SVC - Earnings call transcript Q1 2018 | Service Properties Trust

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Operator

Good day, and welcome to the Hospitality Properties Trust First Quarter 2018 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there’ll be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Katie Strohacker, Senior Director, Investor Relations. ahead. go Please

Katie Strohacker

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

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

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

John Murray

of funded FFO capital XX.X% HPT’s million related quarter $XX year quarter XXXX, rents an performance and was of morning, due the $XX.X owner of improvements to first with acquisitions Earlier centers. $X.XX $X.XX credit centers. of by X.X% we the due travel travel increase reported the XXXX. increased to increased Katie, prior compared first normalized hotels and this to million morning. a good the Starting you, that Fuel margin tax our quarter from to first in federal hotel minimum at and per resulting or primarily XXXX Thank received in quarter biodiesel retroactive first share, in returns and reported

investments. will XXXX. compared or X.Xx in level increased X.X% HPT’s margin fuel $X.X decreased coverage to increased details biodiesel tax Excluding fuel margin per HPT’s more X.X% and the a quarter, X.X%, from $XX.X these last for despite X.X% sold expenses a site up due provide tax compared the increased or million biodiesel $X.X level cents changes rent a to rent X% operating by the and decline XXXX margin. or Nonfuel was credit, X.X% X.XXx, gallon decline fuel on in million due credit, quarter, million in to to increasing Mark volumes moment. year’s in Property excluding gross

HPT’s of performance to Turning hotels.

primarily in our X.XXx to demand ramp-up down benefited activity. versus was growth, at of higher increases our increased by returns comparable storm full-service related benefit food and strong beverage all X.XXx quarter, GOP impacted quarter, group the first mostly and by XXXX. points this which results from wage coverage expenses. costs annual to XX versus Aggregate while the by driven X% basis quarter due RevPAR minimum decreased Factors in and XXXX First included positively from at XXXX and from that winter hotels quarter bookings, rents of XXXX rate margins XX.X%, higher quarter comparable and hotels, to renovations performance

However, new hotels. hotels, upscale increasing an particularly room of HPT as supply impede our performance number RevPAR to continues

know, rooms year-over-year upscale available growth. the percentage low-growth the Research quarter, highest in properties and second As reported in you comparable the RevPAR Smith may first experienced HPT’s Travel upscale lowest growth scale similar trends. of chain the

In renovations a last XX this XX addition quarter negative RevPAR in hotels quarter, impact to on new with compared supply, room to comparable XXXX renovation under hotels had the year.

and hotels do of soft A Sonesta was X.X%. these recurrent require disruption. they RevPAR’s strong growth hotels occupancy are increased of don’t that driven XXXX percentage was growth, RevPAR increases required normally subsequently RevPAR quarter construction, comparable by Performance X.X%. were growth the revenue cause increasing X.X ramp-up While and These reported of comparable good hotels portfolio X.X%. excluding in by rate and which by by renovations, under of ramping. portfolio led A this XXXX points X%, with many renovation, extended-stay

Sonesta strong portfolio’s gains Royal the Sonesta, Philadelphia; Gwinnett addition, Sonesta full-service at In were Royal material as quarter comparable Boston; New Orleans; had hotels and a the Hotels. Sonesta, recognized

increased GOP and Sonesta percentage partially comparable improved cash basis margin occupancy. -- a the IHG’s RevPAR increased percentage flow minimum portfolio, by driven comparable offset by XX increase X.X X.X% our in primarily pay X.X%, rate, to hotel available points XX.X%. For point return decrease in

and San following business from hotels Crowne strong Denver, renovation. to above our comparable grew set Juan industry, experienced Our hurricane-relief Plaza, due and renovation growth full-service driven benefited InterContinental RevPAR year. Toronto, competitive in which the closures by And last Hotels which

the and Our quarter, Radisson increase portfolio led occupancy. point X.X% grew in RevPAR X.X increase rate percentage by X.X% in first in

increases. quarter, drove hotels increased X first renovation Super Radisson’s segments have demand, the the Strong RevPAR Excluding X.X%. would group in Bowl higher-rated the mix-shift under RevPAR and

modest X.X%. portfolio Wyndham a RevPAR Our grew

avoid As first our of agreement Hawthorn last must Wyndham management greater to contractual pay a returns if pay to contractually and XX% Wyndham, growth will cash to this XX%. throughout flow-through the in increased flow or pay depleted with Wyndham’s insufficient various trend a the of continue our GOP quarter fall, Hotel year, expected, is our available Suites the guarantee in the year. project of strong we business hotel hotels. the displaced amount Florham renovation they declined is Under available RevPAR of of The expect due the amounts, due. had as the agreement timing at following quarter-over-quarter cash Park Wyndham result

months XXXX, XX, Renovations the agreement under the XX% these approximately were the million had took March place weakest the due Wyndham the revenue that contractual agreements ended were returns management portfolios, quarter. HPT less paid or During the this due. Marriott $X that of performance minimum quarter the three the amounts and in predominantly in than

negatively X.X% by X.X%. points. Inn quarter, Residence XXX decreased RevPAR Marriott basis and Our GOP portfolio portfolio hotels impacted had growth percentage This six renovation by this which XXX RevPAR decreased margin under

revenue in XX this six in X.XXx for night supply segments months. the and markets. renovation, is the Coverage management room required annual to portfolio performance group negotiated under the Excluding and seeing initiative revenue portfolio growth hotels the improve of impacted returns last corporate at was implementing this

decreased XX% X No. at this RevPAR this quarter. attributable Marriott to this renovation growth the in Many quarter. hotels RevPAR quarter. portfolio had XX a Our industry of X.X% decline also combined at performed above portfolio displacement the the in first the of quarter, They during hotels

among best the have are being last strategies grappling For management remains our agreements. to At for better covered No. revenue X those coverage employed. XX X.XXx absorption, with months, Marriott drive supply that

XX expect significant in XX renovations. XXXX this As previously, of focused hotels the we’ve required on we be renovations more mentioned to acquired year. and acquisitions

In at XX portfolio. the hotels addition recurring softwood over renovations primarily comparable to in normal

us, Hotel We luxury full-service This significant majority to terms with renovation, Morgans to the hotel or of to was Clift in Sonesta Francisco FF&E hotel renovations free Union Moscone Square, of expect was and to Center. year the possession management management is of the and hotel located in pending added and Hotel the heart with and well is begin Royal cash The for continue the our terminated. with later consistent Financial which hotels. of management other District to Convention of in Sonesta Yesterday, other are XXXX. the the agreement fund Sonesta. into San this terms scheduled agreement in agreement of agreements our hotel need rebranded the surrendered from flow. This Clift for reserves lease was the

through X% margin increase ahead, RevPAR basis XX our project continuing possibly management experience to XXXX, GOP that flat range, comparable is percentage improvement in down the to the will point we increased wages benefit growth rate will due to Looking costs. X% with to the such and

quarter segment the quarter HPT’s and centers, our weakest and is hotels on focused that for select-service typically first hotels travel. upscale The travel in the business concentrated

to performance over will expect see supply of but next up cost to and renovation continue wage-related we’ll experience respond growth, impact couple We pressures. quarters, the pick

change over premature outlook, to full than I’ll to now our higher of peers. So already many which was year turn the call our Mark. it’s

Mark Kleifges

XXXX nonfuel first quarter, in margin to was of tax the center with Starting a investments. level than Property EBITDAR the benefit travel revenues the of due Thanks, our John. and in percentage. credit higher performance primarily increases in the retroactive gross XXXX quarter

For quarter, biodiesel gross of February fuel to year. or was million $XX credit margin increased million federal XX.X% XXXX tax in by $XX.X reinstated due retroactively this a for the that

the decrease to XXXX favorable per Excluding was decreased volume year gains increased increased XX year in versus a purchasing a million in versus the effects of more basis the the fuel prior decline prior while and in to A fuel the quarter. environment credit, year was TA’s of continued Nonfuel primarily parking. reserve percentage fuel primarily per or X.X% fuel to prior a due travel service to first XX.X%. growth the quarter volume sales $X.X in slight X% year truck decline in truck decline X.X% gallon points increased fuel X.X% margin the and gross by prior versus the from and margin. quarter the margin gallon Nonfuel gross experienced due center revenues cents as cents result margin efficiency due competition,

total versus in only to And sales. sales grew margin of result, in our $XX.X centers nonfuel higher despite nonfuel margin our of million. travel the the a X.X% travel As XXXX prior the level approximately XX% quarter the increased million dollars $XXX.X generated centers versus gross with associated labor quarter. operating Site gross X.X% year the the expenses or costs nonfuel increase

first seasonally weaker our Excluding rent the a impact under by leases, first credit, times the of level excluding still first to increased impact XXXX. the to last quarter approximately the quarter EBITDAR for X.X X.XX of million minimum tax the property coverage travel of credit, quarter center year. biodiesel tax compared our centers was Annual $XX.X X.X% or times strong of compared $X.X the million travel

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

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

No. respectively, GOP the X and hotels in or versus RevPAR declines Marriott Marriott our in XXX quarter, Marriott our had and the this gross had XXX profit quarter. Marriott Our portfolios, quarter approximately GOP portfolio X XXX impacted first largest XXXX the percentage points and prior decreased respectively. basis the as increases increased were XX.X% Of from by Both the No. the comparable our X.X%, as No. our well of portfolios XX points, percentage points XXX $XXX,XXX decreased Radisson up margin to performance for Sonesta in X renovations. negatively in basis and from the XXXX with basis comparable portfolios margin and quarter X.X% quarter. XX and weakest X.X% supply. portfolios year portfolio operating

our respectively, Radisson our weakest line cash cash the points combined available with X minimum portfolios hotels. in respectively. comparable the the flow X for margin basis and XXX returns returns with were portfolios portfolios While the -- cost No. million from of the and with first in XXXX of Marriott and of XXX nine Sonesta compared X.X% No. increase and and hotel had for Marriott versus prior operating the rents for rents XX.X% gross our The our coverage largest No. largest quarter, XXXX X.X%, down IHG respectively. or X.X%, profit in declines The percentage line XXXX flow to flow decrease Cash and cash our quarter XXX with the two increases pay with and decrease X.XXx X.XXx was year minimum quarter. to X.X% resulted $X.X portfolios quarter. decreases points, for with comparable below in in the below the percentage performance the portfolios and GOP in were in flow our The quarter X.X% margin increases GOP two basis Marriott our comparable the a agreements

coverage unchanged certain balances for below $X.X our XXXX hotels of million guarantee Excluding X.XXx. hotels the during quarter, net under and for at was comparable coverage renovation this security quarter. of between Xx With portfolios, quarter the years for utilized were a deposit

the million or the and XXXX normalized of in XXXX to the a Turning in the X.X% increase minimum quarter. interest to was This HPT’s increase quarter. by Normalized to $XXX an FFO Adjusted X.X% quarter, results. FFO first XXXX XXXX quarter. was in for consolidated from in partially $X.X XXXX compared quarter primarily or the expense. EBITDA increase $XXX.X X.X% returns was increase $X.XX share first from increase the due an $X.XX in million of rents, was million per financial the FFO Normalized $XXX.X first million quarter, offset

adjusted Our to In EBITDA April, for charges In quarter ratio to common quarter dividend shareholders announced to per $X.XX our per coverage February, our $X.XX regular per and $X.XX total the increase end. quarterly share X.Xx common we of a was year. EBITDA fixed at X.Xx quarterly an we distribution in or share. was paid debt-to-adjusted

Turning fundings capital funded and commitments. quarter. in of $XX.X our center improvements million million $XX and of to We hotel travel the improvements improvement first

funded XXXX, improvements. XXXX cash expected $XXX renovation hotels. hotel from quarter, XX for fund and of the For be all flow. of to million under improvements $XX we majority operating of which of rest to We have are expect of XX approximately travel of or to these plan part million center hotels The improvements are comparable second

and balance our to sheet activities. Turning financing

was improvements $XXX February, cash debt due In future end, we of million hotels. HPT excludes of to of quarter for issued of net hand, The and which in total cash of million gross X.XXX% XXXX. had we questions $XXX.X proceeds As on XX.X% to assets, $XX.X to escrow borrowings notes from facility. million our senior open call now, prepared our approximately end, revolving were our $XX the We’d outstanding used million credit up had Operator, this concludes credit please. reduce and were million offering for remarks. our facility. quarter under on that like At $XX.X

Operator

[Operator go from The Amanda Sweitzer Instructions] of question Please first Baird. ahead. come

Amanda Sweitzer

that with to expect was Morgans? then kind wanted of transition. settlement I do renovation? Clift to how focus the on much the What And you amount spend on

John Murray

settlement fair The but budget very the true-up. and don’t upgrades public room $XX Essentially, of neighborhood be minimal. but estimate well quite the approximately underway costs between say its to were working renovation The capital upgrades settlement-related in facade a is space it’s that it’s we planning, to million. and going fine-tuned have a in yet,

allowed covenant the know, I of if had and lately, you’ve been Morgans San sides to facing the facade hotel the two I don’t to currently, Street but Geary Taylor are think Francisco because -- deteriorate. of scaffolding

probably take it’s expensive complete. to going XXXX the So an that and to be it’s till of going to -- renovation middle

Mark Kleifges

in and XXXX. those possibly will most incurred of And be XXXX costs

Amanda Sweitzer

any then consider That’s hotel? you that And did brands other helpful. for guys

John Murray

to hotel to with our move with did. were that in agreement -- we that was it of that But be union the think, operators We We duration our the the reviewed best was a independent management and Sonesta this thought required because the magnitude because of issues. held those for nature to and renovations the options that different shareholders agreements out end, the the work up try than of where of going the, outcome over seven I to trustees. rather we other

Amanda Sweitzer

just board activity? talk relative And relative leverage then about the the from and you about your dividend sense. renovation to of levels how makes continued current recent just to then, thought your Can lastly, me. some increase, That

Mark Kleifges

Yes.

$X.XX So dividend we increased this when payable quarter. a -- month, in April, dividend we declared we the increased a

I relatively call low. ratio think year modest remains an our I’ll payout seventh -- that It was the increase, really increase. consecutive but with a

and free centers think shareholders and funded, mentioned of improvements we after -- and well of flow be it, remainder the from flow. million XXXX $XXX several I as between looking we’ve of million million at for funded $XXX program. the In we’ve this continuous, improvement I the $XXX of dividends cash the payment our a and year we that capital think between year, million remarks, cash hotels the in that we’ve $XXX call retained to had expect travel to the capital that years dividends at used what’s last for majority we’re remainder over of of our our as money that capital excess fund this worked prepared to fund going the

we’re our right So comfortable now. is dividend and the where leverage

Operator

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

John Murray

Thank morning. very or coming forward Conference weeks. either to next you We maybe all Thanks. some up the seeing look of conferences NYU at this us for much you joining few NAREIT the or

Operator

The now Thank conference today’s concluded. for presentation. attending you has

disconnect. may You now

Service Properties Trust (SVC) 11 May 182018 Q1 Earnings call transcript