SVC - Earnings call transcript Q2 2018 | Service Properties Trust

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Hello and welcome to the Hospitality Properties Trust Second Quarter 2018 Financial 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. Please note, this event is being recorded. I would now like to turn the conference over to Katie Strohacker, Senior Director of Investor Relations. ma’am. ahead go Please

Katie Strohacker

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

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

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

John Murray

lower or a compared fuel offset X.X% decline X.X% modest increased increase improvements X.X% $X.XX million quarter. X.X performance margin moment. in we travel fuel $X Mark centers at HPT's with times, increased margins increase Site more X.X% a $X.X in travel hotel despite from per XXXX our the non-fuel due volume year declines hotels and Katie. you, and in returns in per from at centers, of owner margin, Starting will XXXX and our increased X% in the to investments. details rent or second FFO or increasing to operating by rent million our minimum was gallon normalized to of quarter improved Good by compared share, reported million Thank performance reported to second resulting HPT’s of quarter margin rents in an level on due fuel afternoon. $X.XX XXXX. primarily times and Sonesta in comparable expenses level Property acquisitions $X.X portfolio. million these due to up total quarter quarter quarter X.XX funded This morning, prior the capital for a operating second increased provide the compared year's last X.X% to or coverage changes XXXX $XX.X and due at to second

IT increased increased hotels and an HPT's the average driven concentrated benefit our and quarter did job comparable comparable hotel from upscale, returns all X.XX wage FF&E underperformance growth coverage times chain maintain portfolios. RevPAR which refresh supply in by of profitability room by Aggregate margins. from growth at controlling food quarter, hotels, at and quarter, times of offset hotel renovation. lobbies lower this beverage by were our quarter modest XXXX. scales from expenses performance at versus was versus of in second flat RevPAR GOP beverage rooms scale with and our X.XX XXXX hotels annual included All Factors performance XXXX XXXX [ph]renovations to a soft the number and funded growth. RevPAR and costs. margins chain lowest impacted of in under full-service group reflects down Comparable quarter of HPT's combination relatively demand increases industry all the hotel increased were particular renovations guest to had Sonesta versus being reserves. that as the this X% Turning at increased were our hotels, and rooms minimum in to relative the new expenses strong and quarter, and XX.X%, growth XXXX A rate were benefited revenues, positively quarter, in our Faced good a which and improved nice only food results operators rents Wyndham help at the the comparable second IHG of

return offset hotels grew hotels at subsequently hotel X.X%, our decrease percentage increased stay X.X% Sonesta revenue percentage in service portfolio percentage driven this increase quarter, X.X% by increases GOP X.X%. X.X%. increased growth full RevPAR Performance Sonesta stay significantly up that driven Comparable improved portfolio RevPAR the by both by portfolio Sonesta by the cash IHG's and by were points available XXXX Our acquired comparable in a occupancy point from comparable partially comparable in pay points. rate, our basis Group X.X was margin to a of increased led extended extended renovated. flow portfolios. by X.X ramp increased occupancy. and RevPAR in and minimum XXX These

weakness service, last extended full strong X.X%. with quarter margins Excluding Holiday increased at Inn, rooms this outpaced relatively our growth, portfolio driven and Candlewood portfolio out comparable flat pipe where which offset industry Comparable RevPAR the RevPAR stay GOP remained was XXX partially caused had at year X.X% by times. hotels the X.XX supply Anaheim coverage at burst a service XX.X% of from be that to our

negatively growth, quarter. Coverage non-repeat last group to Our is portfolio last impacted for the Supply this coverage X.X%, activity GOP this time business while required quarter. approximately Marriott hotels, Suite compared XXX this the portfolio TownePlace RevPAR was returns flat at at growth quarter, percentage certain times of year. unchanged increased and renovation annual X.X margin from

portfolio Our and currently Marriott this in and markets. strategies our industry agreements. growth renovations Boston to managers the covered sales remains engaged yield are supply due market. RevPAR and LA among optimization increase Number primarily Marriott HPT's average, the in support X.XX asset the LA X.X% in increased Marriott suburban coverage the No.X lagging year-over-year, best and in Boston to X times market At quarter, hotel

higher This measures We dimming, caused decreased own reliance portfolio. at and resulted its RevPAR with which business we hope to re-corporate more believe retaliatory OTA Our our RevPAR by see growth Wyndham and negotiated to X.X%. brand is costs coupled portfolio channels. drive supply on OTA declines investing and through reduce largely marketing with these in full on OTA now in certain resolved Wyndham demand our have challenges focus the spinoff transactions and Hawthorn renewed service suites. been hotels and completed, the La-Quinta platform

amounts months XXth of minimum pay contractual $X continued management three HPT the returns approximately less to June the due Wyndham the XX% XXXX, million than During ended the due. agreement under for

and Center increases portfolio of X.X of of experienced Our declines Diego Brooklyn for X.X%, points, rate by accounted weaker in occupancy San comparable by the percentage X.X%. offset decline a Renovation performance. displacement driven RevPAR Radisson

yield to team led hotels, strong displacement by these plans is in HPT's will asset two Radisson undergo management on on with Excluding RevPAR group would six revenue industry remaining near future. management the working RevPAR gains, have hotels growth. limit renovations that exceeded the

share So maximize can renovation, they can shift they that rate and post share lift. -- shift

the added This Staybridge in million significant event and room hotel increases Radisson Bar. a in Also stay June, Baton June, with it HPT's to in hotel brand agreement quality. is added to lease portfolio our House This hotel Downtown LSU agreement space in extended the X, May rebranded and features improves acquired feet and center. Blu campus, materially on management renovation, later which hotels agreement many to surrendered flexible activities, XXX this convention XXXX. and agreement and continue Rouge’s it nine to added XX,XXX Grill hotel suites miles Royal management HPT is meeting the Morgans Collection Suites with is and Radisson. Sonesta. to as year Blu terminated. was into begin Radisson Minneapolis FireLake the of from acquisition Clift need the acquired HPT for and $XX Louisiana IHG. of This with Radisson investment million hotel to to hotel walking The its of in to for XXX our and of square the is our Turning Sonesta and is States. HPT United local Baton flagship Clift was to hotel five with management it a for scheduled $XX.XX This Rouge, the Cocktail the restaurant In and the distance hotel adjacent possession located Hotel

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

Mark. good active see to their management, continue brands, wage that call I'll operators us give locations and meet strong projections. related and regular cost will turn The combination pressures. now confidence to continued We investment growth, capital our the asset of over supply renovation will impact

Mark Kleifges

quarter investments, was of property level and our higher gross than X.X% quarter, John. primarily the center second EBITDA Thanks, in non-fuel due in Starting to with XXXX performance percentage. XXXX the margin non-fuel revenues the increases travel

a lower For effects margin was per fuel fuel PA’s X%, decreased or and XXXX a second while loyalty quarter, growth the decline costs. and primarily revenues The result basis pricing quarter. of prior reserve the gallon and the center volume in due gains decline from decline points increased to versus to gallon competition, and was the offset X.X% volume in efficiency continued increased XX year, by fuel million $X.X non-fuel the due margin XX.X%. margin per sales due primarily fuel increased in higher by to gross travel a the partially truck primarily percentage fuel marketing of in gross as parking to quarter the Non-fuel margin prior strategies, cents year and versus gross service prior program slight

gross level travel non-fuel versus to million. Site $XXX.X the versus sales As one travel operating million revenues. centers quarter non-fuel year, labor $XX.X dollars total increased the quarter. of And the the increase half in of XX% X.X% to a result, or associated gross XXXX approximately prior with generated our percent a grew due costs expenses non-fuel margin margin primarily our in centers

under million Second strong the quarter times minimum quarter our rent center times second Annual of X.X% X.X $X.X to or a XXXX. travel for of increased centers last coverage X.XX compared property approximately to quarter by leases travel level year. our the EBITDA second was compared

quarter, the this RevPAR cash HPT's percentage increased hotels quarter Turning comparable The X% X flow basis to by X%, available GOP by RevPAR by rents points margin increased a X.X% this at and resulted in percentage to from returns in increase and in operating results decrease partially increase ADR, offset half point our XXX increased X.X%. occupancy. pay one minimum

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

X.X% comparable prior and portfolios quarter. and year RevPAR weakest of performance declines Wyndham Radisson the X.X% versus had respectively with Our the

end X.X% the comparable percentage and increases with XX were the to hotels Of margin comparable offset slightly quarter, our portfolios our second largest XXXX the Hyatt largest quarter, cash in Our $X.X margin partially X.X% portfolios million X.XX hotels with declines in the portfolios hotels versus all respectively. flow XX.X% X.X% The and XXXX XXX the $XXX.X quarter. $XX.X decreases prior basis by while cash the No. all year to replenished and quarter. agreements, the increase With rents minimum our guarantees balance renovation to in and percentage flow quarter in flow estate during the points were deposit times The the a of GOP to XX higher quarter our declined in during XXXX below returns times The and undergoing versus XXX times our at Radisson operating the insurance increases comparable costs. available one operating XXXX percentage from two Coverage to coverage were with Marriott or GOP for for and Hyatt XXX available our for real cash basis two X performance deposits with GOP for and and all of Wyndham of and was X.X% comparable increased from below portfolios or quarter resulting expenses for XX million. two XX.X% was approximately of X.X% the million security the of GOP portfolios basis costs, the Wyndham rents of up XX and hotels increases of Sonesta pay points portfolio portfolios respectively, our security quarter in year due and the Sonesta largest the with in comparable minimum two for margin our respectively. our of basis X.XX the the points above line XXX X portfolios, profit from and the or quarter. of taxes the for quarter percentage second gross quarter. the non-comparable weakest and percentage increased comparable to XXXX quarter. in million in the points line hotels $X.X Radisson had renovations improved part coverage or X.XX had $X.X increase had the points X.XX gross basis margin times hotels The XXXX balances GOP profit down flow The Cash for our primarily for increase quarter. respectively available prior was times due compared returns in and our by year quarter. million prior guarantees in growth to under X.X%

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

to adjusted was adjusted to quarter debt coverage at ratio EBITDA EBITDA X.X end. times was for total Our the annualized X.X and fixed times quarter charges

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

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

loan, facility our unsecured of to term was assets XX $X $XXX financing and cash, we for of revolving amended our gross facility governing $XX.X resulting improvements quarter sheet end, future cash credit of of the on we $XXX XXXX the escrowed the quarter including debt activities, basis the billion and In premium term respectively. dates until please. to XXXX XXXX. that LIBOR our and the both to outstanding maturities maturity for up no credit like the extension We'd million Operator, loan debt At on and remarks. of concludes point call credit prepared open for we million million balance and as in total to Turning million and our May, agreement our unsecured XX.X% end, borrowings hotel. credit had a questions $XX.X had reduction of facility and

Operator

from B. question Riley first Instructions] [Operator with And FBR. comes the Bryan Maher

Bryan Maher

in and Like, Clift or in need read done no the them Morgans, there's supplementals. the releases property, Morgans to are just Regarding the with more you we about now?

John Murray

That's correct, yes.

Bryan Maher

to and property, long how how be think is that it'll type do think much and done take. work spend you going regarding of you'll you then do And what renovation

John Murray

will The of public and building be a systems work, There's amount renovations. room significant renovation work, façade extensive. space guest

rooms. We've we because best that's evaluated, building won't probably permitting developing the it in rooms it already currently million. the well, but how that, And lot the of model And San sometime building extensive process working a is start with complicated we're year. so through model materials planning still out completed to be $XX that ordering So as is, we the they're and – for expect later that, been still of until the Francisco this at of least be but going it's our in process XXXX. so are budget, being estimate. to The on and long the systems think

Bryan Maher

when to X%? much that that second supply, a guess? we I then new know out be was some how year-over-year would put And of kind of Would of the just at renovation supply. occupancy look points, of the break the How roughly and X was related decline renovations, percentage much in some be would you quarter

John Murray

was I occupancy Morgans Clift at decent – a dip But a the associated to pretty hotel that with dip renovations There Sonesta. coupled probably during during say from would with -- May conversion the in was

Mark Kleifges

Yeah.

So was the on in , the points; X.X comparable portfolio, down or so occupancy was points. XX XX down non-comp it

John Murray

that your question? Did answer

Bryan Maher

Yeah. Thank you. It did

that What hotels? to long the clearly, in a do thought On time thoughts better I and that soft. it's to process guys on? ago. many are XX to have does aren’t agreement, the about on what Wyndham years put place really internally pretty seems maybe for those continue Sonesta types your things to those getting conclusion What think be and the is mean, drag to purposes point of change. them for want you that Wyndham? you you get come the there How At

John Murray

Wyndham, up they to, with an living are up living to. Well, are we sides which have agreement or both

something unilateral So do different to there. no right there’s

between properties. recession, the last were I like with, properties in energy the of the pretty after markets Wyndham some that the challenged effects weakness properties with the challenges properties of significant couple a in that in and natural started think of group the sector And right they’ve that started hurricanes. and where Houston are had disasters and and Dallas, some this portfolio Sonesta

of -- them doubt. giving we're benefit the think I the Wyndham

it that revenue Park performance well. to worked past expense the side ramping there that make of had the about side, issues needed I in quarter, and two out. half up on falls back of some being think, up This be Jersey to properties, main New is New on Jersey And Hamilton Chicago portfolio. it the that property the

done, have, acquisition I now focused more Wyndham to now have their that story and bit that trying off a they think terms larger of that their pull Quinta they short, long the of be spin levers because the think they I scale, and have that strategies more little has the La apply of done ability improve they than to the performance. to Hawthorns have in hotels different to service full to

a optimistic things optimistic Wyndham that way they the in I'm differently half, think to turn the there. wouldn't second about corner and that to different approach felt see I then going So at they rather be -- continuing we're so that the better have, taking get and operating just the we're would if going than Wyndham portfolio it, they we're

Bryan Maher

talked smaller week Express in that this about sure to TA growth of versions involved Express you interested How is grow? the know through slightly properties, have TA will I'm business HPT be helping and in ramping TA getting which now. up what they

John Murray

Express an properties. have in interest presently don't We TA investing in

not we're not TA We haven't really yet. even sites generally. one looking at seen -- We're

and than hotel improve at We’re existing renovations can where the try looking -- do portfolios. to to do portfolio to more complete hotel we're looking extent, our acquisitions at in than looking the add-ons we're we

to travel that’s a for So of is smaller push. be is may engine scale some TA of bit that a an those they that while that my the going own franchising hope -- impression centers that

So –

Operator

comes next Baird. Instructions] Bellisario the with Michael question [Operator from And

Michael Bellisario

EBITDA could there rates the guys you that cap on year expect Just you acquisitions, hotel provide underwritten or in the maybe one? multiples two

John Murray

it the a rate the actual with Radisson Yeah. about Suites, underwritten XX.X% XXXX We cap on but was was ES an cap Staybridge And Baton Suites sorry, projected XXXX about underwritten, mean, flow. cash on rate Rouge underwrote the X% Blu, was I’m EBITDA. I

Michael Bellisario

first property finally Hawaii that that coverage your specifically, then maybe hotel in that And four times your is above now and time just can X changed one years? anything thinking agreement, on the for you

John Murray

very quite coverage happy above time. of we're see bit to mean, times one I it after a

resorts I I shutting increased think on States a lot of island, from more by hotel think East also of caused airlift, helped number tourism essentially travelers that Hawaiian Also – off a to remain the volcano the one is and our definitely which has particularly from the has there's in United Coast that a to that Caribbean there. the fact vacations. the driven decide closed on

So, performance why I different the several think has there's reasons improved.

no done is term that about scale good this managing and it just from the think is beneficial. job Marriott also has long hotel HPT, in I or remains property question their relationship a to year, shorter terms having Whether been we’re change a increased a no that in discussions yet. but future has of regarding phenomenon But Marriott the and, term be the resolution seen. found continued of between and where

Michael Bellisario

And side? then currently I Marriott assume impact the from as there's M&A on no on going that’s yet major

John Murray

No impact from that.

Operator

call Thank to like return you. there the questions, And to no for closing any as comments. I Murray more John are would

John Murray

very for of to forward us you some today. much We soon. look you Thank seeing joining

Operator

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

You your may now lines. disconnect

Service Properties Trust (SVC) 9 Aug 182018 Q2 Earnings call transcript