Apple Hospitality REIT, Inc.

Greetings and welcome to the Apple Hospitality REIT fourth quarter and full year 2025 earnings call. At this time, all participants are in a 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. Please note this conference is being recorded. I will now turn the conference over to your host, Kelly Clark. Thank you. You may begin.

Thank you, and good morning. Welcome to Apple Hospitality REIT's fourth quarter and full year 2025 earnings call. Today's call will be based on the earnings release in Form 10-K, 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 2025 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 fourth quarter and full year 2025 and an operational outlook for 2026. 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 fourth quarter and full year 2025 earnings call. Against the challenging backdrop in 2025, our corporate management and hotel teams skillfully executed against strategic initiatives to maximize operating performance, manage expenses, capitalize on dislocations in the stock market, optimize our existing portfolio, enhance our growth profile, and position the company to maximize shareholder value throughout performance in the years ahead. Our portfolio of efficient, high-quality hotels is broadly diversified across 84 markets with exposure to a variety of demand generators. During the year, leisure travel remained strong across our hotel portfolio while policy uncertainty and a pullback in government travel impacted midweek demand, temporarily disrupting the steady improvement in midweek occupancy that characterized much of 2024. Our asset management and hotel teams adjusted strategy to optimize the mix of business at our hotels as demand trend shifted, in many cases layering on additional group business to bolster market share and strengthen overall portfolio performance. Through the successful navigation of changes in government-dependent demand, combined with continued strength in leisure travel, we achieved Comparable Hotels RevPar of $118 for the full year 2025, down 1.6% to the prior year. Based on preliminary results, Comparable Hotels RevPar declined by approximately 1.5% in January 2026. as compared to January 2025, primarily as a result of challenging comps related to wildfire recovery-related business, which benefited a number of our California hotels last year, and the presidential inauguration, which benefited our hotels in the Washington, D.C. area. Winter storms also weighed on January and early February results, but occupancies have improved meaningfully with recent weeks showing significant year-over-year growth. Together with our management teams, we remain focused on ensuring that we are growing market share and prudently managing expenses to maximize the profitability of our hotels. Variable expense growth for our portfolio has moderated, with higher growth and fixed costs during 2025 largely coming as a result of challenging year-over-year comparisons. We achieved comparable hotels EBITDA of $99 million for the quarter and $474 million for the year. resulting in an industry-leading comparable hotels EBITDA margin of 31.1% for the quarter and 34.3% for the year. In January, we successfully completed the transition of our 13 Marriott-managed hotels to franchise, consolidating management with third-party management companies who were in most instances already operating hotels for us in market in order to realize incremental operational synergies. We are confident these transitions, together with a select number of additional market-level management consolidations, will 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 and increase the marketability of the hotels in the future as we consider select dispositions. The Marriott transitions aligned 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. Our disciplined approach to capital allocation has been a hallmark of our strategy throughout our history, balancing both near and long-term allocation decisions to capitalize on existing opportunities while securing the long-term relevance, stability, and performance of our portfolio and maximizing value for our shareholders. While our long-term goal is to grow our portfolio, Our stock is traded at an implied discount to values we can achieve in private market transactions for much of the past year. We prudently capitalize on the disconnect by selectively selling assets and redeploying proceeds into the purchase of our own stock, preserving our balance sheet to safeguard against potential macroeconomic volatility and to protect our ability to act quickly on future accretive acquisition opportunities. During the year, we sold seven hotels for a combined gross sales price of approximately $73 million, and we purchased 4.6 million common shares for a total of approximately $58 million. Shares repurchased during 2025 were priced at around a 2.4-turn spread to dispositions completed during the year and around a 6.5-turn EBITDA multiple spread after taking into consideration brand-mandated capital investments. Our team has done a tremendous job pursuing opportunistic asset sales that further optimize our portfolio concentration, help to manage portfolio CapEx needs, and free capital for a creative redeployment at a meaningful spread. Pricing for the individual hotels varies. However, as a group, the seven hotels we sold in 2025 traded at a 6.5% blended Cap rate or a 12.4 times EBITDA multiple before CapEx and a 4.9% Cap rate or 16.5 times EBITDA multiple after taking into consideration the estimated $24 million in anticipated capital improvements. We were able to use 1031 exchanges to reinvest gains on hotel sales, redeploying proceeds into the acquisition of the Homewood Suites Tampa Brandon, which sits adjacent to our Embassy Suites in Market, and the model by Hilton, Nashville Downtown, which we acquired in late December upon completion of construction. Recent acquisitions have performed well despite headwinds in several markets. The embassy in Madison, Wisconsin saw meaningful year-over-year improvement as the hotel completed its first full year of operations. And the AC Hotel in Washington, D.C., which was also purchased in 2024, produced full-year rev par of $205 and a 43% house profit margin despite the meaningful pullback in government travel and a weaker convention calendar. Four of the six hotels we purchased in 2023 achieved yields in excess of 10% last year, including our Spring Hill Suites in Las Vegas, despite meaningful declines in the performance of that market due to lower inbound foreign travel and a weaker convention calendar. The Nashville motto is ramping nicely, and we continue to have forward commitments for two future hotel development projects, which are currently in early stages, including a dual brand AC and residence in located adjacent to our Spring Hill Suites in Las Vegas and an AC in Anchorage, Alaska. The AC in Anchorage has broken ground and is expected to be delivered in late 2027. Construction has not yet begun on the two Vegas hotels, though current expectations are for the AC and residence in to be completed sometime in the second quarter of 2028. We do not currently have any pending acquisitions slated for 2026. Through all phases of the economic cycle, we seek to create value for our shareholders by driving incremental earnings per share through accretive transactions that enhance the quality and competitiveness of our existing portfolio and ensure that we are well positioned for future outperformance. 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. In the near term, we anticipate that we will continue to pursue select asset dispositions where we can redeploy proceeds at a multiple spread, while at the same time managing future CapEx needs and fine-tuning the distribution of our portfolio to increase exposure to potentially higher growth markets. Disciplined reinvestment in our portfolio is another key component of our strategy and ensures that our hotels maintain competitive positioning within their respective markets and present guests with a value proposition that enables our hotels to drive incremental rate. Our historical annual capex spend has been between 5% and 6% of total revenue, which is a significant differentiator for us relative to our full-service peers. Combined with higher margins, The lower CapEx obligation enables us to produce meaningfully more free cash from operations, which we then use to fund shareholder distributions and strategic investments. Our experienced capital investment scheme leverages our scale ownership to reduce costs, maximize the value of reinvested dollars, and minimize revenue displacement by optimally scheduling projects during periods of seasonally lower demand. For the year ended December 31st, capital expenditures totaled approximately $88 million. For 2026, we expect to reinvest between 80 and $90 million in our portfolio, with major renovations planned for approximately 21 of our hotels, including the conversion of our residence in Seattle Lake Union to a Homewood Suites beginning in the fourth quarter of this year. The transition of this hotel will happen as it reaches the end of its current franchise term, with the determination to change brands informed by competitive supply dynamics within the market and brand incentives. The hotel would continue to operate as a residence inn through the renovation, which is expected to be complete in the second quarter of 2027. Supported by strong cash flow from our portfolio of hotels, we continue to pay an attractive dividend, which meaningfully enhances total returns for our investors. During the fourth quarter, we paid distributions totaling approximately $57 million, or 24 cents per common share. And for the full year, we paid distributions totaling approximately $240 million, or $1.01 per 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 7.8%. 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. Historically low supply growth continues to materially reduce the overall risk profile of our portfolio, limiting potential downside and enhancing potential upside as lodging demand strengthens. At year end, nearly 59% of our hotels did not have any new upper upscale, upscale, or upper mid-scale product under construction within a five-mile radius. Throughout our 26-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, strategically reinvesting in our hotels, and closely aligning our efforts with the associates and management teams who operate our hotels. In 2025, we skillfully executed strategic initiatives to further maximize operating performance, capitalize on dislocations in the stock market, optimize our existing portfolio, enhance our growth profile, and position the company for outperformance in the years ahead. Travel demand for our portfolio has remained resilient, further reinforcing the merits of our underlying strategy. Our guidance for 2026 calls for comparable hotels rep part to be flat at the midpoint, which generally aligns with star forecasts for our chain scales. We believe that this represents a measured base case scenario for our portfolio. With early summer potentially benefiting from incremental leisure travel related to the FIFA World Cup 2026, and easier comparisons to periods adversely impacted by cuts in government spending, tariff announcements, and the government shutdown in late 2025, we acknowledge that this guidance could ultimately prove conservative. With January and February being seasonally lower occupancy months, it is early in the year for us to identify with conviction trends for either business or leisure travel. And as we saw last year, the possibility of policy-related demand disruption is real. We are, however, optimistic about the setup for the year and feel we are well-positioned regardless of how things play out in the broader economy. We remain confident in the long-term outlook for the hospitality industry, the strength of our portfolio specifically, and our ability to drive profitability and maximize long-term value for our shareholders. 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.