Summit Hotel Properties, Inc. Q4 FY2025 earnings call

• 2025 execution: Teams responded to complex operating environment, remained disciplined in growing market share, managing expenses, strengthening balance sheet, etc.
• Fourth quarter demand: Encouraging positive inflection, RevPAR trends improved sequentially, demand patterns stabilized despite government shutdown.
• Market share: Fourth quarter RevPar index improved by 220 basis points to 117, approaching all-time post-pandemic market share highs.
• Capital allocation: Closed sales of non-core hotels in fourth quarter, generated aggregate gross proceeds, and has sold 13 non-core hotels since 2023.
• 2026 outlook: Industry fundamentals improving, demand trends expected to continue improving, benefits from World Cup and favorable convention calendars.
• Market highlights: San Francisco expected continued growth from events and Super Bowl/World Cup, Orlando properties to benefit from new park, South Florida properties with sustained momentum and renovated asset performing well, Nashville's performance driven by sports and group demand.
• Non-rooms revenue: Growth from food and beverage, marketplace sales, etc.
• Expense management: Pro forma operating expenses increased ~2% year-over-year, contract labor declined nearly 9%, employee retention improved with turnover rates down ~24% from 2024.
• Capital expenditures: 2025 consolidated capital expenditures ~$75 million, 2026 pro-rata guidance $55 million to $65 million.

In the fourth quarter, RevPAR trends improved sequentially by over 200 basis points, resulting in a fourth quarter same-store RevPAR decline of 1.6%. Excluding government and international inbound demand, fourth quarter REVPAR grew by approximately 60 basis points year over year. For the full year, same store rev par declined 1.8%, driven predominantly by lower average daily rates. Non-rooms revenue increased 9% and 5% for the fourth quarter and full year 2025, respectively, in the pro forma portfolio. Specific markets like San Francisco saw over 40% year-over-year RevPar growth in the fourth quarter due to citywide conventions and event-driven leisure demand, Orlando properties benefited from the newly opened Epic Universe Park with 9% RevPar growth in the fourth quarter, South Florida properties had 4% RevPar growth in the fourth quarter with sustained momentum across segments, and Nashville's fourth quarter performance was driven by strong sports-related and group demand.

Full-year 2026 REVPAR is expected to range from flat to up 3%, adjusted EBITDA range $167 million to $181 million, adjusted FFO range 73 cents to 85 cents per share. First quarter expected to be most difficult with REVPAR trending in line with fourth quarter 2025 results, but March and April paces showing improvement as demand patterns gradually improve and comparisons ease from second quarter.

Q: John, you discussed the booking pace accelerating into March and April. Can you just dig into kind of the visibility that you have and length of the booking window that underlies your confidence in the trends in the months ahead?

A: Sure. We've seen positive indications from pacing, with March pacing slightly positive and April pace up mid-single digits. Most optimism from not lapping government demand pullback point yet, and near-term lifts in Arizona and Florida markets.

Q: Yeah, again, I'd say generally broad-based, but I do think today what we're seeing is better performance and better lift midweek. And so I would expect the majority of that lift to come from the BT and group segments. But again, I do think we're encouraged with some of the signs we've seen on the leisure side as well. But I would say it's kind of a two-third, one-third mix for us going into the year, and I think two-thirds will come from rate growth, which obviously has positive flow-through implications at the bottom line.

Q: Yeah, sure. Look, I will say we're very constructive around World Cup. I do think the industry has tempered expectations to some extent around what that will actually drive. What we pointed out on the call and what I'd emphasize is a couple things. One, we've got exposure about 60%. of the matches domestically, and it touches about a third of our total portfolio. And so we do have a significant amount of exposure to the World Cup. When we roll it up, you know, again, we expect to see the vast majority of the benefit of those matches in the six markets where we host. I think the biggest impacts, positive impacts for us will come in markets like Atlanta, Miami, and Dallas. But we also expect to see some lift in a market like Orlando where people will kind of tack on an extra trip in South Florida, potentially from Miami. You know, when we roll it all up for our outlook, you know, we think it probably adds plus or minus 50 to 75 basis points to our full year expectations.

Q: Good morning, everyone. Good morning, Mike. John, on your zero to three REVPAR guide, can you maybe help us go from sort of a broader industry outlook to just stacking some of the market or asset-specific drivers that are boosting your forecast, maybe like Fort Lauderdale, assumed ramp up in Asheville? Any other markets or assets to call out that are lifting your outlook relative to the broader industry trends?

A: Sure. Look, at the midpoint of our range, we're probably not too far off of where most industry forecasts are for the year. I think you did highlight a couple of what I'll call summit-specific tailwinds for this year. One is the lift we expect to get in Fort Lauderdale. And Trey commented on this in the prepared remarks. We are seeing tremendous lift since the renovation has completed. We do lap kind of the renovation comp for the first part of the year, so we'll obviously see some significant year-over-year growth. But I think more importantly and more sustainably, we just think that that asset's going to continue to perform incredibly well given the capital that's been invested there and the market that is strong. Asheville is another one that we have. We're still recovering from the storm from a couple years ago that we expect to have strong performances. We expect all of our World Cup markets to perform. I talked a little bit about that just a minute ago, but it is meaningful for us given the significant percentage of assets we have in those markets. And then obviously there are markets like San Francisco, which we expect to continue to be very strong. Obviously off to a great start to the year with not only the convention calendar, but the Super Bowl is also another World Cup market, which we think we will see some benefits from. I'd also highlight the South Florida market generally, even outside of Fort Lauderdale. The trends we've seen in Miami, particularly in Brickell, we're off to a tremendous start to the year there and expect that to continue to be a very strong market. And Tampa, once it lapsed the weather comps from the first quarter, and Orlando are both doing very, very well. Orlando, again, is the beneficiary of the new park that's come in at Universal, which is driving incremental demand.

Q: Yeah, sure. We talked a lot about this in the second and third quarter, and I think when we looked at and we tried to emphasize this on the call, the pressure we saw in RevPAR, particularly in the second and third quarter of the year, was so much driven by the pullback in government and international inbound demand. And part of the knock-on effects of that was it forced us to remix our business. And part of that remixing was into lower-rated channels, particularly lower-rated leisure travels, more OTA exposure, more advanced purchase exposure. We definitely tried to create a layer of group and advanced purchase demand, and I think we were successful doing that. I think what's given us some encouragement is while we were still down in the fourth quarter and we expect the first quarter to still have these government-driven headwinds, we've been forced to do less remixing. And we are seeing a little bit more stability and growth in some of these other segments. And obviously, we're going to get to a point where we lap the very difficult government comparisons. And so, again, what we've tried to emphasize is that outside of those demand segments, The performance of other segments of our business has held up reasonably well. I wouldn't say we've seen any significant widening of the booking window at this point. I will say that, again, we feel like there is more and more incremental demand that's helping offset some of the fall off from the government segment in particular.

Q: Hey, guys. Thanks for taking the question. Apologies if you might have covered all or part of this earlier, but I was really trying to get a sense for, you know, as we look out kind of World Cup 2Q, you have a little bit more visibility now maybe. I'm trying to get a sense for whether you think there's a, before and after? Is there a lull before and after? And so the markets where you have exposure, do you have enough visibility to see what happens before? I think the question is really, does any of the benefit you're likely to get offset at all by things that people not visiting immediately before or after the games?

A: Look, it's not something that has been particularly high on our list of concerns. I certainly understand that perspective. Look, we think kind of net-net this is going to be a very positive event for the industry, certainly for our portfolio given the exposures. I will say, and kind of to that point, Chris, part of how we've approached the event not dissimilar to how we typically approach Super Bowls, is we like to create a layer of base demand on the books. We typically try to get some longer-term stay business, whether it's media or takedown setup type of business, particularly where we have guaranteed nights for extended lengths of time. And we think that helps de-risk match-up scenarios that may not be as favorable. If there is some softness in the transient pickup, We de-risked that to some extent because we've created this base layer of demand. We've taken a very similar approach. Our approach has been very tailored by market because our hotels have different locational strengths and weaknesses relative to where either the fan fests are located or the actual stadiums are located, so those strategies are customized by market but by and large i would say we approach this in a way where we try to strike the right balance between taking a base layer of group at so high rates i think the rates on the books we have over the world cup period are north of 300 so we still have very attractive rates on the books but we do it in a way where again we de-risk a little bit of the kind of in the period for the period risk around potential matchups so that's been our approach consistent with how we've approached Super Bowls in the past.

Q: Yeah, we did, as you alluded to, we did beta test in a number of our assets the pay for breakfast concept at Hyatt places. I would say generally speaking, it was successful to the bottom line. I think Hyatt is still evaluating and we're still working with Hyatt on the evaluation of how that gets rolled out more broadly. But it is something that we felt some benefits of in the second half of last year. I would say, you know, more broadly in terms of kind of points of loyalty in these programs, I think, again, the brands have been receptive to, you know, making sure that as those loyalty programs are growing, some of that benefit accrues to the hotel owners.