Apple Hospitality REIT, Inc.

And welcome to the Apple Hospitality Read earnings call. At this time, all participants are in a listen-only mode. A brief 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. It's now my pleasure to introduce your host, Kelly Clark, Vice President. Investor Relations. Liz, you may begin.

Thank you, and good morning. Welcome to Apple Hospitality REIT's first quarter 2023 earnings call. Today's call will be based on the earnings release in Form 10-Q, which we distributed and filed yesterday afternoon. Before we begin, please note that today's call may include forward-looking statements as defined by federal securities laws. These forward-looking statements are based on current views and assumptions and, as a result, are subject to numerous risks, uncertainties, and the outcome of future events that could cause actual results, performance, or achievements to materially differ from those expressed, projected, or implied. Any such forward-looking statements are qualified by the risk factors described in our filings with the SEC, including our 2022 Annual Report on Form 10-K, and speak only as of today. The company undertakes no obligation to publicly update or revise any forward-looking statements except as required by law. In addition, non-GATT measures of performance will be discussed during this call. Reconciliations of those measures to GATT 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 2023 and an operational outlook for the remainder of the year. 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 today. 2023 is off to a strong start with continued strength in leisure demand and increased business travel. While we are mindful of the potential for macroeconomic headwinds later in the year, at this time, the fundamentals of our business remain strong. Improvements in business travel have lifted midweek occupancies in recent weeks, and news supply remains muted across the majority of our markets. First quarter 2023, comparable hotels rep are improved by 19% compared to 2022. and 6% compared to 2019. Comparable Hotels ADR increased by 11% over 2022 and 9% over 2019, and comparable hotels occupancy was up more than 7% over 2022 and down just 2% to 2019. First quarter comparable hotels adjusted hotel EBITDA was $107 million, a 21% improvement over 2022 and a 4% improvement over 2019. Through strong rate growth and effective cost controls, we achieved a comparable hotels adjusted hotel EBITDA margin for the quarter of 34% despite inflation and wage pressures. We have always been prudent with cost controls, leveraging our scale and diversification to operate as efficiently and cost effectively as possible without sacrificing service, cleanliness, or overall guest satisfaction. Our investment in select service hotels, a key element of our ownership strategy, provides us with an incredibly efficient operating model with limited F&B, efficient public spaces, low energy consumption, few departments to manage, and a focus on essential services and amenities. Our hotels were among the first to recover from pandemic disruption, and we were early in working to restaff to meet rapidly increasing demand in most of our markets. With guest services and amenities restored to modified brand standards, average FTEs for our portfolio have generally stabilized 5% to 10% lower relative to the same period pre-pandemic. Despite incremental operational efficiencies, higher wages and inflationary pressures on other expense line items continue to put pressure on margins. While we will continue to look for ways to drive incremental profitability at our hotels, our ability to protect and grow margins in the future will be largely dependent on our ability to grow rates. We continue to work with our management companies to foster work environments at our hotels that focus on culture, associate engagement, and training to develop and retain skilled associates in today's challenging labor environment. Strategic investments in our on-property teams position us to maintain the quality of our hotels, both in terms of product and service levels necessary to support continued growth and market share, in particular through rate premiums, which we believe will be key to our long-term profitability. As our managers reduce turnover at our hotels and invest in onsite training, we expect to realize efficiencies through lower recruiting costs, less reliance on contract labor, and improved productivity, which should act as a partial offset to higher wages. We continue to look for and underwrite potential acquisitions. And during the first quarter, we entered into a contract for the purchase of the newly renovated 154-room courtyard by Marriott Cleveland University Circle for $31 million or approximately $200,000 per key. The hotel opened in April of 2013 and recently underwent a complete renovation of its guest rooms and interior public spaces. It is located in the heart of Cleveland's University Circle District, a premier educational, medical, and social district on the east side of Cleveland. As we have indicated on prior calls, we have intentionally sought acquisitions in markets that benefit from a mix of business and leisure demand and that have been and will be beneficiaries of macroeconomic and demographic shifts. The Cleveland market fits well within this criteria. It is business friendly, with a favorable cost of living, offers a wide variety of demand generators, and is positioned well for future growth. Overall, the transaction market continues to be relatively quiet, but we anticipate deal volume will increase as the year progresses. Our team will continue to actively explore acquisitions opportunities that refine, enhance, and grow our existing portfolio, while further increasing our exposure to markets with strong growth trajectories and attractive cost structures. Since the onset of the pandemic, we have invested approximately $558 million in 14 hotels. On a trailing 12-month basis through the first quarter, these hotels produced a total unlevered return on our investment after CapEx of over 9%. with meaningful upside remaining as assets continue to ramp and markets improve. With more than 20 years of transaction history and ample liquidity, we are optimally positioned to scale our acquisitions activity to take advantage of strategic opportunities as market conditions become more favorable. As we underwrite potential acquisitions opportunities, we are also mindful of our ability to drive incremental shareholder value through the repurchase of our shares. We have a share repurchase program that is intended to comply with Rule 10b-5 , and during the first quarter we repurchased 250,000 shares at a weighted average purchase price of approximately $14.22 per share for an aggregate purchase price of $3.6 million. We have approximately $339 million remaining under our share repurchase program. During the quarter, we also invested approximately $18 million in capital expenditures, and we anticipate spending a total of $70 to $80 million during 2023. The planned capital projects include comprehensive renovations at 20 to 25 of our hotels. We have invested over a billion dollars in renovations and capital improvements over our 24-year history in hospitality and have significant experience in determining the most effective scope and timing of our investments. to ensure minimal disruption to property operations and maximum impact for dollar spend. Consistent with our historical investment, we anticipate 2023 CapEx spend to be between 5 and 6% of revenues, which we believe is an appropriate long-term average for our portfolio and a meaningful differentiator contributing to total shareholder returns over time. Low leverage and attractively structured debt have been key contributors to our outperformance over the years. and have positioned us to allocate capital efficiently at appropriate points in the cycle to maximize shareholder returns. Our significant liquidity position, staggered maturities, and conservative secured debt exposure provide us with flexibility to be both thoughtful and opportunistic to drive incremental value for our shareholders. As we enter our seasonally stronger months of the year, the fundamentals of our business remain favorable with continued improvement in demand and limited near-term supply growth. Preliminary comparable top line numbers for April are solid with occupancy flat to last year and ADR up 5%. Nearly half of our hotels do not have any new supply under construction within a five mile radius, providing us with the ability to meaningfully benefit from continued increases in demand. And many of our markets that were slow to rebound from pandemic lows have shown improvement in recent months. Our combined acquisitions and dispositions activity has positioned us to produce better portfolio margins and to drive greater profitability over time. While we are mindful of recent headlines pointing to elevated levels of macroeconomic uncertainty, we are optimistic that current trends will continue and position us to drive strong results over the coming months. Consistent execution against our proven investment strategy has enabled us to succeed through economic cycles. Our portfolio of select service hotels is broadly diversified across high-end suburban, urban, and developing markets that are home to a wide variety of demand generators. Our hotels are franchised with industry-leading brands managed by some of the best management companies in the industry and provide a strong value proposition with broad consumer appeal. Underlying the strength of our portfolio is a balance sheet with low leverage and financial flexibility. a consistent reinvestment and portfolio management strategy, and a corporate team with tremendous experience. Having recovered more quickly than the majority of our peers and stabilized operations with industry-leading margins, we are uniquely positioned to meaningfully benefit from incremental top-line growth. We are confident we are well positioned to continue to outperform and maximize shareholder value in any macroeconomic environment. Before I turn the call over to Liz, I would like to take this opportunity to welcome our newest board member, Carolyn Hanlon. With 35 years of leadership experience with Marriott, Carolyn brings tremendous financial acumen and hotel industry experience, and we look forward to further advancing the company's corporate governance and oversight with her insight and leadership. I will now turn the call over to Liz for additional details on our balance sheet, operations, and financial performance during the quarter.