Summit Hotel Properties, Inc.

Good day and thank you for standing by. Welcome to the Summit Hotel Properties Inc. Q1 2022 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Adam Liddell, Senior Vice President of Finance, Capital Markets, and Treasurer. Please go ahead.

Thank you, Carmen, 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, May 4, 2022, 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.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 first quarter 2022 earnings conference call. Overall, we are extremely pleased with our portfolio's first quarter performance. as operating trends accelerated rapidly through the quarter, resulting in our highest quarterly RevPAR and best RevPAR recapture to 2019 levels since the onset of the pandemic, despite a slow start to the year in January and early February. RevPAR in March reached a pandemic-era high of over $120, a 61% increase from our January results. We continued to benefit from meaningful pricing power throughout the portfolio, highlighted by record average daily rates in our resource segment, which finished the quarter 10.5% higher than the first quarter of 2019. We also began to see significant growth in our urban portfolio, particularly midweek, as contribution from corporate group negotiated and business transient demand segments, as well as compression from convention activity in numerous markets, drove strong occupancy levels throughout March and April. First quarter pro forma rev par increased approximately 78% from the first quarter of 2021, driven by a 21% increase in occupancy and a 47% increase in ADR. For the quarter, rev par recapture was 78% of 2019 levels, with nominal rev par and 2019 recapture rates improving each month. RevPAR in March reached an 87% recapture rate to March of 2019 and was 16% higher than our previous pandemic-era high in October of 2021. Preliminary April pro forma RevPAR was expected to be $119, essentially flat to March and approximately 90% of 2019 RevPAR levels, despite some of our stronger mountain and desert markets entering into slower seasonal periods. Similar to our results in the back half of the first quarter, April's better-than-expected performance was driven increasingly by accelerating demand in our urban portfolio, which helped offset the end of the traditional spring break period and the timing of the Easter holiday weekend. Preliminary April occupancy was approximately 70% in our urban portfolio, with rates over $170, which drove RevCar to its highest level since the onset of the pandemic, surpassing our first quarter metrics by nearly 40%. Weekday pro forma rev par has also increased meaningfully through the first part of the year, driven by continued growth in corporate and group-related travel. March and April achieved weekday rev pars of $113 and $110, respectively, each of which was over 20% higher than the prior pandemic peak in October of last year. As we look to the balance of the second quarter, we are very encouraged by the latest forward booking trends, with May pacing over 6% ahead of where April was trending 30 days ago, and June trending slightly up from May. Continued improvement in weekday demand, a strong Memorial Day weekend, and continued leisure strength in the early part of the summer season are expected to result in May and June recapture rates in line or better than the 90% recapture we experienced in April, despite getting into more difficult year-over-year summertime comparables. In our earnings release last night, we also announced two pending transactions. First, we've entered into a contract to sell the 169 guest room Hilton Garden Inn San Francisco Airport North Hotel, currently owned in our joint venture with GIC for $75 million or $440,000 per key. The purchase price is nearly 30% higher than what the joint venture acquired the hotel for in 2019 and equates to a 1% cap rate on the hotel's trailing 12-month net operating income. Importantly, the sale will also allow us to forego a comprehensive $7 million renovation, equal to over $40,000 per key, that was scheduled to begin later this year. We also announced, in conjunction with our mezzanine lending program, the exercise of our equity purchase option to acquire a 90% interest in the newly constructed 264 guest room AC element dual branded hotel in downtown Miami's Brickell neighborhood. at a valuation of $89 million, or $337,000 per key. These two new hotels are located in the heart of Brickell, directly adjacent to Brickell City Center, in one of the country's most dynamic and vibrant markets. The hotels have ramped incredibly quickly since their December 2021 opening, generating first quarter REF PAR of $181, and hotel EBITDA margin exceeding 45%. First Quarter Rev Bar and Hotel EBITDA were approximately 25% and 30% higher than the property's initial budget, respectively. The property features Rosa Sky, a rooftop bar on the 22nd floor offering incredible views of the Miami skyline. The outlet has quickly become one of downtown Miami's most popular nightlife destinations, generating approximately half a million dollars of revenue in the month of March alone. For the full year 2022, we now anticipate the hotels will generate a combined hotel EBITDA yield on our option price between 8% and 9%, effectively in their first 12 months of operation. The acquisition of the AC element represents our first exercise of a purchase option received in connection with providing a mezzanine loan on a new hotel development. We earned a 9% interest rate on our $30 million of funded paper during the term of the loan and we will be acquiring two hotels performing extremely well nearly immediately upon opening at a basis that is well in the money relative to current market values. We believe this further demonstrates the uniqueness of our mezzanine lending program and an ability to capture better risk-adjusted returns without taking on outright development risk. Both the Brickell and San Francisco transactions are expected to close during the second quarter. In the first quarter, we closed on the previously announced acquisition of 27 hotels, two parking garages, and various financial incentives from New Crest Image for a total consideration of $822 million. While we've owned the new portfolio for less than a quarter, we are already 3.5% ahead of our original EBITDA underwriting and are increasingly optimistic that the continued implementation of various asset and revenue management strategies will drive additional upside beyond our initial expectations. Our other pandemic era acquisitions are performing even better, as the Residence Inn and Steamboat and Embassy Suites in Tucson are tracking nearly 40% above our underwritten 2022 EBITDA levels. Combined, we now expect our 2022 EBITDA yields on these acquisitions to be in the 7% range. Since July of 2021, we've executed on approximately $1 billion of transactions, and nearly half of the hotels we acquired have opened within the past four years, implying there is still considerable upside in these assets as our newer hotels continue to stabilize. This activity all serves as a testament to our team's ability to identify and execute on accretive transactions that are consistent with our longstanding strategy of thoughtfully and opportunistically allocating capital. With that, I will turn the call over to our CFO, Trey Conkling.