Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ashford Hospitality Trust Inc (AHT, Financial) made significant progress in its strategy to pay off strategic corporate financing, with nearly $90 million in principal payments made since March.
- The company successfully sold seven assets for more than $310 million, with six sales closing in the second quarter, contributing to debt reduction.
- AHT completed a key refinancing of the Renaissance Nashville loan, securing a new nonrecourse loan of $267.2 million with favorable terms.
- The non-traded preferred stock offering raised approximately $147 million in gross proceeds, providing attractive capital for the company.
- The company's urban hotels performed well, with total revenue increasing by 3% and hotel EBITDA margin increasing by 160 basis points compared to the prior year quarter.
Negative Points
- AHT does not anticipate reinstating a common dividend in 2024, which may be a concern for income-focused investors.
- The company is experiencing some softness in its resort hotels, which are down high single digits compared to last year.
- The transaction environment remains challenging with a wide bid-ask spread, affecting asset sales and valuations.
- The refinancing market has been unattractive, causing delays in refinancing efforts, although improvements are expected in the second half of the year.
- The company faces challenges in selling lower RevPAR, lower quality assets, and is waiting for better market conditions to pursue these sales.
Q & A Highlights
Q: Can you provide additional color on the group business normalizing and what you're seeing in that segment?
A: Chris Nixon, EVP & Head of Asset Management, explained that group lead volume is normalizing, but conversion rates remain high. Group bookings are increasing, with group revenue up 11% for the balance of the year and 19% in Q4. For 2025, group revenue pace is up 20%, indicating strong positioning in the group segment.
Q: Are you seeing any signs of softening demand in other segments like business travel or leisure?
A: Chris Nixon noted continued acceleration in corporate travel, though still below 2019 levels. Urban hotels are performing well, with RevPAR up 3% compared to 2019. However, resort hotels are experiencing normalization, with some softness compared to last year. The company is mitigating this with strong group bookings.
Q: What opportunities remain for refinancing now that the Nashville refinancing is complete?
A: Deric Eubanks, CFO, mentioned that while the debt market has improved, they are actively looking to refinance more loans as maturity schedules approach. Property performance improvements are aiding in securing better refinancing terms.
Q: How is the transaction environment, and are there differences in buyer interest between larger and smaller assets?
A: Stephen Zsigray, CEO, stated that while there is still a wide bid-ask spread, they consistently see multiple buyers for assets. The transaction market is expected to improve with potential rate cuts, which could enhance deal attractiveness.
Q: What are your thoughts on the portfolio's future composition, particularly regarding lower RevPAR assets?
A: Stephen Zsigray confirmed a preference to turnover non-core, lower RevPAR assets. However, they are waiting for better market conditions to run more effective sales processes, aligning with previous strategic goals.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
