Q1 2025 Ashford Hospitality Trust Inc Earnings Call
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Regina: Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ashford Hospitality Trust First Quarter 2025 Results Conference Call.
Regina: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star then the number one on your telephone keypad. I would now like to turn the conference over to Deric Eubanks Chief Financial Officer, please go ahead.
Deric Eubanks: Good morning and welcome to today's conference call to review results for Ashford Hospitality Trust for the first quarter of 2025 and update you on recent developments.
Speaker Change: On the call today will also be Stephen Zsigray, President and Chief Executive Officer and Chris Nixon, Executive Vice President and Head of Asset Management.
Speaker Change: The results, as well as notice of the accessibility of this conference call on a listen-only basis over the internet were distributed yesterday afternoon in a press release.
Speaker Change: At this time, let me remind you that certain statements and assumptions in this conference call contain or based upon forward-looking information and are being made pursuant to the safe harbor provisions of the Federal Security's regulations
Speaker Change: Such four-looking statements are subject to numerous assumptions, uncertainties, and known or unknown risks, which could cause actual results to differ materially from those anticipated.
Speaker Change: These factors are more fully discussed in the company's filings with the Securities and Exchange Commission.
Speaker Change: The forward-looking statements included in this conference call are only made as of the date of this call, and the company is not obligated to publicly update or revise them.
Speaker Change: Statements made during this call do not constitute an offer to sell or solicitation of an offer to buy any securities.
Speaker Change: In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided and the company's earnings release and accompanying tables or schedules.
Speaker Change: which have been filed on Form 8K with the SEC on May 6, 2025, and may also be accessed through the company's website at www.ahtreads.com
Speaker Change: Each listeners encourage to review those reconciliation provided in the earnings release, together with all other information provided in the release.
Speaker Change: Also and that's otherwise stated, all reported results discussed in this call compare the first quarter ended March 31st, 2025 with the first quarter ended March 31st, 2024. I will now turn the call over to Stephen Zsigray. Please go ahead.
Stephen Zsigray: Good morning, everyone, and thank you for joining us today. After my introductory comments, Deric will review our first quarter financial results and then Chris will provide an operational update on our portfolio.
Stephen Zsigray: Our first quarter performance was highlighted by 3.2% comparable rep far growth, 3.6% comparable total revenue growth, and 8.7% growth in comparable hotel EBITDA.
Stephen Zsigray: We're very pleased with these results which clearly underscored the impact of the strategic decisions our team has made over the past several quarters and the strength of our high quality geographically diverse portfolio.
Stephen Zsigray: We're also happy to report the first full quarter results following our recent conversions of the LeConcha hotel in Key West to Marriott's autograph collection and the LePavillon Hotel in New Orleans to Marriott's tribute portfolio. LePavillon had an outstanding quarter, with 78% total revenue growth over prior year quarter, while LeConcha realized 27% total revenue growth over the same period.
Stephen Zsigray: Late last year, we announced GROW AHD, a transformative initiative aimed at driving $50 million in run rate EBITDA improvement.
Stephen Zsigray: Realizing outsized improvement in property level performance is critical to achieving that goal and our nearly 9% year-over-year improvement in comparable hotel events after the quarter reflects the tremendous efforts that our asset management team and property managers have made to drive revenue growth while aggressively managing operating expenses.
Stephen Zsigray: In addition to strong property performance, we've also realized substantial reductions to corporate expenses as part of our DROA-HT initiative.
Stephen Zsigray: Our Board of Directors approved a 50% reduction in cash compensation for board members while also reducing the current size of the board from nine members down to seven. Additionally, total incentive awards granted to executive management and other associates were reduced by more than 50% relative to recent years.
Stephen Zsigray: Lastly, our advisor, Ashford Inc, has now fully implemented a number of corporate cost savings measures for Ashford Trust
Stephen Zsigray: Several initiatives remain underway, but we now expect fully implemented grow AHD initiatives to contribute more than $30 million of run rate EBITDA improvement towards our $50 million goal.
Stephen Zsigray: Since your end, we've also continued to make improvements to our capital structure.
Stephen Zsigray: In January , we closed on the sale of the courtyard Boston Downtown for $123 million.
Stephen Zsigray: The 6.9% trailing copyright achieved on sale, highlighted the intrinsic value within our portfolio, provided important deleverging for our largest loan pool, and resulted in significant capital expenditure savings.
Stephen Zsigray: In mid-February, we completed the refinancing of 16 assets spanning four mortgage loans with final maturities in the first half of the year. This refinancing also enabled us to achieve another significant milestone as we fully repay the remaining balance on our corporate strategic financing, leaving the company completely free of corporate debt.
Stephen Zsigray: In late February , we extended our mortgage loan secured by the 141 room hotel Indigo and Atlanta Midtown in Atlanta, Georgia.
Stephen Zsigray: The extension provides for an initial maturity of February of 2026 and a one-year extension option subject to the satisfaction of certain conditions with a final maturity date in February of 2027.
Stephen Zsigray: The loan has a current balance of $12.3 million and bears interest at a floating rate of silver plus 2.75%
Stephen Zsigray: Most recently, in April , we extended our MS-17 mortgage loan secured by 17 hotels. The extension provides for an initial maturity in March of 2026 and two one-year extension options subject to the satisfaction of certain conditions with a final maturity date in March of 2028.
Stephen Zsigray: The loan has a current balance of $410 million dollars and continues to bear interest at a floating rate of silver plus 3.39%.
Stephen Zsigray: As previously discussed, our non-traded referred stock offering closed at the end of March. This capital rates allowed us to access substantial capital, totaling $212 million in gross proceeds.
Stephen Zsigray: We have launched our follow-on offering of non-traded preferred stock and expect this to be an important source of capital for continued U.D. leveraging and future growth.
Stephen Zsigray: We believe these coordinated efforts are opening a new chapter for Ashford Trust and the collective impact was evident in our company results for the first quarter.
Stephen Zsigray: Looking ahead to the rest of 2025, while macroeconomic events have introduced uncertainty and industry forecasts, we remain focused on controlling what we can control and achieving our grow AHT goal by maximizing the performance and value of our hotels and further reducing corporate expenses.
Stephen Zsigray: We also plan to continue making improvements to our capital structure by pushing out remaining near-term depoturities and exploring strategic dispositions to better position the company moving forward.
Deric Eubanks: I will now hand in the call over to Deric to review our first quarter financial performance.
Deric Eubanks: Thanks, Stephen. For the first quarter, we report a net loss attributable to common stockholders $27.8 million, or $4.91 per eluded share. For the quarter, we reported AFFO per eluded share of negative 98 cents.
Deric Eubanks: Importantly, total AFFO improved by $8.2 million over the prior year quarter. Adjusted $2.2 million for the quarter was $61.7 million, which reflected a $2.2 million increase over the prior year quarter.
Deric Eubanks: With total revenue down, $26.5 million compared to the prior year quarter, this adjusted EBITDA-RE Resolve reflects our focus on cost saving measures at both the property level and corporate level.
Deric Eubanks: At the end of the first quarter, we had $2.6 billion of loans with a blended average interest rate of 8.1% taking into account in the money interest rate caps
Deric Eubanks: considering the current level of sulfur and the corresponding interest rate caps approximately 23% of our debt is now effectively fixed and 77% is effectively floating.
Deric Eubanks: We ended the quarter with cash and cash equivalents of $85.8 million and restricted cash of $139.2 million.
Deric Eubanks: The vast majority of the average restricted cash is comprised of lender and manager held reserve accounts and $2.6 million related to trap cash held by lenders.
Deric Eubanks: While we're shorted cash, increased $39 million in the previous quarter, and the vast majority of that cash is set aside for future capital expenditures.
Deric Eubanks: At the end of the quarter, we also had $22.1 million due from third-party hotel managers.
Deric Eubanks: This primarily represents cash, held by one of our property managers, which is also available to fund hotel operating costs.
Deric Eubanks: We ended the quarter with networking capital of approximately $156 million, which was $34 million higher than the previous quarter. As of March 31st, 2025, our consolidated portfolio consisted of 72 hotels with 17,329 rooms.
Deric Eubanks: After taking into account our recently completed one-for-ten reverse stock split, our share count currently stands at approximately 5.9 million fully diluted shares outstanding, which is comprised of 5.8 million shares of common stock and 0.1 million OP units.
Stephen Zsigray: As Stephen mentioned, we closed our offering series J and series K non-traded preferred stock on March 31st, 2025
Deric Eubanks: Since launching the offering in 2022, we raised approximately $212 million of gross proceeds from the sale of our series J and series K non-traded preferred stock.
Stephen Zsigray: While we are currently paying our preferred dividends quarterly or monthly, we do not anticipate reinstating a common dividend in 2025.
Stephen Zsigray: This concludes our financial review, and I would now like to turn it over to Chris to discuss our asset management activities for the quarter.
Chris Nixon: Thank you, Deric. During the first quarter of 2025, our geographically-deferred portfolio delivered strong results highlighting both the quality of our assets and the effectiveness of our strategic initiatives.
Chris Nixon: Parable hotel rep part increased by 3% over the prior year period, reflecting the successful execution of our top line strategies.
Chris Nixon: This performance was supported by our ability to capture elevated demand tied to the presidential inauguration and several high-profile events.
Chris Nixon: In Washington, D.C. over the three-day period extending from January 18th through January 20th, inauguration-related demand drove 95% occupancy across our hotels and generated over $1.6 million in incremental room revenue compared to the prior year period.
Chris Nixon: We are particularly proud of our asset management team whose exceptional efforts were instrumental in driving these results, despite continued softness in the government segment in related travel.
Chris Nixon: Even with these challenges, Hotel Ibadat across the entire portfolio grew 9% during the first quarter over the prior year quarter.
Chris Nixon: These results were driven in large part by implementation of several grow AHT initiatives that were in full swing during the quarter.
Chris Nixon: The property's discipline focus on maximizing insular revenue and executing targeted expense management strategies has set a strong foundation for the year ahead.
Chris Nixon: With that, I would now like to highlight a few of the recent success stories from across our portfolio.
Chris Nixon: Group room revenue pace remains positive across portfolio despite broader macroeconomic pressures.
Chris Nixon: Every quarter of 2025 group rate is pacing ahead of the respective prior year periods.
Starting in February , we observed softness in a few markets, largely attributable to recent policy changes and actions by those.
Chris Nixon: The top five adults in the portfolio by key count close the quarter with a 10% increase in group room revenue pace compared to the prior either.
Chris Nixon: Looking ahead, these properties are well positioned for sustained performance with Group Room, Room Revenue pace up 6% for the 4-year 2025 and 6% for 2026.
Chris Nixon: We are also encouraged by the pipeline of event-driven opportunities, particularly the Fetha World Cup 2026, which will run from early June through mid-July across several key U.S. markets, including Miami, Dallas, and Washington, D.C.
Chris Nixon: Turning to operating margins as we have discussed on prior calls, we remain focused on reducing costs through operational improvements in enhanced efficiencies.
Chris Nixon: I am pleased to report the first quarter Hoetzal even a margin expanded by approximately 131 basis points compared to the prior year period.
Chris Nixon: As part of our Grow AHD initiative, we have taken decisive strategic actions over the past several months to enhance hotel level Ibadat and improve overall profitability while maintaining service standards.
Chris Nixon: As Stephen mentioned, we have worked closely with our largest property manager, Remington, as well as other brand managers to implement a range of cost optimization measures.
Chris Nixon: Looking ahead, we believe the Grow AHD Initiative positions us to establish a more sustainable and efficient operating model.
Chris Nixon: As we move through the remainder of 2025, we will continue to proactively identify new opportunities to strengthen hotel level performance and maximize long-term value.
Chris Nixon: The last quarter we highlighted the completion of our strategic repositioning of Crown Plaza and Key West Florida into La Concha, now part of Miriam's autographed collection.
Chris Nixon: The property officially converted on December 6th following a $36 million renovation.
Chris Nixon: In its first full quarter under the autographed flag, the hotel delivered strong results with red part of 16% and total revenue increasing 27% compared to the prior year period.
Chris Nixon: We anticipate continued upside as four new food and beverage outlets ramp up, including a full-service dinner restaurant that launched midway through the first quarter of 2025.
Chris Nixon: The Pavillon also delivered a solid first quarter following its conversion to Marriott's tribute portfolio.
Chris Nixon: Rep are increased 87% over the prior year period, and hotel EBITDA reached $1.3 million, an improvement of nearly $1 billion compared to the prior year period.
Chris Nixon: The hotel benefited from both its brand-requisitioning and heightened demand associated with the Super Bowl and Mardi Gras, driving a 313% increase in group room revenue compared to the prior year period.
Chris Nixon: During Super Bowl weekend, La Pavilion achieved 100% occupancy for four consecutive nights with ADR exceeding $900 per night.
Chris Nixon: Turning to the impact of the 2024 Florida hurricane, several of our properties played a meaningful role in supporting recovery efforts during the first quarter.
Chris Nixon: Residents in Orlando, SeaWorld and Health and Tampa provided extended accommodations to construction crews and displaced residents helping meet critical housing needs during a period of disruption.
Chris Nixon: Residents in Orlando was the only hotel in its competitive set registered for the FEMA program which allowed the hotel to support federal recovery efforts by providing nearly 4500 room nights to those affected. This generated approximately $1.2 million in revenue while serving as a vital resource for the community.
Chris Nixon: Moving on to capital expenditures, during the first quarter of 2025, we advanced several key property improvement initiatives aligned with brand, franchise agreement renewals, and our ongoing commitment to elevating our guest experience.
Chris Nixon: Notable projects included the launch of a comprehensive guest from renovation at Courier of Bloomington, the completion of a public space renovation at Hampton and Evansville, and a guest from renovation at NBC Suites West Palm Beach.
Chris Nixon: In the second quarter, we will begin a guestroom renovation at Hilton, Jordan, and Austin, which will also include upgrades to the restaurant and meeting space, enhancing the properties of Peele and leveraging its premier downtown location.
Chris Nixon: Looking ahead, we plan to initiate additional capital projects later this year, including a guestroom renovation at Hilton Garden in Virginia Beach, public space enhancements at the Western Princeton, and the strategic brand conversions of Sheraton Mission Valley and Sheraton Anchorage in the Hyatt Regency Hotels.
Chris Nixon: These initiatives are consistent with our discipline, capital deployment strategy, and for our focus on long-term value creation through portfolio, quality, and brand-of-line.
Chris Nixon: For full year 2025, we anticipate capital expenditure fuel range between $95 million and $150 million.
Chris Nixon: Looking ahead, we are actively rolling out additional ROAHD initiatives aimed at enhancing operational performance. We are also focused on reducing energy costs, optimizing contract labor, utilization, and cutting travel expenses. All decided to drive efficiency, lower costs, and improve profitability.
Chris Nixon: We remain optimistic about our portfolios Outlook for 2025 and are confident in our ability to unlock additional value.
Chris Nixon: That concludes our prepared remarks and we will now open up the call for Q&A.
Speaker Change: We'll take our first question from the line of Jonathan Jenkins with Oppenheimer & Company. Please go ahead.
Jonathan Jenkins: Good morning. Thank you for taking my questions. First one for me wanted to dive into the portfolio trends. Can you maybe help us think about the monthly red par progression in the quarter and the impact of, you know, counter shifts, what impact that had on March and April and what you're seeing more real time.
Jonathan Jenkins: in demand trends given the industry had a somewhat volatile march coupled with, you know, some encounterships and other factors.
Jonathan Jenkins: Yeah, Jonathan, I can think that this is Chris. You know, January was the strongest month of the quarter, right after inauguration when many of the dojo initiatives went into effect is when we started to see, you know, softening.
Speaker Change: There were some other headwinds within the quarter, February , losing February 29th in the comparable to last year being in the week period, certainly put an impact.
Speaker Change: Eastern moving into April , certainly helped March and you know we'll have an impact on April .
Speaker Change: In terms of the broader trends, we mentioned softening in certain markets from the group's segment That's we're certainly seeing that it's not across the board corporate group in the entertainment segments within our group customers are still fairly resilient fairly strong.
We did see some cancellations within the DC market
Speaker Change: Cancelations outside of DC have subsided. We're not seeing a lot of cancellations outside of DC. There are some reductions in block, but a lot of the kind of softening is very short term. So we're not seeing anything really into 2026 at this time.
I mentioned the government, the government pull back.
That is primarily impacting D.C.
Speaker Change: The good news is is that as we are working to backfill that business
Speaker Change: We are seeing strength and other segments, especially in the DC market, so we're working very hard to go after new business transient accounts.
Speaker Change: We're revisiting some of the accounts that we weren't interested in before and business transit pace in DC is up significantly in Q2 and so we are being successful in kind of navigating those trends and backfilling that business.
Stephen Zsigray: You know, our focus is heavily on labor and it's Stephen said kind of controlling what we can control and we're going to do it.
Speaker Change: We're very happy with productivity. We saw enhancements over last year and hours for occupied room. We're running much more efficient hotels still than we were in 2019.
Speaker Change: Our contract labor utilization is down, hourly wages are stabilizing and so a lot of those things are what drove and played a key role in our EBITDA gains and we expect those to continue as we move ahead.
Chris Nixon: Okay, that's a great color there Chris, maybe following up on that and this might be difficult to quantify our estimate but...
Chris Nixon: How much of the portfolio do you think is exposed to kind of international inbound travel and government demand? And it sounds like more recent demand volatility is attributable to you know, calendarships and the pause in the uncertainty versus any type of structural slowdown demand. Is that a fair characterization of your comments?
Chris Nixon: Yes, it's definitely isolated to the short-term in terms of international. It's a very small percentage of this portfolio's demand, it's less than 5% government is a little bit larger but far less than group or leisure and it's particularly isolated to DC. Again, where we're seeing declines in government outside of the DC market, it's more associated with government contractors.
Chris Nixon: and that is such a small percentage of those hotels business. So where we are seeing the declines in government and DC, we've been able to backfill with other segments and so we're fairly confident that will be the case as we move forward as well.
Speaker Change: That's very helpful and maybe flushing gears to the AHT girl initiative. It's already delivering impressive results, you know, almost 60% of the way to the target. Can you help us think about how much of that low hanging fruit has been harvested in kind of your takeaways or areas of success and then what kind of areas?
Speaker Change: or potential opportunities remain in your confidence to get to that $50 million goal.
Speaker Change: Yeah, sure. I think, certainly, the low-hanging fruits always kind of the first to go, but we do still have, we have some really chunky pieces of this. I think they're still ten plus million dollars.
Speaker Change: of improvement that we hopefully will be able to make at the corporate level.
Speaker Change: and then the other piece of it is going to play out over time. It's growing index and it's a different called for us to kind of report on. Okay.
Speaker Change: Where do we think this lands as a percentage of the goal? So my, my, my,
Speaker Change: Expectation is that we've actually probably already achieved a little bit more than that it's just hard to quantify exactly what that is and
Speaker Change: and will continue to make updates as we get further into the year, but still feel very good about our ability to deliver on that $50 million goal.
Speaker Change: That's a great color there. And switching gears to the BAML Highland loan, I'm sorry if I missed this. Is there any update there or update on conversation with lenders? How are you thinking about that maturity?
and many more. Thank you. Thank you.
Speaker Change: Yeah, so we do have a poorbearance agreement in place. We've got an extension option to next month. We continue to work both with the existing lenders and other lenders on potential refinancing, but do expect that we'll come to that conclusion on that one that's favorable.
Speaker Change: Okay, I appreciate that. And then last one for me, if I could, the morning Stanley Lone extension in that press release. There was some commentary about the potential for affid sales. Any color about how you're thinking about potential dispositions, and just broadly, and I'm sorry, I'm sorry, I'm sorry, I'm sorry, I'm sorry.
Speaker Change: You know, what the market's pricing currently, any color would be helpful on that.
Speaker Change: Yeah, yeah, absolutely. So as it relates to sales, there have been two big developments lately that have allowed us to kind of shift our focus as it relates to sales. First, we paid off our obterly forward strategic financing in February .
Speaker Change: That had us very focused on our biggest assets with the most equity because we were trying to generate cash proceeds.
Speaker Change: to pay down that loan. Now that that's behind us, we've been able to shift that focus a bit, and then secondly, as you mentioned with that particular loan pool, as we've negotiated extensions on a lot of our existing loans, we've been very focused on obtaining flexibility.
on Asset Release Prices.
Speaker Change: A lot of these loans are from pre-COVID and the portfolios have changed and the valuations have changed significantly
Speaker Change: and so having flexibility to sell assets that isn't necessarily tied to where their values were seven or eight years ago has considerably expanded our flexibility across the portfolio to explore assets and
and be more opportunistic in what we're looking to sell.
Speaker Change: Relative to the cash flow, those things are throwing off, who allow us to continue to deliver and continue to make significant improvements to our capital structure overall.
Thank you. Thank you. Thank you.
Speaker Change: That's perfect. Thank you for all the color and for everyone's time today. That's all from it.
Speaker Change: And that will conclude our question and answer session. I'll hand the call back to management for any closing comments.
Speaker Change: Thank you for joining today's call and we look forward to speaking with you all again next quarter
Speaker Change: That will conclude today's meeting. Thank you all for joining. You may now disconnect.
Speaker Change: Michael Bellisario, Deric Eube