Apple Hospitality REIT, Inc. Q3 FY2025 earnings call

• Business fundamentals remain strong with supply growth below historical norms and demand resilient, but policy uncertainty, expense pressure, and government travel pullback weighed on performance. - Focused on growing market share and managing expenses to maximize hotel profitability. - Transitioning Marriott-managed hotels to franchise and consolidating management in markets to realize operational synergies. - Completed sale of 3 hotels for $37M, with 4 hotels under contract for sale. - Entered into development agreements for 3 hotels, including an AC hotel in Anchorage and dual-branded AC Hotel/Residence Inn in Las Vegas. - Expect to reinvest $80M - $90M in hotels with major renovations at ~20 properties. - Paid distributions totaling ~$57M or $0.24 per common share in the third quarter.

For the third quarter 2025, comparable hotels occupancy was 76%, down 1.2%; ADR was $163, down 0.6%; and RevPAR was $124, down 1.8%. Comparable hotels EBITDA margin was 35.2%. The portfolio's variable expense growth moderated, with fixed costs showing higher growth due to challenging year-over-year comparisons. The portfolio continues to produce industry-leading margins.

• For full year 2025, expect net income between $162M and $175M. - Comparable hotels RevPAR change is between negative 2% and negative 1%. - Comparable hotels adjusted hotel EBITDA margin is between 33.9% and 34.5%. - Adjusted EBITDAre is between $435M and $444M. - Guidance adjusted due to performance year-to-date, government shutdown impact, and cost control measures.

• Macroeconomic uncertainty and volatility. - Government shutdown impacting government travel demand. - Supply growth in some markets affecting performance. - Policy uncertainty affecting operating performance.

Q: Just taking a step back, as you think about the past few years of transaction activity, hoping you can discuss how you think about market selection. When you're buying into new markets, maybe selling out of others, just curious what are the driving factors behind those decisions? Is it supply? Is it the ability to densify with the same operators? What are the main factors you think about?

A: Justin Knight said market selection focuses on portfolio profile, leaning into business-friendly markets with positive demand trends and demographic support, considering margins, portfolio age, and ability to drive profitability.