Sotherly Hotels Inc.

Hello everyone and welcome to Sotheby's Hotel's second quarter 2023 earnings call and webcast. My name is Daisy and I'll be coordinating your call today. If you would like to register a question, please press star followed by one on your telephone keypad. I would now like to hand over to your host, Max Sims, Vice President of Operations to begin. So Max, 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 the 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 second quarter results for the same store portfolio, REVPAR was $131.16, driven by an occupancy of 70.6% and an ADR of $185.82. Second quarter REVPAR performance represents an increase of 5% over the same period in 2022, driven by a 1.6% increase in occupancy and a 3.4% increase in rate. Year to date, REVPAR for the same store portfolio was $122.27 with occupancy of 65.6% and an ADR of $186.45. Year-to-date REVPAR performance represents an increase of 11.9% over the same period in 2022, driven by a 5.8% increase in occupancy and a 5.8% increase in rate. Overall, our portfolio's second quarter results, characterized by further recovery of group and corporate demand at our hotels, we're generally in line with our expectations. Despite softer than expected leisure demand at our South Florida properties on a year-over-year basis, our portfolio continued to shift to a more normalized mix of business, with strong REVPAR growth from our group and corporate transient segments. Comparing to pre-pandemic metrics, REVPAR increased by 1.8% compared to the second quarter of 2019, despite occupancy being down by 8.7%, demonstrating there is still a significant upside for the portfolio. Examining our portfolio's recent booking trends for business and group travel confirm our belief that demand at our hotels continues to progress towards a more normalized mix of business. For the group segment, our portfolio produced 8.7% more group business in the second quarter of 2023 compared to the same period in 2022, while business travel was slightly ahead of the second quarter of last year. These results were largely driven by our Washington DC market hotels in Arlington, Virginia, and Laurel, Maryland, which are now outperforming 2019 results. While the Washington DC market is nearing a full recovery, our hotels in Houston, Philadelphia, and Atlanta have plenty of upside potential as corporate travel in those markets is still significantly below pre-pandemic levels. We expect demand at these hotels to continue to improve during the corporate and group heavy fall travel season, which should help close the gap to pre-pandemic occupancy for those hotels. Meanwhile, leisure demand across the portfolio remains strong as a whole, with encouraging booking trends moving forward. Look at some highlights across the portfolio. The high-centric Arlington posted commendable performance during the quarter. Fueled by a noteworthy recovery in group and business demand of the hotel, this property is hitting on all cylinders following the lagging recovery in the Washington, D.C. market, outperforming last year's REVPAR by nearly 25%. ADR, which was up 16.6% compared to the second quarter of last year, was the primary driver of this improvement, while Occam & See continues to grow as well. Property further solidified its position as the market leader among its competitive set, achieving a REVPAR index of over 121% during the quarter. Hotel Ballast in Wilmington, North Carolina recorded excellent results during the quarter, beating prior year REVPAR by nearly 15%, fueled by an 11.1% improvement in occupancy and a 3% increase in rate. Results were driven by improved demand from the corporate group and transient business traveler segments and continued strength from leisure demand. The DeSoto Savannah continued to deliver a well-balanced mix of leisure and group business during the quarter. The property easily outpaced the comparable period in 2019, with RevPar improving nearly 25%, fueled by significant rate growth of nearly 19%. The property continues to improve versus competitive set, gaining 730 basis points in fair share during the quarter. During the second quarter, our management team achieved commendable profitability metrics by controlling variable costs and executing revenue management strategies aimed at driving higher rates. Hotel EBITDA margins for the second quarter of 2023 were slightly ahead of the comparable period in 2019. We are pleased with these metrics, especially considering increased expense pressures from restaffing our hotels, higher utility rates, increased insurance costs, and expanded food and beverage offerings that have been layered into our properties. Moving forward, we expect margins to stabilize as we have reached normalized staffing and amenity levels at our hotels following the lean operating model during the pandemic. I'll now turn the call over to Tony.