SVC - Earnings call transcript Q4 2017 | Service Properties Trust

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Operator

Good day and welcome to the Hospitality Properties Trust Fourth Quarter 2017 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Katie Strohacker, Senior Director of Investor Relations. ahead. go Please

Katie Strohacker

today's and Please would morning. prohibited Mark Good short I call, without Murray, question-and-answer call John which Thank retransmission Chief On forward-looking meaning point to out Financial written and recording, of made publicly Securities session. a the securities by Kleifges, and undertakes other revision conference conference revise be of statements call the X, Private HPT's prior are contains consent is call a that Litigation Officer the of transcription March President HPT. of like XXXX Reform the the will company to you. followed beliefs and than the through laws. today's or note obligation that will based today's presentation, filings Act within other no and SEC. release expectations present today's statements or in Exchange with today, Commission The of as conference of These forward-looking results forward-looking statements Securities any XXXX. to the on make

these normalized this including non-GAAP Investor net FFO may found Relations adjusted as AFFO company's Actual calculate materially to call the contain components website. operations the are A as from results of statements. differ to financial well may supplemental and those EBITDA normalized measures, in available normalized our forward-looking income in addition, reconciliation in or In FFO. funds projected package section of from

not John with financial any undue later on place our upon will in with forward-looking website and Additional data XX-K the information the concerning call I factors filed and turn are reliance statements. www.hptreit.com. those Murray. to Investors our supplemental contained could over that today found operating And cautioned at our Form is that, to cause to be differences in SEC

John Murray

and you, Thank good morning. Katie

and to passing about Chairman quarter extreme Barry Portnoy, for the wanted express unexpected Founder and Before the Managing HPT of Group Trustees. of and Mark I one we talk sudden results our our of of RMR and fourth sadness

this As many and is of who our tragic a colleagues for calls for manage family its companies. have loss on and employees RMR week, this other said his

number Our family to be and and and from running CEO under sound Portnoy HPT REITs from dedication, we RMR the long run as Group Barry's the remain us standards as ethic on of been perspective for vision, sets us He leadership HPT work high which remains today. foundation its a us. serious to and the how set President been operations footing inspiration contract was apart greatly the day-to-day have lodging he HPT out high standards condolences friends. an architect for missed. manage We go to Barry's that and and Barry Adam which we other structure will of has a continue will of same guide years the of

by Turning to primarily earlier to fourth the due a per million in XXXX business of quarter share fees versus management normalized decrease $X.XX this X.X% the quarter increased we fourth or share morning, XXXX incentive reported $XX.X in $X.XX of compared to of quarterly which per reported results, XXXX. FFO $X.XX

X.X% an year. Excluding Starting quarter, margins been the and business have negatively or performance gallon a would $XXX.X $X.X periods fees fourth XXXX from normalized gross per quarter XXXX. provide more sold was fuel $X.XX despite period compared in XXXX margins last a fuel incentive on and rent in available changes gross by credit FFO details million X.XX X.X% reflecting early increased were decreased strong site-level same for was margin the increased million from the management share increasing investments. but XXXX. to the for XXXX lower volumes rent diesel tax X.X% to per margin XXXX. flat times fuel in will centers, credit million fourth HPT's not $X.X biodiesel compared The quarter of Non-fuel in or XXXX. federal moment. both Property with increase This retroactively to lower operating level at were per fuel Mark compared a a coverage due gallon by expenses affected cents these or in our XX.X% to travel reinstated HPT's

RevPAR the through was RevPAR positively group fourth quarter to minimum fourth revenues impacted our reflecting to room from beverage quarter. the by and were XX.X%, rents all efforts, increased strength of XXX that performance GOP to with quarter, points strong margins XXXX returns including and from of times factors lease comparable the Turning Aggregate coverage X.XX X% by Hurricane HPT's food this XXXX times GOP. higher There fourth basis demand increased annual in our bookings. up Relief several increased market XX.X% hotels, hotels in increased away associated XXXX XXXX. and and flow and demand quarter portfolio strong the X.XX results, comparable Hurricane versus from X.X% by versus estimate quarter demand a related shifts the Caribbean quarter in We at

growth However continue headwinds, offsetting and portfolio primarily have an impact. from renovations to room supply

percentage portfolio comparable RevPAR of X.X%. led points and increases by strong quarter growth occupancy Sonesta by of Our reported with revenue rate increasing this XX.X% X.X growth

service were grew up our at Hilton at Comparable Head hotels the to that RevPAR Royal Sonesta and ES from renovated Our recovery hotels. strong XXXX. RevPAR increased by X.X% business and ramp portfolio driven the business extended XX.X% our continued Houston full hotels post group in stay due Cambridge Hurricane comparable Sonesta

as occupancy. available recognized renovated comparable and driven to coverage comparable ramp For return margin minimum by and of competition. increased IHG's X.X% the hotel X.XX in X.X in XX.X% RevPAR recently hotels increase GOP increased point X X.X% up cash the percentage times rate hotel resulting the to continue portfolio against better comparable a percentage Sonesta payout points increase percentage a flow improved

set from to renovation. factors brands including Our hotel benefited strong competitive driven strong results which Plaza comparable business relief full due service Hurricane hotels Crown Holiday group closure our business, reported and a by Intercontinental

For margin the GOP improved cash XX.X%. minimum available percentage to IHG on X.X% and pay portfolio, return increased comparable

a led the increase improvement and in in strong by Our X.X% Park RevPAR renovated Jersey. fourth New reflects performance in portfolio's the rate recently increase of X.X% Wyndham Hamilton portfolio's This occupancy. point grew in quarter Hotel X.X% a

increased to Additionally, benefited from following relief returns our demand Hurricane work increased cash pay Houston minimum related to on Wyndham Harvey. available XX.X%. Wyndham's flow

during As previously depleted was disclosed Wyndham's guarantee XXXX. of first the quarter

Under greater pay cash the During available payout amounts XX% [ph] amount default guarantees contractually to all to Wyndham available ended the agreements due return under to contractual HPT hotel due or XXXX hotel. year depleted pay available of in Wyndham of flow by to cash our insufficient our is the due. Wyndham must announce

$XXX,XXX and less February January due. HPT minimum the During under returns agreement the paid XX% of XXXX, management amounts contractual the than of Wyndham due or

quarter Our X portfolio margin Courtyard Fourth basis GOP fourth No. under points. influenced X.X%. renovation percentage in weakest was Marriott hotels by the revenue has renovation performance X by XX increased activity quarter. increased decreasing negatively quarter this RevPAR performance the with with

Excluding most performance. XX times under quarter improve months revenue have RevPAR renovation Marriott X the portfolio's is during profitable are of for X.X%. this coverage enhancing hotels the would this X.XX the management gradually portfolio With last XX portfolio. increased for No. hotel Efforts to

to displacement this quarter Our six X.X% the attributable during hotels increased at quarter. only Hyatt renovation portfolio RevPAR

We not fourth the the any of did acquire assets quarter. or Excluding during dispose renovation six increased have hotels X.X%. RevPAR would

on renovations more comparable to of XXXX As XX in previously significant renovations the XXXX on acquisitions. noted expect in and XX be we to in addition focused portfolio. hotels hotels the cyclical XX acquired renovations require in of

of majority capital fund renovation cash the to We expect from spending flow. free

X.X% Looking are forecasting ahead, growth range. from to industry experts XXXX X.X% RevPAR

for market. projections XXXX the with steady business new GDP resulting lower growth from time, continues to supply demand rate. and At the managers' premise Our improving on are deal tax same

XXXX. XXXX about XX or will long efforts Hurricane Also, XX hotels the Texas were Puerto during some under hotels continue in that HPT in positively year we renovation compared addition have there is uncertainty In and to impact recovery renovation Florida, hotels Rico. all how will of to under part in

are result cause. will to due GOP X% flat in optimistic, now growth approximately XX over the managers percentage with the and turn are benefits for a increased margin of to X% to cautiously call forecasting largely range, comparable points while As wages XXXX RevPAR basis Mark. I they to down currently the

Mark Kleifges

Thanks, quarter, program. despite XXXX our in travel EBITDAR of XXXX of level investments, than sales performance in tax continued higher federal credit the the Starting property decline the center marginally the fuel the with fourth the John. biodiesel quarter absence and was volume

million For travel decreased or X.X% margin for centers quarter. prior $X.X versus the fuel year the quarter, gross our

competition. The was the As in of the per due in decline resulted fuel cost tax the a versus primarily a the volume per prior and fuel efficiency the XXXX X% $X.XX still continued was increasing for margin. decrease federal fuel fuel sales retroactively the fuel volume XXXX. legislation credit margin trends the in The in in was solid absence biodiesel and in quarter reinstated from decline February XXXX increased gross in cents per primarily X.X% fourth a gallon in quarter. margin to of gallon The and quarter. truck tax gains the fourth gallon Fuel the credit year biodiesel decline XXXX program in passed result

of retroactive sales. prior will center a As increased and a our in convenient store travel due year the primarily approximately be portion to versus recovery revenues service result, the Non-fuel credit centers. TA in reflected of a growth of and results this operating receive expects million truck X.X% significant $XX travel to XXXX

approximately X.X% our operating to grew $X.X in $XXX.X cost million travel generated TA sales versus year Our total dollars Site prior quarter XX% the travel and margin initiatives essentially quarter. were during or of due control implemented margin versus gross expenses the non-fuel of the million to year non-fuel XXXX. prior certain centers level flat the centers

the of center travel Annual under the fourth rents of EBITDAR for or X.X% by covered and well quarter remained As for at result quarter of fourth times minimum our quarter these approximately compared X.X leases year. our increased travel changes, fourth centers X.XX level times the to property $XXX,XXX a XXXX.

the cash minimum in X.X increase rents at XX.X%. from percentage hotels returns The hotel increase point a in margin percentage of in an our XXX in were investments, of quarter to GOP and results increase available basis increase our point in operating Turning quarter flow this resulted and pay ADR, X.X% RevPAR with comparable strong X%, to in XXX HPT's occupancy. increase RevPAR this X%

of the portfolios hotels under respectively comparable highest portfolios X%. RevPAR increases and comparable year The growth quarter with quarter. versus Sonesta, with IHG were hotel X.X% quarter, our prior RevPAR growth the this during and renovation the XX.X% was Excluding

to basis have of negatively for points this impacted X quarter Marriott quarter up increases And margin XXXX increased prior X.X% RevPAR XXX portfolios, percentage or XXXX weakest fourth and Hyatt with Sonesta year percentage margin versus from Our increase portfolios the renovations. respectively in GOP portfolios Carlson quarter, and by X.X% of $XX.X an in performance were comparable the operating XXX profit Of the from million and X.X% the the Both the comparable XX.X%. No. quarter XXX portfolios decline gross points and basis hotels respectively. quarter. our increased GOP our approximately largest the have

this declines $XX.X The GOP from in X.X% our gross No. X and the basis percentage our points XX.X% our the XXXX margin Marriott in comparable minimum With While XX.X% down times at resulted and to flow our the several minimum percentage our largest or available six and returns portfolios No. under margin depleted. as XXXX IHG only our and return And for with of portfolios line portfolios in the to our Two largest the cash the of X.XX and February pay portfolios, GOP decline this hotel increases The decline expected flow total guarantee XX% months. our operating in with XX two million profit XX% were the performance points of paid in John increase with return less in for portfolios agreements At times Cash last were with percentage mentioned, weakest and cash all respectively replenished will coverage year portfolios of prior a wide X.XX increase $XX.X the in versus were the have for $XX.X the and Marriott above cash during respectively. security returns versus increased Hyatt were we minimum result for XXXX, rent but million X.X% for payments only coverage and comparable of in $X.X Hyatt deposit flow the quarter. and respectively. the improved rents of January million XXXX. one decreases XX.X% declines increases up XXX and than quarter Sonesta our or with million quarter pay minimum quarter total times in XXXX our for basis balances of and agreement Wyndham year-end quarter year. X below of the guarantee for our year portfolio X.X% nine Should flow X hotels of X.X% minimum Wyndham remain combined with coverage the returns in of and rents. deductions the XXXX.

quarter. $XX.X Turning consolidated in FFO to was or share management recognized incentive and expense the fourth or million million per to XXXX We $X.XX the FFO share of in $X.XX $XX.X the HPT's quarter. in business fee Normalized per results. quarter, in $XX.X $XX.X financial compared million XXXX million the quarter, XXXX fourth normalized XXXX of

per expense partially increase was or XXXX This increase the $XXX.X to a and or increase XXXX $X.XX higher increase $X.X and issuances interest in decrease the rents, incentive the was interest primarily expense, as rates in in million in management $XX.X debt. the from the XX.X% quarter management share FFO million senior due EBITDA to our quarter, minimum Excluding offset quarter. of fee fourth floating of expense. was XXXX increase and business normalized the preferred our million in $X.X from both the primarily rate XXXX note the quarters, in distributions Adjusted quarter in result for returns due XXXX impact XX.X% fee on fourth million X.X% decrease by

EBITDA adjusted at end. the quarter impact times our ratio debt quarter was for fees, EBITDA fixed adjusted total coverage charges to these X.X to was of X.X Excluding and times

improvements million Turning for in improvements expect $XX.X approximately be expected cash fund fourth commitments, $XX travel comparable $XX.X under majority to hotel quarter. are hotels improvements. of plan to XXXX million $XXX our of the travel all we million million improvements and from capital improvement In center fundings funded XXXX, funded The the center of part We of renovation these XX of and of first quarter. operating to hotel flow. or and we improvements have to

balance redeemed senior this XXXX. senior HPT to The $XXX.X as which issued to assets to X.XX% October, total $XXX $XXX.X was due borrowings of from market million hand million to approximately notes revolving Also under offering proceeds million. activities; and million of our cash of issued its cash $XXX of this our $XXX were were $XX.X we due due end sheet $XX.X Turning that or net escrowed approximately October, excludes gross had XX.X% all and of par HPT proceeds senior quarter HPT our were facility. offering million reduce of future capital improvements million In on in of hotels. in and X.XXX% in XXXX. notes X.X% notes credit used The February XXXX. In from million net

our Operator on outstanding revolving and $XXX that until As open we XXXX. maturities concludes April are ready facility for questions. to have the of debt up term remarks, prepared call million no today our credit we

Operator

Bellisario Instruction] [Operator Michael ahead. you. go first comes question Baird. of Our Thank Please from

Michael Bellisario

morning everyone. Good

John Murray

Good morning.

Michael Bellisario

different the approach Can they you with that I their the them aggressive Courtyard for you corporate did some Marriott and maybe a year. negotiated XXXX this weakness was think What last did see throughout take rates talk for what's about and outlook you year portfolio most portfolio? year? recently and from noticed pretty

John Murray

Yeah.

got more more think fee were I taking they - their in this But also a little too market frankly year. a with Starwood off I the ball think place. process our were bit aggressive the little the little that hopefully bit year. eye with They line took maybe there they last for in a I bit have think merger

the other on pay OTA business also to try steps they steps they to cost take to expenses guest kept OTA of to to keep think And are that they down try across reservation of continuing initiatives business. They've down. They've I amount the [indiscernible]. program lowered reduce board while the to reduce some keep to working are take commissions the on reward to flat. cost

and approach hopeful Do so I want help did the Mark less better of them - this they the RFPCs that year you to last. business think And better do OTA has to something than a combination we're add. will to

Mark Kleifges

out XXXX. going thing of there The that point during be Yeah. under those I'd are is XX only renovation to hotels

think portfolio operations basis. year-over-year on in as So I upon generate improve core portfolio expect that activity of year-over-year renovation that the I of will flow wouldn't a changes result a cash significant

Michael Bellisario

do where on stand update and you any potential Got guys share the Marriott to Is it then negotiations? there there? X

John Murray

visited met We've the report. guys discussions, the and January and nothing There's we're it's hotel having went the really some there's after but [indiscernible] so Atlas and with and Conference really the vacation in discussions new. in to I nothing Marry and early

Michael Bellisario

think might me terms relationship Got about their from of one above Wyndham maybe to company it. the change how then about in fund maybe XX%? do last And you the what the anything and willingness and the split there

John Murray

share for Hamilton where have lion's of well. if the that Park reduce of portfolio default. we're perform at XX% in the up We that up renovation pay they that to two year. below pace. cash that hopeful service up full with are ability to reasonably pick team make is with portfolio going portfolio as payment that this just months is two that these that we and hopeful in don't hopeful of flow hotels hopefully the expect of they're least that roughly portfolio to solid the weaker make those improves But level the intending behind and been And sales priority that as with so ability We in Chicago hotels will first just flow. half the cash we place pay realized they have to resonate will. flow particularly well cash think the quarter the you We driven think the the We're

Wyndham. lot relationship right on a acquisition. on portfolio ways their they've plate with more to And of spinoff it I performance, stuff right later got have bit focused and little They've now. We think the and possible be our the with the a on plate that because a in improve its got they'll good the La until with now other that year but take may their Quinta

Michael Bellisario

the Wyndham that months Got is in up the there it backfill and catch any short on to portfolio fall? stronger January-February

John Murray

The accumulatively basis as it's all of Yeah. go. month-to-month you works looked on on the our a waterfall portfolios, way

in may third but then there So be the on some there catch up slippage in and depending second the the perform. probably quarters will hotels fourth be how

Michael Bellisario

Got me. Thank it. from That's you. all

Operator

Maher [Operator Bryan Instructions] from B. Our ahead. Riley question next go FBR. Please of comes

Bryan Maher

Good and morning Mark. John

Mark Kleifges

Good morning.

Bryan Maher

as an from your how standpoint, we kind you is way or really a activity and it about guys, mainly select XXXX much with transaction service? skews do lot should in of You acquisitions XQ your towards didn't to opportunistic, have be there renovations. more service going some full is target, comments think prepared it you when of in But a think just have you said in the on plate

John Murray

a have to We're and Brian. going year. in target they out renovations and don't million easily across We the between in be going $XXX spread to hotels invest TA are

what's there. would are zero pursuing would But keeping And actively I I close not million. the acquisitions say would then be are to it guidance it we we the it, be have for So particular out eye don't really $XXX an currently. on

Bryan Maher

operators type then side. first influence labor have the you costs And well control? of to under keep And of seeing with Okay. of there? what - you type what do on that are your secondarily all What then

John Murray

very unemployment levels low Well, there. the are

are wages rates, pressure underway you efforts good upward more attract where puts of there so that wages. employees. to So because There try cities minimum number on and puts to increase on that are pay pressure

And increases seeing P&L. make wage So benefits country really we across a up. are the cost, up and seems the benefits just push half always and towards go to wages

But that they they to to are there our efficient do managers for ways cleaned can not owner. operators front day much we a challenging cause is that check-ins, are a this less better to confidently hotels, initiatives only to operators. And run want the rooms regularly be operating use so to efficient, can our is can be passive their or so more staff; technology but touches are desk boys So environmentally about the and less to whether get you initiatives need we don't staffing need more clean at models, it's our are the asset the pushing for in housekeeping rooms, are of whether friendly that or if we more is lighter of know do. end get bunch they hotels, use interest, we

Bryan Maher

John. Thanks

Operator

John to question-and-answer our any like session. closing over to back concludes I turn the This conference would for Murray remarks.

John Murray

much today. on a Have very for moment. you good call Thank joining us the

Operator

Thank conference for today's The is presentation. concluded. now you attending

may You disconnect. now

Service Properties Trust (SVC) 1 Mar 182017 Q4 Earnings call transcript