Apple Hospitality REIT, Inc. Q3 FY2024 earnings call

• Travel trends across the portfolio remained relatively stable with business transient demand improving and leisure travel strengthening.
• Completed the sale of three hotels in 2024 and has four additional hotels under contract for sale.
• Repurchased approximately 1.4 million common shares in the third quarter, with year-to-date repurchases of approximately 2.4 million shares.
• Recent acquisitions since June 2023 have produced strong unlevered yields.
• Invested approximately $48 million in capital expenditures in the first 9 months of 2024 and expects to spend between $75 million and $85 million in 2024 with major renovations at approximately 20 hotels.

Comparable hotels RevPAR grew approximately 1% in the third quarter of 2024 compared to the third quarter of 2023, driven by rate improvement with midweek occupancy increases offsetting slight weekend pullback. Third quarter adjusted EBITDAre was $129 million, and modified funds from operations was $107 million, up approximately 6% and 3% respectively compared to the third quarter of 2023. Preliminary results for October show RevPAR up approximately 4% compared to October 2023. Total revenue for the third quarter was $378 million, and year-to-date through September was $1.1 billion, both up approximately 2% compared to the same periods of 2023. Comparable hotels RevPAR year-to-date through September was $122, up more than 1%, occupancy was 76%, up approximately 1%, and ADR was $160, up nearly 1% compared to the same period of 2023.

• Updated full-year 2024 outlook: Net income between $204 million and $221 million, Comparable hotels RevPAR change between 0.75% and 2%, Comparable Hotels adjusted Hotel EBITDA margin between 35.3% and 35.9%, and adjusted EBITDAre between $458 million and $469 million.
• Outlook reflects third quarter performance, decelerating expense growth, impact of announced dispositions, and a later Hotel 57 transition.

• Unanticipated macro events could materially impact operating performance.
• Fluctuations in travel trends, including potential pullbacks in certain markets.
• Challenges with insurance costs and construction finance for new developments.
• Supply demand dynamics could change, affecting RevPAR.

Q: Disconnect between business transient and leisure rates vs history and trend.

A: The gap continues to shrink; weekday ADR is up about 6% year-to-date versus 2019 and weekend is up about 18% versus 2019, and will continue to capitalize on business transient improvement.

Q: November/December RevPAR assumptions and 2025 expense growth.

A: November and December are projecting some RevPAR growth; 2025 expense growth is likely to continue current trends absent a meaningful change in the environment.

Q: Excitement for 2025, mix management, buybacks.

A: Excited about leisure travel resilience; mix management to grow rates; buybacks are predicated on the ability to sell assets at an attractive spread to where the stock is trading.

Q: Midweek occupancy growth, booking window, staffing.

A: Midweek occupancy is building; booking window has slightly shifted but average daily bookings remain positive; shorter booking window impacts staffing and wage growth as teams need to adjust scheduling.

Q: Vegas land parcel, development pipeline, capital allocation.

A: Continuing to explore the Vegas land parcel; preference for fixed price contracts with developers; capital allocation focuses on existing assets with attractive returns.

Q: CapEx, insurance costs.

A: Approximately $75.85 million allocated for CapEx in 2024, most in the fourth quarter; insurance costs down 20% due to a restructured program and good loss experience.