• RevPAR Growth: Same-store portfolio RevPAR increased 0.2% in Q3, with urban hotels up 1.3% and suburban hotels up 3.9%.
• Average Rate and Occupancy: Average rate increased by 1.2%, partially offset by a 1% decline in occupancy.
• Revenue Impact from Hurricanes: Hurricanes displaced nearly $400,000 in revenue, reducing RevPAR growth by 20 basis points.
• Hotel EBITDA: Pro forma hotel EBITDA for Q3 was $59.7 million, a 3% decrease from the previous year.
• Adjusted EBITDAre: $45.3 million for Q3, a 2% decrease compared to Q3 2023.
• Adjusted FFO: Increased 4% to $27.6 million or $0.22 per share in Q3.
• Capital Expenditures: $22.5 million invested in Q3 on a consolidated basis.
• Dividend: Quarterly common dividend of $0.08 per share, representing a 5.2% yield.
• Full Year RevPAR Guidance: Updated growth range of 1% to 2% for 2024.
• Debt and Liquidity: Total liquidity over $400 million, with a leverage ratio nearly a full turn lower than a year ago.

• Warning! GuruFocus has detected 3 Warning Sign with INN.

Release Date: November 05, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Summit Hotel Properties Inc (NYSE:INN) reported its third consecutive quarter of adjusted AFFO growth, indicating strong financial performance.
• The company experienced RevPAR growth in urban and suburban hotels, with increases of 1.3% and 3.9% respectively, driven by strong group demand and improving business transient trends.
• Summit Hotel Properties Inc (NYSE:INN) successfully sold 10 hotels over the last 18 months, generating nearly $150 million in gross proceeds, which helped reduce corporate leverage by approximately one turn.
• The company has a well-positioned balance sheet with over $400 million in liquidity and no significant debt maturities until 2026, providing financial stability.
• Summit Hotel Properties Inc (NYSE:INN) has seen improvement in employee retention and a reduction in contract labor costs, contributing to a more efficient cost structure.

Negative Points

• The company faced a challenging quarter due to industry-wide issues and specific market challenges, including the impact of hurricanes, which displaced nearly $400,000 in revenue.
• September RevPAR declined by 3% year over year, driven by a reduction in occupancy and disruptions from hurricanes.
• San Francisco remains a negative outlier for the company, dealing with a weaker convention calendar and limited office attendance.
• The company's third quarter RevPAR for resort and small-town metro assets declined year over year due to normalization of leisure demand patterns.
• Summit Hotel Properties Inc (NYSE:INN) experienced a 3% decrease in pro forma hotel EBITDA for the third quarter compared to the previous year, partly due to hurricane disruptions.

Q & A Highlights

Q: What gives you confidence that the markets lagging in recovery will continue to deliver above-average growth? A: Jonathan Stanner, President and CEO, explained that each market has unique factors contributing to growth. For example, New Orleans will benefit from events like the Super Bowl and a better convention calendar in 2025. San Jose is seeing a return of tech-driven business demand. Overall, these markets are recovering from a low base, and there's room for continued growth as they haven't fully returned to pre-pandemic performance levels.

Q: Are there any specific expense challenges anticipated for 2025? A: William Conkling, CFO, noted that while there are property tax headwinds in Q4 2024, 2025 is expected to be a more stable year for expenses. The company has managed to keep expense growth around 2.5% to 3% this year, and they expect a similar trend next year, with labor costs stabilizing.

Q: What is the outlook for transactions and capital redeployment? A: Jonathan Stanner expressed optimism about the transaction environment, noting improved capital markets and adjusted seller expectations. Summit has sold $150 million in assets, improving their balance sheet and creating capacity for growth. They remain market agnostic but see potential in urban markets with strong group and business transient demand.

Q: Are there concerns about union negotiations affecting labor costs in urban markets? A: Jonathan Stanner acknowledged the potential impact but noted that Summit has limited exposure to unionized markets. They focus on maintaining competitive wages and good employee relations, particularly in the sunbelt, where union presence is less significant.

Q: What is the status of the Hyatt Place properties in Summit's portfolio? A: Jonathan Stanner stated that while they have sold some lower-performing Hyatt Place hotels, the brand remains strong in the right markets. The remaining Hyatt Place properties are in good condition, and there is no strategic initiative to sell them all. They will continue to evaluate assets based on ROI and market conditions.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.