Ashford Hospitality Trust Q2 2025 Earnings Call Transcript

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July 31, 2025

Key Takeaways

  • Positive Sentiment: Despite industry‐wide RevPAR headwinds, Ashford delivered 1.3% comparable total revenue growth and 2.6% comparable hotel EBITDA growth in Q2, underscoring the effectiveness of its GrowAHT initiative.
  • Positive Sentiment: The company bolstered its capital structure by raising $212 million through a non‐traded preferred stock offering and extending its MS-17 and Highland mortgage loans to defer maturities through 2026-28.
  • Negative Sentiment: Ashford reported a net loss of $39.9 million (EPS –$6.88) in Q2 and accrued $6.8 million of default interest, though AFFO per share would have been $1.93 without that accrual.
  • Positive Sentiment: Strategic dispositions remain on track, with the impending sale of the Hilton Houston NASA Clear Lake and at least three additional assets expected to reduce leverage and improve post‐debt‐service cash flow.
  • Positive Sentiment: Ashford plans $90–110 million in 2025 capex for renovations and brand conversions, and hotels completing major upgrades saw Q2 RevPAR rise 19%, highlighting strong early returns.
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Earnings Conference Call
Ashford Hospitality Trust Q2 2025
00:00 / 00:00

There are 4 speakers on the call.

Operator

Thank you for standing by. My name is Greg, and I will be your conference operator today. At this time, I would like to welcome everyone to today's Ashford Hospitality Trust Second Quarter twenty twenty five Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Speaker 1

Thank you.

Operator

I would now like to turn the call over to Derek Eubanks, Chief Financial Officer. Derek?

Speaker 2

Good morning, and welcome to today's conference call to review results for Ashford Hospitality Trust for the 2025 and to update you on recent developments. On the call today will also be Steven Zigray, President and Chief Executive Officer and Chris Nixon, Executive Vice President and Head of Asset Management. The results as well as notice of the accessibility of this conference call on a listen only basis over the Internet were distributed yesterday afternoon in a press release. At this time, let me remind you that certain statements and assumptions in this conference call contain or are based upon forward looking information and are being made pursuant to the Safe Harbor provisions of the federal securities regulations. 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.

Speaker 2

These factors are more fully discussed in the company's 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. Statements made during this call do not constitute an offer to sell or a solicitation of an offer to buy any securities. Securities will be offered only by means of a registration statement and prospectus, which can be found at www.sec.gov. 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 eight ks with the SEC on 07/31/2025, and may also be accessed through the company's website at www.ahtreit.com.

Speaker 2

Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release. Also, unless otherwise stated, all reported results discussed in this call compare the second quarter ended 06/30/2025, with the second quarter ended 06/30/2024. I will now turn the call over to Steven Zigre. Please go ahead.

Speaker 1

Good morning, everyone, and thank you for joining today's call. After my introductory comments, Derek will review our second quarter financial results and then Chris will provide an operational update on our portfolio. Our second quarter performance was highlighted by comparable total revenue growth of 1.3 and comparable hotel EBITDA growth of 2.6%. With macroeconomic headwinds driving RevPAR declines and pressuring margins industry wide in the quarter, we're very pleased with our operating performance, which reflects the impact of the strategic decisions our team has made over the past several quarters and the strength of our high quality geographically diverse portfolio. In late twenty twenty four, we announced a transformative initiative aimed at driving $50,000,000 in run rate EBITDA improvement that we refer to as GrowAHT.

Speaker 1

Realizing outsized improvement in property level performance is critical to achieving that goal. With comparable total revenue growth outpacing comparable RevPAR growth in the second quarter by 3.5 percentage points and our 2.6 percentage point increase in comparable hotel EBITDA for the quarter, we're reaping the benefits of the tremendous efforts that our asset management team and property managers have made to drive revenue growth while aggressively managing operating expenses. In addition to strong property level performance, we've also benefited from a number of corporate cost saving measures that our advisor Ashford Inc. Has implemented for Ashford Trust. Several GrowAHD initiatives remain underway, but we've seen meaningful impact from these efforts through the second quarter.

Speaker 1

Following a number of asset sales, total reported revenue year to date declined more than $41,000,000 versus 2024, yet year to date adjusted EBITDAre for the company is down less than $3,000,000 We have also continued to make improvements to our capital structure. In April, we extended our MS-seventeen mortgage loan secured by 17 hotels. The extension provides for an initial maturity in March 2026 and two one year extension options subject to the satisfaction of certain conditions for the final maturity date in March 2028. The loan has a current balance of $410,000,000 and continues to bear interest at a floating rate of SOFR plus 3.39%. Just yesterday we extended our Highland mortgage loan secured by 18 hotels.

Speaker 1

The extension provides for an initial maturity in January 2026 and an additional six month extension option subject to the satisfaction of certain conditions with a final maturity date in July 2026. The loan has a current balance of $734,000,000 and bears interest at a floating rate of SOFR plus 4.13%. As previously discussed, our non traded preferred stock offering closed at the March. This capital raise allowed us to access substantial capital totaling $212,000,000 in gross proceeds. We have launched our follow on offering of non traded preferred stock and expect this to be an important source of capital for continued property level deleveraging and future growth.

Speaker 1

Lastly, we continue to make progress on strategic dispositions. We expect to close on the previously announced sale of the Hilton Houston NASA Clear Lake in the coming weeks and anticipate selling at least three additional assets in the near term. The primary objective of these sales will be to reduce leverage and improve overall cash flow after debt service. We believe these coordinated efforts are opening a new chapter for Ashford Trust and the collective impact was evident in our results for the second quarter. Looking ahead to the second half of the year, while we expect demand headwinds to continue to subside and would further benefit from anticipated interest rate cuts, we remain focused on controlling what we control and driving outsized performance.

Speaker 1

We also plan to continue making improvements to our capital structure and exploring opportunistic dispositions to better position the company moving forward. I will now turn the call over to Derek to review our second quarter financial performance.

Speaker 2

Thanks, Stephen. For the second quarter, we reported a net loss attributable to common stockholders of 39,900,000 or $6.88 per diluted share. For the quarter, we reported AFFO per diluted share of $0.78 It's important to note that during the quarter, we accrued approximately $6,800,000 of default interest on our seven forty four million dollars Highland loan. We recently entered into an extension of that loan that eliminated the default interest. If we had not accrued the default interest, our AFFO and AFFO per diluted share for the quarter would have been approximately $11,400,000 and $1.93 respectively.

Speaker 2

Adjusted EBITDAre for the quarter was $73,800,000 At the end of the second quarter, we had $2,700,000,000 of loans with a blended average interest rate of 8.1% taking into account in the money interest rate caps. Considering the current level of SOFR and the corresponding interest rate caps, approximately 24% of our debt is now effectively fixed and 76% is effectively floating. We ended the quarter with cash and cash equivalents of $100,000,000 and restricted cash of $153,900,000 The vast majority of that restricted cash is comprised of lender and manager held reserve accounts. Our restricted cash increased $15,000,000 from the previous quarter and the vast majority of that cash is set aside for future capital expenditures. At the end of the quarter, we also had $21,800,000 due from third party hotel managers.

Speaker 2

This primarily represents cash held by one of our property managers, which is also available to fund hotel operating costs. We ended the quarter with net working capital of approximately $184,000,000 which was $28,000,000 higher than the previous quarter. As of 06/30/2025, our consolidated portfolio consisted of 72 hotels with 17,329 rooms. Our share count currently stands at approximately 6,200,000 fully diluted shares outstanding, which is comprised of 6,100,000.0 shares of common stock and 100,000 OP units. While we are currently paying our preferred dividends quarterly or monthly, we do not anticipate reinstating a common dividend in 2025.

Speaker 2

This concludes our financial review and I would now like to turn it over to Chris to discuss our asset management activities for the quarter.

Speaker 3

Thank you, Derek. During the 2025, our portfolio demonstrated continued resilience despite a challenging demand environment. During the quarter, comparable hotel RevPAR declined 2.2% compared to the prior year quarter, largely due to reduced demand from group and government related travel. During the second quarter, government room nights were down approximately 26% compared to the prior year period, representing a significant headwind to RevPAR performance. Despite these challenges, our portfolio delivered strong performance with comparable hotel revenue increasing 1.3% and comparable hotel EBITDA growing 2.6% compared to the prior year period.

Speaker 3

This performance underscores the impact of our Grow AHT initiative, which has prioritized high margin revenue strategies and targeted cost reductions across the portfolio, resulting in comparable hotel EBITDA margin expansion of 39 basis points. Our asset management team's focus on driving ancillary income and controlling costs has laid a strong foundation for

Speaker 2

the remainder of the year,

Speaker 3

supporting outsized revenue growth even as broader market conditions soften. Reflecting broader industry trends, the second quarter is expected to be the softest period of 2025 for the group segment impacted by the late timing of Easter and continued headwinds from those initiatives affecting government related travel. Group revenue for the portfolio declined approximately 4% during the second quarter compared to the prior year period. Our resort assets performed particularly well with group revenue up 14% in the second quarter compared to the prior year period. Renaissance Palm Springs was a strong contributor to success delivering a 36% increase in group revenue during the second quarter compared to the prior year period.

Speaker 3

The hotel benefited from robust demand associated with festival groups and multiple citywide conventions. Looking ahead to the 2025, group demand remains healthy with group revenue currently pacing ahead of the prior year. We're also encouraged by the growing pipeline of event driven demand, including the twenty twenty six FIFA World Cup, which will run from early June to mid July across key markets like Miami, Dallas and Washington DC. Notably, 42% of our portfolio hotel rooms are located in the host cities for the upcoming World Cup, positioning us to capture outsized demand from this global event. As mentioned earlier, grow AHT has led to significant operational and financial gains across our portfolio.

Speaker 3

Second quarter comparable hotel EBITDA margin expanded by 39 basis points compared to the prior year period. Additionally, during the second quarter, other revenue increased 22% on a per occupied room basis compared to the prior year quarter. As part of the GROW AHT initiative, we have taken decisive strategic actions to enhance hotel EBITDA and improve overall profitability while maintaining service standards. Our property managers have implemented a range of high margin revenue opportunities and cost optimization measures. These efforts include the deployment of tools to help us monetize our amenities, improved food and beverage margin performance plans and cuts to contracted services.

Speaker 3

These targeted initiatives have played a key role in driving margin growth in a tough environment. A good example of this is Marriott Crystal Gateway. Despite headwinds related to government activity in Washington, D. C, Marriott Crystal Gateway delivered a 100% increase in other revenue during the second quarter and improved its GOP margin by two nineteen basis points compared to the prior year quarter. Looking ahead, we believe GrowAHT positions us to operate under a more sustainable and efficient model.

Speaker 3

As we move through the remainder of 2025, we remain focused on identifying additional opportunities to further strengthen hotel level performance and maximize long term shareholder value. With that, I would like to highlight a few recent success stories from across our portfolio. In partnership with the project management firm Premier, many of our assets have recently undergone major renovations or brand conversions and are now beginning to realize the benefits of those investments. For properties that have completed significant renovations or repositionings within the past year, hotel RevPAR increased 19% in the second quarter compared to the prior year period, demonstrating strong early returns on capital. One example is Embassy Suites Dallas Galleria, which completed a comprehensive guest room renovation in late twenty twenty four.

Speaker 3

The property delivered an outstanding performance during the second quarter with total hotel revenue up 31% compared to the prior year period. Another strong performer was La Concha Key West, which underwent a strategic repositioning from a Crowne Plaza to a Marriott Autograph Collection Hotel in December 2024. In its second full quarter under the new brand, the hotel saw RevPAR increased 28%, total revenue increased 41% and hotel EBITDA increased 59% compared to the prior year period. Contributing to this momentum were four newly launched food and beverage outlets, including a full service dinner restaurant that opened midway through the first quarter. As a result, during the second quarter, food and beverage revenue increased 668% on a per occupied room basis compared to the prior year period, a testament to the property's improved guest experience and market positioning.

Speaker 3

La Pavion in New Orleans also continued to build on its recent conversion to Marriott's tribute portfolio delivering another strong quarter. Second quarter RevPAR was up 55% and total revenue increased 46% compared to the prior year quarter. We remain optimistic about this property's trajectory and are actively working to build a robust group and event calendar to further unlock its potential as a differentiated offering within a historic setting. Moving on to capital expenditures. During the 2025, we completed the guest room renovation at Courtyard Bloomington and the public space renovation at Hampton and Evansville.

Speaker 3

Both projects were aligned with brand franchise agreement renewals and reflect our continued commitment to elevating the guest experience. We also began upgrades to the restaurant and meeting space at Hilton Garden in Austin, aimed at modernizing the property and fully leveraging its premier downtown location. Looking ahead, we plan to initiate strategic brand conversions at Sheraton Mission Valley and Sheraton Anchorage, both of which will transition to Hyatt Regency brand. In addition, we expect to commence public space enhancement at Weston Princeton and Courier Bloomington, along with guest room renovations at Hilton Yarndon, Virginia Beach. These initiatives are part of our disciplined capital deployment strategy and demonstrate our ongoing focus on long term value creation through portfolio quality and brand alignment.

Speaker 3

For full year 2025, we anticipate spending between $90,000,000 and $110,000,000 on capital expenditures. In summary, our ancillary revenue initiatives are gaining meaningful traction. Our expense optimization initiatives continue to drive hotel EBITDA growth and our capital investment strategy remains firmly aligned with long term value creation. We remain focused on positioning our platform for sustained success and are fully committed to maximizing both the performance and the value of our portfolio. That concludes our prepared remarks, and we will now open up the call for Q and A.

Operator

Thank you. And once again, that is star one if you'd like to ask a question. And it appears there are no questions going once, going twice. All right. No questions today.

Operator

So I will now turn the call back over to management for closing comments.

Speaker 1

Thank you for joining today's call, and we look forward to speaking with you all again next quarter.

Operator

Thank you all for joining. You may now disconnect.

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