Pace of recovery exceeds expectations at Apple Hospitality REIT


Despite operating in the toughest environment the hospitality industry has ever seen, Apple Hospitality REIT’s portfolio saw sequential improvement in operating results in the first quarter, CEO Justin Knight said.

During the real estate investment trust’s first-quarter earnings call with analysts on Friday, Knight said Apple Hospitality’s portfolio continued to benefit from its significant market diversification and broad consumer appeal. , which has attracted demand from recreation, small groups and regional businesses.

During the quarter, its portfolio achieved an occupancy rate of 67.1%, an average daily rate of $137.03 and revenue per available room of $91.98. Performance metrics improved as concerns about the omicron variant of COVID-19 subsided, with RevPAR in March down less than 2% from 2019.

ADR was up 38% from 2021 and slightly ahead of what it was in the first quarter of 2019, Knight said, while occupancy for the quarter was up 21% from 2021 but down 9% compared to 2019.

“Throughout this recovery, our revenue management teams have done an exceptional job of maintaining rate integrity and pushing rates above pre-pandemic levels on high occupancy nights,” a- he declared.

The pace of recovery has exceeded executives’ expectations, Knight said, noting they are particularly encouraged by airlines opening more “trade routes in response to rapidly increasing demand.” Coupled with this with strong demand for leisure, this will further fuel the recovery over the coming months.

Liz Perkins, chief financial officer of Apple Hospitality, said preliminary April results show continued increases in occupancy, ADR and RevPAR.

As of March 31, Apple Hospitality had 219 hotels with a total of 28,747 rooms in 86 markets in 36 states.

For the quarter, 33% of its hotels achieved RevPAR at or above 2019 levels, Knight said.

Apple Hospitality’s acquisition and divestiture activity since the onset of the COVID-19 pandemic has further optimized its portfolio for the recovery, Knight said. The strategy has been to lower the average age of its assets, reduce short-term capital expenditures and increase exposure to markets that are expected to outperform.

“We have been and continue to be intentional in building our portfolio, looking for assets that are additional to those we currently own, located in strong RevPAR markets,” he added.

The REIT continues to leverage longstanding relationships it has built over two decades for off-market transactions, he said.

Additionally, the REIT is actively underwriting and exploring “dozens of opportunities both on and off the market,” Knight said, noting that he expects his company to be a net acquirer of assets this year.

Apple Hospitality previously announced that it entered into a contract in July 2021 to purchase a new-build 260-room Embassy Suites in Madison, Wisconsin, for an expected purchase price of $79 million. The latest updates on this potential deal include an expected acquisition timeline in early 2024.

“Many closure conditions have not yet been satisfied, and there can be no assurance that a closure of this hotel will occur under the current purchase agreement,” said a Press Releases.

The company continued to reinvest in its hotels to strengthen its competitive position in each market. In the three months ending March 31, Apple Hospitality invested approximately $8 million in capital expenditures. In 2022, the company plans to invest between $55 million and $65 million in capital improvements for 20 to 25 hotels.

During the quarter, Apple Hospitality had adjusted earnings before interest, depreciation and amortization of comparable hotels of $88 million, according to its Press release.

The company reduced operating expenses by approximately 12% in the quarter compared to the same period in 2019.

Knight said total comparable hotel revenue increased more than 70% from the first quarter of 2021.

Perkins said weekend occupancy and ADR for comparable hotels topped 2019 every month in the first quarter.

“January and February weekend occupancy was 63% and 78%, respectively. In March, weekend occupancy was 85%,” she said. “Weekday occupancy improved sequentially during the quarter, with January weekday occupancy of 54%, down 24% from 2019; weekday occupancy of February of 65%, down 16% compared to 2019; and a March weekday occupancy rate of 73%, down only 10% compared to 2019.

Performance in the REIT’s Sun Belt markets remained strong, and demand for suburban hotels again outpaced that of city hotels during the quarter. However, Apple Hospitality executives welcomed improvements in performance comparisons in 2019 in markets that took longer to recover. In March, 41% of Apple Hospitality hotels exceeded 2019 RevPAR levels.

At press time, shares of Apple Hospitality were trading at $16.84 per share, up 4.3% year-to-date. The NASDAQ Composite Index fell 22.9% for the same period.

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