AHIP Outpaces Competitors in Q2 RevPAR

VANCOUVER—American Hotel Income Properties REIT LP reported a RevPAR decline in the second quarter ended June 30 of 57.6% to $33.01 when compared to $77.82 in the same quarter last year. The company’s 79 premium-branded hotels collectively outperformed their direct competition, according to the STR RevPAR Index.

CEO John O’Neill was also encouraged by the increase in occupancy in July. “While our financial results reflect the negative impact of COVID-19, we are pleased to see that our portfolio is performing better than our U.S. hotel REIT peers, and our occupancy recovery is well underway,” he said. “In fact, for the month of July, we recorded 55.3% average occupancy; this, combined with our strong cost-cutting measures, has allowed us to achieve our first cash-flow positive month since the worst of the COVID-19 impacts were seen in April. 

“We are very pleased to no longer be in a cash-burn operating situation given our much improved occupancy and business performance the last several weeks,” he continued. “This is unique among hotel REITs, most of whom are still burning through cash, and demonstrates the strength and resilience of our select-service hotel portfolio, with hotels strategically located in secondary U.S. markets.”

After a dismal April, occupancy rose monthly to nearly 50% by the end of the quarter, O’Neill noted. 

“In April, we saw the most negative impact from COVID-19 measures when average hotel occupancy bottomed out at 21.8% We took decisive measures to cut costs wherever possible and made the decision to temporarily close or consolidate 22 of our hotel properties,” he said. “By May, we saw occupancy improved to 33.3% and reopened all of our properties by early June as business levels warranted. In June, occupancy improved to 49% with all 79 of our hotels open and accepting guests. With these improved revenues and margins, AHIP was able to achieve a positive EBITDA for our hotels in May and June.”

On ADR, he added, “Within this environment, our second quarter ADR declined only 4.3% from last year, due in part to the higher-quality hotels we now have in our portfolio, but also with a very diligent approach in marketing our properties to large government and essential service groups.”

With all of the company’s properties open, July was AHIP’s first month of positive cash flow since March, O’Neill pointed out, adding, “Weekly occupancy growth has continued over the last several weeks, the pace of growth starting to moderate compared to what we saw in May and June. We continue to see improving business levels across our portfolio, including in states with high rates of COVID-19. All 79 of our hotels remain open with an ongoing mix of government, essential service and leisure travelers safely staying in our hotels. Our hotel occupancy has continued to improve with average hotel occupancy in July of 55.3% and our 24 extended-stay properties achieving average occupancy of 64.6%.”

Bruce Prittet, SVP, asset management/COO, broke down the best performing markets in the quarter.

“Our best-performing market was Tennessee, where our two properties there recorded an average occupancy of 73.3%, driven by restoration, recovery and insurance group demand due to tornados in early April,” he said. “Other regions also demonstrated strong resilience and occupancy demand. Our hotel in Kansas achieved 72.8% occupancy, our four new properties in West Texas achieved 58% occupancy and our six properties in New Jersey achieved 54.7% occupancy during the quarter.”

However, he noted, AHIP’s five Embassy Suites hotels, generally located in larger, secondary markets and having exposure to meetings and conference business segments, were the most challenged properties in the portfolio, with four of the hotels closed to guests for approximately seven to nine weeks during the quarter. 

Q2  Financial Highlights

  • Revenues for the quarter decreased 69.7% to $27.3 million, compared to $90.0 million in Q2 2019, as a result of lower demand due to the significant impact of COVID-19 and portfolio changes between periods.
  • ADR decreased 4.3% to $95.13, compared to $99.39 in 2019.
  • Occupancy during the second quarter decreased 43.6 percentage points to 34.7% (78.3% in Q2 2019). Average occupancy in April was 21.8%, when the worst impacts from COVID-19 were experienced. Average occupancy in May improved to 33.3%. Average occupancy in June improved to 49.0%.
  • RevPAR decreased 57.6% to $33.01 when compared to $77.82 in the same quarter last year due to significantly reduced demand related to COVID-19. The STR RevPAR index, which compares the performance of AHIP owned hotels to their competitive set in each region, indicated even though the hotel sector faced RevPAR pressure, AHIP’s 79 premium branded hotels have, in aggregate, significantly outperformed their identified direct competition with an average index rating of 136.0 during the quarter with 100.0 representing a ‘fair share’ of the market.
  • Net Operating Income (NOI) decreased by 86.7% to $4.3 million due to lower revenues, partially offset by expense reduction initiatives.
  • Loss and comprehensive loss for the second quarter was $20.8 million, compared to net income and comprehensive income of $5.8 million in Q2 2019, as a result of lower revenues and NOI, fair value changes on interest rate swap contracts and $3.7 million of impairment charges on three hotels during the period.
  • Diluted loss per unit for the quarter was 26 cents compared to a diluted income per unit of 7 cents in Q2 2019.

Same-Property Results
Same-property metrics represent the performance of the 67 premium-branded hotels owned in both the current and comparative period, or 85% of AHIP’s total current hotel portfolio based on the number of hotels.

  • Same-property revenues for the second quarter decreased 68.9% to $22.3 million ($71.7 million in Q2 2019) due to the impact of COVID-19.
  • Same-property ADR decreased 20.3% to $92.47 ($116.09 in Q2 2019).
  • Same-property RevPAR decreased 67.1% from Q2 last year to $31.07 ($94.50 in Q2 2019).
  • Same-property occupancy decreased 47.8 percentage points to 33.6% (81.4% in Q2 2019).