Sotherly Hotels Inc.

Good morning, all, and thank you for joining us at the Southerly Hotels Q3 2024 conference call and webcast. My name is Carly, and I'll be coordinating your call today. If you would like to register a question during the call, you can do so by pressing star followed by 1 on your telephone keypad. And to remove yourself from that line of questioning, it will be star followed by 2. I'd now like to hand over to your host, Max Simms, Vice President of Operations.

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. 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 methods for the third quarter. Looking at the third quarter results for the composite portfolio compared to 2023, REVPAR increased 4.1%, driven by a 7.8% increase in occupancy and a 3.4% decrease in ADR. Looking at the third quarter results for the composite portfolio relative to 2019, REVPAR increased 6.4%, driven by ADR growth of 10.9%, while occupancy was down 3.6%. Year-to-date, REVPAR performance represents an increase of 4.6% over the same period in 2023, driven by a 6.9% increase in occupancy and 2.2% decrease in rate. Looking at the year-to-date results for the composite portfolio relative to 2019, REVPAR was up 5.3%, driven by ADR growth of 10.6%, and occupancy decline of 4.9%. Overall, our portfolio's third quarter results, driven by strong occupancy growth, were in line with our expectations. Our portfolio's continued occupancy growth, highlighted by our slower-to-recover urban markets, is an encouraging sign that lodging fundamentals for our portfolio have stabilized. The quarter's notable occupancy gains were partially offset by a 3% decline in ADR, as leisure travelers demonstrated price sensitivity due to signs of slowing economic growth. Two major storms occurred during the third quarter, affecting our operations in Florida and Georgia. Hurricane Debbie, which occurred in early August, caused no significant damage to our hotels, but moderately impacted our operations in Tampa, Savannah, and Jacksonville. The more impactful storm during the third quarter, Hurricane Helene, which occurred during the last week of September, caused physical damage to our Tampa asset, as well as substantial operational impact in Tampa, Jacksonville, and Savannah. The bulk of Hurricane Helene's financial impact on our Tampa asset will occur during the fourth quarter. I will detail this impact as well as the recovery process later in my remarks. Looking at some highlights across the portfolio, despite the hurricane-related impact during the third quarter, Hotel Alba in Tampa posted commendable results, growing REVPAR by 13.6%, fueled by a 14.5% occupancy gain over prior year. Hotel Alba continued its well-balanced approach during the third quarter, with a mix of group, which grew by an impressive 54% year over year, along with growth from business travel and high-rated contract business. Driven by a 19.4% increase in occupancy share, Hotel Alba easily outperformed its competitive set during the quarter, growing its REVPAR index by 18.4%. As noted, the improved performance during the first half of the year at our urban locations continued during the third quarter. Our Doubletree Hotel in Philadelphia grew REVPAR by 11% during the quarter, driven by a 15.7% gain in occupancy. The hotel's strong occupancy growth, driven by increased business travel and a more robust citywide calendar, led to a 220 basis point REVPAR share gain during the third quarter. The Whitehall in Houston built on its strong second quarter results, growing occupancy by 60.4%, resulting in a 51.9% growth in REVPAR over the prior year. The Whitehall's occupancy improvement was predominantly driven by growth in the transient business segment, as well as improved citywide demand, an encouraging sign for the property's continued growth prospects. The Whitehall easily outperformed its competitive set during the quarter, improving its REVPAR share index by nearly 42%, driven by a 47.3% increase in occupancy share. The Hyatt Centric in Arlington continues to perform at a high level, growing REVPAR by 3.7% and outperforming budgeted expectations despite a slight rate decline during the quarter. The hotel achieved a strong 4.2% occupancy gain, drawing business from a number of diverse demand drivers in the market, especially group and transient business travelers. Looking at profitability metrics for the portfolio, hotel EBITDA margins have stabilized with third quarter hotel EBITDA margin improving by 55 basis points over prior year. despite the moderate decline in rate for the quarter. The improvement in occupancy at our hotels in Houston, Philadelphia, and Atlanta balance out the portfolio's rate decline, driving down the portfolio's average cost per occupied room, while allowing for additional high-margin non-room revenue. Going forward, we expect normalized staffing and amenity levels, along with stabilized wage costs, which are positively impacted by decline in contract labor, to result in relatively stable margins. While Hurricane Helene occurred during the third quarter, the majority of its operational impact will take place during the fourth quarter of this year. The Category 4 hurricane caused the Tampa Bay area's largest storm surge on record, eclipsing the previous record by over two feet. Despite the storm's sizable impact, our operating team did a commendable job keeping the property open to residents seeking shelter from the storm. As a result of the storm surge, Hotel Alba sustained water intrusion on the first floor of the hotel, causing damage to furniture, finishes, and equipment in public areas and guest rooms, as well as some building systems. Despite this damage, the hotel has remained open due to an expeditious effort to clean up and mitigate the damage, and full restoration is currently progressing at a good pace. We expect impact operations at Hotel Alba as a result of Hurricane Helene through the first quarter of 2025. Physical impact to the hotel, as well as the resultant business interruption, are fully insurable events. A second major storm, Hurricane Milton, struck Florida just two weeks after Helene, causing major wind damage in the Tampa Bay area. As a result of the city's mandatory evacuation, Hotel Alba was closed for approximately 48 hours before welcoming back displaced residents and first responders to the property. Fortunately, during Hurricane Milton, Hotel Alba did not sustain any additional damage to note. Turning now to corporate activity. In July, we announced that the company executed a secured loan on the Doubletree by Hilton Jacksonville Riverfront Hotel in Jacksonville, Florida. The loan, which carries a floating interest rate based on SOFR plus 3%, has an initial principal balance of $26.25 million, with an additional $9.5 million available to fund a product improvement plan at the hotel. The company also announced that it has entered into a new 10-year franchise agreement with Hilton Worldwide. to relicense our Jacksonville Hotel as a soft-branded double-tree by Hilton under the name Hotel Bellamy. As part of its relaunch efforts for the hotel, the company will undertake a complete renovation of the property with a cost of approximately $14.6 million and an estimated completion date of January 22nd. Renovation plans for the property will include a complete transformation of its guest rooms, public spaces, building exterior, pool and sun deck, existing food and beverage offerings, as well as the addition of a new riverfront dining concept. I will now turn the call over to Tony.