For real estate investment trust Summit Hotel Properties, each month of the first quarter was better than the last — a trajectory that executives are confident will continue through the year.
The company reported 53.1% occupancy, average daily rate of $140.45 and revenue per available room of $74.63 in January, and those metrics improved by double digits in February — to 63.7%, $150.96 and $96.14, respectively — and March — to 74.8%, $160.90 and $120.32, respectively.
In each metric, quarterly performance exceeded 2021 levels but fell short of 2019. Still, President and CEO Jonathan Stanner said that it marked the highest quarterly RevPAR, and the best RevPAR comparison to 2019, since the onset of the pandemic.
"We were particularly encouraged by the sequential monthly improvements we experienced across all operating and financial metrics, including first quarter hotel-level profitability that was more than three times higher compared to a year ago. Presidents Day weekend again served as a notable demand inflection point across our portfolio, culminating with March RevPAR of $120 — a 87% recapture to 2019 — and hotel [earnings before interest, taxes, depreciation, amortization] margin of 40%, the highest we have achieved since the onset of the pandemic," he said.
Stanner added improving performance is attributable to "a more meaningful increase in demand segments beyond the robust leisure travel demand that has driven the industry's results in the early part of the recovery."
That broadening of guest demand is illustrated by gains at the company's 43 hotels in urban markets, which executives said points to a rise in business transient and corporate group travel.
Summit Executive Vice President and Chief Financial Officer Trey Conkling said RevPAR at the company's urban hotels was $113 in March and $120 in April, representing a "7% and 14% premium to the previous pandemic monthly high in October of last year."
"Strength in our urban portfolio was triggered by increased midweek corporate and group travel in Sun Belt markets such as Dallas, New Orleans, Austin and Nashville, as well as downtown Chicago, which has seen a meaningful uptick in midweek corporate demand, and downtown Baltimore, which doubled its anticipated targets for convention center roomnights in the quarter," Conkling said.
Robust leisure demand continued to drive performance at the company's 11 resort hotels, where spring break travel drove RevPAR to $183 in the first quarter and ADR exceeded 2019 levels by more than 10%.
The executives are optimistic about the balance of 2022, as bookings have picked up pace so far in the second quarter.
"As we look to the balance of the second quarter, we're very encouraged by the latest forward-looking trends, with May pacing over 6% ahead of where April was trending 30 days ago and June trending slightly up from that continued improvement in weekday demand," Stanner said. "A strong Memorial Day weekend and continued leisure strength for the early part of the summer seasons are expected to result in May and June recapture rates in line or better than the 90% recapture we experienced in April."
Summit also added scale to its portfolio of owned hotels in the first quarter.
With the completion in the first quarter of a deal to acquire 27 hotels from NewcrestImage, the Austin, Texas-based REIT has a portfolio of 101 hotels — 61 of those wholly owned — with 15,227 guestrooms in 24 states across the U.S.
The $776.5 million NewcrestImage acquisition represents "the largest transaction in the company's history and significantly increased our portfolio in high-growth Sun Belt markets," Stanner said. The final piece of the deal — the acquisition of the Canopy by Hilton New Orleans Downtown — closed March 29. Deals to acquire 26 other hotels as part of the same portfolio closed in February.
In an interview with HNN's Stephanie Ricca at the Hunter Hotel Investment Conference in April, Stanner said the company is poised to buy more hotels this year.
A deal to buy the newly developed dual-branded AC Hotel by Marriott and Element Miami Brickell is pending, according to Stanner. The company, in a joint venture with Singapore sovereign wealth fund GIC, has also entered into an agreement to sell the Hilton Garden Inn San Francisco Airport North for $75 million, or $444,000 per key, which represents a nearly 30% premium over what it paid for the hotel in 2019.
"Since the onset of the pandemic, we have closed or announced the acquisition of nearly $1 billion of high-quality hotels," Stanner said. "Collectively, these transactions demonstrate our ability to thoughtfully and opportunistically allocate capital, and we remain well positioned for future growth."
First Quarter Performance
According to the company’s first quarter earnings release, Summit achieved revenue per available room of $97.09 for the the first quarter of 2022, a 78% increase over the same quarter in 2021 but down 30% from 2019. Average daily rate was $151.97 for the quarter, up 47.5% year over year but down 6.4% from 2019; and occupancy averaged 63.9%, up 20.6% year over year but down 16.6% from 2019.
The company recorded a net loss of $12.4 million for the quarter, compared to a net loss of $35.1 million in the same quarter of 2021. Adjusted earnings before interest, taxes, depreciation and amortization for real estate was $32.9 million for the quarter, up from $6.2 million in the first quarter of 2021. Total revenue for the quarter was $141.9 million, compared to $58 million in 2021.
As of press time, Summit stock was trading at $9.61 per share, down 3.4% year to date. The NYSE Composite Index was down 8.9% for the same period.