American Hotel Income Properties REIT (HOT-UN) Q2 2024 earnings summary

Executive summary

• Portfolio of 63 select-service hotels saw strong demand in Q2 2024, with revenue and RevPAR both up year-over-year, driven by occupancy and ADR growth across leisure, corporate, and group segments.

• RevPAR reached a record $103, up 5.1% year-over-year, led by extended stay and select service properties.

• Cost control initiatives are ongoing, with progress in reducing contract labor and insurance premiums, but operating margins remain pressured by elevated costs and labor shortages.

• Significant progress made on capital recycling, with multiple non-core hotel dispositions completed or under contract, and proceeds targeted for debt reduction.

• A dispute with hotel manager Aimbridge Hospitality was announced, citing mismanagement and material economic harm, but no impact to guest experience or daily operations.

Financial highlights

• Q2 2024 revenue was $73.6 million, compared to $68 million in Q2 2023.

• Normalized diluted FFO was $0.10 per unit, down from $0.14 per unit in Q2 2023.

• NOI margin for Q2 2024 was 32.9%, down 60 bps year-over-year; same property NOI margin fell 150 bps to 32.3%.

• Debt to gross book value at June 30, 2024, was 52%, up 10 basis points from December 31, 2023.

• Debt to trailing twelve months EBITDA was 9.7x, a 0.1x improvement year-over-year.

Outlook and guidance

• Management expects continued pressure on hotel operating margins due to elevated labor and operating costs, though cost inflation is decelerating in some categories.

• Strategic focus remains on asset sales and loan refinancings to address 2024 debt maturities and strengthen liquidity.

• Additional asset sales and refinancings are planned to address near-term debt maturities and further strengthen liquidity.

• July 2024 initial results show occupancy at 73%, ADR at $138, and RevPAR at $100, or 103% of July 2023 levels.