Q2 2025 Apple Hospitality REIT Inc Earnings Call
Good day and welcome to the Apple Hospitality Reit second quarter earnings call.
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Now, let's over to Kelly Clark, vice president of investor relations. Please go ahead.
Thank you and good morning, welcome to Apple, Hospitality, Reit second quarter, 2025 earnings call. Today's call will be based on the earnings release and form 10 Q which we distributed and filed yesterday afternoon. Before we begin, please note that today's call may include 4 looking statements as defined by Federal Security laws, these 4 looking statements are based on current views and assumptions and as a result, our subject to numerous risks uncertainties and the outcome of future events that could cause actual results performance or achievements to materially differ from those expressed projected or implied. Any such forward-looking statements or qualified by the risk factors described in our filing with the SEC, including in our 2024, annual report on form, 10K and speak only as of today.
The company undertakes, no obligation to publicly update, or revise, any forward-looking statements except as required by law.
In addition, non-gaap measures of performance will be discussed during this call.
Reconciliations of those measures to gaap measures and definitions of certain items referred to in our remarks are included in yesterday's earnings release and other filings with the SEC.
For a copy of the earnings release or additional information about the company. Please visit Apple hospitality reach.com.
This morning, Justin Knight, our chief executive officer and Liz Perkins. Our Chief Financial Officer will provide an overview of our results. For the second quarter 2025 and an operational outlook for the rest of the year. Following the overview, we will open the call for Q&A at this time. It is my pleasure to turn the call over to Justin.
Good morning, and thank you for joining us today. For our second quarter 2025 earnings call.
Fundamentals for our portfolio improved sequentially. As we move through the quarter, with Brett Park, declines moderating each month and preliminary results for July showing rep Park growth year-over-year.
As anticipated April was the most challenging month, as heightened economic uncertainty, a pullback in government travel, the shift in timing of the Easter holiday and the elongated spring break period, all wait on overall performance.
During the quarter, we worked with our management companies to further optimize the Knicks of business at our hotels, and we're able to strengthen market, share broadly across our portfolio as well as in those markets more heavily impacted by demand shifts related to government travel.
Our teams have demonstrated, an exceptional ability to swiftly adapt to changing demand Trends within our markets in many cases layering on additional Group business at attractive rates.
Although variable expense growth is generally moderated higher fixed costs and lower than expected Topline growth impacted our bottom line performance during the quarter.
The downturn slightly, our property player will continue to produce industry-leading margins. With comparable hotels, the IBA margin is 37.4% for the quarter.
Ously providing guests traveling for both business and Leisure with a compelling value proposition.
What broad economic uncertainty weighed on year-over-year growth and peeled? Capital Market volatility during the quarter travel demand for our portfolio remained resilient.
Further reinforcing the merits of our underlying strategy.
The fundamentals of our business are strong with growth in our group business, largely offsetting slightly softer performance in other segments.
Although the booking window for our hotel's remains short, we are encouraged by recent airline and hotel, brand commentary related to improvements. They are seen in demand and view, these comments as potentially positive, indicators for performance, in the back, half of the Year, our portfolio of rooms Focus hotels, broadly Diversified across markets and demand generators has historically outperformed during extended periods of economic uncertainty and is, well, positioned for upside. Should we see a re acceleration embroidery economic growth?
Supply demand Dynamics, remain favorable across our markets. At the end of the second quarter, nearly 60% of our hotels. Did not have any new upper upscale upscale or upper mid-scale product under construction within a 5-mile radius. This historically low rate of Supply growth is unique to this cycle and we believe materially improves the overall risk profile of our portfolio by reducing potential downside while enhancing potential upside as lodging demand. Strengthens
Supported by the strong cash flow from our portfolio of hotels. We continue to pay an attractive dividend, which is meaningfully additive to Total returns for our investors.
During the second quarter, we paid distributions totaling approximately 57 million, or 24 cents for common share.
Based on Tuesday's closing stock price. Our annualized regular monthly cash distribution of 96 cents per share represents an annual yield of approximately 8.2%.
Together. With our board of directors, we will continue to monitor our distribution rate and timing relative to the performance of our hotels and other potential uses of capital.
We remain disciplined in our approach to Capital, allocation seeking opportunities that refine and enhance our existing portfolio. Drive earnings per share and maximize long-term value for our shareholders.
Since the beginning of this year, we have completed the sale of 2 hotels for a total combined sales price of approximately 21 million.
Entered into agreements for the sale of our full service Houston. Marriott for 16 million dollars and the sale of our Hampton and Homewood Suites in Clovis, California for a combined sales, price of approximately 20 million dollars,
Acquired the home of Suites Tampa, Brandon for approximately 19 million repurchased, approximately 43 million of our common shares, and paid distributions of nearly 146 million. All while maintaining the strength and flexibility of our balance sheet.
We completed the previously announced acquisition of the 126 room Homewood. Suites Tampa, Brandon in June,
The hotel is located adjacent to our Embassy Suite, some represents a unique opportunity to expand our ownership in a submarket that continues to perform well for us with a strong going in yield and operational upside at a price below replacement cost.
The hotel was offered for sale by the loaner and the 18.8 million purchase price represents. A 12% cap rate on trailing 12 months results, through June of this year and a high single-digit cap rate on trailing numbers after all anticipated Capital expenditures,
We anticipate that additional upside from operational synergies. As a result of clustering, this hotel with our Embassy Suites and improved Market positioning following our planned renovation will further enhance Returns on our investment.
Our execution. At this transaction in the current environment, illustrates the underlying strength of our platform and our ability to effectively and efficiently deploy Capital to maximize total shareholder returns over the long term.
While the overall transaction Market continues to be challenging, we have successfully executed on select asset sales in ways that continue to optimize our portfolio concentration and free Capital, which we have been able to effectively redeploy at a meaningful spread.
Pricing for the individual hotels, varies. However, as a group The 2 we sold earlier in the year together with the Houston. Marriott and the 2 k hotels, will trade at a sub. 6% Blended, cap rate or 13.6 times. Evita multiple before capex, and a 4.3% cap rate or 18.2 times. Evita multiple after taking into consideration, the estimated 19 million in required Capital Improvements.
Proceeds from the sales have been used primarily to fund share repurchases.
average market purchase price of approximately $12.83 per share for an aggregate purchase price of approximately 43 million,
Shares. Repurchased year to date have been priced at around a 3 and a half turn spread to recent dispositions and over an 8 turn IBA. Multiple spread after taking into consideration, required Capital Investments.
We continue to have 1 Hotel under contract for purchase The Motto by Hilton which is under construction in downtown Nashville.
This asset is being developed under a fixed price contract and we anticipate acquiring the hotel for approximately 98 million, upon completion of construction later this year.
Since the onset of the pandemic, we have completed approximately 338 million of Hotel sales with an additional 36 million under contract and expected to close in the coming months.
These sales have allowed us to forgo over a hundred million dollars in capital Investments and represent a blended cap rate prior to taking into consideration, necessary capex, or approximately 5% and a sub 4% cap rate after capex.
Over the same period. We have invested more than 1 billion dollars in Acquisitions and purchased 6.5 million shares of our own stock while maintaining the strength of our balance sheet.
These transactions are further enhanced are already. Well, positioned portfolio by lowering the average age. Lifting overall portfolio performance helping to manage near-term capex, needs increasing, exposure to high growth markets. And positioning us to continue to benefit from near-term, economic, and demographic trends.
We have consistently demonstrated our ability to adjust tactical, Capital allocation strategy to account for changing market conditions, and to act on opportunities at optimal times in the cycle.
To maximize total returns for our shareholders.
Since May of last year, we have purchased nearly 78 million of our own shares.
While a long-term goal is to grow our portfolio, when our stock trades at an implied discount to values, we can achieve in private Market transactions. As it has for the past, several months, we will opportunistically sell assets and redeploy proceeds primarily into additional share repurchases, preserving our balance sheet. So that at the appropriate, time in the cycle, we can act quickly on attractive Acquisitions opportunities.
Consistent reinvestment in, our portfolio is a key component of our strategy and ensures that our hotels, maintain their strong value proposition for our customers and remain competitive in the respective markets, while further driving. EBA growth.
Our experienced team is focused on leveraging, our scale ownership to control costs, maximize impact on reinvested dollars and schedule projects during periods of seasonally lower demand to minimize Revenue displacement.
Our ability to effectively renovate and maintain. Our assets is a meaningful. Differentiator that helps us to achieve strong returns for our investors over long periods of time.
during the 6 months end of June 30th Capital expenditures were approximately 32 million
For the year, we expect to reinvest between 80 and 90 million in our hotels with major Renovations at approximately 20 of our hotels.
We entered the quarter at a time of heightened, macroeconomic uncertainty and we're prepared to adjust operational and capital allocation priorities accordingly.
although we did see a pullback in government, travel beginning, in March demand trends of stabilized and overall travel demand remains strong
Our booking window remains short. But as we look at to the second half of the year, we are encouraged by Modest improvements in consumer settlement and some easing of uncertainty related to policy changes, though, economic uncertainty remains elevated. And these improvements are not yet fully reflected, in current booking data, which is pulled back. Slightly year-over-year for August and September.
The adjustments we have made to pull your guidance reflect current booking Trends and could prove conservative. If improvements in the macro environment drive better in the month for the month, pick up like we saw in the first half of the year.
With historically, low exposure to new supplier portfolio is particularly well positioned to benefit from incremental improvements in overall travel demand.
This year, we are celebrating 25 years in the hospitality industry and 10 years since our listing on the New York Stock Exchange.
Throughout our history. We have worked to refine our strategy intentionally to invest in high-quality hotels that appeal to a broad set of business and Leisure customers. A diversifying. Our portfolio across markets and demand generators maintaining a strong and flexible balance sheet with low. Leverage reinvesting. In our hotels, developing our corporate team and closely, aligning efforts with the associates and management teams to operate our hotels.
Our differentiated strategy has been tested and proven across multiple economic cycles.
Across the ability of our business, our low leverage and the depth of our team. I'm confident that we are well, positioned to drive profitability and maximize long-term value for our shareholders, in any macroeconomic environment.
This is now my pleasure to turn the call over to Liz for additional details on our balance sheet, financial performance during the quarter and the outlook for the remainder of the year.
Thank you, Justin, and good morning.
As we have previously messaged a challenging macroeconomic environment, and difficult calendar shifts weighed on our portfolio. Second quarter results.
Comparable hotels, total revenue was 380 million for the quarter and 706 million year to date through June both down slightly to the same periods of 2024.
Comparable, hotels, adjusted hotel ibida with 142 million for the quarter and 248 million year to date through June both down approximately 5% to the same periods of 2024.
Second quarter comparable hotels revpar with 129 down 1.7% as compared to the second quarter 2024.
ADR was $164, down only 10 basis points, and occupancy was 79%, down 1.6% as compared to the second quarter 2024. For the six months ended June 30th, comparable hotels reported an ADR of $160, down 1.1%. Reparation was $120.
.4% and occupancy was 75% down 1.6% to the same period.
Of 2024 respectively.
Our portfolio continues to outperform the industry, where STAR reports RevPAR to be $100 and average occupancy for the industry to be 62% for the first six months of the year, highlighting the relative strength of our portfolio demand despite year-over-year decline.
during the quarter rep part of clients steadily. Improved each month, as we moved past a few key headwinds and our teams, adjusted strategy and reopened the mix of business at our hotels where there were meaningful shifts in government and other demand, segments strengthening market, share for our overall portfolio.
Concerns related to potential policy changes and reductions in government spending as well as the shift in timing of the Easter holiday heavily impacted April results with revpar down 4% compared to April 2024.
In May and June clear of challenging calendar shifts, fundamentals, steadily improved with revpar down 0.9% in May and only 0.2% in June as compared to the same periods of 2024.
Market performance varied significantly during the quarter. With a mix of strong, rev Park gains, and several markets and ongoing headwinds and others due to demand shifts and challenging year-over-year comps
Our team remains focused on hotel and Market specific strategies as well as operational execution to maximize performance.
Based on preliminary results for the month of July, 2025 comparable, hotels, revpar improved by approximately 1% as compared to July 2024, driven by increases in both occupancy and ADR.
Turning back to the second quarter weekend and weekday occupancy. Trends, were heavily impacted by calendar, shifts, and saw Improvement as the quarter progressed.
weekend occupancy, was positive year-over-year in June at up 1.1% after being down, 3.7% in April and down 0.2% in May
Weekday occupancy was also positive. In June up, 3%, after being down 3.1% in April and down 1.5% in May
Weekend ADR grew slightly at 0.1% and weekday ADR contracted by only 0.5% in the quarter driving, the slight overall ADR decline.
Same store room night Channel mix with also impacted by the Easter holiday shift, macroeconomic uncertainty, and reductions in government travel. Brand.com bookings were up 40 basis points year-over-year at 40% otaa. Bookings, were up 20 basis points to 13% property. Direct was up 40 basis points at 25% and GDs. Bookings were down 60 basis points to 16%.
Looking at second quarter, same store, segmentation bar remains strong at 32% of our occupancy. Mix other discounts grew 40 basis points to 28% of mix, corporate, and local negotiated declined. 90 basis points to 17% of mix and government declined, 70 basis, points to 5.2% of mix,
Negotiated as our property teams adjusted strategy in response to shifts in demand during the quarter.
While our group business benefits from Citywide conventions, it is not dependent on large group events and is generally comprised of smaller business, and Leisure groups, ranging from local, corporate meetings and training events to more Leisure oriented groups, like family, reunions, weddings and sports teams.
We continue to see growth in other revenues, which were up 6% on a comparable basis during the quarter and up 8% year to date driven primarily by parking Revenue.
Turning to expenses comparable hotels total hotel hotel expenses increased by 2.8% for the second quarter and 2.6% year to date through June as compared to the same periods of last year.
Or 3.7% and 3.8% on a CPO R basis.
On the same store, basis total Hotel expenses increased by only 1.7% for the second quarter and 1.5% year to date through June.
Total payroll per occupied room for our same store hotels was $99 for the quarter. Only up, 3%, to the second quarter 2024 and Improvement compared, to q1 at 42.00 per occupied room, and 4% growth year-over-year. We continue to achieve reductions in contract labor, which decreased during the quarter to 7% of total wages down. 150 basis points.
Or 15% versus the same period in 2024.
Comparable, hotels, variable Hotel, expenses increased 2.1% in the second quarter with cost control efforts, holding rooms, expense growth to only 1.5%.
And nearly flat on the same-store basis.
Sales and marketing expenses and utility costs, which were headwinds in the first quarter saw Improvement. In the second quarter growing only 7% and 1.9% year-over-year respectively.
Comparable Hotel, administrative and repair maintenance costs grew slightly higher at just under 4% during the quarter.
Driven by administrative wages and other employee related costs, but only 3% on the same store basis.
Consistent with the first quarter real estate taxes were a headwind with increases in several markets and challenging comparisons related to 2024 Appeals.
Despite a softer Topline, our comparable hotels, adjusted Hotel IBA margin is strong at 37.4% for the second quarter and 35.1% year to date. Through June down, 200 basis points, and the 190 basis points as compared to the same periods of 2024 respectively,
Adjusted iPad, diari, with approximately 133, million for the quarter and 228, million year to date through June both down. Approximately 6% to the same periods of 2024 respectively. Mfo for the quarter was approximately 112 million or 47 cents per share down 6% on a per share basis as compared to the second quarter 2024 year to date. Through. June mfo was approximately 188 million or 79 cents per share down 6% on a per share basis as compared to the same period in 2024.
Looking at our balance sheet as of June 30th 2025, we had approximately 1.5 billion dollars of total outstanding debt, approximately 3.4 times our trailing 12 months debe with a weighted average interest rate of 5% at quarter end our weighted average jet debt maturities were approximately 2 years. We had cash on hand of approximately 8 million dollars.
Availability under our revolving credit facility of approximately 475 million and approximately 61% of our total debt outstanding was fixed or hedged.
During the quarter, the company repaid in full two secured mortgage loans for a total of approximately $33 million.
Bringing the number of unencumbered hotels in the company's portfolio as of June 30th, 2025, to 209.
Subsequent to quarter. End in July, we entered into a new unsecured, 385 million Term Loan facility with a maturity date of July. 31st 2030
5 to 2.2%.
Depending on the company's leverage ratio as calculated under the terms of the credit agreement and without a credit spread adjustment.
The new credit agreement for the 385 million termine facility, otherwise contains substantially the same terms as the previous credit agreement for the 225 million Term Loan facility.
Looking ahead, the 5-year tenor will enable us to manage and stagger our maturities as we approach our main credit facility in the next 12 months.
Following the close of this facility are weighted. Average debt maturities increased to over 3 years.
We paid down the existing balance as of that date. On our revolving credit facility, we increased our availability to $650 million.
And approximately 67% of our total debt outstanding is now fixed your hedged. After entering into 2 new swaps on a hundred million dollars of outstanding, debt subsequent to quarter end improving, our weighted average interest rate
Turning to our updated outlook for 2025 provided in yesterday's press release for the full year. We expect net income to be between 161 million and 187 million comparable hotels. Revpar change to be between negative, 1.5% to positive 0.5%
Comparable hotels, adjusted Hotel IBA margin to be between 33.5% and 34.5% and adjusted. EBA to be between 428 million and 450 million.
As compared to the midpoint of previously provided 2025 guidance, we are decreasing comparable hotels, revpar change by 50 basis points. Resulting in a 20 basis, point decrease in comparable, hotels, adjusted Hotel, IBA margin and a decrease in adjusted ibida. Re 55.5 million.
We have assumed for purposes of guidance, that total Hotel expenses will increase by approximately 3.3% at the midpoint, which is 4.1% on a CPO basis.
We continue to assume these increases are driven primarily by higher growth rates for certain fixed expenses, including real estate taxes, and general liability insurance than those experienced last year.
Additionally, we expect approximately 2 million dollars of incremental, expenses related to Brand conferences, which occur every 18 to 24 months, a portion of which was realized during the second quarter with the majority expected to materialize in the third quarter.
This Outlook is based on our current View and does not take into account, any unanticipated developments in our business, or changes in the operating environment nor does. It take into account any unannounced Hotel, Acquisitions or dispositions,
Looking ahead to the second half of the year though. Economic uncertainty remains elevated. It is encouraging to see modest improvements in consumer sentiment and some easing of uncertainty related to policy changes.
Our reservation booking window is short and we do not believe these improvements are reflected in our current booking data which has pulled back slightly year-over-year for August and September likely impacted at least in part by the shift in Russia Shana into September from October.
The adjustments we have made to full year guidance, reflect current booking Trends and could prove conservative if improvements in the macroeconomic environment Drive stronger, short-term bookings.
As we celebrate and reflect our 25 years in the hospitality industry and 10 years since our listing, on the New York Stock Exchange, we are confident our team has the knowledge and experience to successfully and dynamically navigate Market, shifts, and changing conditions, to maximize profitability and drive additional value through opportunistic transactions.
the underlying merits of our differentiated strategy have proven resilient across economic Cycles, enabling us to preserve Equity value, and challenging environments, and to be uniquely positioned to enhance value as opportunities arise
While we have experienced some economic headwinds early this year, we believe favorable supply and demand dynamics persist. Our recent capital allocation activity has enabled us to drive incremental value for shareholders, and our balance sheet continues to provide us with meaningful optionality.
We are confident we remained well positioned.
That concludes our prepared remarks, and we are now happy to answer any questions you have for us this morning.
Thank you. We will now begin the question and answer session.
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At this time, we will pause momentarily till some of the roster.
And today's first question comes from Schmid with KeyBank.
my first question is around guidance, if
Positive booking Trends seen in July, were to continue absent, the holiday shift impact. Would you have been comfortable holding the prior midpoint of repar guidance?
Um, it's a good, it's a good question. I mean I, you know, I think um, had
I think it's entirely based on what we see from a guidance perspect. You know, from a booking position perspective as we sit here today for August and September, you know, if Trends continue to improve. Um, you know, it's been 4 or 5 weeks of, you know, sequential Improvement, which is encouraging, um, you know, how much it would continue to improve, would sort of dictate, whether we'd feel comfortable, maintaining guidance. But I I do believe that there is some upside relative to the current trajectory of of pickup, um, but
Again you know, we have seen how we materialize relative to booking position. Um being noisy like the monthly performance we've seen here today and so felt more comfortable, you know, basing guidance on um the position that we where, where the position is today
Okay, that's helpful. And um on booking strategy, do you continue to add some group onto the books in the third quarter? And at what point would you pivot away from group and look to remix into higher rated segments?
Interestingly um you know group has been a um ADR benefit to us in the second quarter. I think it's 1 of the reasons that um we have seen ADR um hold in there despite some overall occupancy. Declines in the second quarter, so group
Hasn't negatively impacted our overall revpar, uh, performance. So I think as we think about layering on group, it's all about, you know, the right group at the right rate and over the past few months, it really has been, you know, a key driver to the improvement in our revpar. You know,
Performance, you know, as you look from April through June and even into July, we've had elevated Group business. We were really, really pleased with our team's ability to Pivot quickly once we saw Dynamics change, um, in March, and April, and re-strategize, and and think Market by market in hotel at by hotel, and layer on some incremental groups. So, I think today, as we are approaching mix of business and each Hotel, you know, we'll be prudent. And, and certainly not saying we would layer it in everywhere. But, you know, overall, it has been a benefit and the team has done an exception.
Job of putting it in on attractive rates that have only enhanced our repair position.
Great, thanks for the caller.
Thank you.
Thank you. And the next question comes from Ari Kline with BMO Capital Markets.
Thank you and uh good morning maybe just a bit of a follow-up. Um you know if you could provide a little bit more color just on on what you saw on July and kind of the relative strength there and and maybe also just on on the bookings um you know on bookings what you're seeing seeing from that front and then just as far as the Cadence of red Park growth in 3, q and 4 q, how how we should be thinking about that.
Okay, I'll try to answer all those questions. But if I missed 1, um, ask again, um, thinking about, um, July specifically, um, you know, and how that month materialized, you know, we were pleased, we were pleased with performance in July, the Improvement in revpar growth, um, and market share that, we saw, um, really coming out of April and progressing into July the sequential Improvement in revpar, change performance, you know, with overall encouraging. Um, you know, when we look at booking position in August in September, we're down and that's factored into guidance. But um, August booking position, you know, does not take into account at least today, you know, the trajectory of what we saw in July with short-term pickup, um, in the posi, you know, in our booking position. So, I think, oh,
Overall. So I think, you know July, we did see Improvement as we were looking at, you know, future, bookings, um, and in, in the month for the month bookings. But, um,
you know, just just several weeks, you know, we needed to be somewhat cautious there, um, as we think about
Um looks to offset September decline so I think that's where we in part. Believe. Some of it is the shift in Russia, Shana into September and October just being for our portfolio historically, a very strong uh business and Leisure oriented month. Um so when you think about Q2 and Q or or Q3 I'm sorry and Q4
we have anticipated that revpar because of August and September booking position today would be down um and that we would see Improvement in the fourth quarter and we'd have rev Park growth in the fourth quarter.
Thanks and, and that may be just, um, looking at the portfolio and, and the market performance, it looks like some of the Sun Belt markets were, were really some of the weakest in the quarter. Whether it was Phoenix Nationals, Dallas, Dallas, uh, just curious if you can, uh, provide a little bit more color on on what you're seeing in those markets and maybe what specifically drove that weakness.
Um, absolutely. And and actually, if you look at our market results, you'll see their their broad disparities, um, in terms of performance Market to Market. Um, remember across the entire portfolio performance, uh, for the quarter is skewed by April's performance, which is, um, you know, largely calendar shift. Uh, remembering that our hotels.
Tend to prefer perform worse over holiday weeks, um, than they do outside of those weeks. Because of the, the mix, We generally have a business travel, um, you know, when we look at some of the markets that you highlighted, um, the specific factors vary, um, Dallas for example, um, was negatively impacted by convention calendar and, and um, uh, Renovations at the convention center,
Um, Phoenix was negatively impacted by uh, a pullback in in semiconductor business largely, um, impacting our portfolio of hotels, um, that business is expected to come back. As we round out the third quarter of move into the fourth quarter of this year.
Um, though there is some impact from, um, you know, uh, a slight pullback in government in certain other areas. And then when you look through some of our other, some belt markets, um, markets like Huntsville that don't show up specifically, um, as an individual Market. But but um, as uh, 1 of our Alabama markets. Um, so a pretty significant pullback, um, in government, which negatively impacted that market, when we look at the portfolio, as a whole, though, what's interesting is looking at our top performing markets, um, you know, nearly half of them were positively impacted by Improvement in government travel. Um, and then when we look at the bottom portion of our portfolio, um, you know that there are significant number of the markets that that were negatively.
Impacted by a pullback in government. Um, certainly not the only Factor, uh, impact in our Market. But we did see, uh, across the board in addition to the holiday shift in April, some pretty significant shifts in travel patterns and as Liz highlighted earlier, um, our incredibly pleased with our team's ability, um, to shift Focus, um, and and to attract largely, uh, Group business across the portfolio at higher rates. Um, you know, oh, over the course of the quarter, improving our, our uh, occupancy and rate position and and by July putting us in a position, um, to be positive. I, I think certainly speaks to the strength of our team, both here corporately and at the property level and, and also, the versatility of the product that we own, um, and the appeal that that product has with a broad consumer base. So I I would love to be able to point you to a single factor that impact of all of our markets. But the reality is, it's a
Variety of factors. Um, you know, and that that came together all exacerbated during the quarter by the calendar shift, um, impacting April.
Appreciate all the color. Thank you.
Thank you. And the next question comes from Cooper Clarke with Wells Fargo.
Great. Thanks for taking the question. Just giving some of the comments on weaker August and September. Bookings. Can you talk about what gives you confidence in the acceleration in 4q revpar pickup, whether it's mix shift acceleration and fundamentals or softer comps
Having you know, we started to talk about it. Um, and we're more impacted in Q1, but we did have, um, some market share opportunity beginning in November and feel like we have some opportunity as we round out the year.
Great. And then as we think about Capital allocation moving forward in a seemingly improving transaction Market with more available financing. Could we see the pace of disposition activity? Accelerate beyond the announced uh closings with proceeds used for share BuyBacks.
I, I think certainly, I, I think, um, you know, moving back or looking back, um, 12 months or so we we had hoped that, there would be a more rapid recovery, um, in our share price, um, given how we have traded recently, um, and the effectiveness of our team at executed, and I think incredibly well on sales transactions, um, and our ability to benefit from the Arbitrage, between private Market valuations, um, and the implied multiple, uh, in our current share price. Um, you could expect us to, um, you know, dig even deeper into that area. You know, incredibly pleased with both the transactions. We've done to date but also, um, the assets that we currently have under contract, we're continuing to test the market um to see if there's an appetite for larger scale transactions. And to date, um, have have um, had a better ability even with
Uh, more open debt markets to secure attractive pricing with smaller assets or, as you saw, uh, with our most recent announcement, um, small portfolios.
Still in that 20 million or, or less kind of price range. Um, but rest assured, um, that to the extent. We continue to see, uh, an Arbitrage opportunity as big as the 1. We see now, um, we'll continue to pursue it, you know, importantly, um, in my prepared remarks, I highlighted the fact that it, it is our desire long-term to grow the portfolio. And and I think um, using proceeds from these sales um, to fund share repurchases. Um, while we certainly have balance sheet capacity, um, to do more than that, um, it it preserves balance sheet capacity um, to pursue their Acquisitions. Um, as marketing conditions shift and that becomes the the more attractive opportunity for us. Um, in the meantime uh you know in addition to the the immensely positive Arbitrage opportunity that we're we're taking advantage of we're also offloading. Um
Capex. Um you know that that would be needed over the next several years um to buyers of these hotels. Um and uh we think better positioning the portfolio for the long term.
Great. Thank you.
Thank you. And the next question. Constant Chris darling with Green Street.
Hey, thanks. Good morning.
Uh, just actually going back to that last Point. Um, you know, as you think about incremental dispositions, you highlighted the opportunity to repurchase shares. Uh, how does the national purchase contract factor into that thinking? Um, and how would you intend to finance that acquisition?
Uh, it's a good question, a portion of our Acquisitions activity. As, you know, has always been forward commitments, um, on new development assets. Um, because we're making those commitments, in many cases 2 to 3 years, in advance, uh, of the acquisition we're taking into consideration in our analysis, um, more of an average, um, cost of capital, um, than a spot cost of capital. I, I think, um, our intent would be to use balance sheet capacity to fund that acquisition. Um, and proceeds from sale to fund asset or um, stock repurchases. Um interestingly and importantly um highlighted in our press release is the 1031 exchange um opportunity uh and and for tax purposes, um we will be utilizing that um to pursue
the, um, the, the National Asset, but, but, um, largely, we see those as 2 separate phenomenon and as I highlighted,
Um, today, um, where there are limited comps, um, that potentially make NAV analysis, um, tricky. Um, it's very easy for us to do the analysis, uh, for a relative value standpoint between where we're able to transact on individual assets and where we're able to buy our shares, um, and take advantage of the large gap that we're seeing today to drive incremental value for our shareholders.
Submarket relative to some of the Suburban areas in which you already own and um you know, what's your latest perspective on sort of current market trends relative to um your underwriting for the motto and uh your ultimate cost basis there?
Um, so from a, a cost basis standpoint, I think looking at our perky pricing relative to recent trades in the market. Um, it's easy to see that that we have. Um, we have Christian Beyond where recent trades have happened. Uh, we anticipated, um, in our underwriting that the market would stabilize and potentially temporarily pull back, um, and and feel good about the long term value, um, that we will achieve on that asset. Um, you know, I, I think Colin, um, on ryman's call had, uh, very good commentary about the National Market, and we are equally bullish. Long term about the potential there. When we look at at the Delta from a performance standpoint between, um, the downtown markets, remembering we own assets and the Vanderbilt area, uh, which is just outside of downtown. We also own Assets in Franklin, um, the Franklin Market has been a little bit more challenging recently for us. Um, the long-term prospects, we think are
Are good as they repurpose, um, uh, auto manufacturing facilities in that area, which of historically been a key driver of kind of overall, demand for that market. Um, and as the market continues to grow, um, as a healthy suburb, uh, of the downtown Nashville area. Um, but you know near-term, uh, we have greater confidence. Um, and, and when I say near-term, over the next 6 to 12 months, um, think that the, um, that the downtown area will will continue to perform a relative basis. Um, slightly better, uh, with both areas, um, you know, absorbing I think higher than the national average amounts of new Supply, um, But continuing also to see, um, an influx of new businesses, um, and, um, very strong Leisure demand, which we think over time, um, continue to make Nashville a very compelling market for us.
All right, understood. Thank you.
Thank you.
Thank you. And the next question comes from Daniel Hogan with Beard.
Hi, good morning. Uh, first question is quick on buybacks. Um, it didn't look like there was anything in July. Do you feel like those buybacks still have to track asset sales in your mind, or is there room to sort of be opportunistic and, you know, incrementally use the balance sheet there?
I, I think, as I highlighted my, um, earlier response. Um, we intend over time to primarily fund share repurchases utilizing, uh, proceeds from sale. Um, in those instances, the Arbitrage is very easy to quantify. Um, though we do have incremental capacity and have shown, um, uh, you know, an ability to, um, look forward and to buy shares opportunistically, um, you know, and then reset the balance sheet with future sales. Um, you know, I, I think the pullback in July, um, had much more to do with timing, um, of our earnings than it did Appetite for shares. Um, so certainly at, or around current pricing, we continue to see, uh, significant value in our ships.
Okay that's helpful. And then just follow up. Then on being opportunistic with the transactions. Um is there still a large appetite for buyers out there, looking to um take on assets with larger portions of of required Renovations or capex needs, or would you still consider um decisions of assets regardless of uh, capex needs or not? If there's a buyer out there?
Um, our CapEx is a driver, but not the only driver of our dispositions activity. Um, certainly we’re looking to maximize the value um of the trade um and would be willing to sell assets um where we could maximize.
Current price, um, and where we felt, uh, we could further improve the trajectory, and, and quality of our overall portfolio, um, you know, even where near-term capex is not an issue. And, in fact, um, as we move forward, over the next, um, 12 to 24 months, you're likely to see us, um, you know, renovating Assets in advance of sale in some instances because of our ability, um, to perform Renovations more efficiently than potential buyers, um, and seeing that as a way, uh, as well to potentially maximize the value on sale,
Great, thank you very much.
Thank you. And then, once again, as a reminder, please press star, then 1, if you would like to ask a question.
And the next question comes from Billings Lou with a compass point.
All right, good, good morning. I I wanted to um, follow up when you talked about the group business contributing to the bottom line, um, I would imagine it has a little bit of a lead time. So what what was different that allowed you to accelerate adding more Group business? Um, is that something you are going to continue to replicate? And, and why not continue to maintain that?
Group where it makes sense. You know, I think, um, 1 of the things that differentiates our group business from more traditional Citywide, um, you know, and Convention calendar type group business or large group business is that it is. And typically has always been shorter term in nature. Um, so, you know, you think family reunions, um, sports teams, you know, smaller, corporate events. Um, things of the sort. Um, you know, we we've been able to layer that in, um, fairly quickly. Um, so I think, as I mentioned before because we have been able to do that and focus in on that at attractive rates and with some success, we'll we'll continue to focus there where it makes sense from an overall mix perspective.
When you say attractive rates, I would imagine if it's short.
Turnaround for like a family reunion, um, is it attractive for them to get them in or is it attractive to to you?
To us, when I say attractive rates, I mean, you know, obviously we are working with, um, the respective group and and hopefully we're coming up with, um, a win-win for everybody. But, but when I say that, I talked about our group rates year-over-year so rate growth. Um, as we think about, um, you know, different segments of business. We've been able to grow group ADR year over year, um, and an environment where you know, rate has remained strong. Um, but we certainly haven't seen the rate growth, um, across all segments of the business, um, that we have seen in in group business over the last quarter. And so, you know, I think it's, it's certainly Group by group, but we've been able to grow based group, um, group rates, you know, year-over-year which has been additive
And lastly the uh we I believe you said something about market share opportunity in November. Um
What is it that you think is going to happen? You're going to be able to grab market share, and why?
Why specifically November? Or why isn't it something that persists in general? Could you just explain what you mean by grabbing market share? I'm assuming he would always be looking to get it anyways. So what's different here?
Yes. So um I'm going to touch on November specifically and then I'm going to kind of zoom out and talk about market share more broadly. Since we have highlighted it, both last quarter and this quarter and it isn't something we've typically highlighted quite as much. But for November specifically um the week of the election um given the makeup of our portfolio. Um, and when we think about our rev Park growth in November relative to the broader industry, we did not see the same level of performance largely because of the makeup of our portfolio. Um, and being so significantly business, transient oriented. So less about, um, specific market share, like compset market, share and individual markets, and more broadly speaking about, um, how the calendar did not play in our favor relative favor, um, given the composition of our portfolio for November specifically, um, but but as we talk about market share, I want to ground us a little bit.
Um our overall portfolio has always had strong Market, yield relative to the specific markets we're in. And we've had a history of consistently gaining market share within our markets, you know, overall as a portfolio, um, when we reference market share, we look at it 2, different ways, um, which I've sort of highlighted already, we look at our portfolio, rev Park growth relative to the broader industry which is influenced in part by market concentration and portfolio composition as well as property. Specific performance relative to its comps that are market. And as I mentioned earlier, we've consistently had strong market share on an absolute basis in our individual markets. That said, we also like to be gaining market. Share market, specific market share. And we did see in both our performance to the broader industry, and our individual markets, some opportunity in the first quarter specifically, um, which again was unusual and we highlighted that,
And I'll say it again. We're really incredibly pleased that by the end of the second quarter. And for the second quarter overall, we regained that market share within our respective markets and in June outperformed, the broader industry as well. You know, our corporate teams our management company teams and our property teams really did an exceptional job quickly adjusting tactical strategy with all the the demand shifts and dynamics that played in, you know, played into the macro. But our portfolio specifically that we spent a lot of time highlighting the last call. Um and I, you know, I'm pleased to say that we've maintained that market share growth uh, in the running 28 days as well.
Oh, thank you.
Thank you.
Thank you. And this concludes our question and answer session. I would like to return the floor to just a night for any closing comments.
We appreciate you joining us on today's call and look forward to speaking with a number of you over the coming weeks. We hope as always that as you travel you'll take the opportunity to stay with us at 1 of our hotels until next time.
Thank you.
The conference has now concluded. Thank you for attending today's presentation. May now disconnect your lines