Apple Hospitality REIT (NYSE:APLE) reported first-quarter financial results on Tuesday. The transcript from the company’s first-quarter earnings call has been provided below.
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View the webcast at https://events.q4inc.com/attendee/213168681
Summary
Apple Hospitality REIT reported a strong first quarter 2026 with comparable hotels RevPAR growth of over 2% and same-store RevPAR growth of nearly 3%.
The company raised its full-year RevPAR guidance by 100 basis points to 1% at the midpoint, reflecting strong demand and potential benefits from events like the FIFA World Cup.
Strategically, the company completed the sale of its Hampton Inn and Suites in Rochester, Minnesota and continues to evaluate both acquisitions and dispositions to enhance shareholder returns.
Operationally, recent acquisitions like the Embassy Suites in Madison and the BAC Hotel in Washington, D.C. performed well, and transition of 13 Marriott-managed hotels to franchise is expected to drive operational synergies.
The company maintains a strong balance sheet with approximately $1.6 billion in debt and a weighted average interest rate of 4.6%, providing flexibility for future investment opportunities.
Full Transcript
OPERATOR
Greetings, welcome to the Apple Hospitality REIT first quarter 2026 earnings call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press *0 on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Kelly Clark, Vice President, Investor Relations. Thank you. You may begin.
Kelly Clark (Vice President, Investor Relations)
Good morning and welcome to Apple Hospitality REIT’s first quarter 2026 earnings call. Today’s call will be based on the earnings release and Form 10Q which we distributed and filed yesterday afternoon. Before we begin, please note that today’s call may include forward looking statements as defined by federal SECurities laws. These forward looking statements are based on current views and assumptions and as a result are subject to numerous risks uncertainties in the outcome of future events that could cause actual results, performance or achievements to materially differ from those expressed, projected or implied. Any such forward looking statements are qualified by the risk factors described in our filings with the SEC, including in our 2025 Annual Report on Form 10K and speak only. As of today, the Company undertakes no obligation to publicly update or revise any forward looking statements except as required by law. In addition, non GAAP measures of performance will be discussed during this call. Reconciliations of those measures to GAAP measures and definitions of certain items referred to in our remarks are included in yesterday’s earnings release and other filings with the SEC. For a copy of the earnings release or additional information about the company, please visit applehospitalityreit.com this morning, Justin Knight, our Chief Executive Officer, and Liz Perkins, our Chief Financial Officer, will provide an overview of our results for the first quarter 2026 and an operational outlook for the remainder of the year. Unless otherwise stated, all changes in performance metrics refer to year over year changes for the comparable period. Following the overview, we will open the call for Q and A. At this time, it is my pleasure to turn the call over to Justin
Justin Knight (Chief Executive Officer)
Good morning and thank you for joining us today. For our first quarter 2026 earnings call. We are pleased to report a strong start to the year with comparable hotels RevPAR growth of more than 2% despite challenging year over year comparisons to the first quarter of 2025. Underscoring the strength of the quarter, approximately 2/3 of our hotels delivered RevPAR growth and on a same store basis, RevPAR grew nearly 3% with margin expansion. The efficient operating model of our hotels combined with our prudent management of expenses enabled us to deliver meaningful flow through of top line improvements to bottom line performance resulting in growth across comparable hotels, adjusted hotel ebitda, adjusted EBITDARE and modified funds from operations. Demand momentum has continued into the second quarter. Preliminary reports for the month of April indicate comparable hotels revpar growth of over 4% supported by continued strength in demand and the benefit of favorable year over year comparisons related to the negative effects of Doge Liberation Day and the resulting general macroeconomic uncertainty. While the ongoing conflict in the Middle East and its effects on global energy markets adds to an uncertain geopolitical and economic backdrop, our broadly diversified rooms focused portfolio continues to demonstrate demand resilience. Improving occupancy and forward booking trends give us confidence heading into the summer months. Reflecting our year to date outperformance, we are raising our full year RevPAR guidance 100 basis points to 1% at the midpoint. The revised range maintains a measured view of the year ahead and we believe it could ultimately prove conservative. Transient demand has been stronger than anticipated, early summer performance may benefit from incremental leisure travel tied to the FIFA World cup and we are beginning to lap periods negatively affected by reduced government spending, tariff related disruption and last year’s government shutdown. Taken together, these factors represent potential upside not fully reflected in our updated outlook. Disciplined capital allocation has been central to our success over decades in the lodging industry. We prudently balance near and long term investment decisions to capitalize on current opportunities while positioning for the future over time. This approach is designed to deliver compelling total returns to our shareholders through durable earnings growth and long term capital appreciation. In April of this year we completed the sale of our Hampton Inn and suites in Rochester, Minnesota for approximately $9 million. The sales price represents a 5% cap rate or 14.5 times EBITDA multiple before CAPEX and a 4% cap rate or 19.6 times EBITDA multiple after taking into consideration an estimated $3 million in anticipated capital improvements, we continue to see opportunity to selectively prune our portfolio through transactions that enable us to reinvest proceeds in ways that enhance returns for our shareholders. Recent acquisitions have performed well despite headwinds in several markets. The Embassy Suites in Madison, Wisconsin saw meaningful improvement as the hotel completed its first full year of operations. Bac Hotel in Washington, D.C. also acquired in 2024, produced full year 2025 RevPAR of $205 and a 43% house profit margin. Solid results given the meaningful pullback in government travel and weaker convention calendar last year. The national motto which recently received Hilton’s new Build of the Year award for the motto brand continues to ramp well with average RevPAR approaching $200 over recent weeks and the Home and Suites Tampa Brandon, acquired last year, continues to produce strong yields in advance of a full renovation and repositioning planned this summer. Turning to out year commitments, we continue to have forward contracts for two projects in early stages of development, an AC in Anchorage, Alaska and a dual brand AC& residence inn located adjacent to our Spring Hill Suites in Las Vegas. The AC in Anchorage has broken ground and is expected to be delivered in late 2027. Construction has not yet begun on the Las Vegas project. The dual brand AC and Residence Inn are currently expected to be completed in the second quarter of 2028. The current transaction environment does not yet support accretive opportunities relative to our cost of capital and we do not currently have any agreements for acquisitions in 2026. Consistent with our disciplined approach, we remain actively engaged in the transaction market, evaluating potential hotel acquisitions relative to other uses of capital with a focus on maximizing long term value for our shareholders. As we have continuously demonstrated over the years, the flexibility of our balance sheet and our reputation for strong execution puts us in a position to act quickly when market conditions shift to be more favorable. We also continue to strategically reinvest in our portfolio, ensuring that our hotels remain competitive within their respective markets and maintain a strong value proposition for our guests. For the full year we expect to reinvest between 80 and 90 million dollars including major renovations planned at 21 hotels. The scale of our portfolio efficient design of our rooms focused hotels and our experienced in house project management team enable us to maintain our assets with average annual CAPEX spend of approximately 6% of revenues, significantly lower than full service portfolios. Combined with stronger operating margins, this efficiency translates into substantial free cash flow from operations which we use to fund shareholder distributions and strategic investments. For the quarter, capital expenditures totaled approximately $27.5 million. Supported by strong cash flow from our diverse portfolio of hotels, we continue to return capital to shareholders through attractive monthly distributions which contribute to total returns. During the first quarter, we paid distributions totaling approximately $57 million or $0.24 per common share based on Friday’s closing stock price. Our annualized regular monthly cash distribution of $0.96 per share represents an annual yield of approximately 7.2%. Together with our Board of Directors, we will continue to evaluate these distributions in the context of portfolio performance, capital needs and other accretive opportunities to create long term shareholder value. Throughout our 26 year history in the lodging industry, we have refined our strategy with intention. We invest in high quality hotels that appeal to a broad set of business and leisure customers. We diversify our portfolio across markets and demand generators. We maintain a strong and flexible balance sheet with low leverage. We reinvest strategically in our portfolio and we work closely with the experienced management teams who operate our hotels. We own one of the largest, most diverse portfolios of upscale rooms focused hotels in the United States, 216 hotels with almost 30,000 guest rooms diversified across 83 markets in 37 states and the District of Columbia. Travel demand for our portfolio has remained resilient with meaningful growth in recent months, reinforcing the merits of our strategy. We continue to believe that historically low supply growth from new hotel construction in our markets materially reduces the overall risk profile of our portfolio, limits potential downside and enhances potential upside. At quarter end, 57% of our hotels did not have any new upper upscale or upper mid scale product under construction within a five mile radius. We have confidence in the outlook for the hospitality industry and in the strength and positioning of our portfolio as we look ahead. We will continue to focus on the things within our control, operational execution, disciplined capital allocation and an uncompromising commitment to integrity. Above all, we are committed to creating lasting value for our shareholders. It is now my pleasure to turn the call over to Liz for additional details on our balance sheet financial performance during the quarter and outlook for the remainder of the year.
Liz Perkins (Chief Financial Officer)
Thank you Justin and good morning. The first quarter was a strong start to the year with our portfolio demonstrating the durability of our operating model. We are especially pleased with our performance relative to initial expectations that Q1 would be our weakest quarter in the year with a strong finish to February, an acceleration into March. We ended the quarter with RevPAR growth exceeding the high end of our initial full year guidance range for the quarter. Comparable hotels RevPAR was $115, up 2.2%, ADR was $157, up 0.1% and occupancy was 73%, an increase of 2.1%. Performance improved as we moved through the quarter. In January, Comparable Hotels RevPAR was down 1.6%, reflecting a challenging comparison to the same period last year, nearly half of which was attributable to wildfire related recovery business in early 2025, excluding our California hotels that saw benefit. First quarter RevPAR grew 3% in February, comparable hotels RevPAR increased by 1.5%, supported by strengthening business and leisure demand despite some weather disruption. March performance was particularly noteworthy with comparable hotels RevPAR growth of 5.8%, well ahead of expectations and indicative of broad based demand strength across the portfolio extending beyond the early effects of policy driven demand headwinds experienced last year. For the quarter comparable hotels total revenue was up 4.3% to 337 million doll supported by continued strength in other revenues which were up 10%. The efficient operating models in our hotels combined with disciplined expense management drove strong flow through from top line growth to bottom line results. For the quarter we delivered comparable hotels, adjusted Hotel EBITDA of $108 million up 3.6% and an adjusted hotel EBITDA margin of 32.2%, a reduction of just 20 basis points. Results reflect the ongoing ramp of our recently opened Motto Nashville Downtown and the seasonal impact of Hotel 57, both of which weighed on overall comparable hotels results on a same store basis which excludes the impact of the Motto Nashville Downtown. The transition of Hotel 57 and our recently acquired Homewood Suites Tampa Brandon RevPAR grew by 2.8% for the quarter. Same store total revenue grew 3.1% supported by continued strength in non room revenues which grew 6% in the quarter. Strong top line growth combined with disciplined cost management drove same store adjusted hotel EBITDA growth of 4.2% and 30 basis points of adjusted hotel EBITDA margin expansion. These bottom line results are especially encouraging given the ADR headwinds we faced during the …
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