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Apple Hospitality REIT, Inc. (APLE)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered solid bottom-line growth: net income rose 44% YoY to $29.8M ($0.12 per share), operating margin expanded 250 bps to 15.0%, and Adjusted EBITDAre increased 6.7% to $96.6M. Comparable Hotels RevPAR grew ~3% YoY to $109, led by improving business transient demand and resilient leisure travel. Winter weather tempered January, but management sees improving February and continued positive momentum into 2025 .
  • 2025 outlook introduced: Net income $173–$202M, Comparable Hotels RevPAR change +1% to +3%, Comparable Hotels Adjusted Hotel EBITDA margin 34.2%–35.2%, Adjusted EBITDAre $447–$471M, capex $80–$90M. At the midpoint, management assumes total hotel expenses +4.2% (fixed cost pressure in taxes/insurance and brand conferences) with the low end including a $2M loss for Hotel 57 .
  • Capital allocation remained a catalyst: 2024 saw two acquisitions ($196.3M), six dispositions ($63.4M), and ~$34.7M of share repurchases; balance sheet stayed flexible with total debt-to-capitalization ~28% and weighted-average interest rate ~4.7%. Monthly distribution of $0.08 per share continues; a $0.05 special was paid in January 2025. Yield is ~6.5% on recent price context cited in materials .
  • Regional and market dynamics: L.A. and D.C. markets offset winter disruptions; Orlando benefited from storm-related demand; Seattle (Renton/Tukwila) saw training-related softness tied to Boeing, and Nashville/Atlanta/Denver were pressured by recent supply and event calendar shifts .

What Went Well and What Went Wrong

What Went Well

  • “Driven by steady improvement in business transient demand, ongoing strength in leisure travel and muted supply growth, we achieved Comparable Hotels RevPAR growth of ~3% for Q4 and >1% for FY24,” CEO Justin Knight noted, highlighting strong bottom-line performance from ADR strength and moderating expense growth .
  • Bottom-line metrics improved: Operating margin rose to 15.0% (+250 bps YoY), Adjusted EBITDAre +6.7% YoY to ~$96.6M, MFFO +5.7% YoY to ~$76.5M; Comparable Hotels RevPAR up 2.7% to $109 and occupancy up 200 bps to 71.3% .
  • Capital allocation and portfolio optimization: Two acquisitions (AC Washington DC, Embassy Suites Madison; combined ~$196.3M), six non-core asset sales ($63.4M), and $34.7M in repurchases supported EPS and portfolio quality; additional sale in Feb-2025 ($8.3M) and pending Nashville Motto acquisition ($98.2M) add flexibility .

What Went Wrong

  • Margin pressure vs prior year mix: Comparable Hotels Adjusted Hotel EBITDA margin dipped 40 bps YoY to 32.9% in Q4; same-store margins similarly softened amid fixed cost pressure (real estate taxes, insurance) and brand conference costs in 2025 .
  • Market-specific headwinds: Seattle (Renton/Tukwila) impacted by reduced training/consulting business (Boeing), Nashville/Atlanta/Denver softer due to supply growth and less robust group/event calendars .
  • Madison Embassy Suites underperformed expectations in Q4 as securing group business was challenging during seasonally low occupancy; management expects ramp improvement beginning Q2 2025 .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$312.456 $390.077 $378.843 $333.036
Net Income per Share (EPS)$0.09 $0.31 $0.23 $0.12
Operating Margin %12.5% 24.0% 20.5% 15.0%
Adjusted EBITDAre ($USD Millions)$90.536 $140.916 $128.900 $96.590
Comparable Hotels Adjusted Hotel EBITDA ($USD Millions)$105.310 $151.515 $139.222 $108.434
MFFO ($USD Millions)$72.387 $121.329 $107.439 $76.503
KPIs (Actual)Q4 2023Q2 2024Q3 2024Q4 2024
ADR ($)$149.88 $162.98 $162.57 $152.39
Occupancy (%)69.6% 79.8% 77.0% 71.4%
RevPAR ($)$104.27 $130.07 $125.10 $108.75
Comparable Hotels RevPAR ($)$106.31 $130.09 $125.30 $109.14
Comparable Hotels EBITDA Margin (%)33.3% 39.1% 36.8% 32.9%

Segment breakdown (Comparable Hotels; Q4 2024):

Chain ScaleOccupancy (%)ADR ($)RevPAR ($)
Upscale (149 hotels)71.8% $155.52 $111.60
Upper Midscale (64 hotels)70.9% $141.51 $100.30
Upper Upscale (6 hotels)68.0% $183.08 $124.56

Additional balance sheet/KPI snapshots (Q4 2024):

  • Total debt outstanding: $1,476.8M; net total debt to total capitalization ~28.5%; cash ~$10.3M; weighted-average interest rate ~4.7% .
  • Monthly distributions paid in Q4: $0.24 per share; current regular annualized dividend $0.96 per share (~6.5% yield on cited price context) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Income ($M)FY 2025N/A$173–$202New guidance
Comparable Hotels RevPAR Change (%)FY 2025N/A+1% to +3%New guidance
Comparable Hotels Adjusted Hotel EBITDA Margin (%)FY 2025N/A34.2%–35.2%New guidance
Adjusted EBITDAre ($M)FY 2025N/A$447–$471New guidance
Capital Expenditures ($M)FY 2025N/A$80–$90New guidance
Total Hotel Expenses Growth (assumption)FY 2025N/A~4.2% midpointNew detail; fixed cost pressure; includes ~$2M loss at low end related to Hotel 57
DividendOngoingExpect monthly distributionsRegular $0.08 monthly (plus $0.05 special paid Jan-2025); Board discretionMaintained framework

Context on 2024 guidance (for reference):

  • FY 2024 guidance was last updated in Q3: Net income $204–$221M; Comparable Hotels Adjusted Hotel EBITDA margin 35.3%–35.9%; Adjusted EBITDAre $458–$469M; capex $75–$85M .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
Business transient recoverySteady improvement; midweek occupancy building; gap vs weekend rates narrowing; focus on negotiated accounts, percentage-off-bar pricing Primary driver of growth; weekday occupancy up in Nov/Dec; opportunity to push midweek ADR as compression returns Improving; compression building midweek
Leisure demand resilienceSome price sensitivity in Q2; resilient overall; ADR moderated Resilient; storm-related demand boosted FL; weekend ADR mixed but stronger in Dec Stable with pockets of strength
Supply backdropMuted supply; 55% of hotels with no new product within 5 miles Pipeline still muted; planning vs starts; limited near-term shifts; muted new supply improves risk profile Supportive supply/demand
Fixed expense pressureInsurance premium benefits in Q3; taxes appeals helped; guidance implied modest expense growth 2025 assumption: total hotel expenses +4.2% at midpoint; fixed costs (taxes/insurance) higher YoY; brand conferences add costs Headwind vs 2024 comps
Wage and benefitsWage pressure decelerating; payroll per occupied room moderated 2025 wage growth outlook ~3.5%–4% Manageable inflation
Market highlightsDC and LV acquisitions performing; Orlando steady; mixed Nashville L.A. & D.C. offset winter disruptions; Orlando and Tampa saw storm-related demand; Seattle impacted by Boeing; Nashville/Atlanta/Denver pressured by supply/event calendar Mixed by market
Capital allocationActive repurchases; acquisitions via fixed-price development takeouts; selective dispositions Continued: ~$35M buybacks in 2024; two acquisitions; seven-eight small hotel sales at sub-7% caps; 7%–10% portfolio considered non-core Accretive redeployment
Transaction marketBid-ask wide; smaller assets transacting; portfolio premium elusive Still challenging; expect improvement with lower rates/higher fundamentals; focus on individualized small asset sales, repurchases Gradual healing possible
DevelopmentMadison Embassy acquired; Vegas parcel under exploration Vegas: exploring with developer; preference not to build on-balance-sheet; Nashville Motto under fixed-price contract Selective, fixed-price takeouts
Legal/regulatoryNY non-hotel property (Hotel 57) lease issue; conservatively accounted Low end of 2025 Adjusted EBITDAre includes ~$2M loss; transition timing baked into 2024/2025 assumptions Being managed conservatively

Management Commentary

  • “We achieved Comparable Hotels RevPAR growth of approximately 3% for the fourth quarter… We are pleased to report strong bottom-line performance for the quarter and the full year 2024.” — Justin Knight, CEO .
  • “Preliminary results for January 2025 show slight improvement in Comparable Hotels RevPAR… L.A. hotels have continued to perform well in February.” — Justin Knight .
  • “Comparable hotels total revenue was $329M for Q4, up ~4% YoY; RevPAR $109 up ~3%; occupancy 71% up ~2%.” — Liz Perkins, CFO .
  • “We assume total hotel expenses will increase by ~4.2% at the midpoint in 2025… low end of Adjusted EBITDAre includes a $2M loss related to Hotel 57.” — Liz Perkins .
  • “Between 7% and 10% likely of our portfolio would fit [non-core]… local owner-operators have been the primary bidders.” — Justin Knight .

Q&A Highlights

  • Fixed expense normalization: CFO detailed a ~$3.2M fixed cost “hurdle” for 2025 (less tax benefits, brand conferences), implying ~5% property tax increase normalized; total hotel expenses +4.2% midpoint .
  • Non-core dispositions: 7%–10% of portfolio may be candidates; competitive bidding from local owner-operators enables strong sale pricing; redeployment into buybacks/accretive assets .
  • Midweek ADR opportunity: Weekday occupancy nearing thresholds to push rate; still ~5% below pre-pandemic compression; pricing strategy shifts toward percentage-off-bar to leverage compression .
  • Debt and refinancing: ~$295M maturities in 2025; term loans favored for recast; secured debt trickier to replace; potential upside from swaps; target ~5-year term when available .
  • Market color: L.A./D.C. strong in Jan-Feb; Orlando/Tampa storm-driven demand; Seattle softer on Boeing-related training; Nashville pressured by supply .

Estimates Context

  • Wall Street consensus estimates via S&P Global were unavailable at the time of this analysis due to request limits. As a result, comparison to consensus for Q4 revenue/EPS and 2025 outlook cannot be provided. Values retrieved from S&P Global were not accessible; estimates are therefore not included (S&P Global data unavailable).

Key Takeaways for Investors

  • Margin resilience into 2025 will hinge on midweek compression and rate execution; management sees a clear path to raising negotiated/bar rates as business transient continues to recover (watch midweek occupancy trends) .
  • Fixed cost headwinds (taxes/insurance/brand costs) are embedded in guidance; the expense growth assumption (+4.2%) sets a conservative base—any relief could drive upside to margins and Adjusted EBITDAre .
  • Accretive capital recycling remains a catalyst: strong sale multiples on small assets and buybacks at attractive spreads can lift per-share metrics; management cites 7%–10% of portfolio as potential non-core .
  • Regional mix matters for near-term performance: L.A./D.C./FL strength offsets weather; monitor Seattle/Nashville for improvements as training/event calendars and supply dynamics evolve .
  • 2025 guide (+1% to +3% RevPAR; 34.2%–35.2% margins) targets stable growth even with cost pressures; tracking expense cadence and Hotel 57 resolution is key to de-risking the low end .
  • Balance sheet optionality (28% net debt-to-capitalization; ~4.7% WAIR; ~$568M revolver availability) provides flexibility for opportunistic transactions and shareholder returns .
  • Dividend remains attractive (regular $0.96 annualized; 6.5% yield on noted price), supported by MFFO growth and conservative balance sheet—board discretion applies .