Ashford Hospitality Trust, Inc. ( AHT) Q3 2011 Results Earnings Call November 10, 2011 11:00 AM ET Executives Scott Eckstein – IR Monty Bennett – CEO David Kimichik – CFO and Treasurer Douglas Kessler – President Analysts Patrick Scholes – FBR Capital Markets Ryan Meliker – Morgan Stanley Will Marks – JMP Securities Presentation Operator
Previous Statements by AHT
» Ashford Hospitality Trust CEO Discusses Q2 2011 Results - Earnings Call Transcript
» Ashford Hospitality Trust's CEO Discusses Q1 2011 Results - Earnings Call Transcript
» Ashford Hospitality Trust CEO Discusses Q4 2010 Results - Earnings Call Transcript
» Ashford Hospitality Trust CEO Discusses Q3 2010 Results - Earnings Call Transcript
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 had been filed on Form 8-K with the SEC on November 9, 2011, and may also be accessed through the company’s website at www.ahtreit.com. 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. Our third quarter results demonstrated the continued success of our operational strategies to enhance bottom line performance and our capital market capabilities to mitigate risk. Our AFFO per share of $0.39 exceeded by more than 18%, the $0.33 per share we achieved a year ago. We accomplished this with healthy RevPAR increases of 5.8% across our entire portfolio along with stronger operating margins with an increase of 151 basis points. From a macro perspective, we have observed that the global economic uncertainties have caused investors to pay less attention to the solid performance of lodging fundamentals. As a result, many hotel REITs are trading well below the 52-week highs. Our share price has declined significantly compared to the level obtained earlier in the year. This has occurred despite our record trailing 12-month AFFO per share, strong ongoing operating performance, increased cash position, lack of recourse debt and continued growth prospects with the recent Highland Hospitality acquisition. A look back in history would suggest that this is the right time in the cycle to be considering overweighting allocations to hotel stocks. Real RevPAR remains well below prior peak levels. For those investors that are concerned about inflation, hotels historically have been a great hedge against inflation, given the ability to adjust rates daily.
Smith Travel Research expect the continuation of year-to-date trends for the rest of 2011 and project full year industry RevPAR growth of approximately 7.5%. Other industry sources agree, expecting continued improvement in lodging market fundamentals and strong RevPAR growth for the remainder of the year and into 2012.In its August lodging industry update, PricewaterhouseCoopers revised its forecast expecting RevPAR growth of 7.5% and 6.2% in 2011 and 2012 respectively. While 2012 outlooks have been reined in somewhat due to the global uncertainties as compared to earlier in the year, they are still well below the industry’s 1988 to 2010 average RevPAR growth of 2.5%. There are several explanations for the lodging sector’s robust performance in the midst of a sluggish economy. First, unlike prior periods of an early economic recovery, this was one was not preceded by an oversupply of new hotel rooms. Consequently, demand growth has a more immediate impact on the ability to accelerate ADR. Furthermore, the forecast for new supply over the next several years is expected to be well below historical levels given the widespread lack of available debt. Another reason for the solid performance in the lodging sector is that corporations are now much more inclined to encourage travel to spur new business, given their strong earnings and cash positions despite the recently announced cutback in government travel. While unemployment is unfortunately at 9%, the majority of these people employed appear not to be regular business travelers. Transient travel which accounts for approximately 75% of our EBITDA is already at prior peak demand levels. Our business mix is not highly dependent upon group travel which is having a weaker recovery relative to transient. As the industry improves, our view is that corporate transient rates should continue to increase. Therefore, we will continue to focus our efforts here as we believe this customer segment provides the greatest upside. Read the rest of this transcript for free on seekingalpha.com