Sotherly Hotels Inc.

Welcome to today's Sovereign Hotels fourth quarter 2021 earnings call and webcast. My name is Jordan and I'll be coordinating your call today. If you'd like to register a question, you may do so by pressing star followed by one on your telephone keypad. I'm now going to hand over to Mac Sims, Vice President of Operations to begin. Mac, please go ahead.

Thank you and good morning, everyone. If you did not receive a copy of the earnings release, you may access it on our website at southerlyhotels.com. In the release, the company has reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements. Any statements made during this conference call, which are not historical, may constitute forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that these expectations will be attained. Factors and risks that can cause actual results to differ materially from those expressed or implied by forward-looking statements are detailed in today's press release and from time to time in the company's filings with the SEC. The company does not undertake a duty to update or revise any forward-looking statements. With that, I'll turn the call over to Scott. Thanks, Mac.

Good morning, everyone. I'll start off today's call with a review of our portfolio's key operating metrics for the quarter, which reflect another strong step forward in the recovery of our industry. Looking at the fourth quarter results for the composite portfolio, REVPAR was $85.80, driven by an occupancy of 53 percent and an ADR of $162. Fourth quarter REVPAR performance represents an increase of 122.6 percent over 2020. Looking at these figures versus the fourth quarter of 2019, REVPAR was down 16.1%, with occupancy down 19.3%, but ADR increasing 4.1%. For the year, REVPAR for the composite portfolio was $84.29, with occupancy of 52.5% and an ADR of $160.51. 2021's full-year REVPAR performance represents an increase of 90.4% over 2020. Looking at these figures versus the comparable period in 2019, REVPAR was down 25.4%, with occupancy down 25.1%, but ADR essentially flat. These operating metrics were ahead of the majority of our lodging rate peers that have reported thus far for the quarter and for the year. Overall, we are pleased with the fourth quarter results and believe the improvement throughout the quarter demonstrates that our portfolio is heading in the right direction, despite headwinds faced during the period. Examining composite portfolio results on a monthly basis, benchmarked against 2019, highlights the Corps' continuous improvement. October REVPAR was 78% of October 2019 REVPAR. November REVPAR grew to 82% of November 2019, while December REVPAR climbed further to 96% of December 2019 REVPAR. During October, our portfolio continued to experience impact from the Delta variant that started in the third quarter as group meeting planners showed hesitancy and major corporations pushed back return to the workplace dates and extended travel restrictions. Regardless of this impact, we saw an encouraging amount of business and group travel at our hotels during the month of October, the most in any month since the outset of the pandemic. November also saw a solid pickup from these segments as case counts from the Delta variant declined and demand increased at our group heavy hotels such as Wilmington and Savannah. Despite the impact of group and business travel demand caused by the emergence of the Omicron variant in early December, this impact was offset by the healthy leisure demand at our coastal drive-to markets such as Tampa, Jacksonville, and Savannah to close out the year. This strong leisure demand in December helped our portfolio outperform December 2019's Hotel EBITDA by more than 51 percent. Our portfolio's best performing hotels during the quarter were fueled by strong leisure travel and boosted by the return of group and business travel. Looking at some highlights across the portfolio, Hotel Alba in Tampa continued to be a standout among our portfolio and its competitive set. During the period, it produced rev par nearly 40% greater than fourth quarter 2019, with ADR growing over 12% and occupancy up more than 19%. This hotel achieved a rev par index of 126.3% in the quarter, strongly positioning itself as a leader in its comp set. The DeSoto Savannah continued its excellent performance during the quarter, again outpacing 2019 metrics with a 17.3% gain in REVPAR, fueled by strong rate growth of 14.2%. The hotel also continued to outperform its comp set, gaining more than 2,100 basis points in REVPAR share during the quarter. Hotel Ballast in Wilmington saw excellent results during the quarter as REVPAR surpassed 2019 levels by 12.6%. driven by substantial rate growth of over 34 percent. The property gained more than 6,000 basis points in share during the quarter as an encouraging level of group business returned to the hotel. Although the Delta and Omicron variants had a moderate impact on the group and business travel segments during the fourth quarter, we are witnessing continual improvement in these segments as national and regional companies steadily return to the workplace and continue to lessen travel restrictions. Examining recent booking trends demonstrates a steady acceleration in group and business travel at our hotels. In terms of group business, the fourth quarter produced an 11% improvement over the third quarter, while business travel improved more than 10%. Thus far during 2022, we've experienced further improvement to these segments and are projecting this trend to continue as the first quarter is shaping up nicely with citywide events, in-house meetings, and corresponding group room blocks holding strong. While still plenty of room to grow compared to 2019, this trajectory of group and business demand recovery is a promising indicator for our company. During the quarter, our managers combined prudent revenue management strategies with excellent expense controls to achieve strong flow-through and profit margins for the portfolio. Despite rising costs of goods and labor, our management teams achieved strong margins during the quarter, exhibited by hotel EBITDA margins more than 200 basis points above the fourth quarter of 2019. Many cost savings initiatives, such as clustered regional sales and HR positions, cross-training, just-in-time deliveries, and simplified F&B offerings are expected to become permanent SOPs for our properties moving forward. Meanwhile, our managers have been carefully ramping up staffing levels in relation to the return in travel demand. We expect that our ability to achieve strong rates will continue to offset the increase in labor and other rising costs associated with an inflationary environment. Turning to corporate activity, During the fourth quarter, the company entered into a purchase hotel person sale agreement to sell the Sheraton Louisville Riverside. The company recently announced the completion of the sale for a purchase price of $11.5 million. As we've stated before, the hotel no longer fit the long-term strategic objectives of the company. We believe the company garnered an attractive valuation for this asset in the current market, and this disposition will be immediately accretive to our cash flow. Also, during the quarter, we execute an agreement to exchange 85,000 shares of preferred stock for approximately 690,000 common shares. The execution of these exchanges fits with our long-term strategy to shore up our balance sheet while also preserving liquidity. This transaction eliminated approximately $335,000 of preferred dividend payments, as well as approximately $170,000 in annual preferred dividend payments going forward. And lastly, during the quarter, we entered into an agreement to sell the Doubletree by Hilton Raleigh Brownstone Hotel for a purchase price of $42 million. We anticipate a closing date no longer than June 1st. The company intends to use the net proceeds from the sale of the hotel to repay the existing mortgage of the property, repay a portion of the secured notes with Kemmons Wilson, to make any required distribution on the company's preferred stock related to maintaining the company's REIT status and for general corporate purposes. I will now turn the call over to Tony.