Summit Hotel Properties, Inc.

Good day and welcome to the Summit Hotel Properties Q3 2021 earnings call. As a reminder, this call is being recorded. I'm now going to turn the call over to Adam Waddell, Senior Vice President of Finance, Capital Markets, and Treasurer.

Thank you, Michelle, 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 filings. Forward-looking statements that we make today are effective only as of today, November 4, 2021, and we undertake no duty to update them later. You can find copies of our SEC filings and earnings release which contain reconciliations to non-GAAP financial measures referenced on this call, on our website at www.shpreed.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 third quarter 2021 earnings conference call. In conjunction with our earnings release last evening, we announced the signing of a definitive agreement for a transformational acquisition of 27 hotels, two parking structures, and various economic incentives from New Crest Image for a total consideration of $822 million. I'll provide more transaction highlights and other details following our prepared remarks for our third quarter financial results, but we are incredibly excited to have the opportunity to acquire these 27 well-located hotels concentrated in high-growth markets. Overall, we are extremely pleased with the continued acceleration of our improving operating trends in the third quarter, which exceeded our initial expectations and resulted in more than a 25% increase in REVPAR from the second quarter. Occupancy, average daily rate, and overall profitability all reached new highs since the onset of the pandemic, and we more than tripled our positive corporate cash flow compared to last quarter. Demand growth accelerated broadly during the quarter as we sold nearly 7% more room nights in the third quarter than we did in the second quarter, peaking during a historically strong summer travel season in July when occupancy in the portfolio was above 72%. Although August demand pulled back modestly as expected, we saw a reacceleration in the back half of September when occupancy averaged nearly 70% during the last two weeks of the quarter. While leisure demand continues to be the primary driver of our operating results, we remain encouraged by improving corporate transient demand trends. Negotiated room revenue increased approximately 28% in the third quarter over the second quarter, and while that is admittedly off of a very small base, we're also encouraged by some of the anecdotal signs suggesting a more robust return of corporate travel is forthcoming. We reported third quarter pro forma rev par of $98, which was more than double our rev par in the third quarter of last year, and was 24% lower than what was achieved in the third quarter of 2019, a significant improvement from the first half of the year, when rev par was nearly 43% lower in the second quarter and 59% lower in the first quarter than the comparable 2019 periods. Importantly, the recovery of average rates accelerated meaningfully during the quarter, as ADR across our portfolio increased 19% compared to the second quarter, and weekday ADR growth outpaced weekend growth by nearly 200 basis points. Average rates in our urban portfolio increased 24% from the second quarter, and weekday urban ADR grew 27% from the second quarter, which encouragingly reflects some level of rate-accretive remixing of our business with corporate travel. Weekend occupancy was an impressive 80% during the third quarter and averaged 82% in July and September, as the recovery continues to clearly be led by exceptionally strong leisure demand. However, midweek occupancy also continues to steadily improve, climbing to 64% during the third quarter, a full five percentage points higher than the second quarter. And the gap between weekday and weekend occupancy continues to narrow. Trey will provide some additional color on our operating results later in the call. During the third quarter, we completed the previously announced acquisition of the newly built 110-guest room residence in Steamboat Springs for $33 million. The Extended Stay Hotel is the newest hotel in Steamboat, one of only six other hotels that have opened in the market since the year 2000, and the first Marriott-branded Extended Stay product in the market. Since acquisition, the hotel has performed exceptionally well, generating occupancy and rev par of nearly 87% and $161, respectively, and hotel EBITDA margin of 49% for the third quarter. On an annualized basis, this equates to a 9% net operating income yield and less than three months of ownership, despite the hotel having been open for less than one year. During the third quarter, we invested approximately $4.2 million in our portfolio on items primarily related to planned maintenance capital. As we previously mentioned, given our conviction around the long-term improvement in demand trends, we plan to commence several renovations in the fourth quarter of this year and early next year to minimize disruption from these projects. We expect to spend between $15 and $20 million in capital expenditures for the year on a consolidated basis. and between $14 and $19 million on a pro-rata basis. With that, I'll turn the call over to our CFO, Trey Conkling.