Sotherly Hotels Inc.

Hello and welcome to today's Southerly Hotels 4Q 2022 earnings call and webcast. My name is Bailey and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to pass the conference over to our host, Max Sims, Vice President of Operations. 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 obtained. 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. And with that, I'll turn this 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 fourth quarter results for the same store composite portfolio, REVPAR was $102.34, driven by an occupancy of 57.4% and an ADR of $178.41. Fourth quarter REVPAR performance represents an increase of 17.1% over the same period in 2021. For the year, REVPAR for the same store composite portfolio was $108.56, with occupancy of 61% and ADR of $178.01. 2022's full year REVPAR performance represents an increase of 27.7% over the same period in 2021. Overall, we were pleased with our portfolio's fourth quarter results, highlighted by sustained strength in demand for leisure travel, coupled with growing demand for group and business travel. During October, which is historically one of the busiest group and business travel months of the year for our portfolio, REVPAR was up 3.3% over 2019 levels, with ADR up more than 11%. November experienced some softness due to Hurricane Nicole's threatened impact on the southern US. However, December produced similarly strong results, with REVPAR outpacing 2019 by 1.3%, with ADR up nearly 19%. For the quarter as a whole, REVPAR was off by 2.5% to Q4 2019. On an annualized basis, 2022 REVPAR was off 2019 by 6.2%, with occupancy down 12.9%, with ADR increasing 7.7%. While we expect rates to remain strong, we believe occupancy growth will be the biggest opportunity going forward. Our portfolio's recent booking trends for business and group travel demonstrate that demand from these segments continues to grow. For the group segment, which continues to make quarter-over-quarter improvements, our portfolio produced 103% of the group business in the fourth quarter of 2022 compared to Q4 2019. During 2022, the nature of our group bookings was 25% corporate, representing a positive change from the prior year where corporate accounted for 15% of total group bookings. For the transient business travel segment, our portfolio was 68% of the business travel produced in Q4 2019, but was 36% greater than Q4 2021. These gains in group and business travel demand came across the entire portfolio, but most notably out of urban properties in Washington, D.C., and Atlanta, which experienced the best year-over-year improvements in performance. Meanwhile, our portfolio's leisure-focused hotels continued to outperform expectations during the quarter. Sustained strength in the leisure segment was supplemented by group with better-than-expected food and beverage contribution. resulting in strong improvement over pre-pandemic levels in these markets. Overall, rate growth across all segments continues to drive strong results for our portfolio. Our forecasts for 2023, which have shown further improvement to these trends for the portfolio, are an encouraging sign for our company. Dave will comment more on this later in the call. Looking at some highlights across the portfolio, the Hyatt Centric Arlington continued to show steady sequential improvement relative to 2019, fueled by the return of group and business travel to the hotel. Fourth quarter RevFar was only down to 2019 by 1.3% as compared to a 10.1% deficit during the third quarter. Rate, which was up 12.4% compared to the fourth quarter of 2019, was the driver of this improvement. The property continues to outperform its competitive set, and during the quarter, the hotel achieved a RevFar index of over 123% and gained over 11.6% RevFar share, further solidifying its position as the market leader. The DeSoto Savannah continued its streak of excellent performance, which is driven by a well-balanced mix of leisure and group business. During the quarter, the property easily outpaced 2019 metrics with a 21.3% gain in REVFAR, fueled by significant rate growth of 26.1% over 2019. Hotel Alba in Tampa continues to record exceptional results, significantly outpacing 2019 REVPAR by 54.2% during the quarter. Fourth quarter results for this hotel were fueled not only by a 30.8% increase in rate, but also an 18% gain in occupancy, a notable performance that highlights the hotel's successful repositioning strategy. Our management team achieved commendable profitability metrics during the fourth quarter by executing revenue management strategies aimed at driving rate and controlling variable costs at our properties. As a result of these efforts, rooms margin profit expanded 280 basis points over 2019 to 76.5% during the fourth quarter. Meanwhile, hotel EBITDA margins for the fourth quarter 2022 versus 2019 expanded an impressive 780 basis points to 28.8%. For the year, hotel EBITDA margins expanded 270 basis points over 2019 to 28%. As we navigate the post-pandemic operating environment, Margin control will continue to be a crucial area of focus for our managers, especially as additional revenue drivers, which were scaled back during the pandemic, are layered into their properties. All in all, we are pleased with our portfolio's progress during the year and are encouraged by the trends we are seeing going forward. I will now turn the call over to Tony.