Apple Hospitality REIT, Inc.

It is now my pleasure to introduce your host, Kelly Clark, Vice President of Investor Relations. Thank you. You may begin.

Thank you, and good morning. Welcome to Apple Hospitality REIT's first quarter 2024 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 in our 2023 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-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 2024 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. Consistent with our expectations, performance for the first quarter remained strong, with adjusted EBITDA RE of approximately $101 million, an increase of 6% year-over-year, and modified funds from operation of $83 million, an increase of 5% year-over-year. Comparable hotels ABR of $154, occupancy of 72%, and REVPAR of $111, were all in line with results for the first quarter of 2023, despite challenging year-over-year comparisons related to the Super Bowl and an unfavorable shift in timing of the Easter holiday, which was consistent with the industry overall and ahead of our blended chain scales for the quarter. Our portfolio continues to perform ahead of pre-pandemic levels, with comparable hotels' REVPAR for the quarter up approximately 8% relative to the first quarter of 2019. And we see continued upside opportunity to rebuild occupancy in many markets, especially midweek. Despite the tough comparison from a top-line perspective, Comparable Hotels adjusted hotel EBITDA was $112 million for the quarter, down only 3% as compared to the same period of 2023, but still up approximately 4% to the first quarter of 2019, bolstered in part by the Easter holiday shift and with growth in both weekday and weekend occupancies. Preliminary results for our portfolio show comparable hotels REVPAR for the month of April 2024 above the high end of our full-year guidance range. We anticipate that we will be in a position to more meaningfully grow rate as we move into our seasonally stronger occupancy months in the second and third quarters, and that continued strength in leisure demand and further recovery in corporate demand combined with limited near-term supply growth will position us for stronger year-over-year performance as we progress through the year. Our revenue and asset management teams, together with our third-party operators, continue to work to maximize efficiencies and drive profitability across our hotels, achieving strong margins despite the current inflationary environment and ongoing wage pressures. During the first quarter, we achieved a comparable hotels-adjusted hotel EBITDA margin of 33.7%, with year-over-year margin declines in line with expectations for the first quarter at the midpoint of our previously provided guidance range. Stronger rates during the summer months should help margins by offsetting in part continued inflationary pressure on wages and other operating expenses. Our operators are among the best in the industry and monitor real-time performance to focus on-site efforts on maximizing profitability of our hotels without sacrificing service, cleanliness, maintenance, or overall guest satisfaction. Supported by our strong operating performance, we continue to provide investors with an attractive dividend yield, Modified funds from operations for the first quarter was $0.34 per share in line with first quarter 2023. And during the quarter, we paid distributions totaling $0.29 per common share, including a special cash distribution of $0.05 per common share that was paid in January. Based on Friday's closing stock price, our annualized regular monthly cash distribution of $0.96 per share represents an annual yield of approximately 6.5%. Together with our board of directors, we will continue to monitor our distribution rate and timing relative to the performance of our hotels and other potential uses of capital. We recently acquired the AC Hotel Washington DC Convention Center for $116.8 million or $499,000 per key. In addition to its ideal location, premium amenities, and modern guest rooms, the asset generates additional revenue through its rooftop bar and restaurant with stunning views of the city and through its ground floor retail space and a large billboard that are leased to third parties. Our purchase price represents a 7.7% cap rate after an industry standard 4% FF&E reserve and an EBITDA yield of 8.5% on trailing 12-month numbers through March of this year. The DC market is among the lowest supply growth markets in the country, with a robust convention calendar and a broad base of government, business, and leisure demand. DAC is exceptionally well positioned relative to attractions within the city, and we believe it will be a significant contributor to our long-term performance. Our recent acquisitions have been meaningfully additive, creating increased exposure to high growth markets, lifting overall portfolio performance, and driving incremental profitability. The hotels complement our existing portfolio and reflect our proven investment strategy. Recent acquisitions, including the seven hotels we acquired since June of last year, together with the parking garage adjacent to our downtown Salt Lake City hotels, are yielding approximately 9% after capital improvements on a trailing 12-month basis through March of this year, with meaningful upside from projected market growth and improvements in operations driven by the transition of management companies at five of the seven assets. We continue to have two additional hotels under contract for purchase. The embassy suites downtown Madison, Wisconsin for approximately $79 million and a motto in downtown Nashville for approximately 98 million, both of which are currently under construction. The Madison embassy is on track to open this summer and construction recently began on the Nashville motto with an anticipated completion and acquisition state in late 2025. As has been the case historically, our acquisitions focus continues to be on high-quality branded rooms-focused hotels in urban, high-density suburban and developing markets supported by a broad variety of business and leisure demand drivers. Our discipline over the past several years positioned us to be active in a market with limited competition where we were able to secure high-quality assets at pricing that met our internal underwriting criteria. Our balance sheet remains strong with ample liquidity to pursue additional acquisitions, and we are actively underwriting deals that would further enhance and add to our unique and scalable platform. We are, of course, mindful of where our stock is trading, and we'll continue to assess these deals relative to the opportunity to repurchase our own shares and allocate capital where we believe we can achieve the most desirable results for our shareholders. We also continually monitor the performance of our existing hotels and work to strategically dispose of select assets in order to optimize our portfolio concentration within markets we believe have higher growth potential, manage our long-term CapEx needs, and maximize returns on individual assets. As previously announced, during the quarter we sold a Hampton Inn and a Homewood Suites in Rogers, Arkansas for a combined total of $33.5 million. resulting in a gain on the sale of approximately $18 million. The assets were older prototypical hotels that had performed well during our period of ownership, but were facing significant new competition with 15% supply growth under construction and an additional 14% in final planning and had near-term CapEx needs estimated at approximately $22,000 per key. A portion of the proceeds from the sale of these two assets was used to complete a 1031 exchange with the acquisition of the AC Hotel in Washington, D.C., which resulted in the deferral of taxable gains of $15.1 million. Since the onset of the pandemic, we have completed approximately $287 million in hotel sales and have invested nearly $1 billion in new acquisitions while maintaining the strength of our balance sheet. These transactions have lowered the average age of our portfolio, increased revenue per available room and margins, helped to manage near-term CapEx needs, grown the size of our platform, and positioned us to continue to benefit from near-term economic and demographic trends. We continue to reinvest in our existing portfolio to ensure our hotels remain competitive in their respective markets and are positioned to command premium rates and further drive EBITDA growth. Our experienced team utilizes advantages made possible by our scale ownership to control costs and maximize the impact of dollars spent while implementing projects during periods of seasonally lower demand to minimize revenue displacement. During the quarter, we invested approximately $20 million in capital expenditures, and we expect to spend between $75 and $85 million during 2024, with major renovations at approximately 20 of our hotels. As we look ahead, the fundamentals of our business remain favorable, with continued strength in demand and limited new supply. As of year end, more than 56% of our hotels did not have any new upper upscale, upscale, or upper mid-scale product under construction within a five-mile radius, providing us with the ability to meaningfully benefit from incremental demand and improve the overall risk profile of our portfolio. by both reducing potential downside and enhancing the upside impact from variability in lodging demand. Our investment strategy has proven resilient across economic cycles, yielding compelling total returns for our shareholders. We are confident that with our portfolio of high-quality rooms-focused hotels broadly diversified across markets and demand generators, the effectiveness of our brands and management companies the strength and flexibility of our balance sheet, and the depth of our corporate team, we are well positioned for continued outperformance. It is now my pleasure to turn the call over to Liz for additional details on our balance sheet financial performance during the quarter and annual guidance.