SVC - Earnings call 3 2023 | Service Properties Trust

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

Operator

Good morning, and welcome to the Service Properties Trust Third Quarter 2023 Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Stephen Colbert, Director of Investments. Please go ahead.

Stephen Colbert

Good morning.

Joining me on today's call are Todd Hargreaves, President and Chief Investment Officer; and Brian Donley, Treasurer and Chief Financial Officer. presentation followed a session a includes analysts. with call by by management, question-and-answer Today's the and Litigation SVC. I recording, conference that the securities conference note Please retransmission laws. statements forward-looking of prohibited point that within written XXXX call to other contains call Private transcription without consent Act like of Securities would meaning out today's Reform is today's of and expectations are based on as and of statements beliefs XXXX. today, forward-looking These present X, November SVC's in may these statements. differ materially results projected those Actual forward-looking from

Additional can information cause at statements made differences from revision concerning or website. The factors that those conference revise release today's with in website to SVC's publicly is could any filings to our the company the the contained obligation of call. undertakes svcreit.com our be forward-looking in or the SEC, no which accessed results

call funds normalized our to EBITDAre. measures and this found data as as measures, call addition, and from I financial supplemental of well operations the may on to Todd. these be contain which financial over adjusted available will normalized package, with in non-GAAP AFFO financial that, are website. And FFO income turn Reconciliations non-GAAP to including our can operating In net calculate or components

Todd Hargreaves

results good SVC's and Stephen, our you, Thank hotel top solid reflect third morning. line quarter moderate portfolio. in improvement

experiencing Sonesta mitigating hotels. active are demand by RevPAR in contract during led the gain and year-over-year the generally performance. Top some at revenue an comparable XX performance our and X.X% of softening displacement in increased group was from renovations XX.X% As flat quarter comparable hotel XX.X% revenue, leisure-oriented EBITDA we despite a was line gain impacting with

Service due as while decrease to to transient renovation, our into Difficulty] New increased largest notable percentage as by in urban full-service total X.X% revenues group revenues of in Francisco, our outperform XX.X% occurred Sonesta and by positive transient select segmentation service levels, increased We're gains service XX driven full-service in X.X% decreased with extended-stay QX RevPAR at X.X%. to Crowne Sonesta at percentage moving Minneapolis, our and hotels down corporate declined Royal well year our $X.X EBITDA reported led of The market-driven occupancy a declines increased of improvement And and hotels as extended our while of X.X%. RevPAR group at previous full-service were citywide hotels hotels revenues gains increased and continues stay X.X% hotels strong Orleans. Group portfolio revenues been RevPAR, our events. year-over-year shift as quarter and our points, XX.X% Chicago Our as a hotel from from or in year-over-year XXXX. There's extended-stay RevPAR a our from by as [Technical Sonesta result X.X portfolio Denver, RevPAR of a increased in service Atlanta San portfolio select Full segment Royal increased to million. increased declined the portfolio other XX.X% index XX.X% as contract Plaza, to from X.X%. the portfolio with X.X% Cambridge, to

the Nashville. our at Jose Our with properties San activity business in for Beach, increase Sonesta full-service led and existing increased portfolio airline in and rates accounts new Redondo crew contract-related

weekend total OTA increased X.X% occupancy occupancies travel accounts, corporate of September All to gap by Business year-over-year. to by while XX.X% percentage of been channels sales X.X and our on national return. lower XXXX. and gap portfolio of weekday and weekend is XX.X%. The hotel year-over-year respective mid-market at to a operators revenue weekday September, SVC's to revenues trend of point has direct led X.X narrowing revenues to XXXX small from websites from recovery between slower a negotiated outpaced in now The as from and accounts by percentage and up levels, index remain decreased percentage larger points last steering down Sonesta's and positively XX.X% in bookings focused the quarter's been their have is continues commissions, as XX.X%

QX Sonesta of our through by Sonesta last on in ahead our XX% Gains with XXXX build full-service total St. focused D.C. San and loyalty year. to increasing widespread our remain campaigns expenses Insurance Our led this or portfolio expect XX.X% positive program revenue ADR pressure Sonesta, and million by larger program. is by by increased an with improved from Nashville. Hotel which operating Washington, XX.X% its increasing remains from reported led all its operator pace, and advertising by Louis, Francisco, which percentage increased awareness hotels of increase Travel Pass of Revenue brand into Sonesta's group are X.X%. Group of in XX.X% out a XXXX media and increased operators QX Royal led premiums year-over-year, XX.X% the elevated margins. nights, room we pace in continue XX% across to as continue across Sonesta QX. will $X.X Houston,

less labor decreasing the labor, front, occupied which labor each of quarters. in has the per in-house our hotels shifting are room resulted more contract On on labor last relying X in contract

total previous are wages a cost basis However, room year's occupied in-house portfolio the experienced quarter. wages over and a plus for benefits employees X% the per in increasing, increase on

XX% represents investment. our which portfolio portfolio, to net of by lease SVC's Turning

of our with service-oriented XX, leased of weighted retail term lease XXX a As net properties lease XXXX, X.X XX.X% years. average September were

leases largely decline TA by rents in reported minimum September our XX-month with amendments an to of from lease end and coverage leases driven prior The rents in and X% maturities aggregate TA only our well is net of as are X.XXx a XXXX. softer result lease Our of minimum XXXX. XX, trailing X.XXx for EBITDA our increased May of QX sequentially was a The as XXXX. basis our the rents on expire by laddered of net

net coverage to X.XXx dispositions. an guaranteed of with largest Transaction limited lease is quarter the Rent no are investment-grade our and acquisitions and up the from subsidiary retail TA improved muted by QX rated XXXX. QX Importantly, payments BP. the portfolio tenants lease was other in during X.XXx net relatively in our tenant in activity rent for

We continue opportunities, these target how evaluate hotels capital as capital. in volatile carefully but and we to markets allocate full-service acquisition consider specifically disciplined remain we select markets,

detail in will is on balance provide the our like Brian SVC upcoming While and sheet, I'd refinance more into due XXXX. position the to debt emphasize maturities strong XXXX

maturities a and ] over dependable $X performance, unencumbered minimum hotel valuable an continues the detail. flows pool of highly of of to to rents be financial results We provides near our efficient billion leased and will assets, centers in now solutions travel net call portfolio tenant over address and plan in most rated determining all annual total improved the including the from our demonstrate to lease Our effective discuss to TA. proactive financial these BP. With turn future. I to operational XX% cash with of more [ in coming portfolio Brian and investment-grade our large cost to liquidity

Brian Donley

and you, good Thank Todd, morning.

per quarter. Adjusted prior to this our additional effective for increased was interest normalized income quarter per of benefit year X% compared decline the May per to on as with financial share the prior year our largely a $XX.X $X.XX $X.X $XXX.X income by XXXX. tax in recorded, amended $X.XX in XXXX, in leases that of the million third results FFO full TA quarter share partially were $X.XX cash per million. share results. Starting increased offset income the of consolidated $X.XX Earnings benefited balances, result million year-over-year the share quarter from EBITDAre compared earned as prior quarter and or to related Rental this $X.XX hotel year, a to an by per share our quarter versus of

hotel GOP period. line RevPAR profit by XXX basis property million from margin for decreased expense. a XXX basis percentage million comparable declined year, at gross increased reduction to and by operating estate the operating costs our by real points, [indiscernible] hotels the from taxes, hotels profit the performance prior $X.X offset $X.X this of our by quarter, insurance our year points driven XX.X%, the XX portfolio decreased prior in gross increased comparable by Below

$X.X $XX.X a XX prior generated hotels a by XX from By $X service offset Stay EBITDA increase hotels X.X% million hotels from XXX our declined and Extended decline of select $XXX,XXX for XXX our level, service hotel year-over-year partially million declined Our year. hotel for EBITDA full-service million, the our hotels.

patterns Turning to is we're due beginning and million XXXX largely in $XX.XX note quarter seasonal seen, RevPAR the QX. historically of hotel $XX October was million continues our to EBITDA softens ] the projecting early typically RevPAR to expectations Please in range. $XX in as expected the winter portfolio bid our currently hotel to full months. QX for Preliminary to [ $XX demand $XX mid-November has EBITDA and hotel sequentially decline

we the tax provision, quarter million third tax recorded XXXX. of income Regarding our $X.X of benefit in a

tax reverse to of $X.X the We benefit reaffirm expect full our fourth and projection year in expense quarter this million. of

the have Turning rate to sheet. of $X.X balance We rate with debt interest weighted a billion average outstanding of X.X%. currently fixed

followed Our next of senior maturing million $XXX of XXXX XXXX. maturity by October debt senior maturing March is in million notes notes $XXX in

in higher currently are various will these maturities evaluating interest address look We coming options rates. impact to the the of mitigate to months and

$X.X of and the centers as billion. over current large portfolio $XXX our environment. to gross million liquidity hotel look estate including of we undrawn at $X and to well for travel possible all of a book could million facility based credit manage strategies TA value, cash a real billion Our capacity, as maturities rate over assets unencumbered of to diverse includes $XXX total debt Currently, of portfolio on leased our

to Turning investing activity.

expect believe sold the $X.X total quarterly guidance price quarter ready fourth XX During on properties $XX September October, lines and we to We're made share, we spend our we properties is $XX million X make third for common million. million per months XX% and the the concludes We to in questions. normalized had no capital improvements of ended XXXX provide to annualized quarter trailing XXXX. lease prepared We'll ratio remarks. XX, planned dividend on a of for total million our $XX open $X.XX announced at during covered, the on our which our of our FFO the quarter, regular earnings representing quarter, of acquisitions fourth net That capital payout well third we expenditures a XXXX. call. In of

Operator

Riley first Securities. Maher begin B. Bryan now the [Operator question from The will with question-and-answer comes Instructions] We session.

Bryan Maher

upon rate of for you touched off to I with the was first number a half just getting quarter, why of you on you color color to us out little stay But Sticking us minute I XXXX give mean, just $XX the million run the type certainly, think, $XX months. suspect wouldn't ground Brian. Can to level. of a threw the kind you'll and that know in a million. fourth that in a for slow CapEx of give XXXX at said as it that's expect that, I since number? you Do peak I you the couple

Brian Donley

some in That's been Yes. out of also kicking of I off many delays for the about it's in be given of now fully portfolio. elevated do it some our to QX Sonesta segments. trying of multiple whether to getting renovation are CapEx various under mean be expect talked a avoid of couple been, gate, Hyatts projects, bunch Hyatt I We've at but these We're from underway. scoping, a disruption. renovations currently hotels how across the last quarters planning, that's the slow started standpoint.

little going quarter-to-quarter as for plan to plan the It So be as can, disruption sort renovation things to guided avoid because again, especially preview, a a we $XXX million, as $XXX obviously months. in million of will we we going have during like range much think choppy CapEx originally, I as peak summer be of XXXX, we do that a multiyear on. had to it's XXXX, in

book So end there versus be QX QX. could some effect,

Bryan Maher

the correct to until would And to just be your I that's something Would be that will a that turn muted address acquisition XXXXs thought unless somewhat process? suffice down. appetite too it's good say, suspect you

Todd Hargreaves

Brian, that's an accurate statement.

as but at addressing sale underwriting sold XXX you unlikely we a But for being opportunities we what June we similar with purchase X $X bought said, to the asset proceeds. we've years. and evaluate Our couple said, billion buy rest priority agreement. the acquisition of of the bought past continue anything We've under We're transactions. to one nothing current of our we this upcoming hotels year. And time, over that know, That maturities. no -- -- in have Nautilus debt it's remains in calendar

So to we again, sellers, evaluate net but opportunistically upcoming maturities. been is transactions. priority But have we'll the continue

Bryan Maher

security at be stroke else. you Just you a on the for its that any leases? on what something TA look a like refinance. over another interest turn Can give the couple with ones, thoughts when portfolio of as rate the broad security and might given us quick potential I'll to BP debt fairly it high somebody Brian, meaningful

Brian Donley

There's secured bond bank a It's debt different it, could question. studying of something whether we're the debt, level, It's do property you sort ways of be a as it great or very uses portfolio closely. that some other some collateral. couple

our where looking relative our and trading, which look where just Some and spreads the we the is at at of our paths, potential is goalpost XX% say bonds of of range. have trading are the debt sorts that there's to I we could look are at. unsecured would all different far end permutations bonds

XXXX. low rates as We X%. moved Obviously, the of first since have this done year quarter have secured financing as

guess in between goalposts, that in my best today. is somewhere we're So those ballpark

Bryan Maher

continue so where rates think to ever to the do you assets, insurance unencumbered you higher, ridiculously you get about given just many that point have last, get self-insuring? Just

Brian Donley

really I at think that's this us point. No, for an don't option

Operator

The Tyler with next Oppenheimer. question comes Batory from

Jonathan Jenkins

on This Jonathan Tyler. is for

First some trends from me. slowing you of one demand fourth October expecting same with RevPAR the seasonality a kind but in on QX Can quarter guidance and understanding factor, stronger and more and you a are additional is color the the environment? leisure of provide

Brian Donley

it's half Yes, things continue portfolio the hotel seasonal tempering question. in of saw demand QX. of is the of of with changes our we stronger October before patterns second the and months great trend and start summer that Couple one off. activity tapering the in a

of projection might we than our explanation last what a reasonable why be a year. that's lower think little I achieved

trends same with versus are group those and segmentations of continuing So that of sort leisure different thing. transient,

Jonathan Jenkins

in kind mix sustainability And of helpful thoughts historical seen? grouped? group the group strength remarks any on there. on ahead, prepared commentary pace now. then that into business, typically can booking But appreciate us your color the of total I remind where near-term on percent and And what we've group then the you the is the looking is XXXX of

Todd Hargreaves

there So what group historically, it the quarter, where which has segmentation we're probably today with just lower of is you're as in isn't not forward last our seeing We're we saw but more not quarter. operators, strong yes, well. is shift in XXXX But XXXX is going pace surprising back. decreasing. group than leisure in to We're to probably seeing -- well ahead industry a is of sizable Sonesta's back it seeing we're in transient where given little a but certainly a booking lot XXXX. just from pace overall the Most the levels, specifically happening year's quarter been overall for

booking a changing are little windows bit. those So

Jonathan Jenkins

And me, then last could. I for if one

in marketplace, uptick resonating you there? RevPAR it's little seeing In usage talk program Sonesta competing brand, the terms you're what with a about how consumers, the can of loyalty how in the bit any and terms it's index of in

Todd Hargreaves

Sure, It's that's monitor Jonathan, closely. good a very something question. we

program media in the on brand out to loyalty campaigns very campaigns loyalty are focused but in number revenue the at They're also the the through the XX% not sometimes to levels competing booked that percentage of brands, continue some through that program. total increase of to track terms members their really been actual and metrics of We're the seeing name of the the closer are there. their we program, loyalty program of booked advertising has revenues loyalty Sonesta year-over-year. of on get

there. we still brand. But to are we So Sonesta more room your question, are we consumers, lot there's the seeing answer to -- with resonate a it -- of are grow seeing

to effectively need competes service In in. that and There's by very brands level. terms of levels indexing, Sonesta at look service it you certain

Sonesta XXXX. Suites Sonesta are on portfolio, Sonesta very Resorts, other area you Hotels are our this, Sonesta and travel. business as the example, on touched on XX% of our reliant is of Royal XX%, are XX% too, Jonathan, at Select XXXX, hotels Simply which are full-service branded which calls, prior our hotels For we've know, The is

but percentage something focused that Select, portfolio. million total Sonesta million But Select issue, Sonesta caused small to to very of in The on there. It's travel that. a the industry the But acknowledge levels. of of lag bit of in the shift having on. has the a little a focused the it's of XXXX EBITDA Sure, which percentage it's quarter. also this a Select $XX of is not But return we're in recovery a of sold Sonesta some for to something the very was the just portfolio. brand some out So with business lower-performing we're small market this also improving overall $X again, hotels in again, We've the we past.

Operator

[indiscernible] comes with question next from HSBC. The

Unknown Analyst

the of leisure, including versus revenue and hotel lot in so on. could share So great. you terms this would that I in business see and regarding like market information Wondering portfolio of portfolio, geography-wise breakup if presentation be the hotel both the

Todd Hargreaves

leisure? To the clarify, looking for you're versus next business

Unknown Analyst

Yes.

Todd Hargreaves

So historically, very the has it's business. area more been Leisure lagged been, from the leisure. recovered been anywhere our And XX% growth that demand to portfolio recovery really relative and has been obviously, our XXXX leisure. we of XX% concentrated -- to the and in in to saw from We've business 'XX. was RevPAR double-digit relative that's

see shift to starting You're now. that

and some overall. has inbound. see international in to been more There's there travel travel starting than leisure-related been outbound You're RevPAR declines

above portfolio may But next shift relative leisure well to I to think our but you back a over the the So business shift the towards seeing portfolio you're and years, seeing travel our you levels. Through few sold not of few are XX% terms business. to more what pick in leisure. over we've past in towards year-over-year. we're in see more the up leisure, relative XXXX still Still business acquired years,

Unknown Analyst

most be color the the for focus franchise which you My and on share format, the biggest franchising is, or Sonesta strategy is efforts. question also some is next the having if success great could it would

great not it share increased XX%, Additionally, XX% would you an update to which is Sonesta on in in Because it XXXX, booking, through which up an be if has the could from like platform. OTA XXXX. direct is

So any recent thoughts great. be would there, color any

Todd Hargreaves

that I think I got all.

for focused is the There to competitive construction at of something the Red effort, with growth the very Sonesta of team franchising momentum we a not brands the different now. very on all a that's Sonesta hotels lot well is expect new occur franchising legacy in starting as franchising Sonesta Lion a It's Sonesta. brands. right as happening. industry the So of where the lot majority and There's across

is of a lot brands. But it from momentum conversions a there's So of there. other lot

typically when release a will as Sonesta hotel well. put press out franchise open they new a

So they that economy is Royal of out all Lion there is the of way benefits the The to that's the hotels one have brands family upper upscale hotels. Sonesta the from something for public. the large a all Sonesta Red of -- brands way

So is lot wanted F&B lighter a That's launched component getting lot portfolio. including really brands Sonesta brand every they ability brand have Sonesta that a very see. they a new we that of they a recently Sonesta to our Extended ES Stay, as own one They're the reasons and Essential, there. to they of launched of the also with brand because Select, They out their that had focused Suites. they've franchisees. from which as that Suites what Simply hotel the in The select feedback offer called is a service on, the were well was with, success

equity there. of So Sonesta. momentum in -- of XX% been lot there's owns Again, the we're a SVC

grow, but them a the the to brand brand recognition but seeing brand, And across internationally in of grow overall the business. well. the XX% just the us, and helps with franchising is room the not lot in U.S. interested awareness only just not there of helps as that that portfolio. very grow It value we're to So

to not direct terms the In and for sure the Sonesta's I booked OTAs I'm were the from XX% revenues you quarter. followed statistics XX% of that quoting, through of year-over-year were but OTA, bookings percentage declined

decrease. So it did

and that charged at some of to was rates lower due ADRs a of leisure-oriented of Some -- our that lot hotels.

you'd or paying. constant have high use commissions nights bit. room that prefer little the may you obviously, you're Any booking. the always were actual time OTAs, even direct increased there's And So OTAs, the a

longer-term prefer the of there. But occupancy. especially website OTAs select at can midweek service They're our going helping always also get customers transient some fill of hotels, time, you booking You and booking on and rates you get night revenues. occupancy than OTAs you're on backfill just in hotels, extended your at same help occupancy can when extended-stay can through you our higher -- stay would the sometimes

part, a help So they slightly website as stayed Sonesta flat over as and to declined can the most a direct have well. again, increase. of generally the bookings But for percentage through year OTA revenues

Unknown Analyst

ask it will Is I if in a join of else queue. squeeze -- questions okay I more can couple the or

Brian Donley

course. Of

Unknown Analyst

So this Sonesta. again is to related

any to you length members So possible have? for you or of number is stay in details. regarding terms provide it Pass Sonesta of color discuss of differences other the might Travel And we

Hotels loyalty do Do program? you to program Reward when Lion Hello one Red expect be Additionally, or Of not? the Family expect into unified it you

Todd Hargreaves

terms private you're as is know, Sonesta a But So, is, asking. Lion X the of ago. on can't so data years Lion purchased Sonesta Red in you Sonesta specific probably company, brands, we share Red what

have companies they So integrating the in those been together. you far come X X that have process different that essentially have still companies are but integrating, of along

to one one are management But the companies both, have website. right working long app, franchise So, has the occurred integration is on the together teams merging, kind loyalty of one program, essentially, term specifically idea and those now, together.

Operator

turn conference back the to At session, I as Investment Hargreaves, question-and-answer and any concludes remarks. to President the this for Todd time, Officer, Chief like would closing over this

Todd Hargreaves

you. Thank for hope the in continued call. Angeles We appreciate of today's and many SVC Thank see to you week NAREIT next you, for in your conference. joining Los everyone, interest

Operator

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

You disconnect. may now

Service Properties Trust (SVC) 7 Nov 232023 Q3 Earnings call transcript