Apple Hospitality REIT, Inc. · NYSE:APLE
Apple Hospitality REIT — Investor Presentation (August 2022)
43 slides from Apple Hospitality REIT's investor presentation, August 2022
Slide 1: Investor Presentation August 2022
INVESTOR PRESENTATION AUGUST 2022 • NYSE: APLE
Slide 2: Forward-Looking Statements
F O R W A R D - L O O K I N G S TAT E M E N T S Certain statements made in this presentation are forward-looking statements, including statements regarding the impact to Apple Hospitality REIT, Inc.’s (the “Company,” “Apple Hospitality,” “Apple” or “APLE”) business and financial condition from, and
Slide 3: Company Profile & Proven Investment Strategy
C O M PA N Y P R O F I L E & P R O V E N I N V E S T M E N T S T R AT E G Y Scale Ownership of Upscale, Rooms-Focused Industry-Leading Brands Broad Geographic Consistent Strong, Flexible Balance Hotels and Operators Diversification Reinvestment(1) Sheet(2) 219 15 36 5 yrs 26% HOTELS BRANDS S TAT E S
Slide 4: Management Team, Mission and Values
MANAGEMENT TEAM WITH DEEP INDUSTRY E X P E R I E N C E O V E R M U LT I P L E H OT E L C YC L E S • Average executive tenure with the Apple REIT MISSION We are a leading real estate investment Companies is 15 years company committed to increasing shareholder value through the distribution of • Estab
Slide 5: Proven Investment Strategy
P R O V E N I N V E S T M E N T S T R AT E G Y • Efficient operating model yields higher margins Concentrate on Upscale, • Resilient group business rooms-focused hotels • Scale ownership minimizes relative G&A load and provides fixed cost efficiencies • Unparalleled access to data and operational ex
Slide 6: Key Takeaways
KEY TAKEAWAYS • Performance driven by strong leisure and improving business demand, consisting of both transient and small group bookings • Q2 2022 occupancy was 78%, the highest quarterly occupancy since the onset of the pandemic, with Q2 2022 ADR and RevPAR exceeding Q2 2019 levels and continued g
Slide 7: Second Quarter 2022 Performance at a Glance
YEAR-OVER-YEAR PERFORMANCE Second Quarter 2022 Performance at a Glance ($ in thousands except statistical data and per share amounts) Three Months Ended June 30, Six Months Ended June 30, % % % % CHANGE CHANGE CHANGE CHANGE 2022 2021 2019 to 2021 to 2019 2022 2021 2019 to 2021 to 2019 RevPAR $119.41
Slide 8: Efficient Operations: Rooms-focused operating model produces strong margins
E F F I C I E N T O P E R AT I O N S Rooms-focused operating model produces strong margins with upside potential as ADR exceeds 2019 levels YTD 6/30/2022 Hotel EBITDA Margin and RevPAR Comparison 38% 37% 36% 35% 34% 32% 32% 32% 31% 30% 26% $193 $189 $188 $172 $168 $182 $145 $115 $110 $127 $106 APLE
Slide 9: Operating Trends
O P E R AT I N G T R E N D S Upside to pre-pandemic levels with Q2 2022 RevPAR exceeding Q2 2019 before full return of occupancy Occ 2019 Occ ADR 2019 ADR RevPAR 100% $160 90% $152 $146 $149 $142 $139 $142 $140 $145 $136 $136 $137 80% $131 $131 $130 $140 $140 $128 $121 $139 $141 70% $135 $133 $131 $
Slide 10: Occupancy Trends
O C C U PA N C Y T R E N D S Positive trajectory in occupancy with continued upside opportunity 90% 80% 81% 81% 80% 80% 77% 76% 77% 77% 76% 71% 72% 68% 69% 67% 70% 61% Occupancy 60% 56% 56% 49% 47% 50% 40% 28% 30% 20% 10% 0% Week ended 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4
Slide 11: Weekday vs. Weekend Occupancy
W E E K D AY V S . W E E K E N D O C C U PA N C Y Leisure travel continues to lead recovery Weekday occupancy shows strength of business demand 100% 90% 84% 85% 83% 86% 85% 84% 85% 85% 82% 81% 80% 80% 78% 78% 78% 76% 76% 78% 80% 73% 74% 73% 68% 70% 64% 66% 64% 63% 65% 62% 60% 54% Occupancy 52% 50% 4
Slide 12: % of Hotels by Occupancy Tier
% O F H O T E L S B Y O C C U PA N C Y T I E R 2019 15% 85% Q1 2020 16% 63% 21% Q2 2020 25% 20% 41% 9% 5% Q3 2020 4% 8% 41% 26% 21% Q4 2020 2% 7% 44% 33% 14% Q1 2021 2% 3% 31% 35% 29% Q2 2021 8% 34% 58% Q3 2021 4% 35% 61% Q4 2021 8% 43% 49% Jan 2022 35% 37% 27% Feb 2022 10% 36% 54% Mar 2022 4% 23% 7
Slide 13: Portfolio Positioned for Continued Outperformance
PORTFOLIO POSITIONED FOR CONTINUED OUTPERFORMANCE • Well positioned to benefit from increasing business transient demand • Select-service hotels franchised with industry-leading brands have proven appeal with broadest group of customers • Broad geographic diversification provides exposure to wide va
Slide 14: Why Branded Select-Service Hotels?
W H Y B R A N D E D S E L E C T - S E R V I C E H OT E L S ? Efficient Operating Model Broad Consumer Appeal Maximize Shareholder Value • Total revenue primarily derived • High-quality hotels with strong • Ability to optimize mix of business from rooms sold value proposition for guests to drive RevP
Slide 15: Broad Consumer Appeal
BROAD CONSUMER APPEAL Rooms-focused hotels with industry-leading brands have broad consumer appeal SPRINGHILL SUITES LAFAYETTE SOUTH AT RIVER RANCH HAMPTON INN & SUITES ATLANTA- DOWNTOWN Independent HILTON GARDEN INN DOWNTOWN Note: Hotel portfolio statistics as of August 4, 2022. Based on number of
Slide 16: Broad Geographic Diversification
B R O A D G E O G R A P H I C D I V E R S I F I C AT I O N Diversification across 86 markets helps drive strong, consistent performance 3% ✓ Broad geographic diversification provides exposure to wide variety of demand generators ✓ Markets benefit from a mix of business and leisure demand ✓ Portfolio
Slide 17: Additional Upside as Business Travel Strengthens
A D D I T I O N A L U P S I D E A S B U S I N E S S T R AV E L S T R E N G T H E N S RevPAR Change vs. 2019 5% Jun 2022 4% May 2022 With approximately 56% of the Company’s hotels achieving 2% Apr 2022 Q2 2022 RevPAR that met or exceeded Q2 2019 RevPAR, -1% Mar 2022 there is significant room for addi
Slide 18: Opportunity for Long-Term Cost Savings
O P P O R T U N I T Y F O R L O N G - T E R M C O S T S AV I N G S APLE has a proven record of maximizing and improving operating margins across economic cycles and is positioned to further enhance its operating The COVID-19 pandemic model through the recovery. provided the unique opportunity to ree
Slide 19: Limited Near-Term Impact from New Supply
L I M I T E D N E A R - T E R M I M PA C T F R O M N E W S U P P L Y Supply growth well below historical average for our portfolio Portfolio Exposure to New Supply 80% New construction starts have meaningfully decreased since onset 70% of pandemic with anticipated delays in completion due to supply-
Slide 20: Industry-Leading Asset Management
INDUSTRY-LEADING ASSET MANAGEMENT Best-in-Class Operators Strategic Asset Management Approach • 100% of Apple Hospitality’s portfolio operated by third-party property managers • Analytical, data-driven asset management to maximize property-level performance • 94% of hotels independent of brand manag
Slide 21: Balance Sheet Poised for Future Growth
BALANCE SHEET POISED FOR FUTURE GROWTH • Positive corporate cash flow early in the recovery preserved strength of balance sheet and equity value • Conservative capital structure with staggered maturities lowers capital costs • Amended and restated existing $850 million credit facility, increasing bo
Slide 22: Strong Balance Sheet & Liquidity Position
STRONG BALANCE SHEET & LIQUIDITY POSITION Low debt and staggered maturities facilitate agile balance sheet strategy Strong liquidity position for opportunistic growth Debt Composition(1) Debt Maturity Schedule (1) ($ in millions) Total Liquidity (1) ($ in millions) Hotels: 4 Keys: 529 Rate: 3.7% Hot
Slide 23: Effective Portfolio Management & Strategic Growth
EFFECTIVE PORTFOLIO MANAGEMENT & S T R AT E G I C G R O W T H Our objective is to maximize long-term shareholder value through opportunistic dispositions and accretive acquisitions that improve the overall age, diversification and growth trajectory of our portfolio Opportunistic Dispositions Accreti
Slide 24: Recent Acquisition & Disposition Activity
R E C E N T ACQ U I S I T I O N & D I S P O S I T I O N AC T I V I T Y Since the start of the pandemic, the Company has been a net acquirer, purchasing 12 hotels for approximately $473 million, while opportunistically disposing of 24 hotels for a total combined sales price of approximately $245 mill
Slide 25: Net Acquirer Since Onset of Pandemic
N E T A C Q U I R E R S I N C E O N S E T O F PA N D E M I C 12 Hotels Acquired in 2020 and 2021 Brand Location Rooms Date Opened Date Acquired Purchase Price Hampton Inn & Suites(1)(2) Cape Canaveral, FL 116 April 2020 April 2020 $46.7 million Home2 Suites(1)(2) Cape Canaveral, FL 108 April 2020 Ap
Slide 26: Acquisitions Under Contract
ACQ U I S I T I O N S U N D E R CO N T R AC T rendering • Hotel under development with anticipated completion of construction in early 2024 • 260 rooms(2) • Anticipated gross purchase price: $78.6 million or approximately $302,000 per key • Forward commitment with trusted developer • Primary demand
Slide 27: Over 20-Year Track Record of Hotel Transactions
OVER 20-YEAR TRACK RECORD OF H OT E L T R A N S A C T I O N S Apple REIT Companies Transaction History 1999 – August 4, 2022 446 Having purchased as many as TOTA L H OT E L S A CQ U I R E D 74 hotels 227 in a single year through TOTA L H OT E L S S O L D individual hotel and small portfolio transact
Slide 28: Well-Maintained Portfolio
W E L L - M A I N TA I N E D P O R T F O L I O Consistent reinvestment enhances long-term value and leads to traveler satisfaction outperformance 4.3 out of 5.00 weighted average Tripadvisor® rating(1) Upscale and Upper Midscale Reinvestment Statistics(3) 5 Years Average Annual Spend as % of Revenue
Slide 29: U.S. Hotel Forecast
U . S . H OT E L F O R E C A S T U.S. Hotel Forecast 2021 2022 2023 2024 Actual Forecast Forecast Forecast Occupancy 57.6% 63.4% 65.1% 66.4% ADR $125 $145 $150 $155 RevPAR $72 $92 $98 $103 RevPAR Compared to 2019 -17% +7% +13% +19% Source: STR 2022 CoStar Group June 2022 29 HAMPTON INN SAN DIEGO-DOW
Slide 30: ESG Initiatives
ESG INITIATIVES HAMPTON INN & SUITES PORTLAND PEARL DISTRICT
Slide 31: Sustainability Initiatives
S U S TA I N A B I L I T Y I N I T I AT I V E S The Company has in place an Apple Hospitality Key Metrics for 2020(1) Environmental Policy and a Vendor Code of Conduct. With 11.3 total kWh per Approximately 19 Million Square Feet square foot in 2020 as A formal energy management 212,000 MWh Energy C
Slide 32: Social Responsibility
SOCIAL RESPONSIBILITY Key Metrics for Apple Hospitality since 2017 The Company has in place a Health, Safety We are thoughtful in our interactions with and Well-Being Policy, a Human Rights others and know that strong, caring relationships are the core of our industry. 550+ Policy and a Vendor Code
Slide 33: Governance
GOVERNANCE Corporate Governance Aligns with Shareholders • Audit, Compensation and Corporate Governance Committees are independent • Regular executive sessions of independent directors • De-staggered Board allows for annual elections of directors • Required resignation of an incumbent director not r
Slide 34: Appendix
APPENDIX HILTON GARDEN INN MEMPHIS DOWNTOWN
Slide 35: 2020 and 2021 Dispositions
2020 AND 2021 DISPOSITIONS Hotels Sold in 2020 and 2021 Brand Location Rooms Age at Time of Sale Date Sold Sales Price SpringHill Suites Sanford, FL 105 20 yrs January 2020 $13.0 million SpringHill Suites Boise, ID 230 25 yrs February 2020 $32.0 million Hampton Inn & Suites Tulare, CA 86 12 yrs Dece
Slide 36: Comparable Hotels Quarterly Operating Metrics
C O M PA R A B L E H O T E L S Q U A R T E R L Y O P E R AT I N G M E T R I C S COMPARABLE HOTELS QUARTERLY OPERATING METRICS AND STATISTICAL DATA (Unaudited) (in thousands, except statistical data) 2019 2021 2022 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Total revenue $282,224 $327,033 $321,161 $278,005 $152,4
Slide 37: Same Store Hotels Quarterly Operating Metrics
S A M E S T O R E H O T E L S Q U A R T E R L Y O P E R AT I N G M E T R I C S SAME STORE HOTELS QUARTERLY OPERATING METRICS AND STATISTICAL DATA (Unaudited) (in thousands, except statistical data) 2019 2021 2022 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Total revenue $269,979 $310,174 $301,822 $261,702 $143,41
Slide 38: Reconciliation of Net Income (Loss) to EBITDA and Adjusted Hotel EBITDA
R E C O N C I L I AT I O N O F N E T I N C O M E ( L O S S ) T O E B I T D A , E B I T DA re , A D J U S T E D E B I T DA re A N D A D J U S T E D H OT E L E B I T DA THE FOLLOWING TABLE RECONCILES THE COMPANY’S GAAP NET INCOME (LOSS) TO EBITDA, EBITDAre, ADJUSTED EBITDAre AND ADJUSTED HOTEL EBITDA
Slide 39: Reconciliation of Net Income (Loss) to FFO and MFFO
R E C O N C I L I AT I O N O F N E T I N C O M E ( L O S S ) TO F F O A N D M F F O THE FOLLOWING TABLE RECONCILES THE COMPANY’S GAAP NET INCOME (LOSS) TO FFO and MFFO ON A QUARTERLY BASIS FROM MARCH 31, 2019 THROUGH JUNE 30, 2022 (Unaudited) (in thousands, except per share amounts) 2019 2020 2021 2
Slide 40: Definitions
DEFINITIONS Non-GAAP Financial Measures The Company considers the following non-GAAP financial measures useful to investors as key supplemental measures of its operating performance: Funds from Operations (“FFO”); Modified FFO (“MFFO”); Earnings Before Interest, Income Taxes, Depreciation and Amorti
Slide 41: Definitions Continued
DEFINITIONS CONTINUED FFO and MFFO The Company calculates and presents FFO in accordance with standards established by Nareit, which defines FFO as net income (loss) (computed in accordance with generally accepted accounting principles (“GAAP”)), excluding gains and losses from the sale of certain r
Slide 42: Trademark Information
T R A D E M A R K I N F O R M AT I O N “AC Hotels by Marriott®,” “Aloft Hotels®,” “Courtyard by Marriott®,” “Fairfield by Marriott®,” “Fairfield Inn by Marriott®,” “Fairfield Inn & Suites by Marriott®,” “Marriott® Hotels,” “Residence Inn by Marriott®,” “SpringHill Suites by Marriott®,” and “TownePla
Slide 43: Contact Information
C O N TA C T I N F O R M AT I O N 814 East Main Street Richmond, VA 23219 (804) 344-8121 info@applehospitalityreit.com www.applehospitalityreit.com 43 COURTYARD RICHMOND DOWNTOWN
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