Ashford Hospitality Trust, Inc. Q3 FY2024 earnings call

Repayment of Strategic Financing

• Announced plan in January to pay off strategic financing, sold over $310 million of hotels, refinanced Renaissance Nashville, raised ~$173 million from non-traded preferred stock sale, paid down over $100 million of strategic financing since年初, with balance at $82 million; amendment to strategic financing provides discounted exit fee if paid off by Dec 15th provided balance reduced to $50 million or less by Nov 15th.

Operational Highlights

• October saw highest monthly top-line growth in 2024 with RevPAR growth of 4.6% vs Oct 2023.
• La Concha Hotel in Key West on track to convert to Marriott Autograph Collection by end of year, expected to realize 20%-30% RevPAR premium post-conversion; Le Pavillon Hotel in New Orleans on track to convert to Marriott Tribute portfolio by end of 2024, expected to realize 10%-20% RevPAR premium post-conversion; Le Meridien Fort Worth Downtown opened, running well ahead of expectations.
• Comparable hotel RevPAR for portfolio decreased 1% y-o-y, but ancillary revenue increased 15% per occupied room y-o-y; corporate transient up 9% ytd; group room revenue for 2024 pacing ahead by 2% and 2025 pacing ahead by 8% y-o-y.
• Successful property tax appeals reduced total real estate assessments by over $100 million, saving ~$1.7 million in taxes; resolved prior litigation on Marriott DFW Airport, generating refunds of ~$120,000.
• Hurricanes Helene and Milton impacted markets but all hotels remained open with minimal operational impact; completed guestroom and public space renovations for two strategic conversions, with Embassy Suites Dallas and West Palm Beach renovations in progress; 2024 capital expenditures expected to be between $80 million and $100 million.

For the third quarter, Ashford Hospitality Trust reported a net loss attributable to common stockholders of $63.2 million or $12.39 per diluted share. AFFO per diluted share was negative $1.71, and adjusted EBITDAre was $52.4 million. At the end of the third quarter, the company had $2.7 billion of loans with a blended average interest rate of 8%. Cash and cash equivalents were $119.7 million, restricted cash was $114.3 million, and net working capital was approximately $160 million. The consolidated portfolio consisted of 73 hotels with 17,644 rooms.

• Hopes to close transactions in coming weeks to reduce strategic financing balance to $50 million or less by Nov 15th to qualify for discounted exit fee by Dec 15th.
• Completing repayment of strategic financing will allow the company to move past the COVID era and focus on maximizing hotel performance, profitability, and value.
• Ashford Inc. committed to improving profitability of Ashford Hospitality Trust through corporate cost reductions, strategic portfolio turnover, and continued deleveraging.
• Industry fundamentals increasingly attractive, limited supply growth in coming years, and improving transaction and financing markets.

• Natural disasters like hurricanes could impact hotel operations.
• Uncertainty around elections and government-related travel could affect certain segments.
• Interest rate fluctuations could impact financing and asset valuations.
• Uncertainty in transaction execution.

Q: Could you walk us through what you saw on the leisure and BT side for demand in the quarter, maybe on a monthly basis? Has it been a continuation of trends from last quarter? And also, was there any noticeable pickup post Labor Day on the BT side?

A: Stephen Zsigray said leisure side continued to soften, weekend retail soft for us and other hotels in markets; corporate business remains strong, BT for portfolio up over 4% in Q3 y-o-y, split between occupancy and ADR; saw some increase post-Labor Day weekend; government segment was soft due to election unease, expecting it to pick up now election is over.

Q: Can you provide some additional color on the transaction environment more broadly? Has there been any noticeable pickup or changes in demand as of late? Any changes in the bid ask spread, this is in large valuations versus smaller assets?

A: Stephen Zsigray said post rate cut in September, seen uptick in interest from institutional buyers; more interest in assets; election uncertainty brought uncertainty to market, hoping for tighter bid ask spread and improvement in financing and transaction markets.

Q: Can you elaborate on the cost savings related to Ashford Inc.? Is that something that would be at the property level related to Remington and management fees, or is that something around the advisory agreement related to Ashford Inc.?

A: Stephen Zsigray said Ashford Inc. is very committed to improving profitability of Ashford Hospitality Trust, will see corporate level cost savings in addition to portfolio efforts; it's a little premature to quantify now, will comment as details come into view.

Q: Fast forward to the end of the year, you've paid off Oaktree. Can you just remind us of your strategic priorities and how you expect to allocate capital in 2025 once you've completed these near-term transactions and paid off the Oaktree financing?

A: Deric Eubanks said priority one is pushing out upcoming debt maturities, getting refinancings and extensions done; will strategically turn over some assets in the portfolio; industry fundamentals favorable with limited supply growth for next two or three years, and return to office could drive business transient segment.