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Ashford Hospitality Trust, Inc. (



Q4 2011 Earnings Call

February 23, 2012 11:00 am ET


Scott Eckstein - IR

Monty Bennett - CEO

Douglas Kessler - President

David Kimichik - CFO


David Loeb - Robert W. Baird

Patrick Scholes - FBR Capital Markets

Robin Farley - UBS

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Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Ashford Hospitality Trust Fourth Quarter Conference Call. During today’s presentation all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions) This conference is being recorded today, February 23rd, 2012.

I would now like to turn the conference over to Scott Eckstein with Financial Relations Board. Please go ahead, sir.

Scott Eckstein

Good day, everyone, and welcome to Ashford Hospitality Trust conference call to review the company’s results for the fourth quarter of 2011.

On the call today will be Monty Bennett, Chief Executive Officer; Douglas Kessler, President; and David Kimichik, Chief Financial Officer.

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 the press release that has been covered by the Financial Media.

At this time, let me remind you that certain statements and assumptions in this conference call contain are based upon forward-looking information and are being made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to numerous assumptions, uncertainties and known or unknown risks, which could cause actual results to differ materially from those anticipated. These risk factors are more fully discussed in the section entitled “Risk Factors” in Ashford’s Registration Statement on Form S-3 and other filings with the Securities and Exchange Commission. 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.

In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in the company’s earnings release and accompanying tables or schedules, which have been filed on Form 8-K with the SEC on February 22, 2012, and may also be accessed through the company’s website at Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release.

I will now turn the call over to Monty Bennett. Please go ahead, sir.

Monty Bennett

Thank you, and good morning. I’m pleased to report on our record setting performance. Our AFFO per share of $0.42 was our strongest fourth quarter in our history and our eighth consecutive quarterly AFFO per share increase.

For the full year, AFFO per share of $1.86 was also our highest ever reported and reflects 24% growth over last year. The 2011 AFFO marks seven out of eight years of record AFFO per share performance and demonstrates that our strategies to maximize returns while mitigating risks continued to create shareholder value.

Given our record performance and forecast, in December we increase Ashford’s 2012 dividend guidance by 10%. We expect to distribute a quarterly cash dividend of $0.11 per common share or $0.44 per common share on an annualized basis. Since our last conference call in November, the U.S. economy has continued to show resiliency despite persisting global market concerns.

U.S. hotel demand continues to increase with RevPAR growth well above historical average growth rates. Meanwhile, new room supply remains extremely low for the foreseeable future. Clearly, the fundamentals exist for continued improvement in the performance of the lodging REIT.

Even in moderate U.S. economic growth should result in higher than average RevPAR growth. The recent forecasts from PTF

suggest national RevPAR growth for the next couple of years to be 6.1% to 7.3%. These levels are well above the industry’s 1988 to 2010 average RevPAR growth of 2.5%.

On historical basis real RevPAR still remains far below prior peak cycle levels. Given that with each recent cycle, the new real RevPAR peak exceeded the prior peak and it’s expected that the same could occur in this cycle. Since the hotel industry is still in the early stage of this recovery, it remains very good time to invest in lodging REITs.

In particular, we certainly believe that our combined strategic benefits of financial leverage and solid operational performance should position us to outperform our peers over the long run in terms of total shareholder return.

We are pleased with the EBITDA flows of 55% margin improvement of 143 basis points for our legacy portfolio. While the total U.S. hotel market RevPAR grew at 7.9% in the fourth quarter, our legacy portfolio RevPAR grew at 5.4%. The reason for this discrepancy lay in the fact that our MSAs modestly underperformed the national average with 7.2% growth but these particular MSAs are upper upscale comp sets further underperformed. Our assets RevPAR growth matched that of our comp sets though.

Similarly, in the Highland portfolio, we are very pleased with our EBITDA flows of 97% and margin improvement of 114 basis points. Nationwide airport and urban locations underperformed, which is where the Highland assets are concentrated, and accounts for most of the difference in performance.

We do not see this underperformance as a long-term trend. There was also a modest impact due to innovations.

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