Apple Hospitality REIT, Inc.

Greetings, and welcome to Apple Hospitality REIT's first quarter 2022 earnings call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kelly Clark, Vice President of Investor Relations.

Thank you, and good morning. Welcome to Apple Hospitality REIT's first quarter 2022 earnings call. Today's call will be based on the earnings release in Form 10-Q, which we distributed and filed yesterday afternoon. As a reminder, today's call will contain forward-looking statements as defined by federal securities laws, including statements regarding future operating results and the impact to the company's business and financial condition from, and measures being taken in response to COVID-19. These statements involve known and unknown risks and other factors which may cause actual results performance or achievements of Apple hospitality to be materially different from future results performance or achievements expressed or implied by such forward looking statements. Participants should carefully review our financial statements and notes thereto as well as the risk factors described in our 2021 annual report on form 10 K and other filings of the SEC. Any forward-looking statement that Apple Hospitality makes speaks only as of today, May 6, 2022, and the company undertakes no obligation to publicly update or revise any forward-looking statements except as required by law. In addition, non-GAAP measures of performance will be discussed during this call. Reconciliations of those measures to GAAP measures and definitions of certain items referred to in our remarks are included in yesterday's earnings release and other filings with the SEC. For a copy of the earnings release or additional information about the company, please visit applehospitalityreit.com. This morning, Justin Knight, our Chief Executive Officer, and Liz Perkins, our Chief Financial Officer, will provide an overview of our results for the first quarter of 2022. Following the overview, we will open the call for Q&A. At this time, it is my pleasure to turn the call over to Justin.

Good morning, and thank you for joining us. During the first quarter of this year, performance steadily improved across our portfolio as the effects of the Omicron variant, which negatively impacted travel in January and February, eased. Both leisure transient and leisure group demand remained resilient. Smaller corporate and regional business travel continued to strengthen, and larger corporate business made additional strides towards recovery. First quarter red bar for our portfolio was $92. up 67% compared to first quarter 2021, and down only 9% compared to the first quarter of 2019. Throughout this recovery, our revenue management teams have done an exceptional job maintaining rate integrity and pushing rate beyond pre-pandemic levels on high occupancy nights. We are pleased to report ADR of $137 for the quarter, up 38% to 2021, and slightly ahead of our ADR for the first quarter of 2019, Occupancy for the quarter was 67%, up 21% to 2021, and down 9% to 2019. Occupancy, ADR, and REBPAR improved sequentially through the quarter, with March REBPAR down only 1.5% to March 2019. Positive momentum has continued, and preliminary results show REBPAR for the month of April ahead of April 2019. Our corporate and onsite management teams have continued to maximize profitability despite a challenging labor environment and increasing inflationary pressures. First quarter operations were significantly ahead of the same period last year. With comparable hotels' total revenue up more than 70% relative to the first quarter of 2021, we achieved comparable hotels' adjusted hotel EBITDA margin of 34%, despite weaker occupancies early in the quarter, adjusted EBITDA RE of $78 million, and modified funds from operations of $63 million, or 28 cents per share. The pace of recovery has exceeded our expectations, and the rapidly recovering operating environment provides meaningful momentum as we enter the seasonally stronger summer months. We are encouraged that airlines are opening more business routes in response to rapid increases in demand and see this together with strong group bookings, adding to the robust leisure demand to fuel the recovery over the coming months. With locations in 86 markets across 36 states, we benefit from broad geographic diversification and significant exposure to a variety of business-friendly markets that offer attractive cost of living, popular leisure and entertainment venues, a wide variety of demand generators, and various guest amenities. For the quarter, 33% of our hotels achieved REVPAR at or exceeding 2019 levels, even without a full recovery in business transient, which has historically represented more than half of our total revenue mix, and despite reduced travel during the quarter related to the Omicron variant. As the recovery spreads to an increasing number of markets, we see meaningful upside to 2019 for our portfolio. With fewer hotel projects under construction in our markets, we anticipate the pace of new supply, which represented a meaningful headwind for us in 2019, to be less of a factor over the next several years. Relatively low supply, combined with continued improvement in demand, should further accelerate and prolong this recovery. Almost 50% of our hotels do not have any exposure to new projects currently under construction within a five-mile radius. Consistent strategic reinvestment in our hotels has ensured they remain relevant and well-positioned to take advantage of continued rate and occupancy growth opportunities. We invested approximately $8 million in capital expenditures during the first quarter of 2022 and anticipate spending a total of $55 to $65 million during the year. Through our scale ownership of branded rooms-focused properties over more than two decades, We have significant experience in determining the most effective scope and timing of our investment to ensure minimal disruption to property operations and maximum impact for dollars spent. Our ability to maintain our assets with capital spend ranging between 5% and 6% of revenues is a meaningful differentiator for our portfolio and a contributor to total shareholder returns over time. Our acquisitions and dispositions activity since the onset of the pandemic has further optimized our portfolio for the recovery By lowering the average age of our assets, reducing near-term CapEx, and increasing our exposure to markets that we anticipate will outperform over the next cycle, all while maintaining the strength and flexibility of our balance sheet. We have been and will continue to be intentional in the build-out of our portfolio, pursuing assets that are additive to those we currently own, located in strong red-part markets with attractive cost structures and significant growth potential, and at pricing that will allow us to achieve our targeted return. Increased interest in the type of assets we own from both private equity and public buyers continues to push prices higher in our space, increasing the value of our own portfolio while at the same time making accretive acquisitions more challenging. As we seek out opportunities, we are leveraging relationships developed over two decades, as well as our unparalleled experience buying, selling, and owning branded upscale rooms-focused product. We currently have under contract the previously discussed Embassy Suites that is under development in Madison, Wisconsin, for an anticipated purchase price of approximately $79 million. And we are actively underwriting and exploring dozens of opportunities, both on and off market, and anticipate that we will be a net acquirer of assets in 2022. On our last call, we announced that our Board of Directors reinstated regular monthly cash dividends beginning with a distribution in March of $0.05 per share. Based on our closing price yesterday, the annualized distribution of $0.60 per share represents an annual yield of approximately 3.6%. Moving forward, we will continue to interact with our Board on a monthly basis and assess our payout in the context of the current operating environment our expectations for the future, acquisitions and dispositions, and other opportunities to ensure that we are allocating capital to drive the strongest total returns for our shareholders. Our ability to provide investors with a meaningful cash yield on their investment early in the recovery and well ahead of peers is a testament to the merits of our investment strategy and the strength of our team. Our performance since the onset of the pandemic would not have been possible without the collaborative efforts of our corporate brand and management teams and the hard work and dedication of the associates at our hotels. I look forward to announcing our 2021 Apple Award recipients over the coming weeks. For these awards, we once again focused on the associates at our hotels, and we look forward to recognizing five individuals nominated by their management companies and peers for their outstanding contributions to the safety, well-being, and overall satisfaction of our guests. As we look forward to the remainder of 2022, we are confident in our ability to continue to produce industry-leading results. That confidence has been bolstered by recent operating trends, which have exceeded our expectations and created meaningful momentum as we enter what have historically been the strongest quarters of the year. Our strategy of investing in a broadly diversified portfolio of high quality rooms focused hotels with low leverage has been tested and consistently yielded compelling results for our investors. With operations moving beyond pre-pandemic levels and trends pointing to strengthening demand as we move through the second and into the third quarter, we have reason to be optimistic about the future of our business. It is now my pleasure to turn the time over to Liz, who will provide additional details on our balance sheet, operations, and financial performance during the quarter.