Apple Hospitality REIT, Inc. Q1 FY2025 earnings call

• Demand: Despite various factors weighing on hotel performance, solid demand was seen across the portfolio, with rate growth offsetting a slight pullback in occupancy. - Portfolio: Broadly diversified across 85 markets with exposure to diverse demand generators. - Capital Allocation: Completed sale of two hotels for ~$21M, entered sale agreements, repurchased ~$32M of common shares, and paid distributions. - Dividends: Paid $70 million in the first quarter, with an annualized regular monthly cash distribution of $0.96 per share representing an annual yield of ~8.2% based on Wednesday's closing stock price. - Market Conditions: Supply growth in the industry has been muted, with limited new construction within 5 miles of nearly 60% of hotels, and the transaction market remains challenging but selective asset sales have been executed.

For the first quarter, comparable hotels RevPAR was $111, a decline of 0.5% compared to the first quarter of 2024. Occupancy was 71%, down 1.5% from the first quarter of 2024, and ADR was $157, up 1% from the same period last year. Adjusted EBITDAre was $95 million, down approximately 5% from the first quarter of 2024, and modified funds from operations was approximately $76 million, down 9% compared to the first quarter of 2024.

• Full-year 2025 guidance revised: Net income expected to be between $167 million and $195 million, comparable hotels RevPAR change between negative 1% and 1%, comparable hotels adjusted hotel EBITDA margin between 33.7% and 34.7%, and adjusted EBITDAre between $433 million and $457 million. - Guidance lowered from initial projections due to first quarter performance and near-term demand/expense trends, but fundamentals of the business remain strong.

• Macroeconomic uncertainty posing risks to travel demand. - Tariffs may lead to increased costs and delays in planned projects. - Transaction market with low deal volume and challenges in executing larger transactions. - Seasonal and calendar factors complicating demand trend analysis.

Q: Aryeh Klein asked about RevPAR guidance and demand visibility.

A: Liz Perkins discussed booking position, recent strong performance, and potential for market share gain.

Q: Aryeh Klein asked about the transaction market.

A: Justin Knight noted the transaction market remains challenging but selective sales of smaller assets to local buyers are possible, with potential to redeploy proceeds into share repurchases.

Q: Michael Bellisario asked about demand segmentation and CapEx philosophy.

A: Liz Perkins discussed demand segmentation and Justin Knight talked about CapEx philosophy of spending 5%-6% of revenues on renovations with flexibility to adjust.

Q: Austin Wurschmidt asked about RevPAR trends and ADR.

A: Liz Perkins explained Q1 performance, recent trends, and confidence in ADR potential.

Q: Jay Kornreich asked about group booking trends and asset sales for repurchases.

A: Liz Perkins said group remains strong, and Justin Knight stated the company is continuously in the market, able to complete transactions in 3-6 months.

Q: Floris Van Dijkum asked about capital allocation and forward contracts.

A: Justin Knight talked about opportunistic asset sales and limited forward commitments due to market uncertainty.

Q: Michael Herring asked about cost mitigation and industry resilience.

A: Liz Perkins and Justin Knight discussed cost savings efforts and the portfolio's resilience due to limited new supply.

Q: Jack Armstrong asked about RevPAR pressure and labor flexibility.

A: Liz Perkins discussed RevPAR pressure factors and labor flexibility post-pandemic.