Earnings call transcript Q2 2023

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Operator

Hello, everyone, and welcome to Sotherly Hotels Second Quarter 2023 Earnings Call and Webcast. My name is Devi, and I will be coordinating your call today. [Operator Instructions]

I would now like to hand over to your host, Mack Sims, Vice President of Operations to begin. Mack, please go ahead.

Mack Sims

morning, good and you, everyone. Thank

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

in will any assumptions, reflected statements we are no reasonable expectations Although believe on forward-looking we assurance based the that be give can these expectations attained.

risks Scott. in turn implied results or to by call the With the SEC. company's and from does today's differ or are can statements. that, statements I'll and expressed in filings undertake update detailed with those Factors to cause company the duty forward-looking press revise to The that time materially not forward-looking to actual any the release from time over

Scott Kucinski

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

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

further and $XXX.XX. represents with at second were in occupancy quarter RevPAR in X.X% in our of XX.X% in Overall, X.X% $XXX.XX portfolio's an in and RevPAR characterized X% line quarter an increase driven same rate. represents hotels of Year-to-date an by Year-to-date, of period performance in increase performance a Second in rate. occupancy XX.X% the increase same-store by a the XXXX, same of was occupancy portfolio our over recovery a X.X% by corporate increase the a expectations. XXXX driven generally increase increase and RevPAR ADR over group for period and our with demand of results X.X%

business Florida to at growth with Despite more normalized our softer-than-expected year-over-year corporate group of shift and segments. to South mix a our from transient portfolio our properties continued a demand strong on leisure basis, RevPAR

second compared down by our X.X% X.X% Comparing that business occupancy to progress to increased recent the pre-pandemic of our towards of metrics, confirm upside despite demand for XXXX mix group in Examining significant and by trends for to travel is business. booking quarter belief our hotels demonstrating still there the portfolio. more portfolio's RevPAR a being normalized continues

period segment, portfolio business our group slightly travel in XXXX X.X% of was business last year. while second the group of of quarter ahead For same the quarter more in produced compared to second XXXX, the the

by and These our results which Washington, largely Arlington, now hotels driven XXXX market D.C. Virginia are in were outperforming Laurel, results. Maryland,

pre-pandemic While below hotels a in market and significantly upside is those potential Atlanta as markets nearing in plenty is our recovery, still D.C. full have of the travel Philadelphia Houston, corporate Washington, levels.

to to demand help expect continue to should of which We heavy season, hotels corporate pre-pandemic the improve close gap for those during and occupancy travel hotels. group these fall the

booking across the moving strong portfolio a Meanwhile, trends encouraging leisure with whole demand forward. as remained

by fueled portfolio. year's the across XX%. performance recovery hotel. quarter, and lagging by in demand Washington the highlights in business The the is at posted Hyatt property Arlington during noteworthy the on a some market, commendable at nearly Centric the outperforming following cylinders hitting recovery last D.C. all Looking group This RevPAR

transient driver index a second an from nearly over in XX.X% as prior competitive X% occupancy business beating strength were demand rate. from to position group by and XX%, its by Carolina, ADR, RevPAR Property traveler further of during North demand. grow results Wilmington, was set, of continues up year segments increase improvement well. quarter last driven Hotel the market fueled leader Results as to and compared occupancy and during year, which recorded leisure the improved of excellent quarter. by primary in in achieving XXX% quarter, while XX.X% among improvement Ballast this was continued the the RevPAR the its the a solidified corporate

The and in business comparable The share nearly basis outpaced RevPAR set, quarter. period the to growth quarter. significant leisure to the mix XXXX rate property nearly improving in XX%. group gaining Savannah versus a of fueled easily property of well-balanced during during continued DeSoto fair with continues the deliver by The competitive XXX XX%, improve points

and slightly executing our EBITDA margins at ahead higher the metrics strategies achieved team aimed XXXX. controlling the variable period management quarter, comparable the second profitability for of second of driving in XXXX rates. revenue During were by Hotel commendable management costs quarter

our these offerings expense expanded beverage that considering with pleased increased have properties. rates, utility are our metrics, hotels, increased insurance especially into layered food been and restaffing We higher and pressures from costs

we and during the pandemic. model forward, levels stabilize expect normalized as Moving following we have margins the amenity reached to hotels our at lean operating staffing

I will now turn the call Tony. over to

Tony Domalski

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

was approximately year. Hotel $XX period the Year-to-date, year. same an representing increase was approximately revenue EBITDA XXXX. increase an the million same an approximately EBITDA over of hotel of X.X% million, increase $XX.X was XXXX. last an same total period revenue quarter over X.X% For quarter million, Year-to-date, $XX.X representing same for the the approximately representing was last over $XX.X of increase quarter the total the over million, second representing quarter, X.X% X.X%

of quarter period an $X For the improvement over was quarter, last representing the $XX.X adjusted an approximately same million, representing the same increase adjusted and year-to-date XX.X% XX.X% was XXXX over of year. million, approximately FFO FFO

these offerings, or Please FFO expense as compensation our to G&A release to portion corporate income items as extinguishment excludes abandoned the note excludes charges as that provision well additional as interest of items. early expenses, income, interest securities adjusted current our debt, for the well other of on stock other charges refer Hotel losses as charges gains earnings expense, and and our related EBITDA Please and instruments, to tax detail. ESOP related aborted derivative well.

of the and equivalents unrestricted approximately of end and the carried had other XXXX, had June a as fixed X.XX%, rate as million approximately certain which was interest at debt of agreements. $XX.X outstanding total million, principal rate approximately real debt estate taking $X $XXX.X balances the approximately XX, improvements taxes, cash interest of well for million, of $XX.X million of the -- items. capital of weighted XX% approximately in company of the Looking cash interest At our company's company's average rate cash at a account we XX% as reserved of sheet quarter, consisting balance into after swap

quarter, During balance has of announced of a interest-only a X-year The rate fixed million, real the a the mortgage of by Laurel, estate with which and has maturing the $XX term May principal XXXX Maryland, of funding. X.XX%. DoubleTree refinance City the on in Hilton Hotel in second interest we maintains loan,

lending current pleased this which were execution Given netted environment, the to we transaction, with the -- net cash company. challenges million of $X.X the the approximately proceeds in of

more calendar expenditures in third $X.X results operating guidance to and anticipate capital we XXXX. year expenditures with be As normalized will with we environment, a line million amount norms historical enter the quarter. to for a forecast anticipated approximately Issuing for more estimate capital of

million projected and decrease $X.X in hotel in conditions projecting range performance $XX.X the for to the quarter. to for of largely projected Our $XX EBITDA the revenue the portfolio. is is The total current accounts of within EBITDA $XXX,XXX the approximately the and related of third Hotel to well in range guidance million year-over-year We're million considers increase $X an range market expected million. renewal for in year last successful quarter approximately real of received is tax related benefit estate a as to casualty Adjusted the to FFO to as our $XXX,XXX. property of due $X.X costs million and appeals of the in policies

$X.XX $X.X $X.XX or million share. per to

Now call over to I'll turn Dave. the

Dave Folsom

you, Tony. Thank

in despite South market-related faced Florida. quarter. outpaced Atlanta and We in Our year portfolio delivered operating solid results metrics headwinds the moderate prior

as results group portfolio's recovery weekend the benefited fundamentals from at saw hotels, urban improvement our as which of segments leisure travel. Our and the from corporate continued further well

leisure-focused In Overall, demand Savannah reflected and demand and Wilmington, bookings Tampa, strength group both due to in in the pickup. traveler hotels for addition, the normalization continue coastal segments. perform well in revenue leisure is continued to continued business market's with strong our these strength group coupled in

In the international were the pandemic. contributors and and destinations from moderation in markets major demand. pent-up immediately these which this Florida demand the characterized period our which of lines soften to quarter, Increased competition South in following followed we cruise saw demand, markets, benefited

related We location at second ongoing and also strike. Revenues our year-to-date. crew $XXX,XXX faced material were productions writers a a hotel, by this approximately actors $XXX,XXX and many at quarter to reduction the years in Atlanta the via which been group revenue negatively mainstay demand and for film bookings television during source of impacted have Hollywood from

hotel saw well amenities which hotel EBITDA been these headwinds, outperforming the fully below same levels as services stabilized our full-service the commendable achieved not period at had hotel expenses reintroduced. operating time yet portfolio and last year, Despite

factor profitability. critical and rates both Strong a continue in RevPAR be growth to overall

X.X% ADR recovery the the During by our an the hotels. which quarter, by validates group XX.X%. Meanwhile, continued and factor, improvement, year's occupancy business showed portfolio and important sequential segments of at XXXX's our outpaced travel prior ADR

in hotels continue mentioned, the return-to-office and our corporate-focused improvement most rates pandemic. markets the As and notable Scott at occurred RevPAR where to group following climb

with the Our pre-pandemic its during and outperforming competitive quarter. corporate weekend strong includes surpassed upside, mix surprise of to easily travel Arlington a levels hotel group, continues that revenue, set business the which to in leisure well-balanced

corporate locations, And stock, significant at preferred also preferred historically $X.X ongoing dividend potential the for Moving which during an the unpaid series payment announced preferred urban unlocked reducing unpaid more been our company. amount of the by the second shareholders. there demand. for on reinstatement still is transient payments and forward, for dividend quarterly the quarter, an group we of we believe to we represents on Previously, dividend our the owed be additional dependent approximately cumulative priority have catch-up announced million, X decreasing our

the landing inflation, for with of a possibility bookings despite our continue will Fed the of for uncertainty provide portfolio growth. demand We environment the positively surrounding trend in by a decline soft potential rate believe an ongoing to Forward a recession. coupled

remain outlook transient this portfolio's optimistic for XXXX's of the balance well-positioned progress segment last our year, well with operations of ahead XXXX's range RevPAR. growth to continue the QX in we of the seeing opportunity revenue of that prospects will conditions improved fuel the still has XX% QX plenty segment our encouraged pacing is trends portfolio. in business and of We with are XXX% growth of while pacing We ahead forecasted last Our RevPAR back encouraging by and XX% pacing between market is year XXX% half believe year. year. booking group for for the we are to the Overall,

open will up call now the questions, We for operator.

Operator

Instructions]. [Operator

today Goldfarb Sandler. question from Piper first from Our Alexander comes

Alexander Goldfarb

catch-up meaningful is now of back do picture. occur level? is now that portfolio big the feel I was first that of the there's sort Do a more Or pandemic? level to guess before the question normalized the to feel guys sort you a from what versus you

Dave Folsom

Dave. Well, Alex, it's

I from prepandemic. think there's of segment still call, there's still some both -- And growth and our our in and Scott a macro, basis. group I, out both macro a remarks, on some the from room and grow to BT markets some I'd there what

markets opportunity a these shape still market, they the Atlanta for the Houston are the market. in the of hotel industry. of to some get These set yet Some need have the market, improve fully to normalized not revenue Philly markets be to

for So then on is definitely basis, opportunity some And opportunity there improvement. there a there. I think is property-by-property

had you and may repaired. in Atlanta has year, we last recall, It not As that resolved casualty significant been was may water a since or issue. a

a very good problem very, there because are results last had year hotel. with we year-over-year the Our

are some the there BT especially selective of customer. think when market these we hotel upsides, at and some upside So at locations, and group the there's look I both

Alexander Goldfarb

just said premiums your That's remind impact then of us helpful. when I how And met second And new can quarter include believe, went much insurance. the on NAREIT, the you we would you the Okay. at up. full insurance,

premiums just previous? you the now versus can So much are contrast how

and biggest this And sort insurance you is increase better. were maybe with the next is next year reinsurers of met indicating the a when anticipate then companies the hopefully, reserves one, little bit probably companies do year or a insurance have the that you that year, and from similar they brokers

of if companies? a to when a end get the and got Or going sense tunnel the increase substantial to some the you we're in brokers to the insurance spoke multiyear light environment? if you trying maybe Just be at

Dave Folsom

Right.

a And and -- premiums The X season function before the So and we're I'll really Tony I'll happened April company. give driver let of give property what you after in for casualty numbers. renewal that nationally is were those an property better be we're November premiums hurricane in to what's Florida answer With happen the really after over. respect drove and year, next I going change. to going able to to think

you, a a where now, capacity, individual whether was won't to premium, are our that a I That's increase would if be lot casualties. or won't have or really probably reduction XX% market in excess I waiting some there's would there doubling the year. agent as a tell this say, worse huge there kind again but of insured of is betting we Right see a if saw

into Tony, you add So want to that?

Tony Domalski

Year-over-year, little bit quarter. $XXX,XXX of property coverage. it's the liability, a over up [prime] just a Yes. bulk a insurance but auto, policy, about increase went kind million, $XXX,XXX, of the small our cyber, premiums that in the normal was increase of general so And and that is $X

Florida a lot Tampa know, Jacksonville, you properties Houston. Wilmington, Savannah, South and have and even coastal As we of there,

a in large so exposure And a that's hence, us and increase premium. large for

Dave Folsom

was the percentage? What

Alexander Goldfarb

a as $X percentage? What's million the percentage, the

Tony Domalski

XX% total $X on million change. a -- about is it's premiums,

you now a million. it's if probably $X of add our $X all year, insurance costs, So running million running

Alexander Goldfarb

Okay.

Okay. us on then you accrued the can just where question but you final on still preferred the And is, for the unpaid update balance? stand

Dave Folsom

Yes, made quarter. last the payment one we catch-up quarter -- in

As dividend. common a shareholders, else we're to as eager we're you as receive know, everyone

to now, want to window payments we give can't done. more cautious prudent. and get a we're little paid being going I up. a all So be the you Right that's when catch-up

in lot going the we're mentioned lodging the over to frankly, the Bloomberg, going and of refinancings what environment in with As operating quarters. a the are on mortgage and deal how with industry caution with assumptions next yesterday the you happen rests to lending X what's interview and to X your the markets

warrant, made. going I just time are conditions the additional going market give can't frequency to of if to So we're those make payments. you and payments be when

Alexander Goldfarb

the that balance you what's [indiscernible]. But Right. still have current

Dave Folsom

The unpaid balance million. is $XX

Alexander Goldfarb

$XX million.

Great. Okay.

Operator

Instructions]. [Operator

point at We have time. no in questions this

to for like the hand further remarks. I'd team management to So back any

Dave Folsom

We you to look and speaking operator, to next listening you, forward thanks today. everyone the Thank in at with review. quarterly

Operator

call. joining Thank today's you, everyone, for

have a disconnect You now and your may lines, lovely day.

Sotherly Hotels (SOHO) 10 Aug 232023 Q2 Earnings call transcript