great we for that So, hotel asset level. generate of versus at

over So, sort running that’s been level, production of going historically, at and NOI XX% have the we expect forward. margins the

pull. is of think can even that I that but a – So, levers with number we are there said, there

extraordinary to you to done operations have anything else due an would have performance. further already We of diligence some enhanced like property as add that? mean on I the the amount to and of ideas Chris,

Yes.

that and I we call would fruit we that reposition align. certainly of a in we the are larger share plan initiatives team, yet, as Our short-term this there of, long-term. low-hanging the excited until those of of, it, short-term of But and on will pulling really there don’t but publicly kind been team any number call closed with initiatives for also kind asset then But through. about potential transform is a The is have acquisition. you lot both this And them and the I to is and we asset. the of hasn’t want long-term discussions deal excited

terms mean timing have we on of In close, said… I

by of year. Yes, our close end the plan the is to

all Thank the detail, guys. great. That’s Okay, for you all for me.

is B. Maher [Operator Please the Riley go line with from Bryan Securities. of ahead. question Instructions] The next

Yes. Good morning everyone.

a questions. the couple not Just of quick Maybe is quick. so first one

obviously We some in resort portfolio, Beverly of that clearly are the by addition changing part more Has part the to the seeing of seasonality the portfolio. RevPAR of softness the the Is the Rico, Hills, Scottsdale. urban and/or offset kind soon recent of of be resorts the Puerto EBITDA?

thanks. is This talking. Bryan, Richard Yes.

weakest I as had go think seasonality of through a year. the historically, that strongest to we would calendar progress type quarter from you have quarter

As resort countervailing with trend more of that difficult our see seasonality. than a That a profitable to trend, we result quarter as a said, recovery emerging little be could as parse historically, season a have the for couple are strongly which from tends are festive which weeks out at that fourth COVID, be starting stronger properties, it’s very of bit we us. to we to

think where quarter been be far do has historically. I than see So, you that fourth our it stronger will will

to marketplace on out there on for seeing floating. appreciate Okay. fixed Deric anything level be? how that, is similar you of you and fix what what the And the in the And debt? compel of to all kind more are debt opted magnitude of the materially maybe might maybe are versus that to I side, the you painful one the interest with the comments that seeing we do But spiking cost would if rates

Yes.

our would Bryan, that believe our terms I want a really focus predominantly significantly hotel us the owner, be We look, and also has has historically to painful have think we of change structure that focus answer as we borrower. to be So made question But the I going over the that, right I in is nothing been are way now. are that there little would benefited a to say, floating-rate past times way balance few to our as years. look, when it’s but that’s seeing from a sheet still

credit property So, have that term a do there take that that like converted say ultimately to of one say our thing of horizon I the will strategy change is facility on more that is we and maybe do any would or to I some level from sort a wouldn’t some go level look corporate would We go to we drew level in to financing. loan. and down a financing convert corporate we term of used of perspective.

pricing give ideally, facility loan have think I efficient more to a we be a would term maybe little may a from that a bit credit more and like a standpoint, us little flexibility.

So, that’s I do will we future. look something the to in that think

am a you Thank that And in through a one-time or do we this it Inc. once, you financings you. bit this expense? walk could Okay. might But and but know little And just is slow just to explain a deal did with more lastly, and you layman’s year have in thing, true-up a maybe I I maybe or whatever, more terms. again basic, little again, Ashford if can you more through, Inc.? once bit just this Ashford

Yes.

contribution which has when years the really that So, plan Ashford plan booked that will, relates started through captive the the we Inc. a of raised few agreement the company is And and quarter that back in Braemar based the fundraising that any stipulate the contribution to be if platform. Securities of true-up lag, capital capital across split you the has been raised. that companies related the Securities. To-date, three only percent the cost, really on Ashford Ashford goes Securities Ashford the Ashford businesses, operating will the across

have go that think requires accrual. ahead today, itself have in book associated true-up to that, that We GAAP of ahead in we had will platforms that that. how securities, so that raising suspect look we successful are some fund on that for us over related. those the go time might costs in based operating up their to And Ashford step we And would capital going out. do and Securities those the to that’s will anticipate look share and if to Braemar not then anticipate XXXX, balance And with like. are that securities happen like, what and other I market with other we

not the of that will it’s about time, a it hopefully, a operating something was companies. and So, that one-time bit sort the to rebalanced it we share balance have across out every and costs talk over thing of of three quarter,

That’s Thank very Okay. much. you helpful.

back remarks. Thank to like And End you. have to would reached turn Ladies you. of Over the session. question-and-answer of call the over we gentlemen, and for the end closing management to I Q&A the

everybody, on for on joining third to with we call. us next the the day. call. forward good look again Thanks, you quarter earnings a Have Sure. speaking And

Ladies and today’s gentlemen, this conference. you. joining with Thank for Thank concludes us. you

lines disconnect may time. You this now your at