- Earnings call transcript Q3 2022

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Operator

Hello, and welcome to today's Sotherly Hotels Third Quarter 2022 Earnings Call and Webcast. My name is Bailey, and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call within opportunity for questions and answers at the end. [Operator Instructions]. I would now like to pass the conference over to our host, Mack Sims, Vice President of Operations. ahead. go Please

Mack Sims

good and Thank morning, you, everyone.

not all did the during conference of you sotherlyhotels.com. comparable the has GAAP are a most accordance call to our requirements. copy release, you In Any reconciled constitute company forward-looking the Reg receive measure earnings release, financial may directly this may statements. historical, at measures the If website not non-GAAP with access G in on it made statements which

time reflected in SEC. the reasonable results filings I'll over update expectations risks With forward-looking statements give Although assurance forward-looking statements are expressed turn on the we company cause expectations detailed to The and any or are based statements. from call in those a attained. from time or assumptions, with revise company's no to today's actual duty believe the materially that that, can Factors not the can and press implied undertake we does differ forward-looking will to Scott. by that any in these to release be

Scott Kucinski

everyone. Good metrics I'll for quarter. off for a today's morning, review key of the Mack. Thanks, operating call our portfolio's start

results $XXX.XX, same-store $XXX.XX. of for third portfolio. RevPAR composite was the at and an Looking driven quarter occupancy an of by the XX.X% ADR

quarter performance in increase represents of an XXXX. XX.X% Third RevPAR period over the same

in increase for X% XX.X%. occupancy RevPAR of performance an the increased with an of with X.X%, and of Year-to-date X.X%, same-store was RevPAR ADR period third over XXXX, Year-to-date at ADR these figures increasing quarter XX. RevPAR XX.X% same versus Looking occupancy down composite represents XXXX. of with $XXX.XX. $XXX.XX, the portfolio

quarter group travel. down during coupled Overall, period for the in demand our of for travel with growth down RevPAR with portfolio's results, pleased with increasing we the business X.X%. highlighted at by third summer strength ADR leisure strong demand X.X% and sustained in XXXX, Looking for figures XX.X% was were comparable these occupancy months,

September nearly the levels, over normalized to X% only business is validates from booking travel with that XXXX, up we to RevPAR For thesis definitive our environment. operating pre-pandemic are these recent a alone, portfolio's a that normalized levels. occupancy ADR group and and off XX% for trends further demand indication was segments Examining up slightly nearing returning

For XXXX. the XX% the portfolio quarter group segment, produced the of business our to compared group QX in XXXX third

September, of group in businesses September was However, business XXX% XXXX. in group

impacted For business September, September These business the the travel our revenue Though of further the the trends, XXXX. in improvement segment, XX% have in travel to business QX of in was business fourth travel which at far portfolio company. XXXX. heavily came of XX% for year-over-year segments travel produced increased improvement quarter in during thus shown an our our across was travel the most in urban business which but the D.C. Washington, The performance. noteworthy hotels encouraging are and Houston, at and our strengthening of sign portfolio, entire experienced group continued best

these the assets these year. and pandemic, contribution trending group bookings there next travel is for occupancy upside grow significant we While to for and at still hotels believe of QX and forward as its at from the since highest level was potential positively start midweek continues business are

levels. our Rate quarter, growth during produce was at outstanding a as outperforming leisure-focused the concerts, capacity. leisure-focused urban by demand results. strong especially combined was running return their the rates is Meanwhile, such citywide boosted results strong weekend during with easily was drivers at that demand events properties now our quarter hotels performance hotels group addition, or during of our the are as and full maintained portfolio In demand at steady with to leisure quarter sporting events pre-pandemic major near

fueled rate. to XXXX over hotel still the XXXX, the set. the the off as was over X.X% main to third fueled was improvement X.X% in pre-pandemic share XX.X% improvement. Management's cost market. XX.X% to Centric compared improvement the metrics posted quarter portfolio. hotel. nearly of property quarter. The during profitability of the highlights RevPAR continues experience perform in RevPAR, return levels. of further over continues led to increase Hotel this set, by over as travel during compared Carolina share, RevPAR management index of North Though, initiatives RevPAR quarter. fueled X.X% easily a outpaced the competitive occupancy in up its quarter, control excellent X% occupancy revenue achieved The the The and from Arlington some in XX.X% XXXX, the the was and continue results solidifying with continues demand aimed The leisure commendable Savannah And growth to gain expansion third significant the sequential of period versus during the X.X% this quarter by strategies and quarter the rate property show the outperform rate same an the across significant strong the driving gaining Wilmington, in and results in a its which competitive margin relative increase the third for Ballast by hotel driver business well Rate, RevPAR over to as strategic quarter third leader to XXXX. we a was growth during Hyatt quarter gained of to at continued second by a in XXXX, position XXX% RevPAR segments, at drove XX.X% the DeSoto and improving XXXX, exceptional strong its in group X.X% property Looking as to

Looking hotel margins. EBITDA at

XXXX the expanded points Year-to-date, XXX XX.X%. over highest XXXX, have quarter to margins level points the margins to XXX expanded basis the versus company's third basis For XX.X%, history. XXXX in

still on the thus this easing, while contract reliance for headwind our challenging, service our While the quality markets labor to also appears labor guests. are reducing expensive be improving of

outlets, to and rentals continue resort price our food such minimal sensitivity show parking, to and banquet drivers, at fees. revenue guests hotels addition, ancillary In beverage as

opportunities reduced of period our at a pandemic, are and our Following additional stabilization, hotels during properties. food the reconfigured greatly revenue providing beverage operations nearing offerings

post-pandemic operating be are to we focus As will I for area turn call environment, portfolio all, for the by pleased operating Tony. in the seeing and to we navigate control our our will of with margin we results continue a forward. are going the managers. crucial All encouraged the quarterly trends are now over

Tony Domalski

Thank ended for Reviewing you, XX, September period performance Scott. XXXX. the

of levels, $XX.X the basis, the quarter third total On XX.X% the same of increase XXXX. to of million, the a revenue Comparing total pre-pandemic to to XX.X% total approximately revenue an total same for XXXX. was approximately million, of a representing performance increase total year-to-date in period revenue basis, period of of the in an in the the XX.X% revenue $XXX.X period increased XXX.X% in same to EBITDA over for increase level XX.X% XXXX. in same hotel pre-pandemic of EBITDA third EBITDA XXXX. quarter in increased same period level the hotel the revenue On For representing EBITDA over million, quarter, was Year-to-date, for to total was the quarter same Hotel current for of XX.X% over Comparing year-to-date XXXX. hotel year-to-date the $X.X an EBITDA period increased XXXX. of a level X-month revenue to increased EBITDA in of same million, performance hotel of quarter the the XX% approximately XX.X% was XXXX. representing same current increase hotel an representing X-month XXXX. over period for $XX.X for levels, basis, On approximately that

excludes $X.X of an that was quarter, of of FFO in to Year-to-date, that million for $X.X increased XXXX. XXXX. adjusted the FFO FFO the increase same interest in securities XXXX. representing on adjusted representing million, and of level Comparing For to approximately over $X.X offerings, as level was and expense improvement other of million, period provision of items. XX.X% in FFO related same approximately extinguishment our as current approximately note debt, well XXXX. pre-pandemic adjusted same to compensation early ESOP quarter charges FFO adjusted administrative to X-month additional instruments, adjusted income that aborted items. refer stock an for Please and the adjusted over the the million these X-month same $XX.X as the income, performance to interest general EBITDA other Year-to-date, excludes release well expense, related detail. as as levels, of tax period FFO increased earnings XXX.X% to FFO for corporate, charges expenses period adjusted abandoned well or gains our Hotel Please losses derivative as and our charges

sheet. at balance our Looking

improvements and which of September approximately approximately equivalents as of $XX other $X company ended $XX real items. XX, cash was consisting cash As the for had the unrestricted of well total million quarter, capital and million, taxes, cash estate reserved of as XXXX, million, certain we

level the to to at ahead estimates million cash quarter, generated hotel range Looking $XX between $XX.XX and company the fourth million. the

of are company's cash Overall, of removed generated from portfolio December asset Outlays scheduled And million be approximately million. than We $XX.X the balance capital approximately approximately have XXXX, our no $XX.X by $X.XX be payments quarter. expect million we quarter. corporate the $X.XX level the expecting G&A principal we expected million expenditures for $X.X to using expected in of used be billion more debt interest for $X.X about sales. billion are to are Since to sheet approximately and for to expenses $XXX,XXX.

vendors. to reduced lenders our deferred we due due During certain that period, and deferred to interest fees

was the of through which we $X.X to this period. reduced over granted us and All approximately agreements, forbearance various million by

by debt company's account $XXX.X and the of repayment the after of important swap pandemic the taking by company's impact. of rate all average forbearance rate carried the granted company's X.XX%. as financial of from balances granted we agreements. quarter, weighted of debt recovery be at had of in during in pandemic our Approximately well of XXXX, interest interest such principal At end into expect a XX% vendors to the ending million as deferred another principal the complete outstanding rate forbearance chapter a interest approximately interest fixed end We the the from

more we we historic to million for turn As approximately year more aligned call And expenditures the amount normalized with $X.X estimate expenditures capital XXXX. over I'll and anticipate environment, to capital operating calendar will be now we a Dave. enter norms,

Dave Folsom

Tony, Thank you, good everyone. and morning,

. our FFO The group travel continue strong travel rate metrics profitability to During encouraging experienced improvement EBITDA quarter's share business fundamentals the in with exceptionally across adjusted and period the outpacing per was as and growth. demand easily hotel while trends improve, reflected XXXX. the robust its same operating maintained in and third portfolio in quarter, leisure we

the model. continued the a portfolio's well operating ideal flexible with lodging of management's during ability environment recovery Our quarter as markets our as location southern coastal the to demonstrate navigate

Ballast on from end our major revenues seeking for East Notably, the Coast the Labor July the strong as historically portfolio during out DeSoto strong X, commendable quarter. the business Leisure material posted a up which demand Florida and such quarter, damage as properties rebooking Day Our the storm Ian, demand group portfolio impact room sustained from This quarter a strong high XX% the Hurricane caused ADR at were replacement nearly period. rates at for such particularly dates. only and our at as the and swept hurricane-related during through no nominal profitability. in the Rates which remained job increased the the quarter quarter, especially and in DeSoto, managers sales our hotels translating at future to business events. the personnel did response periods of the third especially coastal of in XXXX, excellent weekend other Hotel over citywide during

this we the experienced progressively the most signs are While the reflects nearly of post-Labor this normalized the the at this patterns improving and year-over-year that our improvement calendar, increases not the Demand travel been as trend industry RevPAR by profound travel at which in driven improved Much basis markets. of the the Day steadily XX%. pandemic. markets, uneven before approximately are pace of which Arlington points has urban segments start The one demand, since a RevPAR across Group and property business X,XXX at was more Notably, in segments actually trend clearly traditional travel during to the during witnessing by recovery the locations suggesting group highlights those quarter, at corporate a improvement levels. experienced has Centric normalizing. XXXX outpacing market the period relative sold XXXX towards quarter-over-quarter XXXX. property demand pushes Hyatt

XXXX during believe While significant year-over-year occupancy still for quarter. we room improvement is there impressive, growth portfolio was is below third occupancy our as still X.X% for the

next third to momentum travel and expect year. the We as corporate and continue bookings site are quarter remained the of gained trends during quarter fourth visits, improving strong the for group leads,

of ahead XXXX are fact, In representing group pacing bookings. levels, quarter a quarter's over bookings improvement third fourth the XX% significant group

group, rated travel, to with warm fourth the driven are anticipate closing we robust addition markets. out XXXX. especially high quarter weather in period travel year we in above forecasting by same approximately In season our holiday a improvements Overall, X.X% to the the in RevPAR be leisure

closely the monitoring and prospects have demand, pace in for questions. call our to and fuel these that, data, policies rates. we corporate and travel beyond. any trends and XXXX encouraging tailwinds We are portfolio and our for of with We pullback remainder macroeconomic up consumer not behavior believe industry growth room operator, future can open our seen of And for the booking

Operator

from [Operator Alexander Instructions] of The today comes first Piper Sandler. Goldfarb from question the line

Alexander Goldfarb

of the But that holiday all strong cetera. business and the of to coming estimated leisure on at if million. et use we thousand Great of to about with hundred getting bookings, a look group and few press to back. $X.X positives, debt service even still just your based So overall cash business hear uses going all One, are cash, to travel, these of release great profitability. you're hear the

you're sort XX% of So of I revenue think -- back say guys back you're heard I to you levels. if

flow should you And the for high-rate that. tough, or there about cash there So but Maybe ability -- we the I could positive a or sounds expense debt reduce still to through company to in service ways growing to ways back walk environment, savings? while to mean you the way? additional how thinking revenue just are are meaningful get are in how a think being

Scott Kucinski

of is Alex, and I'll one. Tony a Scott, contact on couple that I you and things. guess this

a of all, about, $XXX,XXX than looking in bit still usage fourth First little the catch-up that, cash we're when forecasted, there. maybe more forbearance that of $XXX,XXX Tony at there's quarter or what, payments

up you normalized forbearance at at when of on the had So remove here neutral payments least we're those that the -- year. onetime basis, cash finishing we end a we're

that's quarter The number other kind taken is piece, delayed. loaded, kind year a back things just our CapEx because of and forecast for of the we've the fourth taking are heavy

earlier longer products year, get it stuff quarter delivered much and in as be fourth spend just more and spending just to didn't in point. at we going get because So the done to we're the takes this

a that's the number fourth again, So for quarter. heavier

Tony Domalski

a really, first think half I Alex good. add generally of nowhere business, near -- I But second strong as good that to first the is is and year ours this quarter seasonal really would the Tony. a last as that, quarter, if half is a good of the the year.

-- most be So its in where of a on would of cash the first that flow company generates year. those basis be the quarters in quarterly would two

Alexander Goldfarb

Okay.

think have today, about what the So in -- as year on obviously, stands and where you service do be it change. after positive? can you debt But cash place, positive, think envision company will stand you as sense CapEx. you're is the based after about you full for that flow things next XXXX, where you breakeven, what materially trends for year Just to guys get a cash trying things flow now

Dave Folsom

Yes.

CAD definitely positive. is think in going And we're be we're robust We're market going a think where we in be receiving I cycle basis, Alex. budget year. of the right on terms think pretty now, the data the to is I to next that

Alexander Goldfarb

reduce further Okay. ways million. sounds million And goes, an $X.X $X.X as isn't Again, understanding Are there -- like probably service. really that to the far that refinancing debt is that it then so option. as debt

can get thinking grow pay cash such So really dividend restoration. obviously can that that or start principal like the are do to more, you and towards to debt reduce I'm then downs that, anything there service flow

Scott Kucinski

a that all amortizing, principal make our payments of Yes, we all so basis. on debt on Alex. mean scheduled is I

month. So every principal balance nature, single single quarter, producing is by the it's every

Beyond reduce manner. meaningful those to cash not reduce it's cash a We're use scheduled payments possibility, sitting down. to a of debt not a on in that but excess going debt the ton to could be be excess our pay to

Tony Domalski

penalties that add loans or that would Tony. pay CMBS we either cannot do number -- a of is a debt significant some debt. debt This like our prepayment have Yes. on I their down that CMBS we of

that many for made catch I down is of interest deferred up in to, XXXX, deferred the principal opportunity I'd next mortgage there's to a comment So use and year. too have maybe we pieces the also script there -- to outside calendar won't deferred for year are and we not recur coming That's in $X.X bring of there's million million that $X.X next maturity worth your about couple debt really a the payments pay that payments. up vendor on cash forbearance Alex, think year. to that pieces that of attention we

So we source next free a as that at of liquidity there's source look year. cash -- of in our view, for flow

Alexander Goldfarb

forbearance that correct? in 'XX, million payments You said won't in 'XX we're $X.X and of be catch-up that

Scott Kucinski

That's correct.

Tony Domalski

Right.

Operator

questions [Operator waiting There are Instructions] at no time. this additional

to over for like closing any back remarks. Please ahead. to I'd So go pass the conference Dave Folsom

Dave Folsom

everyone, for release. fourth again and us Thank call, Thank you on with to joining on speaking earnings look you. forward we quarter our our you,

Operator

today's concludes This for Thank your all conference call. you participation.

You may your now disconnect lines.

Sotherly Hotels (SOHO) 10 Nov 222022 Q3 Earnings call transcript