Apple Hospitality REIT, Inc.

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 2024 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 applehospitalityread.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 third quarter 2025 and an operational outlook for the rest 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 for our third quarter 2025 earnings call. While the fundamentals of our business remain strong, with supply growth continuing to be well below historical norms and overall demand proving resilient, policy uncertainty, expense pressure, and a continued pullback in government travel all weighed on operating performance during the quarter for our portfolio and for the industry broadly. With many of these factors outside of our control, we have focused with our management teams on ensuring that we are growing market share and managing expenses to maximize the profitability of our hotels. From a capital allocation standpoint, we continue to see an opportunity to take advantage of the current disconnect between public and private market valuations, by selectively selling assets and redeploying proceeds to buy our own stock. At the same time, we are leaning into future investments that we feel will ensure our portfolio's continued relevancy and allow us to achieve strong results for years to come. Together with our management companies, our asset and revenue management teams have done a tremendous job shifting the mix of business at our hotels to strengthen market share and tactically adjust to changing demand trends, driven in part by the pullback in government travel. Transient leisure demand for our portfolio remained resilient during the quarter, and our property teams have successfully targeted group business, which has helped to offset slightly softer midweek business transient. For the quarter, we achieved comparable hotels occupancy of 76%, down 1.2%, ADR of $163, down only 0.6%, and REVPAR of $124, down 1.8%. Impacted by the recent government shutdown, Comparable Hotels REVPAR was approximately 3% lower in October 2025 versus October 2024 based on preliminary performance data. The hotel teams have also been diligent in their efforts to mitigate cost pressures and operate as efficiently as possible while delivering the high level of service and quality our guests expect. As a result of these efforts, variable expense growth for our portfolio has moderated, with a higher growth in fixed costs largely coming as a result of challenging year-over-year comparisons. Though slightly down versus prior year, our portfolio continues to produce industry-leading margins with comparable hotels' EBITDA margin of 35.2% for the quarter. In addition to the day-to-day efforts with our management teams to maximize the performance of our hotels through the implementation of systems and effective management practices, we also look for structural ways to drive overall performance. Over the coming months, we will be transitioning our Marriott managed hotels to franchise and consolidating management in these markets with existing third-party management companies to realize incremental operational synergies. We are confident these transitions, together with a select number of additional market-level management consolidations, will help to further drive operating performance at our hotels. In the case of the Marriott managed assets, the transition away from brand management will also provide us with additional flexibility in the future as we consider select dispositions. The Marriott transitions align with Marriott's publicly stated goal to drive incremental efficiencies in their own business, and we appreciate their willingness to work with us in pursuit of a mutually beneficial outcome. We have always been disciplined in our approach to capital allocation, balancing both near and long-term allocation decisions to capitalize on existing opportunities, while securing the long-term relevance, stability, and performance of our platform. Through all phases of the economic cycle, we seek transactions that enhance the quality and competitiveness of our existing portfolio, drive earnings per share, create value for our shareholders, and ensure we are well-positioned for future outperformance. In the current environment, we have strategically executed select dispositions and forward commitments on new development to manage our near-term CapEx needs and to ensure we are exposed to markets with strong growth profiles. At the same time, we have been able to take advantage of near-term opportunities that exist because of the disconnect in public and private market valuations, using proceeds from dispositions and cash from operations to fund share repurchases. We will continue to adjust tactical capital allocation strategy to account for changing market conditions and to act on opportunities at optimal times in the cycle to maximize total returns for our shareholders. Since the beginning of this year, we have completed the sale of three hotels for a total combined sales price of $37 million, including our full-service Houston Marriott, which we sold during the third quarter for $16 million. We currently have four hotels under contract for sale for a total combined sales price of approximately $36 million, including the previously announced pending sale of our Hampton and Homewood Suites in Clovis, California, as well as the contracted sale of our Hampton and Homewood Suites in Cedar Rapids, Iowa. We anticipate closing on the sale of these hotels during the fourth quarter of this year. While the overall transaction market continues to be challenging, we have successfully executed on select asset sales in ways that continue to optimize our portfolio concentration, manage capex, and free capital, which we have been able to accretively redeploy at a meaningful spread. Pricing for the individual hotels varies. However, as a group, the three hotels we sold this year, together with the two Globus hotels and the two Cedar Rapids hotels, will trade at a 6.2% blended cap rate, or a 12.8 times EBITDA multiple before CapEx and a 4.7% cap rate or a 17.1 times EBITDA multiple after taking into consideration the estimated $24 million in capital improvements. Proceeds from these well-timed dispositions have been used primarily to fund share repurchases. Since the beginning of the year through October, we have repurchased approximately 3.8 million of our shares. at a weighted average market purchase price of approximately $12.73 per share, for an aggregate purchase price of approximately $48 million. Shares repurchased year-to-date have been priced around a three-turn spread to recent dispositions and around a seven-turn EBITDA multiple spread after taking into consideration estimated capital improvements. While our long-term goal is to grow our portfolio, when our stock trades at an implied discount to values we can achieve in private market transactions, as it has for the past several months, we will opportunistically sell assets and redeploy proceeds primarily into additional share repurchases, preserving our balance sheet so that at the appropriate time in the cycle, we can act quickly on attractive acquisitions opportunities. Since May of last year, we have invested nearly $83 million in our own shares. In June of this year, we acquired the Homewood Suites Tampa Brandon for approximately $19 million. And we are on track to acquire the Motto Nashville Downtown, which is nearing completion of construction in December of this year for a total of approximately $98 million. While it is still several months out, we will also be converting our residence in Seattle Lake Union to a Homewood Suites beginning in the fourth quarter of next year. The transition will happen as the hotel reaches the end of its current franchise term, with the determination to change brands being informed by competitive supply within the market and branded incentives. Upon conversion, the hotel will be one of only two Homewood Suites in the downtown Seattle market. The hotel will continue to operate as residence in through the renovation and conversion, which will be completed during the second quarter of 2027. This hotel sits on incredibly valuable real estate, and we are excited about the opportunity to reintroduce it under a new flag. While our primary near-term focus has been on dispositions and share repurchases, we entered into agreements for the development of three hotels during the quarter, each located in a key dynamic market that will further enhance our portfolio positioning in the years to come. We entered into a fixed-price board purchase contract for the purchase of an AC hotel to be developed in Anchorage, Alaska, with an anticipated 160 rooms for a total of approximately $66 million. Anchorage has consistently been one of our top performing markets with both strong leisure and business demand driving overall performance. While early in the development process, the hotel is expected to open in the fourth quarter of 2027. Also during the quarter, we entered into a fixed price forward purchase contract with a third party developer to develop a dual branded property that will include an AC hotel and a residence in Las Vegas, Nevada. on the land we own adjacent to our Spring Hill Suites Las Vegas Convention Center for a total of approximately $144 million. It is our expectation that the hotel will be completed and open for business in the second quarter of 2028. The AC Hotel is expected to have 237 guest rooms, and the Residence Inn is expected to have 160 guest rooms. The Las Vegas market continues to expand as a top destination for sports, entertainment, and conventions. And while recent market performance has been negatively impacted by lower international inbound travel, we have strong conviction in the future growth and long-term viability of this dynamic, business-friendly market and are excited to expand our presence there. Since the onset of the pandemic, we have completed approximately $354 million in hotel sales, with an additional $36 million under contract and expected to close in the coming months. These sales represent a blended cap rate prior to taking into consideration estimated CapEx of approximately 5% and a 4% cap rate after CapEx and have allowed us to forego significant renovation expenditures in markets where we see limited upside, preserving capital for higher-yielding investments. Over the same period, we have invested more than $1 billion in acquisitions and purchased 6.9 million shares of our own stock while maintaining the strength of our balance sheet. These transactions have further enhanced our already well-positioned portfolio by lowering the average age, lifting overall portfolio performance, helping to manage near-term CapEx needs, increasing exposure to high-growth markets, and positioning us to continue to benefit from economic and demographic trends. Consistent reinvestment in our portfolio is a key component of our strategy and ensures that our hotels maintain their strong value proposition for our customers. Our experienced team is focused on leveraging our scale ownership to control costs, maximize impact on reinvested dollars, and optimally schedule projects during periods of seasonally lower demand to minimize revenue displacement. Our ability to renovate our hotels efficiently is a meaningful differentiator, which combined with effective portfolio management helps us to achieve consistent, strong returns for our investors over time. During the nine months ended September 30th, Capital expenditures were approximately $50 million. And for the year, we expect to reinvest between $80 and $90 million in our hotels, with major renovations at approximately 20 of our hotels. Supported by strong cash flow from our portfolio of hotels, we continue to pay an attractive dividend, which is meaningfully additive to total returns for our investors. During the third quarter, we paid distributions totaling approximately $57 million, or $0.24 per common share. Based on Friday's closing stock price, our annualized regular monthly cash distribution of 96 cents per share represents an annual yield of approximately 8.6%. 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. Although macroeconomic uncertainty has continued to weigh on year-over-year growth and fueled capital market volatility, travel demand for our portfolio has remained resilient further reinforcing the merits of our underlying strategy, and we are confident we remain well positioned to drive profitability and maximize long-term value for our shareholders. 63% of our hotels do not have any new upper upscale, upscale, or upper mid-scale product under construction within a five-mile radius. This historically low rate of supply growth is unique to this cycle, and we believe materially improves the overall risk profile of our portfolio. by reducing potential downside while enhancing potential upside as launching demand strengthens. Our hotels, which are broadly diversified across markets and demand generators, operate efficiently and produce strong cash flow while simultaneously providing guests traveling on both business and leisure with compelling value proposition. We have historically outperformed during extended periods of economic uncertainty, and we believe we are well positioned for upside should we see reacceleration in broader economic growth. While we are early into our budget process for 2026, we are encouraged by airline and hotel brand commentary related to improvements they are seeing in demand, as well as lapping the pullback in government demand we have seen this year. And with hotels in each of the U.S. markets that will host the 2026 FIFA World Cup, we are well positioned to take advantage of additional demand created by the events. Throughout our 25 year history in the lodging industry, we have refined our strategy, intentionally choosing to invest in high quality hotels that appeal to a broad set of business and leisure customers, diversifying our portfolio across markets and demand generators, maintaining a strong and flexible balance sheet with low leverage, reinvesting in our hotels, and closely aligning efforts with associates and management teams who operate our hotels. Our differentiated strategy has been tested and proven across multiple economic cycles. With the strength of our broadly diversified portfolio, the overall resilience of our business, our low leverage, and the depth of our team, I am confident we are well positioned to drive profitability and maximize long-term value for our shareholders in any macroeconomic environment. 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 outlook for the remainder of the year.

Thank you, Justin, and good morning. While the travel industry has faced macroeconomic headwinds this year, we are generally pleased with the overall performance and resilience of our portfolio. Comparable hotels' total revenue was $365 million for the quarter and $1.1 billion year-to-date through September, both down approximately 1% to the same periods of 2024. Comparable Hotels adjusted Hotel EBITDA with approximately $129 million for the quarter and $375 million year-to-date through September, down approximately 7% and 6% as compared to the same periods of 2024, respectively. Third quarter, Comparable Hotels REVPAR was $124, down 1.8%. ADR was $163, down only 60 basis points. and occupancy was 76%, down 1.2% as compared to the third quarter, 2024. For the nine months ended September 30th, comparable hotels REVPAR with $122, down 1.4%, ADR with $161, up 10 basis points, and occupancy was 75%, down 1.4% to the same period of 2024. Our portfolio continues to outperform the industry where STAR reports REVPAR of $102, ADR of $160, and average occupancy of 63% for the first nine months of the year, highlighting the relative strength of our portfolio demand despite year-over-year decline. Our teams have done a tremendous job adjusting strategy to re-optimize the mix of business at our hotels where there were meaningful shifts in government and other demand segments. as well as maximizing revenue around special events to strengthen market share and performance for our overall portfolio. July was the strongest month of the quarter, with Comparable Hotels Rev Park growth of 1%, while August and September turned negative as anticipated, with September impacted by the unfavorable calendar shift of Rosh Hashanah from October into September. Even with the pullback in August and September, we are generally pleased with the performance of our portfolio and the resilience of travel broadly, despite elevated macroeconomic uncertainty and the pullback in government travel specifically. Market performance varied significantly during the quarter, with a mix of strong RevPar gains in several markets and ongoing headwinds impacting others due to demand shifts and challenging year-over-year comparisons. Our team remains focused on hotel and market-specific strategies as well as operational execution to maximize performance. Top performing hotels during the quarter included our South Bend Residence Inn and Fairfield Inn & Suites, both with rev part gains over 20%. Our Richmond Marriott saw rev part increase almost 17% year-over-year during the quarter. And other top performers included our Denton Homewood Suites, Lafayette Spring Hill Suites, Meadowah Residence Inn, Boca Raton Hilton Garden Inn, Salt Lake City Residence Inn, and our Austin Round Rock Homewood Suites. Hotels with significant year-over-year red par declines included our Arlington Hampton Inn & Suites, Houston Park Row Residence Inn, Austin Fairfield Inn & Suites, Tucson Town Place Suites, San Bernardino Residence Inn, and our Phoenix Homewood Suites. Based on preliminary results for the month of October, Comparable Hotels RevPar declined by approximately 3% as compared to October 2024, which was impacted by incremental pullback in government demand as a result of the government shutdown, which began on October 1st. While we expect the shutdown to continue to weigh on demand until the government reopens, we are optimistic that we will benefit from the near-term pent-up demand upon reopening. Turning back to the third quarter, Weekday and weekday occupancy trends softened as the quarter progressed, together driving overall portfolio occupancy declines. For the quarter, weekend occupancy was strong at 81%, but declined 120 basis points, slightly outperforming weekday occupancy, which declined 160 basis points. Weekend ADR was approximately flat for the quarter, turning negative in September after being positive in July and August. while weekday ADR was softer, declining 80 basis points for the quarter and contributing to overall REVPAR declines. Highlighting same-store room-night channel mix, brand.com bookings were up 110 basis points year-over-year at 40%. OTA bookings were up 70 basis points to 13%. Property Direct was down 120 basis points at 23%, and GDS bookings were down 20 basis points to 17%. Looking at third quarter same-store segmentation, bar was up 40 basis points at 33% of our occupancy mix. Other discounts grew 30 basis points to 29%. Corporate and local negotiated declined 70 basis points to 17% of our mix, and government declined 40 basis points to 5.2% of mix. Group business mix improved 50 basis points to 15% and continues to be a focus area for our property teams in response to demand shifts in other segments. We continue to see growth in other revenues, which were up 4% on a comparable basis during the quarter and up 6% year-to-date, driven primarily by parking revenue and cancellation fees. Turning to expenses, comparable hotels' total hotel expenses increased by 1.7% in the third quarter and 2.2% year-to-date through September, as compared to the same periods of last year, or 2.9% and 3.6% on a CPOR basis. On a same-store basis, total hotel expenses increased by only 1.5% for both the third quarter and year-to-date through September. Total payroll per occupied room for our same-store hotels was $40 for the quarter, up less than 2% to the third quarter of 2024, an improvement compared to first quarter growth of 4% and second quarter growth of 3%. We continue to achieve reductions in contract labor, which decreased during the quarter to 7% of total wages, down 140 basis points, or 16% versus the same period in 2024. Comparable hotels' variable hotel expenses increased by only 0.7% in the third quarter or 2% on a per-occupied room basis. Occupancy declines and cost control efforts resulted in rooms' expense decline of 1% versus third quarter of 2024, driven by same-store rooms' wages decline of 0.8%. Comparable hotel administrative and repair and maintenance costs grew slightly higher at just under 4% and 3% respectively, while sales and marketing expense as well as utilities were more muted at just 1% growth. Consistent with the first and second quarters, fixed expense growth remained elevated, growing 12% in the third quarter, driven by increases in real estate taxes in several markets, as well as general liability insurance premium increases. Despite a softer top line, our comparable hotels adjusted hotel EBITDA margin was strong at 35.2% for the third quarter, as well as year-to-date through September, down 200 basis points and 190 basis points as compared to the same periods of 2024, respectively. Adjusted EBITDA RE was approximately $122 million for the quarter and $350 million year-to-date through September. both down approximately 5% as compared to the same periods of 2024. MFFO for the quarter was approximately $100 million, or 42 cents per share, down approximately 7% on a per share basis as compared to the third quarter 2024. Year to date through September, MFFO was approximately $288 million, or $1.21 per share, down 6% on a per share basis as compared to the same period of 2024. Looking at our balance sheet, as of September 30, 2025, we had approximately $1.5 billion of total outstanding debt, approximately 3.3 times our trailing 12-month EBITDA, with a weighted average interest rate of 4.8%. At quarter end, our weighted average debt maturities were approximately three years. We had cash on hand of approximately $50 million, availability under a revolving credit facility of approximately $648 million, and approximately 68% of our total debt outstanding was fixed or hedged. Subsequent to the end of the third quarter, we repaid in full one secured mortgage loan associated with two of our hotels for a total of approximately $29 million, bringing the number of unencumbered hotels in our portfolio as of October 31st to 210. As previously disclosed, in July, We entered into a new unsecured $385 million term loan with a maturity date of July 31, 2030, enabling us to stagger our maturities as we approach our main credit facility in the coming months. Turning to our updated outlook for 2025 provided in yesterday's press release, the adjustments made to full year guidance reflect performance year-to-date as well as the potential negative impact of prolonged economic uncertainty and the government shutdown on the remainder of the year. For the full year, we expect net income to be between $162 million and $175 million, comparable hotels rep part change to be between negative 2% and negative 1%, comparable hotels adjusted hotel EBITDA margin to be between 33.9% and 34.5%, and adjusted EBITDA RE to be between $435 million and $444 million. As compared to the midpoint of previously provided 2025 guidance, we are decreasing comparable hotels rep part change by 100 basis points, while increasing comparable hotels adjusted hotel EBITDA margin by 20 basis points, and increasing adjusted EBITDA RE by approximately $300,000 as a result of strong cost control measures year-to-date, a more favorable general liability insurance renewal than anticipated, and lower G&A expense. We have assumed for purposes of guidance that total hotel expenses will increase by approximately 2.1% at the midpoint, which is 3.4% on a CPOR basis. We continue to assume these increases are driven primarily by higher growth rates for certain fixed expenses, including real estate taxes and general liability insurance than those experienced last year. This outlook is based on our current view and does not take into account any unanticipated developments in our business or changes in the operating environment, nor does it take into account any unannounced hotel acquisitions or disposition. While economic uncertainty remains elevated and the ongoing government shutdown continues to weigh on government demand and travel more broadly, we remain confident in our team's ability to successfully navigate shifting market conditions. Our experience, Discipline and agility enable us to adapt dynamically, maximize profitability, and capture value through opportunistic transactions. The strength of our differentiated strategy has proven resilient across economic cycles, allowing us to preserve equity value in challenging environments and position ourselves to capitalize on emerging opportunities. While we have faced economic headwinds this year, favorable supply-demand dynamics persist. Our recent capital allocation decisions and portfolio adjustments have driven shareholder value, and our solid balance sheet continues to provide meaningful flexibility. Importantly, we remain focused on the long term. Despite near-term volatility, we are committed to executing our strategy with discipline and patience, ensuring our portfolio is well positioned to deliver growth and value creation over time. That concludes our prepared remarks, and we'll now open the call for questions.