Earnings call transcript Q4 2022

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Operator

Greetings and welcome to the Apple Hospitality REIT’s Fourth Quarter and Full Year 2022 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Kelly Clarke. Thank you.

You may begin.

Kelly Clarke

morning. good and you Thank Welcome to XXXX and year fourth Hospitality call. REIT’s earnings quarter full Apple Today’s based yesterday will which call be we Form release distributed XX-K, and and filed afternoon. on the earnings

cause and that projected events result, Before we as results, by differ numerous are actual and based subject securities federal assumptions, call that are uncertainties include These statements current those forward-looking to defined from forward-looking achievements today’s or the laws. on or begin, future to statements may and could implied. outcome note of please views performance as risks, a materially expressed,

Any as such XXXX except statements qualified today. no undertakes of our XX-K publicly annual with filings factors law. by the Form forward-looking The in or statements, Company our described forward-looking in to revise are any SEC, obligation as report only including update by speak the required on risk and

will of certain GAAP during measures yesterday’s non-GAAP discussed this other be earnings addition, to release referred items and Reconciliations call. are measures the our and in of included In SEC. with remarks in to measures definitions performance filings those of

copy a applehospitalityreit.com. the visit Company, of information release the please additional For or about earnings

Chief an the Officer; our Officer, Knight, morning, operational for full an Perkins, outlook quarter This overview provide XXXX. year Justin and and Liz will of our fourth our Chief for Executive Financial results XXXX and

open we overview, will call the for the Following Q&A.

the Justin. call At this to turn is over to it time, pleasure my

Justin Knight

Good us morning and you thank for joining today.

another growth Apple for are year strong continued and Hospitality pleased of We to operating report performance REIT.

two training, sheet our by further one quality reinstating positioned hotels the took investing noncore of ensure bolstering in our distributions, of asset. for ahead hotels, high and year strategic portfolio are renovating our we we reinvesting to well XXXX, during balance acquisition the optimizing steps and Additionally, and disposition through and staff and monthly the that

of driven growth over for $XXX, and our by a was as improvement down the improvement RevPAR XXXX X% over X% year X% to in was for full XX% as rate. RevPAR X% XX%, was XXXX. ADR meaningful an was a Occupancy compared was the XXXX total XX% for improvement XXXX improvement down portfolio to XX% revenue up approximately XXXX to and to XXXX, year approximately to XXXX. and XXXX. XX% XXXX. portfolio compared year compared And to compared up only $XXX,

up and cost achieve effective Strong XX XXXX actual for enabled compared margin and to to approximately $XXX points XXXX. growth and to or was points share, EBITDA basis X% rate $X.XX XX%, per XXXX up adjusted XXXX. MFFO us XXX controls the million, year compared XX% hotel basis of to down to

higher rates, quality support to related important to engagement. believe management our occupancy long-term These Emerging we in developing focusing in challenging and talent particular necessary continued key despite business which in on-property the companies and in a have our from be cultivate investments hotel disruption, the have the we provide growth on level to market providing associates culture associated rebuilt retain pandemic through our levels environment labor service position worked and to our of by strategic maintain training hotels us to make teams and portfolio share, will investments with necessary profitability. and

partial efficiencies wages. at training, staffing realize stabilize managers act to our should expect higher and which offset As our to onsite in a hotels we invest as

as spend fortunate We reduce a to able XXXX as to and the contract and service benefit in were work profitability to pre-pandemic well-maintained to pandemic on with to to result, relatively XXXX. we reduce capital portfolio and levels. levels both were we dependence which renovation a strategically entered have be elevated see young continues Additionally, labor, preserve to and

our capital hotels. expenditures we XXXX, approximately invested XX in of million significant at $XX During with renovations

our done Our inflationary deliver our and and position tremendous chain that CapEx supply within managing team strengthen markets. in-house cost-effective competitive a results to has outstanding respective pressures challenges job

XX spending projects $XX hotels. anticipate to renovation $XX our We million to of million includes which XXXX, XX at during comprehensive

spend our focused than ownership more significant properties we the of for and anticipated our scale closely our in time. impact timing portfolio, between of CapEx of and ensure historical branded XXXX shareholder effective disruption we experience and over determining maximum Our approximate us, differentiator our X% to is which for and revenues, minimal dollar have more a property decades, to of for meaningful over investment contributing and returns XXXX two Through appropriate investments scope believe to most total operations rooms X% spent.

the our to the of of this monthly addition led in were a Supported on October. X.X%. again our both price dividend monthly in distributions post-pandemic reinstating have December, by share yield closing on March strong our distribution regular per with cash payment $X.XX approximately $X.XX XXth, annual annualized our an in beginning paid and January our increasing share August Friday, Based in per approved year. distribution operating industry of of in special $X.XX performance, and In payments, Board per distribution which regular of February represents monthly of our distribution we share,

to fundamentals bolster operating Strong positioned our also balance sheet. us further

in maturities July, able acquisitions. million During capital restated reinvestments our were In and the improved existing amended borrowing increasing million produced which utilize we year, of and we fund extending shareholders, achieving to approximately capacity, $XXX credit pricing. the distributions excess we to to facility, new and $XXX paid

significant thoughtful capital to and and staggered to debt to opportunistic with low years. were both be markets, value uncertainty conservative contributors attractively now our flexibilities macroeconomic and for liquidity incremental maturity outperformance Faced over drive debt leverage provide Our position, us exposure, volatility secured with greater past key shareholders. the dates our structured our and in

$X.X $X.X on one XXXX, in resulting approximately boutique hotel, of sold in a for In independent gain million, we a hotel Richmond, sale million. Virginia XX-room

the combined Downtown of million, year, purchased Hotel during which Louisville hotels, total a fourth both During Hotel $XX the quarter. Downtown for also we AC of the two AC the were acquired and Pittsburgh

our and to and and built we been time, beneficiaries to concentrate refined mix will in that our demographic intentionally have macroeconomic portfolio ownership exposure demand, have over create markets sought shifts. to leisure and have of markets be of we that benefit from As and business

numbers onset exceeded hotels. hotel the owned recent our ramp pandemic, of remaining the invested CapEx hotels original total these the during XXXX hotels as $XXX third the underwriting assets by a XX for A meaningful year, with over EBITDA our return all in meaningfully X%, Omicron quarter have we The acquisitions have than These million of markets unlevered of outperformance. produced improve. in in the approximately produced of of excess investment contributing of impact operational first unlevered variant and upside million Since for on more to and XX full yields continue XX%. to our despite $XX after

and portfolio forward for by comps to we reason be travel strong, easy strength Looking XXXX, demand. have XXXX our were top-line January helped in to numbers continued optimistic.

year, While year leisure teams high we entered of the continued with expectations are in the in potential improvement both for mindful our for demand. property later and headwinds have the macroeconomic business

slow shown a under lows exposure favorable, many hotels in our projects And The recent having supply improvement meaningful no to is with pandemic half that of have mile of to X radius. months. were within markets nearly construction our from rebound picture

optimally we mandated of months relatively years are the while With margins Our to and coming of we better capital market been our number the over when and combined progresses. has positioned history, in maturities And expect XX to increase recent the market over activity drive acquisitions us investment transaction time. ample greater transaction right. has debt and brand dispositions grow market portfolio, to portfolio to positioned quiet, are and profitability properties year as conditions liquidity to produce

past remain strong in of incredibly results travel and resiliency ability are to value any the We and macroeconomic year of our accomplishments proud our drive shareholder maximize environment. confident in and this

for over additional financial to operations turn balance year. on during now details sheet, call performance I’m and the our pleased Liz the to

Liz Perkins

Thank you, good morning. Justin, and

Top XXXX. up fourth X% the XX% strong be quarter XXXX to quarter line approximately the to quarter performance fourth total the for revenue to fourth and portfolio with continued

quarter travel quarter XXXX to quarter during us X% the and Continued strength an to enabled leisure fourth XXXX. achieve in as improvement XX% compared in of RevPAR fourth strong in demand recovery $XXX, a of over and business

XX% $XXX, modestly continued the and to in ADR only demand same and X% seasonally what in with XXXX. XX%, down January to saw X% business X% of results ahead growth show and to occupancy of for and shy quarter both strength occupancy XXXX, just was the we fourth leisure the Preliminary XXXX. quarter quarter. January of X%, was XXXX up approximately ADR for fourth the lower, approximately demand period down was in XXXX With

seasonally our as improve We to stronger will through see the first are growth months. to begun and rate confident quarter reach have that we progress occupancy and continue

recovery to and in XX% continued seasonal respectively. strength performance November expectations, and recent XX%, in meaningful were business October, both demand. December and leisure Relative XX%, reflects weekend occupancies a

we fourth As weekday occupancy to quarter, improvement was X% over and only entered September down XXXX. an the October XX%, October

was typical was to occupancy December XXXX. X% quarter weekday levels. $XXX, X% Although November occupancy for December, nearly up weekday and ADR December seasonality the to impacted XXXX Weekday in up rate

our such the Top patterns a at XX same mix urban XX% improvement in hotels San XXXX. of our continue suburban look relative demand with had Anchorage, locations Savannah trends, included of the during market. transient RevPAR of more Tampa, as Worth. above we Fort demand Phoenix, impacting and RevPAR normalize. of and to portfolio and Huntsville, XX% As quarter Syracuse, levels nearly business to Diego, pre-pandemic or period performers every travel in segments improvement produced

a and are markets, and their including high time, the across additional quality markets, providing upside in in These portfolio, located to for we their portfolio. results within our well San While continue improved of York, to slower hotels our expect number respective Denver. performance see recovery assets we over Jose improve New

to during increased in room channel teams. the remained property sales in support from of bookings of OTA the the management terms our efforts XX% bookings brand.com fourth. company at Property third to bookings to quarter. XX%, and direct continued quarter XX% In night the XX% stable testament moved a mix,

for indicating trends. early bookings preliminary continuation a Lastly, shows of first the GDS continued data improvement business And the represent quarter, travel in the to XX% quarter. positive revenue

third same-store be and to XX% which in mix also only will discounts XXXX, demand. the Looking group quarter that the of not XXXX corporate Group the to between gone that XXXX in illustrates are with though the corporate at hotels the than negotiated Other quarter negotiations the to three increased with at just fourth positive continue see have line business quarter at XX%, to rate meaningfully rates. The our negotiated for without segmentation, small from XXXX of XX%, meaningful pricing, XX% improved resiliency fourth we’ll slightly relative bar and in XX%. elevated levels third local after an And segment continued business production was improvement quarter. still remains through higher occupancy years optimistic indicator travel but And we demand. successful a negotiated changes accounts. quarter, improve, to in

per to a Turning and continued market wasn’t total and room and part quarter impacted for wages the the contract in up for to per occupied increase to cost occupancy expenses, unexpected. room than for results quarter, With higher higher of was challenges create utilization our labor. training same-store just employees, third hotels labor quarter tight seasonally payroll time quarter, fourth costs the XXXX. slightly by fourth were and $XX higher quarter operational full for the XX% the under of occupied A lower

and we remain will on to reduce labor down believe contract increase rates and we’re levels, able elevated temporary anticipate year-over-year stabilizes, pre-pandemic staffing While a recruiting and growth wages that portion the is overall and in as of relative come will in-house we costs reliance costs the labor. on-boarding to

productivity us uphold position As efforts our levels continue to and to These to and the we’ve to a top maximize always positive we done, will to our rate and efforts high environment support assets. sustain work profitability attracting of balance of retaining service conducive long-term initiatives talent. growth with necessary cleanliness better the

XXXX, to basis able to a keep in expenses asset relative on were excluding significant to rooms management payroll pressure. inflationary despite per onsite occupied and same-store X% teams room increases Our

million effective XX challenging the impact adjusted inflationary $XXX despite of XX%, adjusted achieve growth controls XXXX. comparable down also us enabled margin hotel hotel highlighting up and quarter of was comparable cost and approximately fourth the to Actual and EBITDA positive for approximately only EBITDA of quarter pandemic. since environment EBITDA of the onset XX to margin fourth basis transactional adjusted points activity the hotel to XX%, rate quarter Strong labor the but XXXX, of basis fourth our the points

and industry believe we calls, past for our largely for conditioned to expansion on grow margin our stated that rate. have we long-term on portfolio As the be will ability

anticipate our to costs short-term expect proprietary be increases management structure things, employee rate based our of operating recent hotels and of Approximately use hotels expenses. their near-term markets. on-boarding we in growth align of around a pressure management expense utilizes, recruiting driven are temporary, our our operated While other elevated and wages against XX% contract performance variable continued portion on a by we and labor, under managers within a fee optimizing to agreement other balanced a scorecard which with and of among owners performance payments better on

against fees experienced of reintroduced based three budget, the because share these the market range. variable are other the variable fixed by property and target Over years, disruption contracts satisfaction the your have industry, scores. performance midpoint the payments XXXX, past structure. fee things, guest of on Beginning we management have we under Among X%, earned of achievement meaningful at in

million, adjusted quarter EBITDAre up the MFFO to X% approximately XXXX. period XXXX $XX to quarter the up quarter quarter fourth million, up same and $XX XX% the X% was compared XXXX to XXXX. for was and Fourth XX% fourth to in the compared

is by unamortized our in value XX debt comprised billion on a fair debt of adjustments debt, outstanding approximately sheet, total Total billion with credit December costs X.X $X times our outstanding and of secured we weighted rate X.X%. our approximately balance approximately at XX-month million unsecured had and as XXXX, excluding $XXX hotels property $X.X Looking trailing interest outstanding average debt XX, facilities. issuance of level in EBITDAre

debt are average maturities years. almost five weighted Our

At of XX% debt quarter, had was million. credit million, outstanding cash availability to approximately facility the or under and of fixed $X our of million of end we hand in loan term of overall $XXX leverage year-end, portfolio number in the we revolving total hedged. of approximately on XXX. approximately the secured $XX levels, to of mortgage mitigate Subsequent our swap impact low the most million, increasing a environment. the full hotels agreements for and total Valuable three current rate interest repaid loans of $XX unencumbered availability importantly,

in the for of maturity feature total under increased credit across and $X.X highlighted, million and achieving to July, from facility. million pricing an capacity capacity $XXX million Justin credit billion. existing billion, the the which of amended increasing $X.X dates As borrowing $XXX The under provided These facility, billion facility $X.X to and $XXX we improved approximately additional restated our extending updates term revolving credit includes in the the accordion be facility. amount loans agreement the may approximately

initiatives. senior of details inaugural and our seven-year facility the facility our strategies credit Through mortgages, June balance the in primary of refinance report, and in our December, July, which published further corporate Also strengthened repayment sheet. in additional secured we our ESG we the closed notes performance, additional responsibility

environmental, of We integral areas shareholders. social have part always key uphold an believe worked high and and value standards, to our governance for focus driving we are these long-term of

as industry wide evolve. progress ESG to our enhance expand deepens We related standards disclosures, our continue will and and

Turning press for in outlook XXXX release. to our yesterday’s provided

into to and key comparable macroeconomic short-term range and windows due for meaningful future XXXX. other of outlook performance, broader our uncertainty, reflects limited visibility metrics a RevPAR hotels booking Given change

Although forward headwinds latter our currently of our impacted the outlook booking will industry not portion the by that does be for a the macroeconomic year. lodging provide portfolio data of evidence anticipates in recovery slowdown,

adjusted be and and be to $XXX million, to and be hotel comparable we and the hotels million between and expect $XXX X%, RevPAR EBITDA million. to change comparable be year, XX.X% to income between X% between EBITDAre adjusted net For full $XXX margin hotels million $XXX XX.X% between

to margins to XXXX While utilities, and on mitigate pressures, to be pressures cost impacted increased working by other inflationary anticipated our costs. wages are diligently insurance hotel are operating management and asset and relative teams

are end improvement with continued conditions full range lodging the slowing, Omicron easier quarter quarter from demand. XXXX, expected when or The on steady to growth strength the outlook take variant RevPAR demand second acquisitions reflects leisure operating reflects high and it any our demand first account unannounced This the first in transient. hotel lodging business but in is into does the based and into year relatively hotels unanticipated results in for macroeconomic current trends, XXXX a and low change Based comparable quarter account softening RevPAR of The business roughly to the take the throughout range of developments in of or view flat on XXXX end does XXXX in beginning benefit not the environment, significantly impacted our half with in negatively nor year. any compared to current comparison dispositions. the the changes the second

differentiated have as into Over the XXXX, the we positioned well remain demonstrated three environment. we our years, macroeconomic move last believe And any we we of resiliency strategy. for

is intend to and sheet our restructuring opportunities. balance pursue liquidity, strong, which and we recent provides additional to extended use accretive maturities opportunistically Our

Our assets that and maintain we are in competitive over a other capital good our market. dispositions advantage condition, in with products recent investments, ensuring

Overall, existing the to performance the enhance year. recent help our internal to of systems to to our the hotels. portfolio processes be ways favorable used picture And further of that us performance should enable our through will the our has bolster and and supply continues coming maximize our experience in team

our concludes prepared remarks. And that

Justin that you us. happy have for any and will answer I to be may questions now

Operator

Thank you.

Anthony conducting We a Instructions] be question-and-answer [Operator will Barclays. ahead. from now Powell Please Your go session. question first with comes

Anthony Powell

you higher of you’re by decline on sequential items? driven exit of impact question get temp could ‘XX much a better this of how How trading labor on under A those as costs are control, the basis of kind the many if margin and that two able to margins? those the I year? guess points be from And tailwind

Justin Knight

and out, went the Interestingly, It’s last how so on. year year a staffing we as question. occupancy played remembering ramped good

Though an contract number rapid of -- which use relative based we fourth use part on saw the lower had the As we in been it slightly year. where think through to the fourth part continued necessitated of quarter. that labor the markets, ramp latter we occupancy, came increased in of down large case of which is part during our that or elevated quarter in a the seasonally

year, in As than employees, reliance. somewhere to continue XX% into that without taking we productivity regular labor group. start elevated that’s more on And rapid costs of will contract turnover expectation our around and more is our remember, because average that have we lower consideration the

through gone We impact. haven’t to the quantify exact

our contract But to second As labor easier we the contract will services of the the levels But on somewhat we numbers, that of staying you the to guests if part. quarter be on labor at inflated year, latter the we’re And have us to front. provide last comps, were part increased and the as more as and get year, were will that significant, fully not those just to remember, be the the result, impact comps challenging for had obviously, we of year, productivity the yet hotels. of in we necessary staffed XXXX towards a first weren’t in number beginning the quarters. will comping more

Anthony Powell

February trends, kind of the trends. think pickup the seeing to what you into get in improvement quarter, rest talked Maybe you in you detail about. to and that that some -- on I you’re said on here more expect said see and maybe of Maybe the for demand current what and some see January just starting you and you you’re pricing gave numbers

Liz Perkins

begin even did prepared to gave that’s as to illustrate a unexpected. January. pullback in in to look, increase in February to from the seasonality an increasing, ramp rate we I occupancy it as slight And and well. as with growth and remarks, I February not relative January relative in rate my beginning see we more on expect And back both We in think would books in We we’re as shared XXXX numbers. rates, And occupancy so perspective then at, March.

Justin Knight

did And well in January of related it’s the renovation disruption -- that as well. and have under in increased important we first storm note properties to number some

Operator

go Next question, Batory with Tyler ahead. Oppenheimer. Please

Tyler Batory

acquisition the on Justin, topic. me, for one First

later You being coming be year. like maybe talked this you about deals some to sounds think market opportunistic, more might

to obviously take advantage a of in strong right really liquidity that. You’re now position

through your Interested well? kind interested seeing us Just what walk there now. like, right you’re valuations and of are out pipeline as looks rates where what cap

Justin Knight

Absolutely.

we’ve we in additive, to market be that maintain and we’ve to have the been made have from that the But to that been are back build acquisitions quiet. acquisitions. sheet. since active such assets and and process continues pandemic the allowed remarks our So, and been market operational balance standpoint in able selective significant highlighted strength I prepared portfolio relatively acquired that of an my of the our in beginning core

our market will brands we deals We year, assets year. are last underwriting of higher - them come market. And will and to deals be to CapEx at greater have pressure Many that today. we a as to cause back from number with come that interest of are move the around that continues the combined more to looked rates expectation through

in and That deals lot we’re at right, when to capacity that the year today. and be the really balance of move we’re seen opportunity be of as of the in in to acquisitive market. we’ve We’ll deals back that year. an adjustment for continued half to those seeing into said, to be continue Most pricing we last And again, we that have there market underwriting we active new for marketed. question, date meaningful have will haven’t assets. monitor a be what significant sheet the not is are anticipate on as you your our And looked highlighted a that and

part were equity last importantly, the rates private players in I a in transactions those of of to had complete higher competitive. number that market the interest And less signed latter they think meaningfully unable year. participants up have made

the contingencies, being without not financing bid, and quickly the our last our ability And portfolio without deals opens meaningful closed as the competitive we to up, those did able underwrite a our we that As to about we ability think we close year, because a advantage. as at were we existing assets financing have acquire looking in contingency. space high to based experience have to a result, two act market on and the assets our

Tyler Batory

appreciate wages. And a then, quick great. that. Okay, I follow-up on

you your suburban overall between are difference locations expecting what terms of in resort wage more of increase some markets expecting you is with in year-over-year there for XXXX? what significant cost wage are In overall urban or the terms inflation the And of a labor increases? and guidance,

Liz Perkins

I’ll don’t be what around more start with their question. urban the of depends location. be onerous have that rates very in challenges necessarily latter average the urban part market them It rates side. certainly of the challenging, that to then locations really allow that It’s with on locations for wage and that more have suburban We location suburban on your wage specific. urban specific. friendly sort may have It’s ramped and well, not are line and very business the more where would really their

I had more rely general, even been where market it’s location, more in within think we labor have we’ve contract same and have a to that whether challenged. on or markets, broader urban wages suburban

it’s So, specific. market really

we at last wage and year-over-year, about we this continue year that look into would XXXX, relative how that really we especially took through ramped into think pressure to anticipating year have how but As also we we rates, account to we finished guidance the year. and as

year, but in of the at we not did this fact half that easier the ramped the labor question mentioned level. just staffing in have comps first And last to first levels. year and we’re at model very indicating Justin ramp to due of Anthony’s well through that stabilized same quickly that weren’t we half that response we

I some basis, year-over-year said, and more past more have or And wage we’ve opposed year from wages as think few increase years. over the extent from normalized rates XXXX we’re stabilization feeling compound hopeful to increased compound That inflationary a some think -- we a year-over-year last modeled significantly XXXX. on to to of

Tyler Batory

Thanks all detail. the That’s helpful. for Very Okay. me. for

Justin Knight

you. Thank

Operator

Next America. question, with Bank go Dany Asad of ahead. Please

Dany Asad

underwriting cost Question how margins XXXX much everybody. when from growth your RevPAR need get or is, here to base? improve operating morning, would you’re leverage to in you Good Hi.

Liz Perkins

the Increase line slightly range, relative of margin, basis, what? a to our on At at high end in X% we’re comparable with up.

the forward, I through rate get the point more that think growth we more and RevPAR So, growth the that bottom-line. from comes we more on would that have the rate

Dany Asad

Got it.

Okay. here, we’ve would largely why think be is there -- in And for we we any kind different seen by of seasonality about of when quarter XXXX? we since what when EBITDA recovered any contribution reason -- the then than for the are think XXXX,

Liz Perkins

our and coming season really to seasonality mind overall specifically. That second anti-seasonal second Portland, perform basis We the Maine third first is historical portfolio the will strongest in be -- stabilized of slightly way still, even changes quarter; overall XXXX, And portfolio and sort the to our portfolio. fourth, and leisure will has But with had in the behind with third. did Generally, the No. bought it performed properties. based acquisitions. that we’ve more back that a on mix is and

Justin Knight

our too productivity Dany, that relative margins overall for on -- actual performance for impact When comp portfolio. and especially performance have portfolio transaction as note and we’ve at our you’re guidance. you you meaningful provided to at actual looking important look will actual the when XXXX, activity look it’s year-over-year to

Operator

Next Baird. ahead. with Michael Please Bellisario question, go

Michael Bellisario

clarification year-over-your just impact net is you first the that Liz, or ‘XX guidance on there you just disruption, a question, that’s provided? could that renovation the embedded provide in

Liz Perkins

-- year-over-year, throughout renovating think, XXXX. we not have We were I

relative entered have spilled we QX into budget. fairly year, were similar, projects we We of beginning slower be little we year. more year, so, not the it projects how had summer out coming will that of than had we Last different. And we did CapEx XXXX, over look the think to renovations we given a And January year. should the at will managing of the our of COVID. this were distribution And more at we have XXXX, to bit this guidance -- as capital be though release I comp you when overall, that

had So, I similar. rooms throughout service fairly significant We should overall a bit renovations different, look think last of out distribution overall from an perspective, year. some the but be year little might the

Michael Bellisario

are that service similar, but Got it. about be earnings right, there incremental and out rooms some occupancies ‘XX, though in thinking might of conceptually? But starters, back up,

Liz Perkins

Yes.

Justin Knight

the in quarter? first Predominantly Yes.

Michael Bellisario

Got it.

renovate topic impacts of your that two, better? your Okay. capital how there it more just the a supplies, of insight there how growth maybe impacting outlook push maybe you to a and a renovation the Any of decisions hotel willing kind your instead a today and on kind out is of or And helpful. also markets. it outlook into growth supply or lot year be in of allocation is understand of the low the supply renovations with Does make selling growth supply backdrop would because kind capital decision

Justin Knight

it’s -- part, that those discretion the a we return on allocating position getting where investment. in think have greater capital around towards I our putting a to us anticipate, for better most projects

I in competitive of anticipate to and CapEx of we’ve many of way increase assets, spend where the environment more able can spend those in we think remain maintaining an in move able rates, markets pandemic, been meaningfully the where towards out direct profitability. we that be the new have markets. coming to we’ll vast hotels less opening, And of we’ve as we certainly prioritized by our majority

we continue an to as of upside and as through overall the through continue our as capital of portfolio the at years, on we’ll move several for markets we or renovations look be based individual strategy. think, next I potential move piece mindful dispositions to important our

Michael Bellisario

that the on. or that be downside the could sort surprise help maybe topic for included contract a what’s maybe, can already and helpful, or full estimate understand, the throughout commentary this year? of Maybe placeholder guidance, then, And us more expenses. Any on upside aside me in baked one at and you’ve still an your touched would point Thanks. just what’s from Got to it. you labor

Liz Perkins

increase have we property guidance. renewal gone do but So, modeled yet, significant our not have the insurance through into

So that have what have budgeted better couple years. could modeled, there. worse or feel the of have we fairly like go conservatively -- than like been we past Property taxes but we’ve favorable feel been

that an have whether materializes, to in think -- our we’ll see. increase, I we degree guidance, assumed what

So go way as that’s either could a portion that well.

back the half And in And fourth of we’ve consistency modeled that particular, of we in go we the were where have utilities labor. modeled hotel with what modeling and think, the year, consistency, as to expenses, looked up. same seeing continuing We quarter at performance. we and generally, I off we in seen

the job, So X% lower of for our controllable majority exceptional that of maintaining payroll an outside done a of year. sort or team costs has costs,

continued I that think will well. we there’s those manage anticipation

a the labor side, ramped took really on year. we the And we how look the back at of half in

them a and higher productivity contract may more I efficiencies. a to there’s the be labor at we have end we’ve midpoint, range. way that the tried we gain first the back certainly bit tough Justin as of some But year, the of we to We There’s were in maybe able more the wean labor -- hopeful comp. model half, at of mentioned, and the assumption off more little experiencing the recognizing expenses think half are

Michael Bellisario

That’s it Thank me. you. for

Operator

Please [Operator ahead. comes Instructions] B. question Securities. Your next Bryan Riley from Maher with go

Bryan Maher

Thanks. And I your listening assessors call. to this hope insurers tax Liz, and aren’t

Liz Perkins

We of budgeted plenty increase.

Bryan Maher

if Does to stress there, than front, in you’re portfolio pace earlier acquisition a see willing out And got out long refinance slowed does that that onesie-twosie, the could of kind I questioning. fast couple I ramp a Anyway, of some look a that. on which start of year? with But is real know that XXXX. them in tell it do don’t questions, or there better some like off little steady kind following to throughout early you like said you look to create kind get on acquisitions? how seems But opportunities more acquisitions, sense the now. a wait XXXX. there of quiet a you in but Yes, XXXX

Justin Knight

been in a pursuing the acquire the as earlier, appropriate past strategic years, I onset specifically to pandemic. sheet of And XX pricing hotels. we’ve with but really highlighted the say when for that’s I purposeful could is and capacity as for intact those result, think hotels, a since acquisitions, significant have very I we balance

have driver We for Then, assets per is, looking able we to share utilizing will done since are disruption first deals in as are that yielding quarter, where And think that’s I there fact even massive pandemic, the a unlevered the in of highlighted result after onset of Omicron. the are us the I market individual constantly larger earnings pencil. And that primary underwriting, when portfolios. we accretion. we X% in and And was a the at CapEx. year of they excess transact

we forward deals. do want to sure basis So, of have anticipate currently go that additive that, we meaningful significant portfolio on we to want upside deals, to in number good capacity every we that a have. is those. while do We the And the sure make make a to we deal do

will the there think we will meet we market. in But opportunities will has they increase anticipate in assets underwriting that be be that the the as we that individual to move criteria. latter come of a about portfolios to underwriting as I coming transact And into there meaningful may think the and those year, the likely part we be well. past as certainly active in market our materialize, will when we’ll been case smaller as

Bryan Maher

should and compelled brand thinking brand mentioned push And XXXX there Thanks. out we you always in that standards be which Marriott, be And that standards sense that we is something that or put comments other something do sell? that PIPs. to that owners might could there your in prepared others, the to know that you raised? lever then about Hilton just think that that you one risk Is talk could and the could about How raise into in years XXXX, impact existing cost? marketplace are be those

Justin Knight

at we to as have inflationary owners brand a brand level. pressures requirements. standards, than acted were at still overall capital meaningful have position in made into speaking was offset an we’re in I hospitality and Really to which other peers more our favorable the the standards, to we adjustments space coming the the and look as meaning pandemic, brands -- When specifically operating

anticipated emphasis towards to And rebuilding see generally, been process major we’re and the reserves to improvement. reinvest groups fund improvements. to future refinancings capital, operating the in of to to the to in seeing needed What order and major and more funding investors, capital would to renovations, where renovations. of market, But pandemic need on what hotels. around a for in renovations reallocate put is through significant we’ve found that we ask historically capital where is cycle there’s go a around have regular capital to deficits hold Many that shortfalls, ownership motivated follow hotels calls assets fund required back or they’re sellers on either make bring

of we And how increasingly think the to will we and current things we think the about with factors ownership And consistent I assets. where past. brands have significantly And forward interest groups about to with think be as seen groups will renovations, on explore play opportunities that put out both lenders those would the see are what deferred sale driving adjusted their rates where LTVs as pressure move higher. for potential environment, in that in we’ve

significant continue our portfolio, that remarks, and our be capital X% As between our I at average. our historical we we to of utilizing to able generate portfolio to prepared will relatively by invest own a revenues, we And young portfolio advantaged in. as And consistent is cash. fund needs, with having X% look which continues in highlighted meaningfully is to expectation that have we’re our my continued

our ability more a on Importantly, to of our forward distributions, we acquisitions CapEx this capital, and to anticipate past an year, And having even from that operations continue go do we to than fund all activity. basis. enough had after

Operator

Green Next with question, Street. Chris Darling

Chris Darling

Thank you.

the with limited to mentioned pricing of adjustments. that comments, Justin, deals some earlier come have back but some going you your market, back to

at quantify and there’s that you still a take dynamic play. if sizable maybe Wondering that even could comment possible. I it, on So, to bid-ask if mean spread that

Justin Knight

Absolutely.

at through my marketed will were then half So as to anticipating that those I contract buyer’s tied up financing obtain back deals in the year. to and I a some highlighted greater deal fell that deals consistent year response the of the move either we openly were, A with LOI flow remarks underwriting. and of obtain portion that and/or think or questions financing out of under this point, and result pricing at we prepared some earlier, are of past as inability be that think their

the if fact fundamentals continue And similar take meaningful market. impact other that, buyers, bid-ask year, even a consideration this in firm because pricing strong think hold. things increases cap rates, is in environment think the I adjustments for ordinarily would in they’ve in be they year-over-year. operating been and the I support that today’s at which cases, anticipate to reluctant in contracts elevated position many meaningfully But variances costs, well spread with financing to go the might assets, sellers should to prices, into continued that pricing improve get had to the factor the be they or to adjust

of question, we said, there will we that them that on half and without change will to Bryan’s their in think, could of debt, the will their brands I markets, additional the pricing move debt Now, do pressure have I to And with we refinancings. to the have the responses number pressure that will feel adjustment, see back into some sellers, move in back pressure and the reinvest year. on costs, put as And we a going increased incremental then the a through gave increase of as which floating some Many be rate groups assets. year.

Chris Darling

it the quarter? one might this just That’s but for hoping comments, that I taken discuss helpful. impairment charges last me. have in Okay. you And could were missed then, prepared the

Liz Perkins

end charges market impairment really performance our analysis we a The it was two of It bulk result And of assets. the Sure. one were throughout just that the was was year. do it and and of the driven. asset, on normal and at

Operator

will now you. to remarks. Thank for Justin call turn Knight over I the closing

Justin Knight

hotels. to a with us forward of time Thank very you’ll we And in you. you travel, We to that look call shortly. meeting great appreciate of And today. day. a as the opportunity you take to participate stay one you our Have number our always, with at as taking hope

Operator

This concludes today’s teleconference.

You participation. may disconnect thank for time, lines your and your you at this

Apple Hospitality REIT (APLE) 22 Feb 232022 Q4 Earnings call transcript