INN - Earnings call transcript Q1 2019 | Summit Hotel Properties, Inc.

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Operator

Good day ladies and gentlemen and thank you for your patience. Welcome to the Summit Hotel Properties First Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this call is being recorded. to President call Markets, of like host to Mr. now Vice Senior Finance would turn over the your I and Capital Adam Wudel. begin. Sir may you

Adam Wudel

and Thank Jon Dan Hansen; today Executive am Vice Chairman, you Chief morning. note and These and forward-looking and Summit today Financial that and as Officer, defined of other known President, laws. are Officer, uncertainties securities risks Hotel to considered and statements Properties' as Please Otis our joined Executive statements comments in Chief subject our President federal are XX-K good Stanner. described XXXX unknown both by and by Form filings. SEC I many

duty effective statements as and May of to we later. today no XXXX update today Forward-looking them that are only Xnd undertake make we

filings Please of call Properties' find Summit release measures and You non-GAAP contain www.shpreit.com. reconciliations this Chairman, referenced Hansen. and on Executive SEC at can welcome earnings website copies Officer our financial Dan Chief to President, Hotel on our which

Dan Hansen

Thanks for XXXX our call. joining earnings conference Adam first us today all thank quarter and for you

with long-term strong very on pleased ability sales execute of believe quarter and the this shareholders. are top the to performance and asset we that our value We for portfolio create bottom-line past

occupancy. the of scale X.X% X.X%, of reported RevPAR and as aided the FFO driven and continued our RevPAR profit was X.X% by was total X.X% increase On quarter, negative the respectively. expanded a first reported points RevPAR results changes rate-driven This compares upscale control. of top industry quarter the for we to a a $XX.X during positive in basis favorably the XX we XX to increase on For X.X%, $X.XX margins for and Operating quarter focus pro basis, growth negative growth reported of of XXXX. in expense share, quarterly markets which compared a quarter or first by the chain an adjusted the forma increase per million X.X X.X% as rate which percent

again the closed an market represents among XXXX. to of basis April X.X% once Our shortly. gain will in in XXX.X six sale But we pro quarter share more XXth, the on of rate these totaling quarter forma hotels quarter occupancy. competitive with excluding portfolio driven X.X% guestrooms. the in X.X% pro a basis to share market of compared a the by on first increase sets increase hotels XXX its Subsequent XXX and forma RevPAR of increased transaction a gained on points six average end, RevPAR which on Jon index first details provide a

certain we in of would were you across demand with segments by expect, throughout markets a including key Baltimore, quarter, Louisville. San Francisco, aided particularly pleased markets demand strength Atlanta, Boulder, strong this our the as were guest results and and While

In our Our of over in for market. despite RevPAR also of quarter a market, the very absorb online these months. market for with as drive related having The Super Adjusting room from convention Atlanta a Fisherman's quarter as posted helped submarket three a from Bowl overall saw come respective XX Baltimore in hotels the the incremental market the the Convention that last Marriott hotel RevPAR significant a related a increasing demand than calendar to our we San as lift of the high-rated sets. and in demand from has the offset to market comprehensive X% strong first rooms Super Center and increased XX.X% the Moscone our that RevPAR to and by in over XX% The wide-room demand from renovation facilitated corporate the that XX.X% in fewer renovation. outpacing much the dramatic group renovated benefited the the more Bowl, The increase still public Wharf four Bowl reopening Francisco quarter RevPAR posted XX%. convention market past following city supply strong Atlanta, of hotels competitive but significantly the a better year's upgraded base XXXX, first strong in recently in increase entire quarter Inn spaces lift product importantly, have saw produced than begins average the displacement significant hotels a quarter, business. more growth downtown the and the Hotels, nights. and our from for the Minneapolis well-timed and of benefited Holiday benefited calendar Super Boulder the from

RevPAR grew was competitive in nearly Our points our better XXX which quarter, basis X.X% by hotels four growth. sets the than

in group allowed for the in Francisco, quarter. in growth reduce revenue the our the calendars on inventory Inn, the RevPAR layered transient declined increase a corporate OTA-driven revenue, focused group in resulted quarter. Our our manage and at more new group to substantial for X.X%. convention Adjusting In the RevPAR which Louisville, higher during We revenue encouraged still moderate hotels trends the were in of by Center increased increases to to quarter, sales Despite within the drove an as the XX.X% increase effort bookings. in in such segments on allowed in Louisville base. also business, back rated corporate yield negotiating related XX.X% the and first overall in markets' XX% top corporate of group effectively our a reopening contribution, hotels gain reliance increased an Strong to the our segmentation Atlanta, the guest Residence which already in two in several drove portfolio. the in Convention quarter in and accounts posted that primarily group segmentation of positive us X.X% four demand The XXXX shift segment increase in quarter. strong of our displacement these San

Jon and by space by and improvements common renovations and our from During the over extremely guest investment substantial items that at of to Nashville; and our proud first positioned room ranging Marriott, areas our accomplished million portfolio quality comprehensive complete we lobbies, I team has redesigned as as that have quarter, The better, Courtyard included am well into and Downtown; thoughtful Boston/Waltham. that well to activity we the invested portfolio renovations shareholder the been to and uniquely that, has made fitness to effective portfolio our turn very past our transaction $XX.X I'll months. a our bar existing all company average and centers, XX Garden Hilton hotels the and never as of capital providing from well positioned guest how an the In over we of closing, clear has years that great commitment our been Courtyard age long-term have to experience. own our the Inn, create are wanted be strategic best-in-class we highlighting hotels Pittsburgh X.X With Today, XX Stanner. CFO, to I Marriott, benefit call as to the value.

Jon Stanner

and good morning, everyone. Dan, Thanks,

X.X% XX%. quarter basis from For per quarter, XXXX, million, occupied as a EBITDA in forma hotel $XX.X were just well room during expenses the the basis, GOP same by increase pro contained expanded Expenses our margin and resulting hotel to on hotel operating the XX.X%. increased points XX was flow-through a of in period EBITDA X.X%

NOI to from months on six cap first the adjusted brand The end, quarter, first the the quarter of trailing our million rate $XXX Subsequent we expenditures capital unchanged million sale price totaling represents XXX XX gross $XX.X items. was the quarter a XXXX. guestrooms. including PIP EBITDAre sales hotels of for During completed of of X.X% mandated estimated

March ending basis our average points was an the X.X% EBITDA for the period. average lower months XX XXst, of $XXX, hotel of XX.X%, margin hotels had which than portfolio our XXX average same RevPAR the For lower six was which than portfolio and

of In million. for we our West two Virginia addition, a sales on totaling guestrooms XX February gross price hotels Charleston, in sold $XX.X XXX

hotels to Following real of an capital at stay. of Residence the commitment fee Inn, sale portfolio markets the these XX% which the our implied continuing us in hotels, at own want Valley great Hunt IPO XX diversified guest in quarter, of first we where estate results opportunistically the prudent XX XXXX, high-quality we at a demonstrates have to in now that that purchased sold yield. strategy the recycling our own hotels simple the a in we also In to interest eight

positioned and be sheet more nearly $XXX years. of liquidity, well current continues no remaining average maturities with XXXX to balance than of of Our million the end five term until

with rate million March we had average interest of debt total a $XXX outstanding of weighted As of XXst, X.XX%.

X.X is year further declared sheet. highly ratio XX, with forma million six of times a our efforts the in We XXXX flexible net recycling we in without progress hotels to share a price has XX% On great AFFO basis. three And secured XXXX. of $X.XX quarter a reduced sale penalty we XX, at over sale of result of the annualized On balance per May hotels discussed, our hotels. on payout adjusted of full April press with debt a for April mature the unencumbered. of the assemble annualized sale combined The program results trailing have outlook. As a first a of which of unencumbered which yesterday, our loan our of to guidance in XXXX approximately as a our eight per made variable of release the now The share. to now rate updated repaid to for common dividend we today, EBITDAre dividend or $XXX.X interest that a that million, X.X% $XX.X prudent pro year-to-date quarterly approximately EBITDA capital midpoint of on are we loan XX% the was $X.XX set validation continued our mortgage incorporate

Our revised adjusted to $X.XX of per full and EBITDAre million is to year $XXX.X adjusted for $X.XX share FFO million. XXXX $XXX.X guidance

capital beyond back debt are pro growth forma year dispositions, the XXXX RevPAR unchanged With same-store $XX million and X% improvement. $XX those to over mentioned year call full our million for will previously remains as I or Dan. in assumed for to estimate acquisitions, additional Our turn that, X% equity estimate does transactions the guidance. to raises No of full

Dan Hansen

We pleased the outlook Thanks, Jon. solid for and our were quite the first the we call with about continued our Summit. open that, for quarter questions. your producing with we'll optimistic of XXXX summary, remain In as future to well-diversified results. And portfolio results

Operator

sir. question you, Our Austin from please. [Operator KeyBanc Wurschmidt Capital Thank Markets, of of the question first line Instructions] comes your

Austin Wurschmidt

Thanks morning. good and

how's segment the portion So of it's year, outlook Dan the group that the for But, strong balance first portion significant kind of I know the business. in look, the the quarter. or of And of discussed a contribution the you business? for not

Dan Hansen

but team and our is Dan. Group a city-wide We've our portion visibility Thanks, the huge not XX%. a ability mean with not groups. management manage their pace. I been We in roughly for calendar can Yeah. balance Austin. we pleased look the It’s It's of look have as we just the favorable to revenue very markets -- into year. events, this business. the convention And of small pretty our and that's think stable the number at near-term

Austin Wurschmidt

the segment the balance So should growth an we bit expect a Or XQ of same of through year? the that outlier? of was level from

Dan Hansen

It's Dan again.

more think from I quarter-over-quarter. bit stronger their that think based market in over a expect of wides but you little I that as that But than so city force. haven't wouldn't each should fall, flow they would normal year. number, where some growth a and conventions the as growth on And quarter think it flows has the first we contribution of expect level I balanced was it and group volatility ebbs

Austin Wurschmidt

source that. as about how million to go-forward on targets $XXX versus on should $XX basis, capacity for that it your maybe based leverage funding think then, match dry equity your a most with whatever call of time? attractive the investment available Thanks And willingness that deploy to Okay. million with we some longer-term powder of

Dan Hansen

I in over good years. past that is we to debt-to-EBITDA the as maturities several times think the X.X range considering X.X stated next a negligible the for net times especially us,

more to get should you certainly balanced we to we -- balanced down as we've approach expect like approach. closer a us a dispositions. in think about we think past be as And would to as favor more the I high So shown probably can end opportunistic. it of is But the

Austin Wurschmidt

thanks time. Great, the for

Operator

Thank you.

Markets. Our comes Wes Golladay the RBC of of next Capital from question line

Your line open. is

Wes Golladay

just I follow-up to on question. guys. morning Good Austin's Hey! want

bit So, you'll get your middle maturities little to probably assuming EBITDA have a of growth, you the no range. of

a more to model just look Would the may a this you So, how Would little we powder? I little pricey. And bit should year? It's forward? consider a company know be market going you acquisition more a this little seller’s building -- selling dry of market. of

Dan Hansen

so. a a and simple answer. you've it do continue Wes doesn't fair of it's Yeah. a as and have to We Dan, do its good amount question underwriting, say before unfortunately it expressed to investors, if depends it is of and a buy, upon was surprise really least present a challenging opportunities but it what there shouldn't the lot themselves. a sale But

good aggressive. again feel the on a that It’s opportunities very as -- about outlined. see But the we about underwritten but to be going I wouldn't number based we're definitive value. extra there's say So, we've them adding range where how we capacities, much

apologize But So, for I long one. not a the answer. it's think simple

much opportunistic. I think it's very

Wes Golladay

did I'm the mention bit looking off which margins the walk for you driving driving -- also is there. through that's what's labor and can little OTAs expanded You you're time Is the by the -- components then the labor imagining in margins, And higher is yielding multiple maybe Okay. that a at it margins it shortages? it? efficiency, first quarters

discuss maybe just us. So for that

Jon Stanner

appreciate Jon. question. the I It's

I on of think you the main really drivers hit it.

reducing contract did check Changing first we have And making to shipping good keeping on margin we probably have have continue ship the been expand easier us little some then a being several of we labor. that reliance and over on in on think and higher bit -- and be pretty cost that margins. really from costs business a impact mix focused a and to years the sure -- cost very as for top nice out foremost did we're a growth to labor and able last makes quarter always I which OTA it this our line perspective.

quarter. good So a kind given feel we high performance to be still first to in margin had from little closer to we of of XXX we'll a that down the the perspective. flat bit the end Hopefully range

Wes Golladay

Okay. Thanks a lot guys.

Operator

James. of Instructions] the Raymond Crow comes line next Our from question [Operator of Bill

Your open. line is

Bill Crow

I hotel emerge brands or or -- expense morning Moxy newer Tru going in you these their Good branch Thanks. and of concepts seen edge Maybe think Courtyards to the Dan -- guys. and more you at adventurous more and on I think consumers Motto versus don't know some do Jon are seem getting we've traditional cutting mean more there? what is well. doing do be of and

Dan Hansen

this they and to I I offering think I'll think a alternatives, a important than I something I directly, we were today several is in-house Working becoming add of properties. are more guests are itself design is years guests to last it's projects. at ago different level own Bill, stretch than renovation the reasons say think and that some I at do customization Dan. one our and with think today And more start. and that we've kind level our an our experiential, of brought looking do to opportunity is think which gives more the that specifically looking brands the us for uniqueness that cycle. there's while of authenticity looking of

So there or a a unbranded, bit to And they some for I are Hampton bit flairs, I special little little focus think whether local little something incorporate think it branded and I they today. authentic looking providing make is warranted. a it do branded, are unique soft because that is whether think Courtyard a we can a do more something on or independent bit are a

that hopefully helps. So

Bill Crow

you Dan thanks. does, have a in It Okay. hotel success Orlando. developing

the company time area developed anything talk You that about? talked could you the or that capability two about capacity of time, in to from that asset an

Dan Hansen

quite are There's a at high Construction -- costs definitely opportunities out level. still there.

distribution guest future and certainly we the and to Brand talked going of us small and as a wouldn't and expect created. will that contribution the we opportunistic. from location and preference, think we they the part look what that we we've at more. all is matter more provide a strong have -- as much very the But do. kind those believe is to short in about how in be of past And anything So value I loyalty term

or from don't are we So that, lean can opportunities opportunities, where either want make away to sure shy bolster we if to there some some in we that. new exposure

So nothing still long-term our mentioning, that short the that create of is value. how we to think in a part but term on worth thesis

Bill Crow

Thanks. for One more me.

labor on or unchanged Kind the two is better? Getting assess what's the worse? Maybe of with it. over turnover On a challenges going that's three And getting last it quarters? rates? to way good

Jon Stanner

meaningfully months. the Bill of Hey, would last say over I fairly its the Jon. think it's I changed XX don't it’s course that, stable.

I the think across – low. rate countries remain are unemployment extremely

to find tends and than full-time think been of I our expensive having has less as solutions which management with employees. labor, creative our companies us to be along contract around trying efficient focus

wouldn't I wouldn't say a say I that getting that lot So worse really better. getting it's it's

same operating of of think that challenges XX managers. of I a it the is teams today. kind ago our exist But more still and focus existed more months our both and

Bill Crow

it Great. That’s me. for Thank you.

Jon Stanner

Bill. Thanks,

Operator

Thank you.

the of Baird. question next Our of from Michael comes Bellisario line

Your line open. is

Michael Bellisario

Cadence a top throughout year looking guidance to I'm modeling in help just line for us from of perspective. here? the the terms just not explicitly

Jon Stanner

you caught Could question. repeat it please? your Mike Michael - only – Bellisario Q the we half back were you Yeah.

top in asking that guys you the about we of progresses the the of think XQ expect year – in just posted? number XQ, quarterly as XQ, Just on throughout just year that terms you XQ versus terms line how the particularly the cadence

Jon Stanner

first of to Michael, Jon. out it's Look it be turned think I us. directionally. quite Hey, the Obviously, at for just quarter kind strong

the shift renovation year or today a one that of dramatically in fairly little quarter There's more second as we so out quarter. with bit not the more dealing others. kind the sticks and quarter of of it got the in from from it the bit a are April second Easter balanced. half see we've tailwind a back is April sort the headwind have and We in little – of do We

Michael Bellisario

how then how maybe it. Got against environment read than view point XQ seeing high-level as should kind the overall full this internal the further And too? zooming we well better balanced out of performance. even just assume better fundamental and at then expectations it's your you're year of I just just kind the into unchanged guidance

Dan Hansen

Yeah. over it of said I'll the think in by remarks Look ways say great I just what but I prepared incredibly This months. efficiencies, restructuring team that's done revenue working team first my been Dan. the XX hard, I quarter management. create in work combination to not think is the operations that again. last Mike is and in its is

worked construction have renovation minimize think Our that show – create a opportunities is starting work clearly that design team and and diligently to disruption in QX. to I great lot all Hopefully, point. stable of – a But a see never there's this as We reminder, opportunities for growth there's lot visibility continued been. do not at has the us. market the as of

I think job managing through our does a team that. masterful

what shorter renovation for quarter. Jon would of as at from next so seeing And a -- we're a some tailwinds some statement, earlier, could the stable I general environment referenced or least headwinds, as that create smaller say But the volatility.

Michael Bellisario

maybe of others Got just follow-up what seen then Any the opportunities or or terms underwriting on a acquisition you've today? are a what you you've pricing sense it. what expectations? trade question potential acquisition prior Or in one for give you And of from changes maybe That's helpful. underwritten? us Can front.

Jon Stanner

Sure.

Our changed. underwriting hasn't

makes this at very focus the it Now to which we that things get IRR, unlevered to point. on hard pencil double-digit still

that broken. profitable. investment, brand mix constructive of we've as calls that ramping guest It or capital as something feels new from is maybe brand a with we like maybe that with about new isn't been talked much the theory be think construction of neglected I as or could have something our story in prior

underwriting So underwriting. we in find environment it's of We're unless the the lot within the catalyst growth a little a can not harder. current

of So lot I very is certainly There market. competitive get are people for it looking a options. still a

So challenging to be expect. I think more be we'd continue -- what to is

Michael Bellisario

helpful. guys. That's you, Thank

Jon Stanner

Thanks Mike.

Operator

call to Sir? remarks. any over to Dan Hansen time, for closing I'd At this the like turn

Dan Hansen

Well, thank joining today. you all us for

which continue capital to deliver and for well shareholders terrific day. to continue look Our through guest we love. innovative high-quality opportunities thoughtful again allocation a value today's expertise operational in we see results, Have strong And create soon. to forward properties hotels, located talking to and you

Operator

and wonderful for that Ladies today's Thank and day. you concludes a participation, conference. your have gentlemen

time. You your at may disconnect lines this

Summit Hotel Properties (INN) 3 May 192019 Q1 Earnings call transcript