Apple Hospitality REIT Inc Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Dori Kesten - Wells Fargo Securities - Analyst : You've mentioned a challenging comparison for 2025 fixed cost versus '24. If you were to normalize for that, what operating expense growth have you assumed in your '25 guidance?

Question: Dori Kesten - Wells Fargo Securities - Analyst : Okay. And then you've been selling relatively small hotels in tertiary markets with probably outsized CapEx versus their upside. What percentage of your portfolio would you describe in that similar way today? And then just who is the natural buyer for these assets that you found?

Question: Austin Wurschmidt - KeyBanc Capital Markets Inc. - Analyst : Liz, I think I've asked you this in the past, but going to ask you again. You'd referenced that midweek ADR continues to be meaningfully below weekend ADR. How close are you to reaching an occupancy level midweek where you kind of cross that threshold that gives you the ability to push on rate more meaningfully?

Question: Austin Wurschmidt - KeyBanc Capital Markets Inc. - Analyst : That's helpful. And then switching gears. Justin, you referenced the transaction market remains challenging but somewhat of a bit spread. Curious what you think narrows it. And to the extent that it remains wide, I mean, how aggressive are you willing to get cobbling together some of the smaller portfolios and redeploying those proceeds into buying back shares of your stock?

Question: Jay Kornreich - Wedbush Securities Inc. - Analyst : Just curious of your thoughts for -- on the guidance RevPAR growth of 2% in 2025. If there's any opportunity to outperform that, do you see that coming more from the midweek business transient demand picking up or weekend demand continue to stay elevated? And are you able to provide any kind of cadence as to how you see quarterly RevPAR shaping up throughout the year?

Question: Floris van Dijkum - Compass Point - Analyst : Justin, I'd love to -- I mean, I sometimes think that you don't get the credits in terms of capital allocation that you perhaps deserve. You've clearly been leaning more into the -- in some of your urban markets. You've got another, call it, is it 7% to 10% of your hotels that you could look to sell, accretively redeploy those. Where do you think you're going to be redeploying them -- capital? Is it more urban? Is it more suburban? And how is that mix shifted? Maybe if you can talk how the portfolio looked in 2020 between urban and suburban and how do you see that trending over the next three to four years.

Question: Floris van Dijkum - Compass Point - Analyst : Maybe if I have a follow-up for Liz, Liz, the $295 million of debt that matures this year, I think the 10-year has dropped almost 50 basis points over the last month. Would you -- where would you borrow at today for 5- or 10-year money? And would you consider prefunding some of those maturing loans today and use the cash to get some nice interest? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 25, 2025 / 3:00PM, APLE.N - Q4 2024 Apple Hospitality REIT Inc Earnings Call

Question: Floris van Dijkum - Compass Point - Analyst : And in terms of the term of debt that you would look to put on, is it five -- extend the maturities or five years or something like that? Is that the right way to think about it?

Question: Michael Bellisario - Robert W. Baird & Co. Incorporated - Analyst : I got a few questions for you. Just first on operating expenses and sort of looking ahead, maybe help us understand like what are your operators doing differently or maybe better in 2025 to offset some of the above inflationary growth that you referenced. And then sort of when you step back, how much of the P&L is actually kind of controllable versus noncontrollable?

Question: Michael Bellisario - Robert W. Baird & Co. Incorporated - Analyst : Anything different that your operators are doing or targeting for 2025? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 25, 2025 / 3:00PM, APLE.N - Q4 2024 Apple Hospitality REIT Inc Earnings Call

Question: Michael Bellisario - Robert W. Baird & Co. Incorporated - Analyst : I got -- I'm here.

Question: Michael Bellisario - Robert W. Baird & Co. Incorporated - Analyst : I think we're good on the operating expense. I can move to my next question. Just for Justin. When you guys do your analysis of sort of buy versus sell and you're triangulating values, maybe give us the lay of land. How have real estate values maybe changed over the last 90, 120 days both from the buy and sell side, from your perspective?

Question: Michael Bellisario - Robert W. Baird & Co. Incorporated - Analyst : Fair enough. And then just throwing one follow-up there. It looks like aging CapEx as sort of the main drivers of what you're selling. Any other major factors that you're considering? And then maybe also, when does the more broadly challenging fundamental outlook become a bigger driver of an asset sales plan?

Question: Aryeh Klein - BMO Capital Markets - Analyst : Maybe just following up on the transaction discussion. If you weren't perhaps constrained by deal sizes for transactions, what percentage of the portfolio will you consider noncore versus that 7% to 10% you highlighted earlier? Or does that 7% -- 7% to 10% inclusive of all the assets you might do as non-core?

Question: Aryeh Klein - BMO Capital Markets - Analyst : Okay. Got it. And then maybe just on the RevPAR guide. Just curious, as it relates to the mix of occupancy and ADR growth that is embedded in that guidance.

Question: Aryeh Klein - BMO Capital Markets - Analyst : Just as it relates to the RevPAR guidance, curious on the mix of occupancy growth versus ADR growth that's embedded in that RevPAR guidance for '25.

Question: Chris Darling - Green Street Advisors - Analyst : Liz, just a quick one. I may have missed it earlier, but what's your outlook for wage and benefit growth this year?

Question: Chris Darling - Green Street Advisors - Analyst : Okay. Helpful. And then, Justin, going back to maybe the supply backdrop across your markets, just digging a little bit deeper. I understand there's little in the way that's under construction broadly. But what about projects in the planning process, anything that might come out of the ground in the near term? Just wondering if you're seeing any changes sort of holistically one way or the other.

Question: Chris Darling - Green Street Advisors - Analyst : Okay. Makes sense. I guess transitioning to a market where maybe that income relative or potential income relative to cost formula might actually make sense, Las Vegas. Anything new you can share in regards to the development parcel there? And I think maybe more importantly, given where your cost of capital is today, how would you think about potentially starting on balance sheet a project like that in today's environment?