Hersha Hospitality Trust Class A Common Shares of Beneficial Interest

David Wiltshire- Percent relative to the first quarter of 2019 the resort portfolio generated $15.2 million in EBITDA a 21 increase 21% increase to the prior quarter and approximately 80% growth on the first quarter of 2019. David Wiltshire- Our properties in Miami and Key West once again benefited from the unprecedented demand and pricing power in the South Florida market. The Parakeet Hotel and Villas was our best performing asset during the first quarter from a RevPar growth perspective. At 85.2% occupancy and a $579 average daily rate resulted in a $494 RevPar, which surpassed fourth quarter 2019's RevPar by 68%. Parakeet generated $4.5 million of EBITDA for the quarter, a record for the property, and 161% increase to the same period in 2019. We have seen continued strength at the Parakeet through April and expect continued outperformance throughout 2022. The Miami Beach market turned in another great performance in the first quarter, as the Cadillac had its best EBITDA producing quarter ever, generating $5.5 million, a 73% increase to first quarter 2019. The Ritz-Carlton Coconut Grove rounded out this record-setting quarter with 19.5% REVPAR growth compared to the first quarter of 2019 and generated $1.8 million of EBITDA, its best quarter ever, and a 72% increase to the first quarter of 2019. We expect to see very strong momentum in the South Florida markets moving forward, driven not only by the traditional leisure traveler, but also by the clear uptick in future business travel related to the influx of notable tech finance and cryptocurrency companies that are relocated to an open new office space throughout the Miami market. In California, the Sanctuary Beach Resort continues to demonstrate the pricing power of well-located, high-quality, differentiated offerings, posting ADR of $478 for the quarter, an increase of 76% to 2019, leading to REVPAR growth of 36.7% compared to 2019. The sanctuary posted EBITDA of 641,000 for the quarter, a more than three times increase to the same period in 2019. Turning to our urban gateway markets, we are seeing strong demand growth, even with the return of business travel in only its early stages, which will be the next leg of recovery of demand in urban gateway markets. As we all know, urban demand has been disrupted in prior quarters due to Delta, and then Omicron. But there is more momentum today than we've seen since the onset of the pandemic. More companies are returning to the office, more conferences are taking place in person, and TSA data and airline earnings suggest Americans are traveling via air at the highest rate since 2019. And while the sequential growth acceleration I mentioned earlier has positively impacted our entire portfolio, it has been most pronounced in our core urban markets. While occupancy continues to recover, we have maintained pricing power across the markets that were most severely impacted by Omicron. Our urban hotel ADR of $218 in March is only 2.5% below March of 2019. The strength was driven by Boston, flat to 2019 at $228. Philadelphia, down just 1.2% at $241. and Manhattan, which was down only 2.5% at $212. Notable performers for March include the Rittenhouse Hotel, which closed the month with an ADR of $601, 34.6% above 2019. The Ritz-Carlton Georgetown, which generated an ADR of $554, 18% higher than 2019. The Boston Envoy, with an ADR of $327, an increase of 6% to 2019, and high at Union Square, where ADR of $324 was about 5% ahead of 2019. The continued rate strength drove RevPAR for our urban portfolio up 31% in the last two weeks of March compared to the first two weeks. All of our urban markets have experienced sequential growth. The largest drivers, though, have been Philadelphia with 39.5% growth, Washington DC with 36% growth and Manhattan at 28.1% growth. Revpar growth has continued into the first half of April and is expected to build for the quarter. In a similar fashion to the urban demand recovery, the return of business travel has grown incrementally after a severe impact from Omicron. According to SAP, 77% of US travel managers reported they had more employees traveling in March than February. In addition, 96% of U.S. travel managers said their travel spend will increase in the next 12 months, predicting an increase of 34% on average. This trend matches what we are seeing on the ground, where the majority of our business travel for Q1 occurred in March. In New York, the reduction to our on-the-books occupancy for both group and business transient has improved by 50% from January to mid-April. While there is still ground to make up, the improvement has been clear and consistent. We believe this rapid improvement in our urban portfolio and the continued recovery of business travel provides a clear trajectory of growth for HRSA's uniquely positioned portfolio. From a strategic standpoint, our public market valuation continues to be significantly discounted to private market values for our assets and our deliberately assembled portfolio. It is our view that as performance continues to accelerate and replacement values skyrocket, this gap will close through continued EBITDA production. That being said, our cycle tested and highly skilled management team will continue to evaluate any and all opportunities to close this public to private market value gap while using the financial flexibility that our recent transaction offers to focus on the parts of the portfolio where we can add the greatest value in the early stages of this recovery cycle. With that, let me turn it over to Ash to discuss in more detail our financial performance and outlook. Great.

Thanks, Neil. And good morning, everyone. I'll be sure to leave plenty of time for questions on our recently announced transaction after my prepared remark. My comments will focus on the rapid accelerating demand improvement we witnessed across our portfolio as the first quarter progressed. and its impact on our margins and cash flow, before closing with an update on our balance sheet and outlook for the current quarter. As compared to 2019, our January comparable store REVPAR was down 31.5 percent for the month. With the resurgence of demand across our portfolio, February and March performance reduced the deficit to 13.4 percent and 14.2 percent, respectively, the lowest spread since the onset of the pandemic. The strong demand at our leisure-oriented properties and the recovery of demand at our urban hotels in the back half of March also allowed us to drive rates, with ADR exceeding first quarter 2019 by 10.5% for the comparable portfolio. Due to the seasonal nature of our portfolio, the first quarter is typically the softest quarter of the year. Coming into the year, we forecasted a corporate cash flow loss for the first quarter, and we're extremely pleased with our ability to generate $23 million of property-level cash flow and approximately $3 million of positive corporate cash flow during the slowest quarter of the year that was significantly impacted by the pandemic. This cash flow generation was driven by the strength of our margins during the entirety of this work. Our ability to drive ADR growth, along with our stringent cost controls and asset management initiatives, resulted in GOP and EBITDA margins for the quarter of 40.8% and 28.3% respectively, roughly 370 basis points better than first quarter 2019. Incremental growth in occupancies in conjunction with our focus on rate integrity and expense savings initiative resulted in margin expansion and material cash flow generation at our hotels in March. As comparable GOP and EBITDA margins for the month, came in at 47.4% and 34.7% respectively, both higher than March of 2019, and we are witnessing this type of margin performance in April as well. Our South Florida cluster led the portfolio again this quarter with 45.9% EBITDA margin, highlighted by the Parrot Key, Cadillac, and Ritz-Carlton coconut fields. The Parrot Key finished the quarter with a 59.8% EBITDA margin, a 2,100 basis point increase to first quarter 2019, while the Cadillac generated a 58.2% EBITDA margin, exceeding first quarter 2019 EBITDA margins by more than 1,000 basis points. Robots' results were also seen at our California Drive-Thru Resorts, as our Sanctuary Beach Resort in Monterey and the Hotel Milo in Santa Barbara generated EBITDA margins that were both more than 1,500 basis points above our 2019 margins for the same period. As we progressed into March, many of our urban luxury and lifestyle assets also began to drive increased profitability. Notable performers include the Ritz-Carlton Georgetown, Boston Envoy, and Hyatt Union Square, each posting EBITDA margin growth greater than 500 basis points higher than 2019. Over the course of the pandemic, our portfolio has undergone a transformation as we have traded strategically selected assets to maintain operational flexibility. On a same store basis, first quarter hotel EBITDA came in just 7.7% below 2019 level. As demand continues to recover, we expect to reduce the spread to 2019 to less than 3% in the second quarter. traditionally one of our most profitable quarters of the year. Our recent performance and outlook fortifies our view through this pandemic that based on rate integrity and cost controls, our EBITDA will recover back to 2019 levels before REVPAR fully recovers. And our portfolio is clearly seeing this dynamic play out. A few closing remarks on our balance sheet and outlook for the second quarter. So Neil clearly presented the strategic rationale for our transaction and our ability to pay down between $460 to $480 million of net debt is also transformative for our balance sheet and company. We are in close contact with our bank group and anticipate refinancing our revolving credit facility and paying down the majority of our unsecured notes with the proceeds from the asset sales we announced earlier today. The debt paydowns are forecasted to reduce our leverage by approximately two turns, and paydowns of our unsecured notes will also significantly reduce our interest expense and improve our credit and covenant metrics. The detailed financial rationale and impact on our leverage metrics are clearly laid out in the supplemental presentation that is now on our website. Transitioning to second quarter outlook, month to date in April, we've seen continued top line growth across our portfolio. RevPAR is expected to increase nearly 20% from March. Although South Florida will once again produce the largest share of revenue, and while our resort portfolios continue their unprecedented run, it is our urban markets that are outperforming our forecast at the highest level. And we're forecasting a continuation and further acceleration of these trends during the second quarter. The largest outperformances from prior months have been Manhattan, Washington, D.C., and Boston. Each is projected to surpass 70 percent occupancy and outpage March REVPAR by 30 to 40 percent. With our sights set on the recovery, which has already begun to actualize across the entire portfolio, and today's transformative transaction, we remain laser-focused on operational performance of the portfolio and pursuing other accretive opportunities that become available throughout the cycle to highlight the value of this portfolio. So with that, that concludes my portion of the call, and we're happy to address any questions that you may have. Operator?

Thank you. So if you would like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. When preparing to ask your questions, please ensure your phones are muted locally. Our first question comes from Dori Keston. Please go ahead, Dori.