HT - Earnings call transcript Q3 2019 | Hersha Hospitality Trust

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and welcome to the Hersha Hospitality Third Quarter 2019 Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference call over to Mr. Investor of Manager Costa, Relations. Greg is Sir, the floor yours.

Greg Costa

based to, you, Hospitality today. us which and was will Trust earnings afternoon. quarter morning Mike, good everyone, be call Welcome Today’s quarter distributed conference joining the release, XXXX third XXXX Thank third call. on to yesterday the Hersha

factors results, forward-looking the like risks These statements be forward-looking involve actual the future and unknown Prior would everyone today’s These to with to within proceeding, cause performance press considerably different results, performance as conference financial positions statements. that filings or to uncertainties that detailed and SEC. company’s from other and or factors remind the well company’s company’s I any financial within call may as may contain position. release, the are known

now is Trust’s Hersha Shah, pleasure you may my Neil the begin. Operating Neil, to Hospitality Mr. to call Officer. it that, With over H. President Chief and turn

Neil Shah

call. for Good morning, you thank and on joining today’s us

Jay Chief Joining morning Shah, Chief Officer. Executive Parikh, Ashish me our are Officer; and Financial this H. our

for significant consumer to continue cautious uncertainty lower, resulted has in a near-term this deceleration the and corporate on the to over us trade have growth XXXX into global and spilled political U.S., for outlook lodging in drift confidence, as Forecast leading and impact GDP tensions our remain industry.

RevPAR South negative quarter. only the our of flat quarter. not brought in corporate on remained and Last meaningful in persisted and We RevPAR quarter for we September, in XX quarter, rebound. but positive DC markets markets, for Hurricane third recorded we this a and demand to impact our the Weakness forecast our down travel top demand markets, particularly many meaningfully the six on Washington, showed be challenging to in and margins July August, Star’s to had constructive track Florida. outlook. did the the anticipated June, reflect Of international Dorian

Year-to-date, in to year share, we gateway challenging market flat points for have gained market. major baseline a basis markets. negative of market our urban XXX been but been has XXXX has performance

that are markets coming Florida targets. event hotels these the stronger the in the of notably, calendars. nation’s XXXX. our will convention market be and in confident portfolio rebound segment Most We and is expected our markets leading achieve majority our have In of will XXXX, years to leading South

October fundamentals That the rest softer year said, trend XXXX, on markets. September forecasting for the from for of are in we based and early the our observations

a our outline capital operating this fresh have we morning. initiatives We to will these a few near-term of approach and taken strategies, and allocation

year, seven newly company our drive Throughout acquisitions results highlighting the been South three Florida. repositioned the we’ve the specific recent hotels, seven seven are quarter repositioned consecutive second versus our our driver redevelopment two our hotels. projects for in our to our The primary and catalysts of markets: outperformance

growth million hotel activated in margin invested and weighted assets, event XXX quarter. experience. with the of We restaurants of These guest $XX an RevPAR delivering EBITDA growth basis the average into bars posted X.X%, a rooms, legacy hotels where upgraded points space, we third created added while and

marketplace, these from position future. continued anticipate growth hotels portfolio for These not to respective meaningful concepts. foreseeable the their the our assets only but their We themselves recaptured have within leaders outperformance established as drive in for have

X.X% throughout had XXXX, year their disruptive provided but well, Second, ongoing in XXXX reported a RevPAR renovations during hotels hotels third tailwind which weighted June was obscured strong since acquired These year. average the the of we last quarter. we by the seven performance growth the as

cluster competitive We and strategy. advantages of expect continue drive hotels ramp these as to outperformance, to the they our meaningful garner

occupancy or Cadillac the and exceeding than margins hotels ramp, Key expected. ADR, been The continued was slower but the redevelopment the achieving two to but build. Resort, catalyst, Parrot of have third are Our and prior slower to peak

The Florida, This expense Keys, that second Hurricane the in quarter. beach and Rico production was traveler which in to drawn demand softer Caribbean Florida growth, coupled and value-oriented the hotel resulted South third again in the openings from quarters last hindered this and Puerto Irma. year on in attract that leisure South EBITDA were closed with

margin Adding significant our to hotels They Hurricane cancellations, to over an this portfolio a was and to the approximate across but potential to for these Day staffing for impact, loss fully of million in whose the forecasted occupied in led with assets threat increased path Labor secure Dorian, been cancellation the weekend, our impact. required region. led $X EBITDA widespread conjunction had

pressure At softer and remain the results our are despite hotel above we for in prior this was on sequential projections in impact and the rate constructive to as for year generate able second and on of again the demand XX% peak transient quarter, our fourth market-wide Despite third Miami. the the the Cadillac, Hurricane seeing uptick Dorian, pace growth December. in quarter, we an quarter, November

surpassing levels than be holistic the we markets two we market was in but demand underwrote Parrot last these the challenging able Key XXXX. to the Demand that West, ADR quarter resort Key to the anticipated Resort levels. transformations. peak for South stabilized waned, will property in and remain confident EBITDA when year surpass share prior peak this saw market the capture In recorded the proved But upgraded more we the Florida during

markets. on the I focus in outperformance capital. of nation’s will our clusters versus now Beginning our their respective

in was straight market performance X.X% our the Our RevPAR in third for and points, the September our hotel favorable growth during upgrade portfolio bolstered quarter, by outperforming offering. strongest and during to following share driven Congress growth ADR XXX That gain generating basis generated by comps, a X.X% by three DC weeks at to Washington, XXXX. the transformation and growth, underwent RevPAR star four hotels continue holistic lifestyle Gregory, XX.X% a session St. which

points XX.X% for over quarter. occupancy a underwent our asset growth resulting shift basis of the we leading strategy Hotel, sales the X,XXX newest to portfolio, in addition, in Waterfront the at In strategic our growth, Annapolis in RevPAR

third as market factors will the in of robust comes. believe of poised we market us fourth in is continue IMS and notable lead better overall be during November the new in rest more DC easier of with the without believe portfolio October supply was markets to Washington. continue return one the quarter, Pace the year for elections easier and midterm into momentum the comp our fundamentals the and this less to deliveries, These events, and strong in to a quarter XXXX in convention with calendar, the robust and such

again, growth our by portfolio to the be Demand generated Boston strong points. Envoy Boston outperformed quarter, cluster growing by X.X% ADR and continues to of third basis remained performing third and the driven assets quarter, the The the in XX.X% and market growth. in best one exclusively RevPAR the by and RevPAR XXX during outpacing market our

an we and XX% Additionally, revenue were we capital over with into growing expanded through capacity our from Lookout by infusion of generate assets. our Rooftop XXXX, ROI in Seaport events. this increasing expectations this quarter Results F&B in continue this private to recent increase our department in strong premier

Massachusetts has a And more challenging market will market all QX to to Sox, with Columbia growth holiday with said, a calendar in Boston momentum success standout Gas expect robust in comparison difficult faced long. a October leading we of a causing difficult this year, XXXX continue been this be cluster as for with soft, X.X% compression, year the for calendar. explosion Jewish the shift, us postseason but comp no our convention QX convention for That was significant and XXXX. ADR the Red it

outperformed impact generating the approximately of basis and generated demand the headwinds spot growth South an at the Hurricane increase international The third basis by Despite Grove, market quarter was on for RevPAR XXX occupancy portfolio Florida our growth comfortable Coconut XX.X% RevPAR points. Ritz-Carlton points. and bright of X,XXX Dorian, our during positive

quarter, transient margins in The the redesign these grow hotel to and – which room renovations by points. capture in allowed higher that the attracted success XXX underwent combined basis success a continued incremental at and transformation demand us revenue restaurant, with third XXXX,

ramp Auto high We and the momentum the such After stronger fourth Center Miami is the quarter will Super supported events the and at Show continue Cadillac next Parrot and by quarters, around Convention Basel. February. Art profile softer quarter redeveloped our second in pace weekends, high believe Key, third the in as into demand Beach fourth attracting Bowl the the year, showing positive and

the diverse was as with a the market Miami economy among market. the was convention city’s recently second Philadelphia city advantage demand will growth growing of very highest and first-half strong calendar. our the Coconut a as and recently our in significant job increase creation, of terms portfolio in robust of also the corporate XXXX, base took country in renovated labeled in most a for hotels Grove hotel more the

loss activity December. our outperforming anticipate to XXX at advantage Hampton difficult a comp, last quarter both continue against a busy quarter Philadelphia, with the points rate. generating quarter this third the RevPAR the in Despite take increased our trend the Convention comp bumped set calendar the RevPAR growth We continue did year. group November XX.X% However, Center, by this up into basis with cluster X.X% fourth and occupancy growing will in by of and Inn

sets. City, and increase continue in believe the in And driven Philadelphia, purpose-built will investment we supply educational the of the technology, across cluster media, remain the new sectors outperform Center demand Despite by competitive their healthcare we fundamentals in in confident growth to meaningful City. long-term our

West portfolio Coast, Santa strategy in a X.X% led implemented Barbara on mixed a West favorable to growth. generating September. The Hotel the third of corporate we supply Milo to new loss which allowed Coast, had was during us for face in on RevPAR the Out group RevPAR decelerating our from the newly in rates The drive and weather quarter. calendar performing results travel, the and X.X% robust asset best Hotel’s sales our

grew X.X%, by supply Monica in new be the increase. by continuing Ambrose absorbed Santa share X.X% ADR and submarket, RevPAR a Despite Hotel to captured our driven

Beach and to has directly leisure in continues early weekend XXXX. our ramp Monterey, growth, in basis over X,XXX corporate base. The points Hotel’s registered in renovation XXXX its margin up Sanctuary an groups, And as in customer from midweek our increase led to hotel Resort the renovation

negative market third in remains demand coupled demands, Diego, supply all strong weaker corporate with demand the to with and Seattle, X.X% slightly San new Los Our hotels quarter. international In results. for and Angeles Sunnyvale the in to growth led flat faced and

online a the that have at continues supply impact has to come new Pan However, significant grows Pacific. this on the rate year

be in fourth fourth quarter, Coast will Diego, RevPAR events West these markets will face the RevPAR do continue the will San generated this in citywide of Our quarter impact XX.X% growth. XXXX on to headwinds not repeat growth that in year. This most notable which which

absorption constructive of significantly Los far from calendars our thus remain However, results positive Angeles supply RFPs, with in continued in Seattle. new West Diego, our and San XXXX, group for we Coast in and hotels strong

New York from City quarter, to close remained robust XX% our portfolio registered Occupancy growth the a remained perspective. our market during third toughest as occupancy.

our growth price-agnostic the to was states demand travelers. elevated decelerating which rate than X.X% However, travelers, demand equate and traveler historically not from leisure loss, as more portfolio RevPAR a supply rate-sensitive generated growth, from deliveries, impacted did generating by International business

Despite XXX Assembly, has the best few New month. basis spots several the the this challenging and outperforming advantage taking in the have the years week, there With market demand the been of compression by market bright in a General York, end seen during our quarters points. portfolio of at UN

York ADR nearly occupancy. our New City the $XXX week, XX% for portfolio was at For

suffered. and attempts the with to quarter, our however, to led ADR For push margin this overall, share market declining ADR, quarter decline

previously fourth As continue year pricing and growth to RevPAR supply the quarter. third for deliveries Manhattan X.X% be power. in the pressure across impacted the quarter, were anticipate gate will mentioned, We to ADR supply improvement in higher the and which

Jewish generated growth to RevPAR difficult New The of impactful, October our the be fourth in cluster weeks our when York holidays to portfolio up shift two comp quarter against the first of and last bumps year. of the – were the X%

for leverage. in an our We our I the sheets environment, we for to strategy. margins, began meaningful that to an sale. use transition updated to on leverage capital growth our plan and expectations flows flow quickly cash cash marketing guidance, balance actively and you Before With to by reduction with EBITDA year lower free are to accelerating XXXX expected wanted reduce the hotels Ash free intended discuss allocation several update and our we I uncertain

debt. million With will and the can gateway on private values proceeds pay to to within major we quarters. markets, from disparity $XX sales to $XX two down next transact hotels, or two accretively Proceeds market in be four preferred public shares utilized or net our between these million C in asset the

sales are buyers. that in marketed, in being We’re current for for portfolio you the fourth with international increase from XXXX. we very to number our forward call, We variety we of outlook the for assets domestic look on interest not and with a Depending on an sooner. the may earnings encouraged our XXXX, other of if interest the assets update sharing target and inbound quarter our

also we the XX% will took quarter, asset weighted average price internal capitalizing market when third remain market than below the dislocation our stock leverage XXX,XXX volatility repurchased on back of at During more prevalent. shares extreme trading periods net shares our reduction of the August, place strategy, in focused on was that when value. We $XX.XX, buy but are advantageously a

leverage, alone environment, single-digit several that been RevPAR the quarters a trend not likely shows enough In in outperformance will sustain this has strategy and reduce next pursuing we industry low this a cost also discuss Our for environment will Ash margins, outlook that is our remain. we actively are market-leading remarks. growth. To sales. to our are several containment his in To hotel executing drive

Our cycles in three our successfully has boost sector. shareholder management of together highest team the alignment level navigated can and

confident or our for in are is whether creation a shareholders, are cycle pause. that we over, lead strategies just growth are deploying We to value will we the

to Irma. Over two close after allocating did $X We of in our highest platforms million our assets investments by by last country EBITDA-producing in $XXX industry. the this years, approximately several of assets markets reposition recycling portfolio potential following the our Hurricane we the sought hotels, upgraded most to and of into largest in one the transforming the new hotel highest quality billion to by

place, sector, with all our lowest of at believe strategic yield is our a behind a XX% this trading stock one we stabilization and with CapEx With the lower dividend payout And an portfolio investors. NAV of along disruption ratios this great foreseeable our than in entry of sight. the internal for within X% the reduction more for the us, future, load plans is leverage below in point with

more With to performance, year. in detail our our it over that, me let turn discuss guidance to for margin sheet and the Ash updated balance

Ashish Parikh

and Thanks, good Great. everyone. morning, Neil,

third in mentioned the power bottom strength dollar, top both and we’re to prevalent growth, macro and line during headwinds quarter U.S. of slowdown occupancies drive, throughout which to impacted transient pricing and continued the As and despite line international corporate leading ability substantially the portfolio. travel, a our record the

extremely operating supply this losses while mix strong. as a RevPAR from slowing they significantly Our margins, occupancies of In markets, new and remained quarter new number impacted our hit highs, deliveries. ADR we trends experienced

basis in example, For X.X% margins Neil But XX%. These XX%. industry-leading that of realized York New to XXX margins loss extremely margin as portfolio, GOP leading deliver EBITDA XX% we maintain exceeding exceeding of discussed ADR points. and assets losses occupancy our high

These West greater dynamic dynamics, XX types portfolio loss we on RevPAR is certain in pressure similar Dorian, We it the in from maintain of to all our margin with disruption from Coast. days properties resulted than ago. portfolio witnessed the Hurricane a in anticipated with and But coming ADR, these difficult Philadelphia margins. combined

face at several But of quarter, margin, these was margin encourage and of limiting our that operating in properties. company of third provided to the alignment the loss control even peers. Despite in amongst XX.X% able in portfolio our us margin unique to expansion management remain we the our EBITDA our costs, our difficult highest generate operating labor environment yielding one the model flexibility our with challenges,

profile our defending fundamentals cost market even remain growth We into of muted. property. will cash containment for loss, the our mitigate drive believe at forecast initiatives share our occupancy we’ve focus measures XXXX, As remain margin in EBITDA assets our bolster flow if on growth and demand strong near-term and enacted to markets while the

ways restructuring our to started We’ve staffing property-level been impact opportunities working guest and evaluate reduce identify departments have minimal with we changing the model. for property to out of already operational teams operating all our operating expenses seeking model, inefficiencies, with and experience, to

our limiting to ensure strategies outperform expense these continue we our sales to our while and Additionally, that to we have realigned overhead achieve results. management concepts, revenue

on a operating with structured property for contracts models focus vendor our environment. particular labor such evaluating items, that appropriately outsourced are to maintenance current as and also our ensure labor We’re the

coordination and with strategies unique to utilities to reduce operational continue look at in our and look our team, lastly, at that in continue rooms department And to EarthView we expenditures capital ROIs to costs immediate energy-saving the mid generate high-teens.

margin capital performance at Key. Before expenditures, moving to our and Cadillac on a Parrot spend me minute the let

had quarter, path impact notably, Hotels. forecasted at Dorian’s Key Parrot Hurricane discussed, performance last the our cluster significant on Neil most of Florida Cadillac the South a but As and overall

over to the points at of loss required last in at Last-minute the X,XXX to close increased during quarter. staffing the Key impact cancellations the months secure of margin resulted the two Cadillac basis points of and and hotel, X,XXX Parrot basis

past critical are over will revenues committed As And our headwinds, these operating we’ve to margins on at recent significant in months we’ve incurred period. by slower to remain our investments marketing the The these ability and top noted assets front. and to of calls, driven reestablishing our these expenses XX operational will staffing, operation line expertise properties the on stabilize a and the the ramp-up assets next results. drive than rate stabilize in be to assets light the

rearview look these in we confident we expenses, line a a to mirror to positive bottom at in and reduce with As us at drive demand backdrop allowing full-year in ability performance are XXXX these Florida, group South stabilization our the more of in to hotels. transient

to focus cash large-scale us. initiatives of few free are flow. drive disruptions the on projects continue into behind over management renovation-related limited our forecast years, asset us quarter, the our As capital discussed And to we last next allowing majority

third XXXX. $XX.X versus we quarter the allocated of capital the million $XX.X million to quarter, During in projects third

CapEx, million spend, maintenance excluding capital range million total we deposits $XX XXXX XXXX. including anticipate to projects, be to XXXX, in the million $XX our For $XX for but in of versus capital

calculated across free further reduction of the assets that reduce flow to spending, several ratio. undergone large-scale us have increase, a forecasted is CapEx dispositions our in to next cash our With renovations, and stabilization quarters allowing payout

We XX% our a stabilization as look believe interest recent ratio us provide at disposition, savings refinancing cap if profile. of our payout activities. from below planned assets our our to, the reduce close expense cushion can of even items and amount spending, dividend with These significant not we remain

accommodating active interest been So a appears with we’ve more in environment. rate debt be near-term to the markets what

quarter, advantage of million senior fix refinanced the of took senior we series into eliminating we term market XXXX. contracts the swap strength During and the debt our all remaining $XXX.X million of debt term on interest of until the of $XXX our entered unsecured the loan as a unsecured rates new maturities to loans,

Garden The in in Inn savings expense interest conjunction run Tribeca, Hyatt the we in and Square rate interest savings and term at swap rate loan agreements, with mortgage $X.X refinancing estimated in of of XXXX. XXXX million quarter in $X.X resulted Hilton and second the new our refinancings completed Union million

near-term capacity as ample business flexibility, With the with cash we our million execute our $XXX revolver continue plans. have these and improve we potential to refinancing of maturities, to on our hand

finish updated guidance published earnings our I’ll was XXXX, in release So which full-year for presented with our yesterday.

decelerating to of as XX in October for RevPAR expectations carried rapid deterioration proved markets trends to have impactful challenging discussed, the As Jewish consumer of fourth which logging of be and have with the the top in been and trends the shift corporate for holidays. quarter several into quarter majority We economic September, industry saw markets, confidence. metrics we third underperformed the the

we’re the clusters, the positive guidance reflect in anticipating we markets. Washington, is quarter fourth DC to South and our in challenging Florida of the for revising our environment. are remainder our operating full-year Accordingly, but softness continued Pace

growth, margin our X.XX%, points. range the comparable which and RevPAR X.XX% is basis loss points forecasted now at EBITDA well tightened as XXX as basis We portfolio of between XX to our

We full-year share $XXX.X $X.XX $X.XX million EBITDA our to between range be to be are and per now million. forecasting and the FFO and XXX.X adjusted

call. questions the can happy have. So where portion Q&A, address to of may and any that are We this proceed you Neil concludes Jay, I now my Operator? to

Operator

Thank you, sir.

begin question-and-answer of the [Operator Please And Instructions] first will our question now Bellisario We from session. Michael will go ahead. Baird. come

Michael Bellisario

everyone. morning, Good

Jay Shah

Mike. morning, Good

Michael Bellisario

terms First initiatives to then question – for eventually realize you. Maybe cost the about of just you’re talked saving could And you savings those you in thinking what kind of those the there about? cost timetable quantify savings?

Jay Shah

Sure.

of those lot as a started initiatives, speak. we Mike, we So,

savings all the $X properties, We budgets are initiatives. But to new we not are cost which about yet. the for finalized look these targeting continuing from at a are for baseline, million of

of of will the the XXXX. those enacted savings in and those end be I realize think the majority will year by

Michael Bellisario

repurchasing disposition helpful. your that outlook think can maybe coming threshold you And Got and forward, then the was should of capital of given rationale going of for share during repurchases how we again just and about proceeds in especially repurchases, it. kind quarter, remind That’s door? shares your of for share any weakening out opportunistic us use your just any fundamental the

Neil Shah

We in active XXX,XXX we Mike. August when XXX,XXX Earlier Sure, back we shares. about about were the acquired bought in shares. year,

in the the buybacks. not a are $XX looking million year, It’s than when to XX% discount opportunity for close We a at we But NAV, trading strategy. for buybacks. are we It’s at to more buybacks. clearly opportunistic. target So

year, to leverage in we’ve Now, been cash the flow we also using this focused always our mind. that’s pay Throughout and on debt. balance free are reduction down

seeing authorization As are goal now. help lot been down, is sales in we’ve I stock. one and right expectations of attractive reduce going back think, now there some we remains, continue free to leverage. volatility come flow have our we to our to number as buy we But pricing to pursue the when asset mentioned, cash leverage very markets, Reducing a

have to $XX proceeds sales. million we’re, as a, we from million our in to some remarks, planning mentioned, think I $XX I in were

use will opportunistic buyback planning on debt be for and the front. We pay are that downs to to continue

Michael Bellisario

kind EBITDA you’re sell? we then asset pricing which from sales. And of perspective about how lastly, you’re cap or the and should thinking just pursuing an assets about on How just to think multiple rate

Neil Shah

the less can at we’re sell as assets where Mike, and we’re time, today. contribution trading a to focused this than multiples have greater on EBITDA company portfolio that At

focused joint venture We’ve in in We’re focused lot on some City, assets. of Miami. some inbound York assets interest a New on gotten

so in assets $XX assets, we’re proceeds. portfolio across mentioned two We’ve in And they’re million select $XX to remarks today. to our four the targeting that million

the on market, particular, market, has Depending not less very that year, market private for increase the outlook in is And – acquisitions our next there robust. we been – could the is there’s of to kind for urban kinds two, acquisitions last on a year leading demand gateway and high-quality available hotels that’s of market pent-up or lot the of those the assets. from buyers for

we being that’s what’s attractive leading and So sales. asset us more to it very see consider

Michael Bellisario

Thank That’s helpful. you.

Operator

And have the Jefferies. come Katz we will question David next from of

David Katz

Hi, good morning, everyone.

Neil Shah

morning, Good David.

David Katz

one underwriting conservative you’re to that for question, the in is just upfront. appreciate to some Neil, to gave one I it just the to a and or – leave you sense How both wanted how way you that And like all room of about suppose gave what the for? of that’s guidance, upfront detail, guidance? get I I that ask I you does clear looking downside, what scale to of five? the I’m you ask

Ashish Parikh

both line results that slippage. of December, for July there our now. some are we tried remainder has October gave We in we definitely we’ve of for as have and back to And we then David, right those only months November and it for looked forecast forecasts guidance accordingly. adjust the seeing our initially at been top

certainly are couldn’t there have ranges it these back stand these we anyway guidance are – the set – think numbers go to that to don’t that in the to downside. I

trend results will as we so market in, travel be line the booking sure the volatile and at reported. so now for top just think right would looked is that window our I we October and

David Katz

just asset we I parameters. to But just sales might about we talking it. order on those Got timing some in of how know And the might you’ve be talked about? when and magnitude and big

Neil Shah

year. to to early hotels faster the David, call two if release will sale a provide we We’ll quarters. able year-end hopefully the we call, two by more our accordingly. next an And four next for bit update little within be of make next quarterly we’re progress, Sure. targeting

are We’re contributors, metric. focused trying today that assets EBITDA debt-to-EBITDA significant down bring we the on aren’t because to

we multiple, today. And low so focused assets EBITDA high are on

of by matter, all I think our as values Los well that as the the marketplace, New York Angeles. processes strong the paid of in Miami, the very – sales as of in some our City, private there from markets is in seen market peer in being you’ve for companies,

smaller this $XX so focused that million on to we’re $XX And million but so can hotels, release at or stage, proceeds.

preferred C has coupon is and X.XXX% – million Our tranche $XX of preferred is total. of in a

use Our first and step to accretive clearly would to pay that to flow. be that cash is down, proceeds

to offers well. interest there of exploring – are are planning get there we have – Now, larger don’t we we stage, inbound more continue this But some and and we how months those see of believe on on next that our and EBITDA of across to that next assets of flow at kinds can two as not what year, we’re execute sales. cash flow level we reduce four can these debt turns how assets much organic cash couple we’ll just the transactions. these But in world those with expect to

David Katz

helpful. very It’s you. it. Got Thank

Operator

Kelley, America. of Shaun have we Bank Next

Dany Asad

Dany Asad on actually is This guys. morning, Shaun. good for Hey,

you those given particular of want market over transaction health each is are of other you’d to asset one today types but already, given on are one and have today? you targeting it question. asset what you performing, of detail then, guys that And the there type? or Are follow-up lot sale full sell limited the targeting service is Just So service? how a reason the a the specific is any

Neil Shah

exploring two to that service, two we’re two they the are on are Dany, four full today, are select service.

CapEx the really is the for multiples driving so private market were we what’s assets, segment, on it’s if it in we a call can required, the hold be And outlook would assets to York it’s for the not how get very we York grow year. New on in to mixed hotels City. and for strong make more. New our still bids geographically, to for And next And them try is see the much

than probably portfolio. we are more in other our markets focused So there

Dany Asad

totally Okay, fair. that’s

my follow-up. then And Okay. just

this out the since initiatives on next the across have if are how – balance so morning So you margins sure do call, to like saving your thinking especially making – about between you those and protecting year, do two? yes, have occupancies we’re resources high protect that and you deliver cost laid it you like guys and how the portfolio, adequate

Ashish Parikh

Yes.

Dany, Ashish. is So, this

So guest that facing. would things we targeting are be really

For our housekeeping. focus those looking in program, instance, services energy, ways on. as to at even But to really that it focus comes on guests several and wouldn’t would the I’ve chemical It be mentioned and my when to like laundry something it water, looking tapping scripts. something our use, relates at we’re things especially EarthView items,

to more Also managerial revenue ways ways comes on to to those to front looking as to consolidate positions property management, position, ways it desk. property-level comes marketing, consolidate allocation at cut sales and down and as off it

looking there. something we adjustments plan guests of necessary time. lot new. So and at – certainly from are all impact work containment the items directly managerial where won’t There that work, is from will some but not cost on staffing a the this be We it’s

little in an it’s just environment, its think that. bit unique more a I

shop. We’re any not demand seeing type of

seeing occupancies loading. not We’re

we feel cycle these you you look very opportunity. at costs to have can this today the good So guests. where in are new that in really impacting deep about identifying And without we cut late ways

Dany Asad

Understood. Thank very much. you

Operator

Ari have we next, And BMO. Klein of

Ari Klein

And us just there? on timing asset when expect on following maybe your you update you to and maybe about talk Can leverage targets question. Thanks. up get on just

Jay Shah

Sure.

four the kind metric. five targets debt-to-EBITDA of to remain times leverage Our

Florida greatest ramp to – in of that to going is our that be newly – the particularly of up as the repositioned We the line continue bringing trends South assets, ramp the and contributor assets acquired they newly up. we to think kind

of So is there. way getting the growth primary EBITDA organic

spending calculated. far, in we’ve future. CapEx and now XXXX so discussed And and reducing the we also foreseeable for We’re XXXX are as

property bring calculated considering We’re also in. sales to that

we we how years. But really they Obviously, couple We where get believe think by how it there we the we we – robust are the can there. have of within is we a XXXX. in or in have that there are difficult believe that ramp can believe we’re depend markets – think sales XXXX, we we portfolio, the pay the with downs planned considering, and with the that get up property on does

Ari Klein

been just And to obviously, turning York maybe New challenging. markets, Great. pretty then

can XXXX, what that positives And and a how has – quantify any year-to-date? you year-to-date EBITDA much that had your you market there on kind of EBITDA As margins look drag maybe expectations to see? are then you of potential

Neil Shah

I’ll the first it. part take of just

York the the there next convention in continue New are big and increase to of a some the to in market. that had York. of is there in expected XX But mean, it we outlook for for to comp to next for there’s room kind good as market. there in challenging. Just New look New quarter, think fourth a convention be quarter Convention tough we it next forward we nights We and never year, going think I is York year, But Center as XX% signs is growing year fourth the

and shutdown and the The with be year then big to year, challenge – of it transient in uncertain. corporate fall, less we’ve the issues. in with had the the started middle uncertainty and the trade year of that is We But – demand, government next remains expect throughout a obviously, we into the year. drag New would international we’ve we this York

The York, international in New not been that of strong demand impactful next has year. dollar be a to we’d much highly sharp as reduction and expect

of And penetration the demand New hotel it in equation so there’s it But primarily, supply the of new there. continued is of a lot of some confidence. a space. supply, side short-term rental – little that of York, just of us It’s some just gives supply, the the bit

still We supply do expect New year. new meaningful next have York to

We’re thing – one very be hit to that. year, we XXXX. about and similar X.X% really new coming. our growth where similar one it’s we it’s submarkets. is to growth believe single There’s This the this where of in it going year, year supply XXXX every around fortunate supply had that, is just finishing it’s

assets, looks isolated next Manhattan, to but side it District other do and have be have also a submarkets be of Next grow year, the bit some little and the more hotels Financial we other able year. to also should where that far in we west

to one be New a about. market table year consultant as not that the think bang forecast to little a are and mixed the But expected we continue of better year. according than to this it of York, we is next ready kind to

Ashish Parikh

New EBITDA the to at midyear fourth our asked, and to that contributor contributed how July some look adjustment. from in guidance from four, of attributing in to about just York quarter, the a just of to had – softness end of and guidance take this we’re quarter our of how you $X.X if EBITDA third a And million add much you was what a guidance? adjustment – So

Ari Klein

color. great. Okay, the for Thanks

Operator

Maher Next of Bryan we Riley. have B.

Bryan Maher

morning. Good Yes.

we the a at it admittedly But and results it Is Can XQ certain demand? contributing after clusters in that? what to you to now it Is impacts? expectations? XXXX, factors think look in Is more talk biggest when our reduction are to lower So, the have supply? uniqueness do quarter the third one-time them. Europe all you

Neil Shah

that But supply dealing of in years. softness we we for Sure. several and see been elevated into visibility upfront and pronounced. these more kind of Bryan, have I levels in supply much kind markets gateway does we’ve can – predict the global the And with of it. it demand we last can make any

international So we really has And biggest corporate the demands. that both it’s been of impact transients demands. softness would and kind say and the

how You might changed. because We if be at our market XX% least lot you’re and to or to short-term there’s is, of the in say, sensitive, transient. corporate try being be more more are has XX% alternatives. But XX%, used willing and price York, New more rentals able a much XX%, at much to these on that occupancy mix count could days leisure they other mix

a believe demand So we do issue. it’s

in this of trends that international segments. demand. soft positions year concentrated been two highly those by And major gateway driven have in markets We has a for year are corporate urban very kind

Bryan Maher

is think I out prepared your having RevPAR is basis the impact. provided point the on it you a you last know of year? when convention comments, to much for then next haven’t And in in Okay. thoughts your How calendar. healthier But release that to mentioned an you’d XXXX, night your uplift both XX guidance for XXXX.

impact full I think calendar? of it’s because point a to RevPAR the percentage

Neil Shah

it’s I compression – mean, to a point, the it could a think in I leads –a be point. percentage it markets. percentage

I of number historical this, has there – of research lot has As lower of been compression a and XXXX a and on discussing, we’ve think than been just a been levels. but nights significantly lot there’s

some markets, that hour And of be of an calendars is these new in supply convention the it markets. and some could

a As XX% room we there’s Boston, Super Los And also Bowl. over next just projected doubling, Miami through of forward nights, nearly run in from In our the nights convention space. is Angeles a room increase the XX%. convention just look I’ll to XXX%. not markets. few year, up nearly that’s

Convention lead increase the Super there’s that first year, very strong. does The to throughout But significant booking. also be quarter in the a Bowl Center’s

As been closed for the renovations for you Convention Center had know, years. several

also is New DC York, XX%. I mentioned XX%. up Washington, earlier, And up nearly is XX%,

our we So some And it’s that some improvement and meaningful transient to really that if performance lead is there can and believe in compression. lead demand, could something that be corporate markets. that in to international could significant

Bryan Maher

you Thank Okay.

Operator

Bank. have Please Chris go we Deutsche Woronka of will next, And ahead.

Chris Woronka

know the little Hey, guys. hotels? performance in you bit What independent good about them a at a quarter. few I mentioned of morning, asked your

and XX soft brands? some the markets, lot you have brand affiliated feel product total. that hotels your if are that’s that maybe maybe really, soft you a think is the as do question impacts disproportionately of with of coming yet I into in not

Neil Shah

lot we’re our always our on work so. looking and But just of think them. all these the Chris, hotels. to always knocking can’t all – We on make brands I are put their hotels we a door soft think math don’t on the of of about brands at

for is hotels many we hasn’t and don’t EBITDA – it hasn’t hotels. sense – adding a that believe make help brand they lead those that results soft have But it our good collection – they We on and can autograph been to pure productions. independence,

– – Our where in or out a But and beverage. are limited that of we’ve with a we are food lifestyle kind independence of leased destination great hotels our food design purer of kind beverage smaller kind have and either hotels in and they positioning. neighborhoods independence are with of

we’re better RevPARs of than drive, margins. And better not able also so generally our to only but hotels, branded most

last has – is growth the portfolio to independent part for of the several continued portfolio. the Our be years highest

of continue we faster these so –it’s they that of other hotels. significantly – $XX million of grow soft It’s And about they don’t are independent – EBITDA our than portfolio. by to from to I the We believe believe million brands. think that will about we’re $XX impacted can the on that they growth generating rest

sales in to opportunity that set we a buyer an hotels of to new handful for or market, some the today. And provides we reoriented and hotel, think well. actually independent well of because kind they and But numbers they big so are considering are transaction branding a change it. of positioned so do a consider An as discussions our it

Chris Woronka

appreciate initiatives then And the cost for I color. Okay. the a just on second.

a, aren’t a kind about as cut, expected. costs because you’re are guess, I’m I considered to kind that But break coming as trying move. be it. making of of that like commentary of this I when sound that, the I there’s doesn’t lot viewed know guess, if is these to call times a a – It cuts cost versus XXXX view a, revenues glass don’t need Sometimes, square through

you we these it’s that we’re done do is how So things are deeper just or than kind you jive? – that That being something had, before that? in wish you of maybe retrospect,

Ashish Parikh

execute is Yes. operating glass we just at wouldn’t are costs.. environment looking Chris, we I late to as I much as a it we’re mentioned, as always cut as characterize and different not cycle. this look, – break And ways and the

at not and those occupancies forecasting to all. occupancies significantly, record we’re if drift running down are We

our of of just our more point, of going some reevaluating new of all that that. where just we’re you’re can at kind sort initiatives focusing zero-based So and of on we this budgeting saying, and to budgets time install the

we’re the expenditures, capital not at less acquisitions disruption, less in market have we really time. As this

are the up we if we’re remains focusing really challenging, all right look, increases. that’s occupancies and our How we now. focus do on, property tax insurance hold margin more still So seeing increases, environment? maintain mitigate that And to kind rates of

Chris Woronka

for rationale did accelerated think out, get you think there, quarter.? here some the me, have realistically do have lastly, mean, enough. why from reduction I program you did, now an the the it’s the Fair for share more leverage what to sales. committing you I reduction. regarding then on would totally assets third straight or in And and be, that repurchase, you guess bullets much left pretty question – Okay. you you’re just

Neil Shah

in for not one. could Chris,, No, left. we very we significant withstand of in basis, we that test cash reduction. And company then our debt downturn secure believe we bullets expect, – strong This portfolio probably industry, it. have a still pressure the very one we’re We on but kind But a our we we a are is prioritizing flow that dividends.

opportunistic And in the will market. buyback so be continue we to

I strategy, sell opportunities think both. that we as we our reduction continue can to we but will leverage buybacks to find believe we do with hotels, balance

Chris Woronka

Thanks, Fair I guys. color. the Okay. appreciate enough.

Operator

Next Anthony we Barclays. have of Powell

Anthony Powell

good morning. Hi,

mentioned in you’re that a some few higher of leisure You customers seeing your times just a markets. mix of

strong. and airlines travel leisure pretty at industries Now trends variety across a when they’re we like look of cruises,

you getting customers of way hotels? your any So leisure is industries of at there more these better a or a the for job of out pricing do

Jay Shah

Yes.

able That both opportunities. been compress look continuous in confidence I have to is a the – some and will isn’t peaking and those that, is of and a as Ash supply increase. tapering us mentioned, market into supply be as Neil consumer think bit haven’t this being has next gives price always That across actually in think I portfolio, is – markets our I what XXXX think shopper. more year. there will because we And be of meaningfully we our said, is

higher are a they demand fundamentals have. The growing than rate at

that in a able able us nights we’re coming narrowing be compression for year some between to seeing delta put traction. And supply be gives to the demand. our more And and pricing to markets confidence the so and have in power drive

Anthony Powell

Got it.

rentals. some City industry times a coming the more a a talked for to referendum a short-term there. was in the regulate There yesterday a years? And Okay. as that bit in method over that few the you short-term you about resulted also see new restrictions about Airbnb rentals Jersey Do

Neil Shah

we’re don’t regulatory I there’s clearly these Yes. what – hurts specifics a think seeing around sensitive the method the it the world to well Madrid the know rentals this cities really over in don’t to just housing – like markets, only I as are that U.S. cities know I hurts or not it of affordable kind really been and all more and that. market short-term as distressed to in but in hotels, rentals Europe leads But major

same think, kind time, I there decline. more of part so And the just It’s of these of alternative are their in and the the leisure growth likely rentals to more customers will – continue rate – short-term at is getting they mind.

it do impact, And of all – still all significant further is of very of in and in we major these markets. and today than it there but comes kind think in in terms declining real penetration so it’s see today. it’s We – in gateway of up it our most of that of urban markets we’re

job this regulations and across we not it, the either to point Monica preventing gotten year, are having other strong Santa not see of that next very more they regulate hopefully very kind we’ll regulations of performance cities enforcing And there. a are enough, you good more see But most – that. yet. haven’t of done or has for

Anthony Powell

bit more just more, like think impact markets, less you has a seems do this let’s been rentals XXXX? the short-term there to, So impact or in the because say, or relative year this it about has year XXXX of of the been some chatter

Jay Shah

Yes.

has think customer. more, also is little again, less down, this especially transient with corporate have leisure that we function growth the I impact more that in this And but bit was think a they’ve a significant. the come rate these markets. penetrated We

to leisure looking the at price-sensitive, And rentals market. having leisure market after we’re alternative. go as are the then So because short-term an they they’re

Anthony Powell

you. Thank Okay.

Operator

Davidson. D.A. have we Next Barry Oxford of

Barry Oxford

guys. Thanks, Great.

guys new Coast far little talked very the maybe you online Europe. Can XXXX? you in supply see But us You product referenced out or those markets as firming you color nicely in see West you up issues also do Seattle. there, give a as coming the in that particular, about and the kind of

Neil Shah

a Hyatt on Convention room hoteliers. significant before particular, Seattle, biggest that was in all that was X,XXX year impact was expansion Center’s In a last that’s had complete. and Center Yes. hotel Convention opened major the this late impact very It Seattle opened the

really that has so impact significant been year. a this And

by be given been absorbed market. We strong expect the next how demand in that has year, to

that But large, still do. geographic in in as are a play Seattle. there of open couple will markets same in do as nearly but said, we are They XXXX they hotels not that the

in side. be don’t impactful of supply So should think supply Seattle, challenge XXXX away, it less it’s we the the than kind but going

West Diego new a the with started mentioned lot On Coast, well. West just XXXX LA of San I you Coast, had supply the and in as

we some seeing San But XXXX. Los we Diego, still and have service select Angeles and are space well, Diego in San in online the new like Diego supply Angeles, We in – coming in next year. feel it’s Los in San

XXXX those So we would be some West consider to peak new markets for of supply on the Coast.

Barry Oxford

switching talking type What CapEx, from substantial Great. about see spending you gears, lower think And we’ll CapEx see reduction of were reduction quite do then when XXXX XXXX. a the from you XXXX? in to XXXX we to

Ashish Parikh

Barry. is Hi, Ashish. This

Barry Oxford

Yes.

Ashish Parikh

in forecasting now. any CapEx. increase are we not Right

general target XXXX. CapEx same probably So in of level the

Barry Oxford

Okay. guys. Perfect. Thanks,

Ashish Parikh

Yes.

Operator

for I management any Gentlemen? the now Well, conference then would turn session. the to like at closing over conclude we back time, team question-and-answer the call this remarks. will to

Neil Shah

us lot of any today. rest additional and – a you. to ring to you, directly the the are you a you by Jay, I have have questions. the day, please for give feel time of office. everyone, here of calls your free for standing with I but at thank Thank Well, Ash know go many

Operator

to time disconnect At day. again, everyone. has Again, you great this of time, care, thank have your and conference concluded. lines. a call may we rest for sir, now Take also today. you, and the Thank And the team the you your

Hersha Hospitality Trust (HT) 6 Nov 192019 Q3 Earnings call transcript