Sotherly Hotels Inc. Q2 FY2024 earnings call

• Portfolio Metrics: Q2 RevPAR growth driven by occupancy, YTD RevPAR up 4.1% over 2023. Urban hotels in Atlanta and Houston showed strong occupancy growth.
• Hotel Performances: DeSoto, Hotel Alba, Georgian Terrace, and Whitehall had significant RevPAR growth. DeSoto in Savannah had strong group and leisure mix; Hotel Alba in Tampa had excellent top and bottom line; Georgian Terrace in Atlanta saw occupancy growth from corporate/association business; Whitehall in Houston benefited from transient business growth.
• Corporate Activity: Secured loan on DoubleTree by Hilton Jacksonville Riverfront with $26.25M principal balance and $9.5M for renovation; new 10-year franchise agreement with Hilton for Jacksonville hotel, $14.6M renovation planned; extension on first mortgage loan for DoubleTree Philadelphia Airport Hotel, $11.5M renovation planned.
• Profitability: Hotel EBITDA margins stabilized, Q2 margin up 69 basis points Y/Y. Occupancy growth enabled non-room revenue growth.

In the second quarter of 2024, the composite portfolio's RevPAR increased 4.3% compared to 2023, driven by a 5.8% occupancy increase and a 1.4% ADR decrease. Relative to 2019, RevPAR increased 7.5% with ADR growth of 11.7% but occupancy decline of 3.8%. Year-to-date RevPAR was up 4.1% over 2023, with 6.6% occupancy growth and 2.3% ADR decrease. Relative to 2019, YTD RevPAR was up 4.5% with 10.5% ADR growth and 5.3% occupancy decline. Specific hotels: DeSoto in Savannah grew RevPAR 6.8% Y/Y and >33% vs 2019; Hotel Alba in Tampa grew RevPAR 7.8% Y/Y and nearly 63% vs 2019; Georgian Terrace in Atlanta grew RevPAR 8.5% Y/Y; Whitehall in Houston grew RevPAR 9.4% Y/Y. Total revenue Q2 2024 was ~$50.7 million (+3.4% Y/Y); YTD total revenue was ~$97.2 million (+5.1% Y/Y). Hotel EBITDA Q2 2024 was ~$15.7 million (+5.8% Y/Y); YTD hotel EBITDA was ~$28.1 million (+4.2% Y/Y). Adjusted FFO Q2 2024 was ~$7.5 million (+6.8% Y/Y); YTD adjusted FFO was ~$12.7 million (+8.5% Y/Y).

• Total revenue for 2024 projected in range of $179 million to $182.6 million, midpoint +4% Y/Y.
• Hotel EBITDA projected in range of $46.1 million to $46.9 million, midpoint +3.8% Y/Y.
• Adjusted FFO projected in range of $12.8 million to $13.8 million ($0.64 to $0.69 per share), midpoint -8.7% Y/Y.
• Full year 2024 RevPAR forecasted 104%-106% of 2023 RevPAR.

• Weather-related events, particularly in coastal/florida properties, could impact bookings.
• Mortgage market conditions affecting balance sheet and ability to pay preferred dividends.
• Rate sensitivity in leisure travel affecting ADR.
• Potential recessionary impacts on travel demand.

Q: About Jacksonville refinancing and renovation timeline A: Dave and Scott discussed the extensive repositioning of the DoubleTree by Hilton Jacksonville Riverfront hotel, stating it's a life cycle repositioning starting around 2025 and completing early 2027, unlike Philadelphia's simpler renovation.

Q: Leisure travel ADR and outlook A: Dave and Scott mentioned leisure travel had rate sensitivity, but group and business travel were strong, with booking trends positive and no immediate recessionary impact seen.

Q: Occupancy vs ADR focus A: Dave stated occupancy has upside, rate growth may slow, and focus is on operating efficiencies while balancing occupancy and rate for profitability.

Q: Outstanding preferred dividends A: Dave said there's over $21 million in unpaid cumulative preferred dividends, paying current preferred, but cautious with balance sheet due to mortgage debt and capital markets, no timeline for full repayment provided