Apple Hospitality Reit, Inc. · NYSE:APLE
Apple Hospitality Reit — Q2 2023 Earnings Presentation
49 slides from Apple Hospitality Reit's earnings presentation, Aug 4, 2023
Slide 1: Investor Presentation
INVESTOR PRESENTATION AUGUST 2023 • 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. These forward-looking statements include statements regarding our intent, belief or current expectations and are based on various assumptions. These statements involve substan
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) 220 15 37 5 yrs 29% HOTELS BRANDS S TAT E S
Slide 4: Company Overview
C O M PA N Y O V E R V I E W #1 Top 10% #1 HOTEL REIT PERFORMER OF ALL REITS PERFORMER MSCI US REIT Index for 2022 2022 TSR performance; #8 overall in the MSCI for 2022 Nareit Lodging/Resorts Index for 2022 +26.0% Outperformance vs. MSCI US REIT Index in 2022 Positive TSR Only positive 2022 TSR of a
Slide 5: 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 16 years company committed to increasing shareholder value through the distribution of • Estab
Slide 6: 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 7: Key Takeaways
KEY TAKEAWAYS • Meaningful year-over-year topline growth driven by seasonally strong leisure demand and improving business travel • Q2 2023 Comparable Hotels Occupancy was 78% and ADR was $161, resulting in RevPAR of $126, an improvement of 5% over Q2 2022 • Q2 2023 Comparable Hotels RevPAR was up 7
Slide 8: Second Quarter 2023 Performance at a Glance
YEAR-OVER-YEAR PERFORMANCE Second Quarter 2023 Performance at a Glance ($ in thousands except statistical data and per share amounts) Three Months Ended Six Months Ended June 30, June 30, % CHANGE % CHANGE 2023 2022 to 2022 2023 2022 to 2022 Comparable Hotels RevPAR $125.64 $119.28 5.3% $117.52 $105
Slide 9: 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 YTD June 30, 2023 Hotel EBITDA Margin and RevPAR Comparison 37% 37% 36% 33% 32% 30% 30% 29% 29% 29% 28% 26% $233 $221 $206 $208 $198 $181 $177 $130 $145 $135 $118 $124 (1) APLE CLDT INN HST RLJ AHT SHO DRH XHR
Slide 10: Comparable Hotels Operating Trends
C O M PA R A B L E H O T E L S O P E R AT I N G T R E N D S Q2 2023 produced highest Comparable Hotels RevPAR relative to 2019 since start of pandemic, with continued room for growth in occupancy Occ ADR RevPAR 100% $166 $159 $161 $160 $160 $155 $156 $157 $155 $156 90% $148 $152 $146 $144 $139 80% $
Slide 11: Comparable Hotels Occupancy Trends
C O M PA R A B L E H O T E L S O C C U PA N C Y T R E N D S Strength in Comparable Hotels Occupancy with continued upside opportunity 100% 90% 83% 84% 83% 80% 79% 81% 79% 76% 77% 76% 77% 78% 77% 77% 80% 75% 75% 73% 69% 70% 70% 63% 62% 61% Occupancy 60% 56% 50% 40% 30% 20% 10% 0% Week ended Jan 2022
Slide 12: Weekday vs. Weekend Hotels Occupancy
W E E K D AY V S . W E E K E N D H O T E L S O C C U PA N C Y Leisure travel strength continues Weekday occupancy shows improvement of business demand Weekday Weekend 100% 90% 85% 86% 86% 87% 84% 84% 83% 82% 83% 81% 82% 80% 81% 78% 77% 79% 78% 77% 80% 75% 75% 74% 75% 75% 74% 71% 68% 67% 70% 64% 62%
Slide 13: Portfolio Poised for Continued Outperformance
PORTFOLIO POISED FOR CONTINUED OUTPERFORMANCE • Well positioned to benefit from increasing business transient demand • Select-service hotels franchised with industry-leading brands provide strong value proposition and have proven appeal with broadest group of customers • Broad geographic diversifica
Slide 14: Positioned for Outperformance Across Cycles
POSITIONED FOR OUTPERFORMANCE ACROSS CYCLES Limited near-term portfolio impact from new supply High margins drive profitability Embedded Business transient demand continues to improve upside Balance sheet strength and liquidity for opportunistic transactions potential In Q2 2023, approximately 30% o
Slide 15: Benefits of Branded Select-Service Hotels
B E N E F I T S O F 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 t
Slide 16: Broad Consumer Appeal
BROAD CONSUMER APPEAL Rooms-focused hotels with industry-leading brands have broad consumer appeal HILTON GARDEN INN SAN DIEGO/RANCHO BERNARDO COURTYARD HOUSTON NASA/CLEAR LAKE HAMPTON INN & SUITES PORTLAND- PEARL DISTRICT Note: Hotel portfolio statistics as of August 3, 2023. Based on number of gue
Slide 17: Modern Accommodations and Amenities
M O D E R N A C C O M M O D AT I O N S A N D A M E N I T I E S WITH BROAD CONSUMER APPEAL 17
Slide 18: 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 87 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 3% ✓ Portfo
Slide 19: Market Strategy: High-Density Suburban
M A R K E T S T R AT E G Y HIGH-DENSITY SUBURBAN Properties ideally located in upscale submarkets with attractive cost structures that benefit from a broad mix of business and leisure demand generators and resilient group business. With proximity to an array of guest amenities and conveniences, thes
Slide 20: Market Strategy: Urban
M A R K E T S T R AT E G Y URBAN Properties located in business-friendly cities leading the recovery. Beneficiaries of demographic shifts and economic development, these urban locations are home to numerous demand generators, not heavily dependent on inbound international travel and poised for conti
Slide 21: Strong Operating Margins
S T R O N G O P E R AT I N G M A R G I N S APLE is well positioned to maximize efficiencies and drive profitability: • Broad consumer appeal allows for optimization of business mix as APLE has a proven record of recovery continues to drive ADR and RevPAR growth • Rooms-focused hotels are inherently
Slide 22: 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 New construction starts have 80% meaningfully decreased since onset of pandemic with anticipated delays in 70% completion Nearly 50% of
Slide 23: 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 24: Proprietary Management Agreement Structure
P R O P R I E TA R Y M A N A G E M E N T A G R E E M E N T S T R U C T U R E With steady recovery in our business and more stabilized operations, we returned to a variable rate management fee structure for 2023 with payments based on a balanced scorecard to optimize performance COURTYARD SEATTLE KIR
Slide 25: 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 $850 million credit facility, increasing bo
Slide 26: Strong Balance Sheet & Liquidity Position
STRONG BALANCE SHEET & LIQUIDITY POSITION Low debt and staggered maturities facilitate agile balance sheet strategy Strong liquidity position for opportunistic growth Debt Composition(1) Debt Maturity Schedule (1) ($ in millions) Total Liquidity (1) ($ in millions) Hotels: 2 Keys: 325 Rate: 3.9% Hot
Slide 27: 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 28: 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 Our acquisition and disposition activity since the start of the pandemic has optimized our portfolio by lowering the average age of our assets, reducing near-term CapEx and increasing exposure to markets we anticipate will outperform over
Slide 29: 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 15 Hotels Acquired 2020 - 2023 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 20
Slide 30: Accretive Acquisitions
ACCRETIVE ACQUISITIONS • Acquired June 2023 • 154-room Courtyard by Marriott® Cleveland University Circle • Hotel opened in April 2013 and recently underwent a complete renovation of guest rooms and interior public spaces • Total price: $31 million or approximately $201,000 per key • Primary demand
Slide 31: Acquisitions Under Contract
ACQUISITIONS UNDER CONTRACT 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 generators: • Univ
Slide 32: Acquisitions Under Contract
ACQUISITIONS UNDER CONTRACT Rendering • Hotel to be developed with anticipated completion of construction in 2025 • 256 rooms(2) • Anticipated gross purchase price: $96.7 million or approximately $378,000 per key • Forward commitment with trusted developer • Ideally located in downtown Nashville wit
Slide 33: Over 20-Year Track Record of Hotel Transactions
OVER 20-YEAR TRACK RECORD OF H OT E L T R A N S AC T I O N S Apple REIT Companies Transaction History 1999 – August 3, 2023 449 Having purchased as many as TOTA L H OT E L S A CQ U I R E D 74 hotels 228 in a single year through TOTA L H OT E L S S O L D individual hotel and small portfolio transacti
Slide 34: Well-Maintained, Institutional Quality Portfolio
W E L L - M A I N TA I N E D P O R T F O L I O WELL-MAINTAINED, INSTUTIONAL QUALITY PORTFOLIO ✓ Consistent reinvestment enhances long-term value and leads to traveler satisfaction outperformance ✓ Experienced team utilizes advantages of scale ownership to control costs and maximize impact of dollars
Slide 35: U.S. Hotel Forecast
U . S . H OT E L F O R E C A S T U.S. Hotel Forecast 2022 2023 2024 2025 Actual Forecast Forecast Forecast Occupancy 62.6% 63.5% 64.4% 65.3% ADR $149.06 $154.28 $159.03 $164.27 RevPAR $93.29 $97.95 $102.49 $107.31 RevPAR Change +29.8% +5.0% +4.6% 4.7% 2019 RevPAR Index(1) -7.3% -2.7% +1.8% +6.6% Sou
Slide 36: ESG Initiatives
ESG INITIATIVES We own one of the largest and most geographically diverse portfolios of rooms-focused hotels in the United States and are dedicated to making a positive impact on the many communities our hotels serve. We are mindful of our environmental footprint and committed to reducing our impact
Slide 37: Environmental Stewardship
E N V I R O N M E N TA L S T E W A R D S H I P Apple Hospitality is committed to enhancing and incorporating sustainability opportunities into our investment and asset management strategies, with a focus on minimizing our environmental impact through reductions in energy and water consumption and th
Slide 38: 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. 625+ Policy and a Vendor Code
Slide 39: 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 40: Appendix
APPENDIX COURTYARD LOS ANGELES BURBANK AIRPORT
Slide 41: Recent Dispositions
RECENT DISPOSITIONS Hotels Sold in 2020, 2021 and 2022 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 Decem
Slide 42: 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) 2022 2023 Q1 Q2 Q3 Q4 Q1 Q2 Operating income (Actual) $32,835 $80,745 $75,410 $17,488 $49,247 $83,029
Slide 43: 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) 2022 2023 Q1 Q2 Q3 Q4 Q1 Q2 Operating income (Actual) $32,835 $80,745 $75,410 $17,488 $49,247 $83,029
Slide 44: Reconciliation of Net Income 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 T O E B I T D A , E B I T D A r e , 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 TO EBITDA, EBITDAre, ADJUSTED EBITDAre AND ADJUSTED HOTEL EBITDA ON A QUARTERLY BA
Slide 45: Reconciliation of Net Income 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 TO F F O A N D M F F O THE FOLLOWING TABLE RECONCILES THE COMPANY’S GAAP NET INCOME TO FFO and MFFO ON A QUARTERLY BASIS FOR 2022 AND 2023 (Unaudited) (in thousands, except per share amounts) 2022 2023 Q1 Q2 Q3 Q4 Q1 Q2 Net income $18,002 $65,345 $59,
Slide 46: 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 47: 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 48: 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 49: 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 COURTYARD AND RESIDENCE INN 49 RICHMOND DOWNTOWN
Apple Hospitality REIT — Q2 2023 Earnings Presentation on 6ix