Apple Hospitality Reit, Inc. · NYSE:APLE
Apple Hospitality Reit — Q4 2023 Earnings Presentation
54 slides from Apple Hospitality Reit's earnings presentation, Feb 23, 2024
Slide 1: Investor Presentation
INVESTOR PRESENTATION FEBRUARY 2024 • NYSE: APLE
Slide 2: Forward-Looking Statements
F O R WA 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 substant
Slide 3: Company Profile and Proven Investment Strategy
C O M PA N Y P R O F I L E A N D P R O V E N I N V E S T M E N T S T R AT E G Y Apple Hospitality is a publicly traded real estate investment trust that owns one of the largest and most diverse portfolios of upscale, rooms-focused hotels in the United States. Scale Ownership of Upscale, Industry-Lea
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% Positive TSR +16.8% Outperformance vs. Nareit Lodging/Resorts Index in 2022 Outperform
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 O T E L C Y C L E S • Average executive tenure with the Apple REIT MISSION We are a leading real estate investment Companies is 17 years company committed to increasing shareholder • Established and operated 8 public hos
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 resilient leisure demand and improving business travel • 2023 Comparable Hotels RevPAR up 7% to 2022 and up 8% to 2019 • Midweek occupancy continues to improve and forward booking trends remain strong • January 2024 Comparable Hotels
Slide 8: Fourth Quarter and Full Year 2023 Performance at a Glance
YEAR-OVER-YEAR PERFORMANCE Fourth Quarter and Full Year 2023 Performance at a Glance ($ in thousands except statistical data and per share amounts) Three Months Ended Year Ended December 31, December 31, % CHANGE % CHANGE 2023 2022 to 2022 2023 2022 to 2022 Comparable Hotels RevPAR $105.01 $102.56 2
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 2023 Hotel EBITDA Margin and RevPAR Comparison 36% 36% 36% 30% 30% 29% 28% 28% 28% 26% 26% $227 $212 $203 $205 $179 $169 $132 $141 $131 $116 $120 (1) APLE CLDT INN RLJ HST AHT DRH PK SHO XHR PEB RevPAR Upscale
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 Q4 2023 produced highest Comparable Hotels RevPAR growth relative to 2019 since start of pandemic, with continued room for growth in occupancy Occ ADR RevPAR 100% $166 $165 $163 $160 $162 $161 $161 $158 $155 $157 $157 $156 $157 $157 90% $14
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% 80% 78% 79% 77% 80% 78% 80% 76% 77% 76% 77% 75% 75% 77% 77% 77% 77% 77% 73% 72% 72% 73% 69% 70% 70% 69% 70% 67% 65% 64% 61% 61% Occupancy 60% 56% 51% 50% 40%
Slide 12: 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 strength continues Weekday occupancy shows improvement of business demand Weekday Weekend 100% 90% 85% 84% 84% 85% 86% 84% 82% 83% 81% 79% 81% 81% 81% 78% 77% 77% 77% Occupancy 80% 75% 75% 74% 75% 75% 74% 75% 75% 74% 75% 73% 71% 72% 72
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 Q4 2023, approximately 30% o
Slide 15: Benefits of Branded Select-Service Hotels
BENEFITS OF BRANDED SELECT-SERVICE HOTELS 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 RevPAR and EBITDA • Abi
Slide 16: Broad Consumer Appeal
BROAD CONSUMER APPEAL Rooms-focused hotels with industry-leading brands have broad consumer appeal HAMPTON INN & SUITES PORTLAND- PEARL DISTRICT COURTYARD SEATTLE KIRKLAND HOMEWOOD SUITES PHOENIX NORTH- Note: Hotel portfolio statistics as of February 22, 2024. Based on number of guest rooms. 16 HAPP
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 4% 3% ✓ Broad geographic diversification provides exposure to wide variety of demand generators ✓ Markets benefit from a mix of business and leisure demand 3% ✓ Por
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 recovery continues to drive ADR and RevPAR growth APLE has a proven record of • 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 LY 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 completion 70% More than 50% o
Slide 23: Industry-Leading Asset Management
I N D U S T R Y- L E A D I N G A S S E T M A N A G E M E N T Best-in-Class Operators • 100% of Apple Hospitality’s Strategic Asset Management Approach portfolio operated by third-party property managers • Analytical, data-driven asset management to maximize property-level performance • 94% of hotels
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 AC HOTEL PITTSBURGH D
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 Hotels: 4 Rate
Slide 27: Effective Portfolio Management & Strategic Growth
EFFECTIVE PORTFOLIO MANAGEMENT & S T R AT E G I C G R O W T H Opportunistic Dispositions Accretive Acquisitions Strategic Growth ▪ Reduce exposure to lower growth ▪ Invest in hotels and markets with markets greater growth potential ▪ Dispose of hotels where strong ▪ Acquire assets in strong RevPAR E
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
RECENT ACQUISITION & DISPOSITION ACTIVITY 20 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 2020 April 2020 Hyatt House(1)(
Slide 30: Recent Acquisitions: Courtyard Cleveland
RECENT ACQUISITIONS • Acquired June 2023 • 154-room Courtyard by Marriott® Cleveland University Circle • Hotel opened in April 2013 and underwent a complete renovation of guest rooms and interior public spaces prior to acquisition • Total price: $31.0 million or approximately $201,000 per key • Loca
Slide 31: Recent Acquisitions: Courtyard Salt Lake City
RECENT ACQUISITIONS • Acquired October 2023 • 175-room Courtyard by Marriott® Salt Lake City Downtown • Hotel opened in October 2015 • Total price: $48.1 million or approximately $275,000 per key • Location type: Urban • Primary demand generators: • Technology • Defense • Oil and Gas • Transportatio
Slide 32: Recent Acquisitions: Hyatt House Salt Lake City
RECENT ACQUISITIONS • Acquired October 2023 • 159-room Hyatt House® Salt Lake City/Downtown • Hotel opened in January 2015 and underwent a full soft-goods renovation prior to acquisition • Total price: $34.3 million or approximately $215,000 per key • Location type: Urban • Primary demand generators
Slide 33: Recent Acquisitions: Residence Inn Seattle
RECENT ACQUISITIONS • Acquired October 2023 • 146-room Residence Inn by Marriott® Seattle South/Renton • Hotel opened in August 2019 • Total price: $55.5 million or approximately $380,000 per key • Location type: Suburban • Primary demand generators: • Aviation • Aerospace • Manufacturing • Technolo
Slide 34: Recent Acquisitions: Embassy Suites South Jordan
RECENT ACQUISITIONS • Acquired November 2023 • 192-room Embassy Suites by Hilton® South Jordan Salt Lake City • Hotel opened in March 2018 • Total price: $36.8 million or approximately $191,000 per key • Location type: Suburban • Primary demand generators: • Health Care • Technology • Distribution •
Slide 35: Recent Acquisitions: SpringHill Suites Las Vegas
RECENT ACQUISITIONS • Acquired December 2023 • 299-room SpringHill Suites by Marriott® Las Vegas Convention Center • Hotel opened in October 2009 • Total price: $75.0 million, or approximately $251,000 per key • Location type: Suburban • Primary demand generators: • Leisure • Conventions • Professio
Slide 36: Acquisitions Under Contract: Embassy Suites Madison
ACQUISITIONS UNDER CONTRACT rendering • Hotel under development with anticipated completion of construction in mid-2024 • 262 rooms(2) • Anticipated gross purchase price: $79.3 million or approximately $303,000 per key • Forward commitment with trusted developer • Location type: Urban • Primary dema
Slide 37: Acquisitions Under Contract: Motto Nashville
ACQUISITIONS UNDER CONTRACT Renderings • Hotel to be developed with anticipated completion of construction in late 2025 • 260 rooms(2) • Anticipated gross purchase price: $98.2 million or approximately $378,000 per key • Forward commitment with trusted developer • Ideally located in downtown Nashvil
Slide 38: Over 20-Year Track Record of Hotel Transactions
OVER 20-YEAR TRACK RECORD OF HOTEL TRANSACTIONS Apple REIT Companies Transaction History 1999 – February 22, 2024 454 T O TA L H O T E L S A C Q U I R E D Having purchased as many as 74 hotels 230 in a single year through T O TA L H O T E L S S O L D individual hotel and small portfolio transactions
Slide 39: 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 40: U.S. Hotel Forecast
U.S. HOTEL FORECAST U.S. Hotel Forecast 2023 2024 2025 2026 Actual Forecast Forecast Forecast Occupancy 63.0% 63.6% 64.0% 64.1% ADR Change +4.3% +3.1% +2.8% +3.1% RevPAR Change +4.9% +4.1% +3.5% +3.2% Source: STR. © 2024 CoStar Group. Published January 2024. HAMPTONN INN & SUITES PHOENIX 40 DOWNTOWN
Slide 41: Corporate Responsibility Initiatives
CORPORATE RESPONSIBILITY 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 t
Slide 42: Environmental Stewardship
E N V I R O N M E N TA L S T E WA 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 usage and through i
Slide 43: 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. 690+ Policy and a Vendor Code
Slide 44: 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 45: Appendix
APPENDIX COURTYARD AND RESIDENCE INN RICHMOND DOWNTOWN
Slide 46: Recent Dispositions
RECENT DISPOSITIONS Hotels Sold 2020 – February 2024 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 Decembe
Slide 47: 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 LY 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 Q3 Q4 Operating income (Actual) $32,835 $80,745 $75,410 $17,488 $49,247 $8
Slide 48: 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 LY 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 Q3 Q4 Operating income (Actual) $32,835 $80,745 $75,410 $17,488 $49,247 $83
Slide 49: Reconciliation of Net Income to EBITDA, EBITDAre, Adjusted EBITDAre 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 , ADJUSTED EBITDAre AND ADJUSTED HOTEL EBITDA THE FOLLOWING TABLE RECONCILES THE COMPANY’S GAAP NET INCOME TO EBITDA, EBITDAre, ADJUSTED EBITDAre AND ADJUSTED HOTEL EBITDA ON A QUARTERLY BASIS FOR 2022 AND 2023 (Unaud
Slide 50: 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 T O 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 Q3 Q4 Net income $18,002 $65,3
Slide 51: 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 52: 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 53: 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 54: 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 54 RICHMOND DOWNTOWN
Apple Hospitality REIT — Q4 2023 Earnings Presentation on 6ix