INN - Earnings call transcript Q2 2021 | Summit Hotel Properties, Inc.

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Operator

Thank you for standing by, and welcome to the Summit Hotel Properties' Second Quarter 2021 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I would now like to turn the conference over to your host, Mr. Adam Wudel, Senior Vice President of Finance, Capital Markets and Treasurer. Please go ahead.

Adam Wudel

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

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

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

Jon Stanner

call. and joining which pleased all from for extremely and the first thank our our with increase us the Adam, Occupancy, nearly acceleration second our RevPAR trends exceeded you represented quarter, we earnings second Overall, a in the XX% of are for Thanks, expectations conference initial operating significantly today quarter quarter. XXXX in average positive and daily the room we during sequentially quarter, reached month importantly, new XX% pandemic. sold second for And and in onset achieved all since each the first nights did highs quarter. cash quarter. Demand in the of flow the the improved than overall more the quarter we corporate rate profitability we

during first XX% pace than hotels particular. the at are demand portfolio urban that faster our at we mid-week grew a are located results, trends operating in performance locations also overall hotels a demand leisure of increasing quarter. considerably over on improving second the to continues corporate quarter, by driver our While in positive Demand and urban our the transient primary be encouraged the effect our having

month only RevPAR increase higher second quarter, period. second forma RevPAR last achieved XXXX XXXX, July comparable RevPAR further July of over and a of we above improvement started. XXXX was and improved over narrowed sequentially quarter Like was our quarter acceleration the than of the last year, over RevPAR when which year-to-date $XXX, was preliminary the a Xx will our gap the quarter, what the full show which second each flow from in pandemic results robust a on for RevPAR nearly XX% and month since XX% second reported a over XX% was sufficient first quarter RevPAR in than to XX% quarter. the XX% For cash $XXX of June for improvement than we levels, RevPAR just significant considerably to drive $XX, with demand, basis. pro July lower the first This be corporate quarter RevPAR lower expect positive below our

second the was weekday days than Mid-week XX% XX% higher continues XX% as of which occupancy weekend Importantly, and digits. was our in to Average ADR increased from XX and quarter and XX% it quarter both occupancy with Weekend the recovery occupancy narrow. weekend quarter, portfolio and improve, average Mid-week XX in over accelerated as encouragingly portfolio between continues increased quarter of points a to our meaningfully gap was during May travel. and steadily first level rates across an our ADR reflects the occupancy the weekday to both the the impressive percentage of ago. during business July first rates some rate-accretive compared corporate full remixing in grew double June. urban was also XX%, just

books negative response in if reopening have past over see the Thankfully, the experienced any are closely we the positioned months. the variant X% our pace July the any we rates X% to we company momentum operating expect, at time up Delta and we strong the on August pace is slightly to in spread the of positive. it remains higher. to over what July monitoring September October would reversal August pace up than had you to-date, developments of over with is month, and COVID-XX is XX% As well for few our variant nearly the of but months future and higher for not pace very begin decidedly numbers, this last seen we've September.

period, some we half back get will preclude pent-up Jewish in operating into replaced get not corporate slower the when and the into some into later the season. leisure by results be would the color optimistic in we results some past a business demand will we that additional our of in September, Trey call. particularly August that and provide holiday demand October While plateauing as period, we of Day remain naturally leisure post-Labor on of

which to well-located, were leverage demand net During and into corporate for we operating is guestroom into with from our of completed of million. our to quarter, the a GIC. overall $XX end, Springs extended-stay the favorable Steamboat venture wholly-owned rooms joint models. proceeds of the with Subsequent of GIC which from joint $XXX quarter for liquidity. high-quality totaling contribution perfect increased benefit trends second capacity, investment contribution acquisition transaction venture our and proceeds, Inn guest efficient portion hotels, asset of cash million, six The portfolio the reduced reinvested to scales hotels with our further generated approximately million complement Residence XXX cash enhanced $XX the XXX market hotel is existing a the The our newly-built expected

since first months hotel has a in As been in in $XXX. XX% performers, other our compared the RevPAR that Springs, have the year its competitive our to over been one operation. over In has able X set XX% the with best in just running market, X premium and of ownership, RevPAR hotel of six XXXX, extended-stay of of occupancy only the the newest first hotel weeks the one over products Steamboat of Marriott-branded hotels the to achieve market that opened

underwriting, the fundamental quickly how reflecting of has the operating for forecast improved. XXXX already backdrop Our hotel just is ahead our

Our to to opportunistic parties find commitment joint XX and investment grow holds to and the a continue $XXX venture total affirms million partnership. from of unique assets both with now nearly the investments

quarter, $X.X items During we related planned the primarily capital. invested portfolio to approximately our on million maintenance second in

As of minimize we demand to the long-term we improvement plan XXXX, given around renovations from conviction which quarter, our to in last mentioned historical second those advantage several than trends, of half the lower will projects. into take occupancies the disruption still accelerate

between on spend to and publicly a million Trey call new to welcome $XX consolidated year the rata to million turn $XX million pro our expenditures for XX like I'd in a to expect over and We and that, basis. between on capital the $XX CFO, basis With Conkling.

Trey Conkling

good Thanks, Jon, everyone. morning, and

that growth hotels During the month achieving XX% demand summer exceeded overall continued or our recovery second by resort nearly remained XX% quarter, and to and of Resort with RevPAR a driven strong across with occupancy occupancy better, lead levels in $XXX. robust the the each continued quarter leisure travel.

of For July XXXX, which levels. Inn occupancy, Residence quarter ADR resort the our RevPAR XXXX second Steamboat, comparable preliminary and exceeded excludes portfolio,

June. RevPAR month-over-month June better strength Moving for our compared with an non-urban on during to of preliminary occupancy of the July RevPAR XX% steady to of occupancy our a improvement demonstrated with portfolio $XX XX% This quarter RevPAR, growth resort achieved and second subset to numbers XX% $XX the XX the improving approximately weekend and substantially metrics with on our than X% demand. representing non-urban a portfolio, and Consistent occupancy hotels. portfolio $XXX

month-over-month sequentially Finally, hotels compared quarter while of was benefited over to June. averaging XX second XX our XX%. to our strong to representing compared lag broader urban with to improve with also July as the The XX% urban $XX, by is travel, assets travel recovery, increasing RevPAR anticipated from continue preliminary outlook continues occupancies XX% summer to first hotels have sector weekend This for RevPAR the quarter. exceed urban strong driven growth

a in booking continues remain room near we night in experienced and nature of to decline on of Although, a be the very windows percentage booked have the challenge, nights forecasting stay. short-term or to

room nights XX% the April XX% from nights from period. week week X XX% days XX% in June, booked the for declined For stay same within to time that example, and declined booked of in over to in transient

Operating is drove margin second we quarter $XX.X to hotel quarter million which XX% the hotel occupied this XX% improving the expense of trend, the this quarter, another per and margin the to the room cash first respectively. combined hotel gross costs than more While cash for declined to flow perspective, demand, flow booking short Pro as pre-pandemic standards, positive Summit to a for an in second management a encouraging relative enabled and than thoughtful operating second forma with From which impressive represents XXXX. window reported profit growth EBITDA very XXXX, reflecting an corporate environment. continued quarter. Xx we compared was higher XX%, in view EBITDA over generate EBITDA

or second growth, hotel across to lean operating our the pre-pandemic continue hotels, model, XXXX. the expenses, than team of XX staffing which on has controlling hourly been XX% very We of consists top asset these line operate and great the average our Rehiring primarily an a strong has XX% approximately housekeeping staffing a ongoing occupancy-driven compared less Despite job quarter to in levels. staff, particularly management industry. to of issue department done when challenges of a EBITDA utilizing leading retention FTEs

call we approximately Today, $XX through rata turn liquidity balance that, over the Lastly, currently pro all We no X.X%, debt of and maintain and liquidity. have includes on which I maturing ample we current sheet interest hand. to million the XXXX. of to With until unrestricted repay November is weighted our XXXX, average rate nearly have Jon. turning cash debt will over of back million to $XXX liquidity, total maturities

Jon Stanner

closing, particular. open and enthusiasm we call business overall the in general. business model gain optimistic on for the the the on to outlook our your And Summit confident we'll with remain that, and recovery questions. Thanks, In in Trey. to recovery our of We in continue

Operator

of Our comes from question first One. Instructions] Neil Malkin Capital [Operator

Neil Malkin

I in a private look? First Is more demand travelers? specifically you your little bit prepared in seeing noticeably from your call you come question, it terms mainstay stronger, business them called negotiated about Can out can -- or does but performance. of talk you more larger markets? the it maybe your how in to getting guess, press about are mid-week remarks and that accounts just contributing release guess, you I corporate that regional

Jon Stanner

a Lauderdale, of the say, Orlando, leisure little Neil. is Tampa, for we've the and and on the markets be to strength. bit that just Thanks talked And markets It's driving like both. Tucson, Sure. stays some about continued leisure-oriented strongest longer markets, would I mid-week the of the better certainly, lot markets question, continued side. have and overall a Yes. Fort

remarks to prepared in well. starting see the -- as are We mentioned and it we

the to starting see in starting And mid-week. rates properties. it some see probably, even come urban You're as in is better typically, think calls, comes rewind, how to you're -- rate more our two evolve. continues as or comes encouragingly monitoring what give mid-week is, of rate earnings been occupancy And last anything, first happens second. and over three I what And we've to

starting I certainly on negotiated level think, back we're the rate business we're to what type We're by see side. of come some encouraged in. seeing very corporate of

think, were I over up negotiated in $XX rates corporate the second quarter, the our first quarter.

see of outlook starting accounts your business. more to the remixing seeing, regional, type as the business the Nonetheless, about and is bigger, get positive, pre-pandemic, It's more corporate better. to you some continues of to that So were better I to more larger drive that they national we've local, same not think, talked and for you're of that. previously, extent are

Neil Malkin

theme. that. Yes. sticking appreciate same with the No, Maybe

not expect of out group's I the are property sort regard the you one group of the for think term? performance in of fourth helpful telling quarter XXXX sort of at transient in talk that with see you a lagging how cadence -- sector's terms portfolio. your is of like you could sort what near the it about be assessing and levels, as talk obviously, managers the But you about business guess, least post-Labor the or guys side? what really uncertainty in for recovery business would can I to just you think Day you if pace, issues playing I travel the you could what -- the and to relative

Jon Stanner

in picture and come Yes. expect Look, timing like was It's our transient pre-pandemic. of more that corporate lot and it of The -- a look when, to of is I think, a bigger if, we the question. we question it's term, longer and minds. back not --

that on kind meaningful saw business trajectory an to leisure of I than the you're recovery more back do come But to I a back that think, is of believe to to what that back we see we've the that to in and post-Labor way. going Day, going as expect evolved do think come that gradual start more industry, come be we meaningfully. side. again, to

has we've haven't what seen changed, Delta sentiment given the certainly We look, -- market seen variant. with

that and week We yet. behavior And our haven't to weekend of the July results be seen last strong even very consumer affect continue through July.

in and positive. monitoring August X Rates quite our Our for over the increase the held nicely. every pace closely. certainly has books next to We're it months continue looks month very pace on

slower said I we of a pace from say, we As for get some of encouragingly, August, like this Day or Downtown school. into markets the or is the been plateauing half perspective where back half we've some again, being in where see results Boulder, some as we and Pittsburgh we've recover I return best would to or into wouldn't in Cleveland there our in been month period. the particular, urban seen the have prepared have in seen of in remarks, post-Labor of to that preclude what markets What the benefit Downtown increases we think pace back of

us today and on supports optimistic continuing assess and when numbers that -- So to back. But think, we book that the business that difficult comes have do things we cadence of it's the we're still the sequencing are again, I overall, all to improve. in the for exactly

Neil Malkin

Trey, real maybe I bigger quick, guess, a last theoretical question. or picture one for just

looking potential like? is about that study that for like before doing And you looks Summit? there kind or or to on growth. some and think, lodging how that your you of -- alternative you're for talk I at what augment just allocation interest it Can touched realistic in doing maybe something on there? What

Jon Stanner

as Yes, I'll on we I start, and lot, focused like. end, Jon. change, that Neil, about a you'd that what we've changed. preferences hasn't always would in can is say if talked Trey the Look, and it's believe and customers' we've jump evolve how at

fair evaluate. make And of certainly those so We something we immediate any to a to want continue of that but We cognizant business. current continue number We we have evolve. how that we're sure certainly to plans, our business. study preferences love don't it's do

Operator

question next Our from Austin comes KeyBanc. Wurschmidt of

Austin Wurschmidt

these ADR here the have And of price Or just that markets seen that some if seeing month-to-month, is Jon, sensitivity kind leisure this on side demand broadly? curious, is you lift achieved the increasing less it ADR in Just and reflecting if are really you've X? as urban of any well? driven to

Jon Stanner

would leisure has Certainly, market the Yes. we it's by on say the there's are. I well And and this a markets, mean, strong In mid-week of with dramatically we've to leisure been again, across industry. side, I kind growth markets market. fair The prices amount mean, travel. markets. push urban I documented compressed in in been elasticity. pricing has able been that and are better of

the Now in much baseline the lower. lower, was was bar fairness, much

look of the cadence again, need mid-week out to we in the the and most But in we in as see types recovery are we that where business a kind those off that think, of particular, over And are much locations, So base. lower growing -- we of urban I have come see business think that. that to I opportunity. starting back, the is we urban of

of come talked we into As mid-week particular. remixing result in some in some kind corporate level business and But more of a believe, we've of about, leisure. improve of seen do is we rates the that demand of and

Austin Wurschmidt

Yes.

out spread and of bit to and back So just means as the transition of a corporate kind the into upside into travel, the a what bit it's rates fourth if seamless for type weekend to do take kind move recovery or you continues a summer mid-week little of and that hold, coming to out quarter looking further? you that little between ADR think of

Jon Stanner

narrow. The or first out Yes. second Look, certainly quarter probably early I think in in it to quarter. continues the peaked late gap the

the second we're slower that of and expectation reasons. One, -- for getting to We quarter couple in have the later a demand gap naturally seen into July. period. My just in into narrow leisure changes a that again, is

a strong. school, to leisure think going getting still are back are be I will where in-person. while back so kids to We're And offices going to point

of there's of going of going been the would think type pickup We the the quarter of fourth less think the get industry summer. I corporate quarter. -- we as to little the start to we're later travel and travel has the across parts the a into strength be latter do third that to a see that of -- into

that I of So not how that is and you're begin see our the of between generally, be narrow. going I'm going by think, of to mid-week but stronger sure again, quantify time driven kind Part properties. urban weekend gap would out it performance or just results to difference, to do

Austin Wurschmidt

last leisure it. best the And one today or one. versus What's the then business? to guess Got your mix between just mix BT

Jon Stanner

Austin, XX% still normal XX-XX. environment, in say, it's And to leisure, a I probably rough It's would closer rough, numbers.

Operator

from Bank Our comes question America. Dany of Asad of next

Dany Asad

your in staffing. remarks, the topic on touched prepared guys, You of

the So think the how normalized operations just should counts about FTE how a at tweaks environment? made more hotels, of returned levels we've to your once context to relative we to in you've pre-COVID

Jon Stanner

and Dan, jump again, start Yes. in. I'll Trey

been, that operating the that documented And is back, -- that And ran FTEs well labor. I I to average just or what we'll FTEs of normal the I don't half do to of portfolio. slightly and I of of this running we XX. lower that's think Again, just occupancies. how be less unique stabilized number. I still are based today. about the a We're forward. environment And again, than than think still on think, add brand is lot there standards going with is be XX model a we an being level that to half right just across across is adapting Part for challenges industry. lower continue find the think us evolve. to able XX that's think is average going of the historically, on part do are to opportunities

and is we're on meaningful perspective. stay-overs a other and the are encouraged we're is the trucks come That's that are that all in overall, to services like of amenities and I labor-intensive, reevaluating different in pre-pandemic that help profitability think margin A brand and services a of amenities social but generally food standard. our these think costly us the reevaluated, that I from and think, were for something lot put I things not shuttles. airport offering going by most hours cleaning opportunity kind place breakfast slightly and be a hotel back being And level. and the likely that at other form, optional

Dany Asad

the Got it. some in might last already that And weeks just moving one couple to anyone about of brands started direction. anybody else that been making like going that. we've Have that's brands something permanently of heard this to you have it mean, opt-in over commit -- heard we've standard big concept I as an like forward? Has the that opposed have heard from into Hilton

Jon Stanner

Hilton has that Yes. -- others if not announced follow. one hopeful formally it. is optimistic the has certainly only that will We're

Operator

Bellisario next of comes from question Our Michael Baird.

Michael Bellisario

for questions of you. Couple

back focus it's for but business the for I about probably mentioned look strength -- Austin does versus segment you Jon, and traveler? First, go excuse But a couple the pockets know what know I weekend, strong September, a seeing pace How of cetera, markets, any that at you maybe booking certain you're pace to point. markets more of me, weekday week? could this just bookings et numbers, September, August, small of amount on and the

Jon Stanner

first all, in Day -- September Look, is Labor Yes. of September.

are expect. have all that that strong bookings in that weekend obviously you leisure-oriented the would markets we over So

it's than we of underperformed. one -- have For in September, talked August. their the similar it's markets of rest dynamic markets pace, a terms about of later that It's what in have that improvement

urban-related is So it more our markets.

are set are as September, up for for It August. more up still us say we fairly said, X% over nights for double probably look would As we look narrowly. pace I But today little room but our in is digits is in up, where a things I rates at pace September. importantly, September early

So demand. some mid-week by that more the and is hope that more corporate of is driven

Michael Bellisario

Got it.

just... like it's it impact and sounds on having on based early too still a So big that days labor

Jon Stanner

Atlanta, There and small markets for books improve in are helping is those some that pace. have on activity we particular, convention group example, the in like

in convention we I say group clearly again, driven what driven or outside Labor But beyond corporate, would that it early September, pace and see by type traditional are small September, early for we is by again, the seeing really activity. of leisure. sources. is improvement that, your it's leisure But So demand small it's it's October. Day whether for

Michael Bellisario

to gears pre-pandemic markets. just Got then go just your get supply switching side? get seen your latest bit on it. you growth projects average in your tabled? markets, weighted And projects front, outlook the Have started the the a for on supply more more portfolio little in question, supply back your maybe What's

Jon Stanner

is Look, construction, think of starts going completed. and finished do I slow. Yes. that which ground get I continue going most are to in new think to still to and the what's under

a think in We dialog certainly with things. new pencil lot developers, they're lot still difficult looking at to is I markets. have of construction a do of

year where going have my to historical that of expectation we're below our period averages. so supply a couple -- is And well runs

Michael Bellisario

transactions. money then then maybe to me some And ability work deals over just about to talk in more versus term? the Can of on and near last level it. your your Got you portfolio pricing put one-off deals on for one confidence

Jon Stanner

ago. the began. active -- time look, been certainly than It's XX was active XX more days it ago, than pandemic more ago, XX The it's Sure. pipeline days the is since days at any today

assets constructive. to I I pricing well, there's today on are question markets become quality any seen we've upward. what the financing stay that higher moved have fundamentals have I as do has that think the at continue in don't think, more market, before. rates any the think and than of So are time improved

find lot stabilized I I be continue improve. very perspective we'll think I supply that existing grow and is of We're underwrite a will of unique good on from fairway able to a an of really the new middle of opportunities, asset is to Steamboat and do a prices think asset down think We example perspective. were kind right some transact the seen You've demand a that, to out we've very, capacity We've is I valuation of with. yield million compelling who that think under more there on can at got type partner fortunate facility. there. And a got assets. $XXX of our compelling a eager that

And that so continue be we'll again, we able to here. we're some how be magnitude of around be able find that our to It be opportunities is disciplined allocate us. hopeful given We'll hope a capital. for on always assets to the approach find market, to opportunities. But will the returns-driven

Michael Bellisario

portfolio single asset then versus pricing? And

Jon Stanner

between know market-driven we've pricing a of huge demand-driven. I delineation say, don't portfolios. that single assets would I -- and Yes. seen and between it's more kind

are core CBD you seeing pricing probably in So pre-COVID markets, discounts type markets steeper expect. you'd drive to urban of than still to you're in as probably leisure-oriented

Operator

Our next Crow Bill from question comes James. of Raymond

Bill Crow

leisure time Jon, labor. nightly three to topic, off talked one opt-in in kind talked. change last seeing We I'm that and we that had doubled quarter whether the business rate the wondering any between it rate of still doubled base, opting whether guests Any travelers? a but for low difference housekeeping? in of number increasing the percentage last is questions, had and you're that,

Jon Stanner

opt-in kind first would you would you was don't quarter. probably back probably leisure today, meaningfully. XX% I to to and something picking come percentage haven't to know of It's expect, I XX% Bill. on, have the versus isn't that vaccinations answered say, on more in as rolled would business, as up, XX% have more I out it Look, generally, Yes. I the

we relatively seen pickup It that So it's continue is still today. to probably increase. have rate Again, low. XX%

Bill Crow

labor of that part And has in that question, available? easing And of benefits? unemployment September of where the that has talked challenges. extended But about the know Okay. more availability about markets labor industry seen post it the made you've labor. I talk second

Jon Stanner

Yes. Look, that, seeing do degree. applicants. to I more think helped think that you're I has some

hope of seen tight, do to to continue and to we've post-Labor and continue challenges are in some to be functions transitory, get creative Day. relief start our a done. I is think continue that going think get some as But Labor how we're in basic that we in we've I labor I challenge. see we labor, is and to be be the staff to to continued that see at get going to Day going the to challenges into you'll hotel continue Again, it's past better regard think fall. the and and will

Bill Crow

labor workforce thought how is And turnover able Jon, the hire quality of quality How that used of labor. to is? I what general the then -- up? show on don't on be? is finally, they it increased you're of Or a the it can to days? these mean, it because Is has kind you us give

Jon Stanner

I candidly. Yes. Bill, today, challenging think it's Look,

to to a back we're seen days. when of few come shows, number fair that employees, then you think don't no work a a I get you come get people few we've a fair -- even get number able for for and days new of

that do question really getting a labor hotels. been no We're been it there's I think it there's and fortunate that challenge, question we've group awfully good But getting quality to management so a no got great staff a have that has challenging. trying that companies And labor. good has breadth of job and good

Operator

from question comes of Malkin Our Capital next One. Neil

Neil Malkin

quick a follow-up for Just me.

has to been maybe you can when price and could stock an the what worked engine get you how has share XXXX higher, or leverage main about pull Summit why the the underperformer is get Jon, particularly, running? in of just you kind you can historically, -- So can you think things given very talk external well do or

Jon Stanner

that one handful we certain to Look, business stock performs a able why I hard a externally. of we to be Look, Neil, way. of We've the me have that clearly, done been REITs comment today. grow. on like to We're Yes. in lodging it's grow mean, to able the -- for

how be and over operating that able creates the value. for value. to we operate is and we stock believers we'll thoughtful and -- have here quality over we're what and time to think, outperforms. I believe tremendous the do the trying to platform the have, And this underperforms the have. portfolio the creates think I we way There's do And on the that run that way We're periods in be of we going business that business. of in run a when goal a very is again, business a amount -- of model we in we time, huge to long-term how the operating be the that

Operator

call I'm at I'd you. Jon further over questions closing for remarks. this Thank to the time. and Stanner, any CEO, to the President back turn like showing no

Jon Stanner

and us Yes. earnings Thank you for look all you following all joining forward soon. up We thank all very and second in post our you much, quarter person with to today conference see call. for earnings hope you to

Operator

and for you. all Thank day. a all participating, Ladies you disconnect. today's this you conclude conference. great Thank gentlemen, does may Have

Summit Hotel Properties (INN) 4 Aug 212021 Q2 Earnings call transcript