Sotherly Hotels Inc.

Hello everyone and welcome to the Southerly Hotels first quarter 2022 and in school. My name is Victoria and I will be coordinating your call today. If you would like to ask a question during the presentation, you may do so by pressing star 1 on your telephone keypad. If you wish to withdraw your question, please press star 2. If you have dropped this online, please press the red flag icon. When preparing to ask a question, please ensure that your line is unmuted locally. I'll now pass over to your host, Max, to begin. 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 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. Looking at the first quarter results for the composite portfolio, REVPAR was $100.89, driven by an occupancy of 53.9 percent and an ADR of $187.23. First quarter REVPAR performance represents an increase of 52.5 percent over the same period in 2021. Looking at these figures versus the first quarter of 2019, RevPAR was down 17.2%, with occupancy down 22.9%, but ADR increasing 7.5%. Overall, we were pleased with the first quarter results, despite headwinds faced at the start of the year due to Omicron variant, and believe the improvement throughout the quarter demonstrates that our portfolio is quickly advancing towards normalization. Examining composite portfolio RevPAR results on a monthly basis, benchmark against 2019 highlights the quarter's continuous improvement. January RevPAR was 66 percent of January 2019 RevPAR. February RevPAR grew to 77 percent of February 2019, while March RevPAR actually eclipsed 2019, with RevPAR representing just over 100 percent of March 2019's results. While the Omicron variant had a substantial impact on all travel segments during the start to the first quarter, We experienced a transformative shift in consumer behavior during the second half of the quarter, as rapidly declining case counts were combined with a significant increase in bookings, particularly from grouping corporate travel. We are encouraged by the performance of our urban market hotels, such as Arlington and Houston, which, despite the headwinds caused by Omicron, easily surpassed budgeted expectations for the quarter following nearly two years of underperformance. Our portfolio continued to benefit from the sustained recovery in leisure travel, which became even more robust due to pent-up demand from the Omicron variant in late December and January. In particular, our coastal markets such as Savannah, Tampa, Wilmington, and Hollywood experienced a renewed surge in leisure demand that was combined with the steady return of group demand during the second half of the quarter. Pricing power continues to be the major driver of profitability, especially for these leisure destinations. many of which attracted unprecedented rates during peak periods, such as President's Day weekend and spring break. Our portfolio's best-performing hotels during the quarter were again primarily driven by strong leisure travel, but also boosted by the return of group and business travel. Looking at some highlights across the portfolio, the DeSoto Savannah continued its excellent performance during the quarter, again outpacing 2019 metrics with an 8.4 percent gain in RevPar, fueled by a significant rate growth of nearly 35% over 2019, which led to outstanding flow through. The hotel also continued to outperform its comp set, gaining 850 basis points in REVPAR share during the quarter. Hotel Alba in Tampa continues to be a standout among our portfolio, and the hotel's competitive set. During the period, it produced REVPAR nearly 33% greater than the first quarter of 2019, with occupancy up nearly 2% and ADR growing more than 30%. Comparing these results to Q1 2021, which included the Super Bowl and the immediate market, also highlights the property's stellar results, as RevPAR increased nearly 34% year-over-year against a tough comparable. This hotel achieved a RevPAR index of 116% in the quarter, solidifying its position as the leader among its competitive set. Hotel Ballast in Wilmington saw excellent results during the quarter, with signals of sustained recoveries underway for this asset. Substantial rate growth of 20% over 2019 levels facilitated an impressive flow-through during the quarter. Notably, the property gained more than 2,600 basis points in share from its competitive set during the quarter, as the group business segment, which is vital to this hotel's performance, ramped up to pre-pandemic performance levels in the latter half of the quarter. Examining our portfolio's recent booking trends further demonstrates the steady acceleration in group and business travel at our hotels. During the first quarter, the group segment produced a 15% improvement over the fourth quarter of 2021, while business travel improved more than 20% over the fourth quarter of last year. Thus far, during the second quarter, we have experienced further improvement to these segments and are projecting this trend to continue as the balance of the year is shaping up nicely with strong attendance at citywide events, in-house meetings, and corresponding group room blocks. 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. Our managers execute a lean and flexible staffing model in order to control variable costs and achieve excellent flow-through, despite uneven demand and rising costs of goods and labor faced during the quarter. We continue to focus heavily on pricing power, not only for our room rates, but also for our F&B offerings, banquet rentals, and parking, for which consumers have shown minimal price sensitivity. Moving forward, 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 our corporate activity, as previously noted, the company has entered into an agreement to sell the Doubletree by Hilton Raleigh Brownstone Hotel for a purchase price of $42 million. During the first quarter, we entered into an amendment to this agreement with the buyer to extend the closing period in exchange for an additional cash deposit of $800,000, with the closing date now set for June 1st. Including this modification, the buyer has a total of $1.6 million in non-refundable deposits associated with this transaction. The company intends to use the net cash proceeds from the pending sale of the hotel to repay the existing mortgage on the property and to repay a portion of the secured notes with Kevin's Wilson. The company recently extended the maturity date on the existing mortgage of the Doubletree by Hilton Laurel with the existing lender by one year to May 2023. As part of the modification, the company paid down the principal balance of the loan by $400,000. The current loan balance is now approximately $7.6 million, or approximately $37,000 per key. Lastly, year to date, we have executed agreements to exchange approximately 50,000 shares of preferred stock for approximately 488,000 shares. The execution of these exchanges fits with our long-term strategy to shore up our balance sheet while also preserving liquidity. These transactions eliminated approximately $245,000 of deferred dividend payments, as well as approximately $100,000 in annual preferred dividend payments going forward. I will now turn the call over to Tony.