Apple Hospitality REIT(APLE) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Comparable Hotels total revenue was $315 million for Q4 2023 and$1.4 billion for the full year, representing increases of 3% and 7% compared to the same periods in 2022 [19] - Comparable Hotels' RevPAR grew by 2% for Q4 and 7% for the full year, reaching $105 and$116 respectively [19] - Comparable Hotels' adjusted hotel EBITDA was $104 million for the quarter and$500 million for the year, down 2% and up 5% compared to the same periods of 2022 [23] Business Line Data and Key Metrics Changes - Comparable Hotels' ADR increased by nearly 3% for Q4 and 5% for the full year, reaching $151 and$157 respectively [19] - Comparable Hotels' occupancy was essentially flat for Q4 and up approximately 2% for the full year compared to 2022 [19][20] - Adjusted hotel EBITDA margin was 32.9% for Q4 and 36.4% for the full year, down 160 basis points and 90 basis points respectively compared to the same periods of 2022 [23] Market Data and Key Metrics Changes - January 2024 saw a Comparable Hotels' occupancy increase of just over 1% year-over-year, with ADR growing over 2% [8] - The company noted favorable travel trends with limited near-term supply growth, which is expected to support revenue growth [8] Company Strategy and Development Direction - The company plans to continue acquiring high-quality branded, rooms-focused hotels in urban and high-density suburban markets [14] - In 2023, the company acquired six hotels for approximately $290 million, enhancing its presence in business-friendly markets [11] - The company aims to maintain financial flexibility with low leverage while pursuing additional accretive opportunities [6][14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the trajectory of the industry and the company's portfolio, citing strong leisure demand and improvements in business travel [18] - The company anticipates continued strength in demand with limited new supply, which is expected to positively impact overall performance [17] - For 2024, the company expects net income to be between$191 million and $217 million, with RevPAR growth projected between 2$216 million, which were used to fund acquisitions [10][25] - The company invested approximately $77 million in capital expenditures over the past year and plans to spend between$75 million and $85 million in 2024 [17] Q&A Session Summary Question: Can you remind us of your math on equity issuance and targeted returns for acquisitions? - Management stated they are mindful of the spread and only issue equity when confident it will drive incremental value for shareholders [32] Question: What needs to happen to achieve the high end of RevPAR guidance? - Management indicated that continued recovery in business travel and stable leisure demand are necessary to reach the high end of guidance [37] Question: How much pricing power does the company have today? - Management confirmed that pricing power is closely tied to occupancy, with opportunities primarily in midweek business travel [40] Question: What is the impact of property tax and insurance increases? - Management acknowledged that they have assumed higher growth rates for property taxes and insurance in their guidance for 2024 [81] Question: What is the rationale for entering the Vegas market? - Management highlighted the unique demand for non-casino hotel rooms in Vegas and the potential for development on acquired land [74]