Summit Hotel Properties, Inc.

Thank you for standing by, and welcome to the Summit Hotel Property Second Quarter 2021 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question at that time, please press star and then 1 on your touch-tone telephone. As you'll remember, today's conference call is being recorded. I will now return to the conference call with your host, Mr. Adam Waddell, Senior Vice President of Finance, Capital Markets, and Treasurer. Please go ahead.

Thank you, Valerie, and good morning. I am joined today by Summit Hotel Properties President and Chief Executive Officer John Stanner and Executive Vice President and Chief Financial Officer Trey Conkling. Please note that many of our comments today are considered forward-looking statements as defined by federal securities laws. These statements are subject to risks and uncertainties, both known and unknown, as described in our SEC filing. Forward-looking statements that we make today are effective only as of today, August 4th, 2021, and we undertake no duty to update them later. You can find copies of our SEC filing and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call, on our website at www.shpreet.com. Please welcome Summit Hotel Properties President and Chief Executive Officer, John Stanner.

Thanks, Adam, and thank you all for joining us today for our second quarter 2021 earnings conference call. Overall, we are extremely pleased with the acceleration of our operating trends in the second quarter, which significantly exceeded our initial expectations and represented a nearly 50% increase in REVPAR from the first quarter. Occupancy, average daily rate, and overall profitability all reached new highs since the onset of the pandemic. And importantly, we achieved positive corporate cash flow for the quarter. Demand improves sequentially each month during the quarter, and we sold 30% more room nights in the second quarter than we did in the first quarter. While leisure demand continues to be the primary driver of our operating results, we are also encouraged by improving corporate transient demand trends that are having a positive effect on our hotels located in urban locations and our midweek performance in particular. Demand in our urban hotels grew at a considerably faster pace than the overall portfolio during the second quarter, increasing 43% over the first quarter. For the second quarter, we reported pro forma rev par of $78, which was over three times higher than our second quarter rev par last year, and a 49% increase over last quarter. Like demand, rev par improves sequentially each month of the quarter, and our preliminary results for July show further rev par acceleration to just over $100, a robust 15% improvement over June, and our first full month of RevPAR above $100 since the pandemic started. RevPAR for the second quarter was 43% lower than what was achieved in the second quarter of 2019, a significant improvement from the first quarter when RevPAR was nearly 60% lower than the comparable 2019 period. This gap narrowed considerably in July, with RevPAR only 21% below July 2019 levels, which we expect will be sufficient to drive corporate cash flow positive on a year-to-date basis. Importantly, the recovery of average rates accelerated meaningfully during the quarter, as ADR across our portfolio increased 15% compared to the first quarter, as both weekend and weekday ADR grew double digits. Average rates in our urban portfolio increased 23% from the first quarter, which encouragingly reflects some level of rate-accretive remixing of our business with corporate travel. Weekend occupancy was an impressive 79% during the second quarter and was over 80% in both May and June. Midweek occupancy also continues to steadily improve, and the gap between weekday and weekend occupancy continues to narrow. Midweek occupancy in July was 67%, a full 10 percentage points higher than it was just 60 days ago. As you would expect, we are closely monitoring the developments of the spread of the Delta variant of COVID-19, and have positioned the company very well if we begin to see any reversal in the strong reopening momentum we've experienced over the past few months. Thankfully, to date, we have not seen any negative response to the variant in our July operating numbers, and our pace for future months remains decidedly positive. August paces up slightly to what we had on the books for July at this time last month, but with rates nearly 5% higher. September paces up 6% over August, and October paces over 25% higher than September. While we would not preclude some plateauing of results in the back half of August and into September when we get into a naturally slower leisure demand period, We remain optimistic that some of that leisure business will be replaced by pent-up corporate demand in the post-Labor Day period, particularly as we get into October and past the Jewish holiday season. Trey will provide some additional color on our operating results later in the call. During the second quarter, we completed the contribution of six wholly-owned hotels, totaling 846 guest rooms, into our joint venture with GIC for $172 million. The transaction generated approximately $84 million of cash proceeds, which increased our investment capacity, reduced corporate leverage, and enhanced our overall liquidity. Subsequent to quarter end, a portion of the net cash proceeds from the asset contribution were reinvested into the acquisition of the newly built 110 guest room resident in Steamboat Springs for $33 million, which further scales our joint venture with GIC. The extended stay hotel is expected to benefit from favorable market demand trends and is a perfect complement to our existing portfolio of well-located, high-quality hotels with efficient operating models. As the newest hotel in Steamboat Springs, one of only six other hotels that have opened in that market since the year 2000, and the first Marriott-branded extended stay product in the market, the hotel has been able to achieve a 30% rev par premium compared to its competitive set in the first six months of operations. In just over three weeks of our ownership, the hotel has been one of our best performers, running over 93% occupancy with rev par of over $180. Our 2021 forecast for the hotel is already ahead of our underwriting, reflecting just how quickly the fundamental operating backdrop has improved. Our joint venture now holds 12 assets with a total investment of nearly $500 million and affirms the commitment from both parties to find unique and opportunistic investments to continue to grow the partnership. During the second quarter, we invested approximately $2.9 million in our portfolio on items primarily related to planned maintenance capital. As we mentioned last quarter, given our conviction around the long-term improvement in demand trends, we plan to accelerate several renovations into the second half of 2021, which will take advantage of the still lower than historical occupancies to minimize disruption from those projects. We expect to spend between $30 to $40 million in capital expenditures for the year on a consolidated basis, and between $25 and $35 million on a pro-rata basis. With that, I'd like to publicly welcome and turn the call over to our new CFO, Trey Conklin.