Ashford's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Ashford Hospitality Trust, Inc. (AHT)

Q1 2012 Earnings Call

April 26, 2012 11:30 am ET


Scott Eckstein - Financial Relations Board

Monty Bennett - CEO

Douglas Kessler - President

David Kimichik - CFO & Treasurer


Smedes Rose - KBW

Nikhil Bhalla - FBR

Bob LaFleur - Cantor Fitzgerald

David Loeb - Robert W. Baird



Good morning ladies and gentlemen. Thank you for standing by. Welcome to the Ashford Hospitality Trust first quarter 2012 conference call. During today’s presentation all participants will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions) This conference is being recorded today, Thursday April 26, 2012.

At this time I would 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 first quarter of 2012. 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 a notice of the accessibility of this conference call on a listen-only basis over the internet was distributed yesterday afternoon in a 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 contained 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 April 25, 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

Thanks and good morning. The first quarter this year continued to reflect the early stage benefits from the hotel cycle recovery and as a result our reporting metrics are positive. It should be recognized however that until the recovery gains have more sustained footing, progress could be uneven at times. We continue to make headway in certain key areas such operating margin improvement, RevPAR growth and risk mitigation. We are focused on how best to create near term and long-term shareholder value within an environment where we continue to see improving trends in the lodging sector and great resiliency in the US economy as a whole.

We remain bullish on the hotel outlook and are confident that our initiatives are adding value. Since our last conference call on February, US hotel demand has continued to improve with RevPAR growth still well above historical average growth rates. In 2011 US market achieved annual RevPAR growth of 8.2%. At 2012 and 2013, the US hotel industry is expected to report steady RevPAR increases at 5.8% and 6.6% respectively according to the recent forecast from PKF.

For the first quarter Ashford’s RevPAR growth was 3.1%. The legacy portfolio registered a RevPAR growth of 3.6% whereas the Highland portfolio was 1.3%. The performance reflects our heavy concentration at Washington DC, Dallas, Forth Worth and certain airport locations as well as some impact from capital expenditures. Approximately 15% of our EBITDA comes from the Washington DC area. While DC has underperformed other gateway cities, we remain confident in this [external] long term market and expect to see improved performance particularly following the 2012 election.

Some factors that affected the quarter’s RevPAR in DC were related to the Pentagon’s Base Realignment and Closure Program particularly in the Crystal City area where several of our assets are located. Also affecting our RevPAR for the quarter was the fact that our second largest market Dallas, hosted the Super Bowl during the first quarter last year which makes year-over-year comparisons challenging.

Lastly airport markets generally, and our airport markets in particular experienced better weather by comparison to last year resulting in fewer stranded passengers needing hotel rooms. In January and February for 2011 the nation experienced 45000 cancelled flights compared to 12000 for this year. Clearly compared to our peers we have one the most diversified geographic portfolios which we believe mitigates risk. The pace of the economic recovery in certain markets could at times contribute to RevPAR variations.

However we continue to see the hotel RevPAR recovery as broad based, noting that for the entire industry, the top performing markets for the first quarter were Nashville, New Orleans and Waikiki, while the top performing segments was highway locations. Additionally we have implemented an aggressive CapEx program which is having an impact on RevPAR. We believe these capital expenditures will result in the future strong market share gains.

We are targeted to spend a $120 million to $135 million for 2012 and during the first quarter we spent $29.5 million in 32 hotels. By comparison to our historical experience with CapEx initiatives in other quarters, we are seeing an impact on RevPAR from the acceleration of our work and a scope for the refurbishments. If we were to exclude those assets in renovation our RevPAR would have reflected 4.8% growth.

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