Sotherly Hotels Inc.

hello and welcome to the southerly hotels first quarter 2023 earnings call and webcast my name is alex i'll be coordinating the call today if you'd like to ask a question at the end of the presentation you can press star 1 on your telephone keypad if you'd like to withdraw your question you may press star 2. i'll now hand over to your host max sims vice president of operations please go ahead thank you and good morning everyone

If you do 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. Looking at the first quarter results for the same store composite portfolio, REVPAR was $116.80, driven by an occupancy of 60.5% and an ADR of $193.03. First quarter REVPAR performance represents an increase of 16.3% over the same period in 2022, driven by a 10.8% increase in occupancy and a 5.6% increase in rate. overall we are pleased with our portfolio's first quarter results as we continue to transition to a more normalized mix of group corporate and leisure demand during the first quarter revpar was off by 8.7 percent compared to the first quarter 2019 although 2019 was a difficult difficult comp that included the super bowl in atlanta even with this one-time event rates outpaced 2019 by 7.5 percent during the quarter stripping out atlanta in the comparison the remaining portfolio's REVPAR performance returned to 2019 levels, a notable milestone in the post-pandemic recovery. Our portfolio's recent booking trends for business and group travel demonstrate that demand from these segments continues to grow. For the group segment, our portfolio produced 58% more group business in the first quarter of 2023 compared to the same period in 2022. In addition, our portfolio produced 33% more business travel than the first quarter of last year. These gains in group and business travel demand came across the entire portfolio, but were especially meaningful at our urban properties in Washington, D.C. and Houston, which posted the best year-over-year improvements in REVPAR performance for our portfolio at 96.5% and 51.3%, respectively. Notably, the high centric in Arlington exceeded pre-pandemic levels of business travel revenue for the first time during the first quarter, capping off a remarkable recovery for the property. While this property is now fully recovered, we continue to have plenty of opportunities in other urban markets like Houston, Philadelphia, and Atlanta, which continue their road to recovery. Overall, we expect our urban markets to continue to improve as return to office rates, business travel, and international travel demand increase, which should help close the gap to pre-pandemic occupancy for those hotels. Our portfolio's overall leisure demand continued to perform well during the first quarter, despite a slight moderation in demand for the South Florida market. Our portfolio's leisure demand growth was primarily driven by strong results at our leisure-focused coastal destinations, such as Savannah, Tampa, and Wilmington, and was bolstered by approved leisure demand in our urban locations. During the first quarter, our hotels benefited from a number of citywide events which have finally returned to pre-pandemic attendance levels, for example, the NCAA Men's Final Four in Houston and the Cherry Blossom Festival in Washington, D.C. boosted these results of our hotels and those markets during the quarter. Looking ahead, we continue to see encouraging booking trends with strong rates of the leisure segment. Looking at some highlights across the portfolio, the high at Centric Arlington posted another solid quarter performance, showing steady sequential improvement relative to 2019, fueled by the improvement in group and business demand. This property reached an important milestone during the first quarter, exceeding pre-pandemic rev par for the first time. outpacing Q1 2019 REVPAR by 5.6%. Rate, which was up 9.7% compared to the first 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 REVPAR index of over 122%, gaining 10.6% REVPAR share. The Doubletree-Jacksonville riverfront recorded excellent results during the quarter, exceeding prior year REVPAR by nearly 20%. fueled by a 10.1% improvement in occupancy and an 8.3% increase in rate. Results were driven by significant improvements in the corporate group and transient business traveler segments, which hover near pre-pandemic levels during the quarter. The hotel outperformed its competitive set during the quarter, posting a REVPAR index of 113%. The DeSoto Savannah continues to be a standout performer for our portfolio, executing a strategy of a well-balanced mix of leisure and group business, During the quarter, the property easily outpaced 2019 metrics with an 18.7% gain in REVFAR, fueled by significant rate growth of 17.6%. Occupancy continues to ramp up with this property, providing a significant opportunity moving forward. Our management team achieved commendable profitability metrics during the first quarter by controlling variable costs and executing revenue management strategies aimed at driving higher rates. Hotel EBITDA margins for the first quarter of 2023 were flat to 2019. However, stripping out Atlanta due to the Super Bowl in 2019, our portfolio's hotel EBITDA margin expanded 550 basis points during the first quarter. We are pleased with these metrics, especially considering increased expense pressures from restaffing our hotels, higher utility rates, increased insurance costs, and the additional amenities that have been layered back into our properties. As expense pressures continue, margin control and effective revenue management will remain key areas of focus for our managers. I will now turn the call over to Tony.