SOHO - Earnings call 4 2023 | Sotherly Hotels Inc.

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Operator

Hello, everyone, and welcome to the Sotherly Hotels Fourth Quarter 2023 Earnings Call and Webcast. My name is Bernd I'll be operating your call today. [Operator Instructions] I will now hand over to your host and Vice President of Operations, Mack Sims. Please go ahead.

Mack Sims

Thank you, and good morning, everyone.

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

statements or Although based in cause factors expressed to assumptions, press SEC. that can by and time on actual undertake from the to implied and reflected materially or release any in in does the update a company are with revise expectations believe today's detailed statements. reasonable from we any duty to the forward-looking are time company's differ results statements The forward-looking forward-looking risks those not filings

Scott. turn With the to over call I'll that,

Scott Kucinski

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

quarter RevPAR X.X% portfolio ADR. fourth and same-store a results decrease the driven the increase occupancy X.X% X%, at a increased Looking in for XXXX, in to compared by

driven For XXXX, increased in year, a X.X% and RevPAR X.X% X% rate. over in increase the a increase full occupancy by

portfolio the of down was results quarter at the to ADR for RevPAR X.X%. Looking fourth XXXX, XX.X% quarter up same-store by fourth driven occupancy X.X%, relative growth and

upside and significant year, X.X% a decrease up the by This the X.X% rates gap was increase forward. RevPAR reflects in a For a in full over portfolio XXXX XX% driven occupancy moving occupancy. for

markets group makes top revenue. proportion characterized occupancy line expectations. larger were with portfolio's the of by fourth in segment quarter in particularly These Overall, results line a our generally were our up growth, results where

RevPAR occupancy experienced growth Savannah to our contributing both bookings results group components, also during a in basis of quarter. X,XXX bounce markets year-over-year highlighted the to occupancy points quarter, large Certain grow during possess in saw South of we improved hotels significant Hotel Florida, which substantial Wilmington, of a the quarter, during by group DoubleTree the continue in leisure-focused nearly and through XX%. Our

improvement is still well growth the significant in our demonstrating Despite period portfolio's their occupancy quarter, organic the during below comparable XXXX, in potential. the overall occupancy

While showing growth room steady most our have for within generally urban the portfolio. our improvement, markets

Whitehall the improved significant its occupancy and group group meeting business the For and and the primarily writers Georgian XX% meanwhile is strikes business, for has example, showing through last in to transient positive shifted year-over-year, actors although industry growth, Terrace, strategy towards than Houston its banquet in production growing the film especially more management and of segments. signs significant it opportunity The of year union Due improvement. business, hotel's the impact on bookings. its

on association these of corporate during As settlement the Terrace' bookings, focus hotel growth Georgian a prospects by actor the the result efforts, group and Management's grew of the renewed forward. combined social group XX% XXXX. should with coupled strike business its improve moving dramatically

the has segments, during highlights Looking X.X% this year-over-year for hotels rapidly occupancy the X%, provides performance quarter. at this moving of XX%. The surpassed particular, business, demonstrates in stabilization, Group plenty XXXX, in by the some The quarter versus gaps across forward. its of the Hyatt levels, driven exceptional fourth fourth Centric a upside corporate rate. XXXX prior group and increase the Arlington, property the in occupancy by RevPAR in X% pre-pandemic period increase outperforming RevPAR outpaced by and a portfolio, continued growth opportunity pre-pandemic comparable in driven year's X% the property's reached by while hotel growth

RevPAR period Group outperformed of continued property strong year business, position both growth. quarter. rate quarter, strong XXX% pre-pandemic expectations comparable over occupancy RevPAR a by quarter The by and DeSoto's outpacing more growth hotel's continues in competitive Meanwhile, basis improve to X% the prior the the The comparable with prior achieving The Savannah the its DeSoto continues in its a fueled the Fourth to fourth property to of during gaining period X.X%, XXXX fuel continued the be set, than leader share outperform XX.X%. levels. index among to competitive in in during its the the which outpaced for fair significant XX%, set, outpaced results. by points year XXXX by XXX quarter. RevPAR

record the in results RevPAR by The property Ballast coupled outpaced and XXXX, quarter. over the outpaced to strong points strong quarter. impressive in fueled set, XXX Wilmington, in Hotel occupancy. basis quarter to during the property Comparing X.X%, by achieving group index, prior the prior leisure while North year achieved X.X% increase Carolina, during competitive demand pre-pandemic results year gaining revenue fourth versus in RevPAR XXX.X% share a

Looking for at profitability portfolio. the metrics

increase to well these view in well strong and maintaining as wages operating to QX investments fourth While which in quarter We hotel year, the profitability not prior is Stripping year-over-year of rate expense as QX out were above growth. service hotel below levels, modest which EBITDA included these necessary quarter a hotels, XXXX markets XXX year. margin margins over of increased The skews XXXX. as fully there XXXX to points increases property the XXXX hourly our for over the benefits year. onetime in basis due that amenity increases the costs while comparison. were attributed points basis comparable period amenities prior expansion in competitive as several to The in basis EBITDA out remain prior service as more fourth of XXX allow rolled our additional expense and insurance declined variations, were points XXX in us guest

begin amenity the expect reached levels staffing, optimistic we've a forward, Moving to will at more and insurance markets the trending normalized favorably we and term. also wage margins hotels in our near are and property stabilize that

Hotel loan for carries general rate XXXX Alba fixed corporate million in by interest-only March activity. collateralized announced secured the Tampa, the company and were repay mortgage loan loan to a interest Florida. X.XX%. corporate estate Turning existing the month, used we purposes. real a The city and Proceeds executed of funding from first to with Last $XX matures

turn now the to Tony. will I over call

Anthony Domalski

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

for the the was representing total over revenue hotel an XXXX. total a approximately $XXX.X over the X.X% representing Year-to-date, X.X% EBITDA in of representing . Hotel decrease full approximately revenue million, million, XX.X% increase million, a Year-to-date, decrease prior of $XX.X XXXX. full of XXXX. year. same the approximately same the was only X.X% For year quarter was quarter million, quarter, $XX.X was over quarter approximately representing increase $XX.X year for EBITDA of a

million FFO million $X.X one a same from the full of adjusted that over a year decrease of a PPP year. $X.X quarter, loans. partial In $X.X gain XXXX. representing of of experienced million quarter adjusted million decrease For related the quarter, forgiveness approximately approximately to representing Year-to-date, $X.X FFO the $XX.X was was last company's approximately million, we

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

sheet. Looking at balance our

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

the norms those a $X for more normalized historical capital expenditures with estimate we environment, will and that and more fixtures expenditures calendar be enter amount As operating in for year anticipate furniture, line XXXX. of million replacement equipment to the we to recurring

of forecast full for anticipated XXXX. results We're the with providing year guidance a

X% revenue market the And at guidance range, expected of to Our $XXX.X within million conditions We're for Hotel million $XXX million. a range, the this a portfolio. represents projected increase considers range current the of projecting $XX.X and midpoint the of at is million. over in represents to $XX.X and in EBITDA X.X% of XXXX. the this over performance total increase midpoint accounts the range XXXX. And the

comparable to period decrease to at range in decrease in a FFO $X.XX real represents to midpoint 'XX XXXX. is adjusted $X.XX Lastly, guidance, in share. to successful Savannah is the Hollywood of $XX.X million The projected interest benefits for the At due of estate $XX.X increased year-over-year this X.X% and FFO in expense and appeals an or mainly the our properties in adjusted million tax XXXX. onetime the

I'll the call And turn now to over Dave.

David Folsom

and several quarter, strong by good to perform Wilmington over prior were with the Savannah, which during our rates. Tampa we demand, Thank and very year morning. portfolio's with off characterized properties, you, achieved leisure Overall, at well and pleased continue quarter, during including in RevPAR the fourth productive X% operations the company, a year, historically of capping growth strength Tony, our group coupled

was is normalizing of view ADR this sign pandemic. as by story encouraging recovery trends, in the move the further as of during behavior occupancy corporate lodging the has in growth demand RevPAR We growth pandemic, we since industry industry recovery quarter. the driven characterized traveler travel an which that Although the the group the been growth during the the the from and driver

to group urban within fourth below such will Houston. our levels at during the hotels during and opportunity located and our was While occupancy growth We business both believe quarter. there basis plenty year-over-year accelerated XXX as occupancy Atlanta is the portfolio, increase travel XXXX this transient Philadelphia, fuel especially of still in occupancy which quarter, markets, growth, points still

persistent segments. are and the market-related facing these travel considerable hotels corporate challenges, group While headway making in

in during for is market. as industry stay studios important it upside. us while It to The production hotel opportunities Centric basis in historically, extended the segment standpoint, from improved still example, Arlington, was the has this film Georgian as comparable its the of in a the nonfilm the believe begin substantial the period the performing at group well note and that to year XXX We should XXXX. growth also in blocks settlement Hyatt booking strikes from RevPAR benefit surprised film room continually below for recent points the Terrace, Atlanta occupancy still

picture, Even XXXX this group XXXX, they're considerable XXXX. portfolio's revenue still our our still was segment. revenue upside for full XX% was group gains, below at XXXX with XX% demonstrating strong revenue these above Looking group

distinct hurdles borrowers. lodging underwriting standards translate continue for for The challenges higher as stricter present debt markets the to sector to

original time, same changing our or the conservative drive in the debt upcoming in liquidity to we environment address being monitoring closely opportunistic being are Recently, the portfolio. assets we are our needs. future additional company in We refinancing we hotel as of the approach to maturities refinanced At million Tampa the advance for cash value the the repositioning mortgage our successfully for in of our loan to maturity culmination representing date strategy, over hotel the which for in created substantial $XX company. resulted and proceeds of

we of a the nonbinding term working the challenges these refinancing the previously given proud X diligently modify refinancing We're the mortgage for As Philadelphia further recently years. lending and have events the of with asset. sheet in additional current favorable in especially with both on to options to the discussed, We lender outcomes, and been recent extend for lender the environment. agreed

over for our loan the X schedule portfolio XXXX. is maturity loan next evenly several in only additional years spread ahead, maturity with Looking

with trend to lodging there and lodging led shrinking the while will be anticipated threat economic by fundamentals recession anticipate have a growth outperform pockets of total in continue the urban resilience market, the continues to travel, additional to which appears uncertainty, demonstrated to XXXX, near major We term. Looking corporate continued be ahead of hotels positively.

in long-term between open our for which growth hotel portfolio, year prospects of by XX% shifting year travel. from XX% operator, full our we with optimistic and XXX% of traveler revenue QX comments, year, for call RevPAR strength remain ahead Overall, to well pacing is corporate With encouraged booking XXX% forecasted full year while leisure is our XXXX benefit on RevPAR. offerings, growth continued questions. up group the pace last at booking can and full the of travel toward the We XXXX specifically preferences the year. XXXX range portfolio trends is those for cautiously we're Looking unique positioned in portfolio, ahead to product last

Operator

Piper Instructions] first Goldfarb from do [Operator have We question, our comes Alexander Sandler. from

Alexander Goldfarb

Just a few questions.

flagged. book travel doing First, not just localized on I some drive Clearly, of travel corporate them going department. companies, through looking business it level, a drive trying group a to sort positive But maybe touch. people their et of plan every of for They're thinking like sort I'm coordinate boutiques. who lot cetera, But are book brand not Hyatt a leisure seems what to people to corporate hotels, are dedicated travel you some has Marriott, are the for you guys our especially their And your Yes, of guys travel more it own that driven. company a within They're sort effort lot how type. of since websites, a realize travel. to that's to on group understand construct. Hilton, that on more that are

Scott Kucinski

question Alex, it's for attempt to you. that Scott. I'll answer

and From know. is have reliant with properties traveler it metrics So state an on come individual for seen engine you've probably past that really travel. that perspective, the highly highly really are we property in business don't really seen back business individual Arlington you as I and in that one obviously years, is many mean is through reliant, the the we we've release. as our today that the us,

are back that very, and quickly. seen Philadelphia come back BT have seen come not we've that as strong. X So very Houston

which our a loyalty on really, comes as not a from So group and group, focus is perspective. of on reliant variety different brand forms is in

group have property corporate We robust effort and very at a the individual levels. the sales both

have third parties also that assist. We

sales We have group government the at dedicated corporate associates level.

that added sales back of past putting over and group and into we've group staffing the couple we've repositioned something So as on robust years the hotels. refocused effort. It's grown

exceptional sure sales that through and effort. not to really really critical independent where occupancy if referenced, that's independents. really I'm your but at that's our those you at that And So look have numbers drive to portfolio answers question, the additional very we we is group group the

Alexander Goldfarb

understood and just looks at balance it increased if is, the That's the you like about the helpful, question Scott. the Alba, increased The $XX -- looking looks I you next it sheet the like by loan commentary, million.

off. cash has are covering out since and company of needs down are unrestricted What on paying increasing X, encumbered to You're been million rather balance -- the to just pay than your $XX the Like -- and like sitting mean I've assets for thoughts but the a mean, not cash it balance mortgage for been issue plan unencumbering, on on you to debt and all seems company saying I'm just guys. I debt take this, take Alba, I the unencumbering, focus that start get driving of lower flow. to on free cash an

So million unrestricted about sitting that, that's million as separate apart for especially on items. $X allocated that's and from already you're are guys of you thinking various cash, $XX how the

David Folsom

Yes, Alex, it's Dave.

whole we look picture, holistically portfolio. throughout debt the Our at

that of So and that hadn't in occurred, value at have same we before got commercial cash down seen exercised taking a globally some that because we've But the actually property yes, value to would Tampa, pay would And the not. if require cash of real the the may that's us I we debt, estate did think as have mentioned, in the some of take this. picture lot of you or time, want we debt whether industry to but out that created Tampa out our repositioning efforts. a over you we pandemic

go think these our the box same So future. is as take of out happen assets. And multiple processes, want have cash cycle on be the as available have we through their some the We properties the what cash at very a and life you maintain time, may of hand to we function we recall, conservative. to improvement in

we're least look closed. be that trying be markets markets essentially or what our So we right XX X very the at like. now, available open, And with refinancing the to capital in for they're conservative opportunities. think we hotel we able each the going XX advantage cash, might XX months once take or or know capital mortgage and are of look to But to at to markets asset some public going the almost I just that where be months can't or closed agree REITs additional capital months. are

paying in have some So at then more raising don't least I not make and can we REIT the the markets become think that space, amenable and we But to be to to down public near decisions available need of front. it would within now maybe capital right the on start cash take term. all debt, wise unrestricted our

Alexander Goldfarb

And then So I cash, intensive is do especially -- flow mean of trying the just understand your cash that estimate XXXX? nature I guess point, given I what for free to I'm you But anticipate defensively service, CapEx. -- after cash be? your flow you what normal the What free not -- big do cash hotels. do the to is you cash normal the free figure after but R&M, debt Dave, flow

David Folsom

Yes.

the to number out strip think I'd you weigh potential there. If a ask kind to on CapEx, of in Tony nonrecurring have I

Anthony Domalski

My go double million I head $X of guess But wrong, I back have is check. the probably top off be to back could and to a year. $X million my

David Folsom

lot with of interest expense amortization. is numbers A out how debt respect to and principal flesh it going these on depend to

on refinancings, debt we're I up have to get some not front going . some lot going of where to interest-only upfront think a spend on principal periods of we're cash amortization. to these

Alexander Goldfarb

Okay.

that's that of So inclusive amor X% before? to that's paydown X% is or --

Scott Kucinski

onetime But here. in your which coming of it's have future inclusive. the expenditures, point, some to inclusive PIP not CapEx, so That's nonrecurring will

Alexander Goldfarb

Okay. And then just the final question.

is that? and amenities that if F&B, rate I It X% of back time. OpEx? appreciate we but normalized like growth, labor that guys sounded new but be the OpEx the restoration full Just to XXXX, like insurance, should OpEx if growth you a it are expect a And should way et sort back your in is that costs, to know saying full sounds to It the X%, going back take of and normalized level, don't basically is whatever, what the that's level. in we cetera.

David Folsom

years in cost, in abundance chain of because Well, I been the been into just as tax, to nervous the We've and XX%, his specifically I with an increase those excess you X% to service the theme some should industry has you that's not where capacity of the so number. estate I somewhat the see. normalized all demanded had a lot then by volatile about hotels the remarks, asset middle they've that growth, nominal XX%, for And would on operating is or quite scale renewal we've mean, to the staffing cost to we saw then X first respect XXX% created time picture. see years, whether been with the right is insurance get are that but think couple big of can insurance mentioned with as levels for I'm but insurance not I'm periods. now. the normalizing growth, sync well it's market. also at in rate prior But expenses. margins I year. want Scott And I in they And we're real And to and going levels X% of And less lot be But what the prepandemic lot think operating the big taxes. know, that us renewal staffing. going designation, picture we in expense, a start we're have expenses, outlier operating the and of the drivers. a expense as mean, this back there's what estate or And amenity that of a back sure of their say, growth getting of premium back operating growth tax the their we're the expense in or normalizing least real had and is, our X%, levels Those to

Operator

question comes Brandon next private Our is a from investor. who

Unknown Attendee

payment the the area? speak and dividends to foresee that of you preferred you deferred in what Would stock

Scott Kucinski

dividend, on striving get made the previous is Scott to we've it's We calls time X speaking. year stated catch-up any we certainly spoken, This that the and something in XXXX. We've repaid. payment deferred/preferred Sure. calendar

capital will through goal, we I previously that think be operations. our stated executions additional is to ongoing absent raising, repay that what

Alex is how focus main and to markets kind As refinancings allocation these to alluded the debt debt now, our and the Dave's unfold the capital to, be company of of on over next on previously or capital our comments for right year behave. going how uses our X

critical of have and that see and So need puzzle. debt they how down either and piece needs interest underwriting also how less getting underwriting restrictive assets. to markets, behaves the reopen that's capital how a help to they the process We rates coming to the our

as look at cut that a So that to we getting the dividend, back a in And take we unfolds needed really put preferred up forefront. the positive at can hopefully, further. that fashion,

Unknown Attendee

do you additional an that mean not preferred that dividend this anticipate Would dividend preferred year? extra and

Scott Kucinski

visibility repaid. We and what you it to think But to we what consider and really goal favor prefer term. our need in -- the payment. we the when That's here Again, markets how get our can't we potential -- debt move in short I better cash move see tell future a is reduced what a we a on critical flow estate repay now. by better all on being potential dividend. understanding preferred right to is the better free Fed, interest get And a focus we that's that, and rates commercial our companies visibility we'll as have real of for

Operator

any I think questions. further we Instructions] have not do [Operator

would like to Executive over Dave remarks. I you. the Folsom, hand for call back closing to Officer, So to Chief Dave,

David Folsom

Thank you, look today. with next joining Thank everybody in and our call. We speaking to operator. forward everyone, quarterly you, again on listening for

Operator

this and call. you for Thank concludes Ladies gentlemen, joining. today's

you. Thank lines. your disconnect now may You

Sotherly Hotels (SOHO) 6 Mar 242023 Q4 Earnings call transcript