Since announcing its strategic financial plan at the start of the year, Ashford Hospitality Trust has made significant progress toward paying it off, its chief executive said.
During the hotel real estate investment trust's third-quarter earnings call, President and CEO Stephen Zsigray said that since January, Ashford Trust has sold more than $310 million in hotels, completed the refinancing of its Renaissance Nashville and has raised about $173 million of gross proceeds from the sale of its non-traded preferred stock.
The REIT used some of the proceeds from each of these efforts to pay down its strategic financing by more than $100 million since the start of 2024, and the balance now stands at about $82 million today, he said. Ashford Trust Wednesday agreed to an amendment to that strategic financing that allows for a discounted exit fee if the REIT fully pays off the financing by Dec. 15 as long as the outstanding balance is reduced to $50 million or less by Nov. 15. The strategic financing has a final maturity date of January 2026.
“We are currently working on a couple of transactions that we hope will close in the near term, and we continue to believe we have a viable path of paying off this financing entirely before the end of the year,” Zsigray said.
As the company looks forward, completing the repayment of its strategic financing will allow Ashford Trust to “finally turn the page on the COVID era,” he said.
In light of the underwhelming revenue growth across the industry through the first three quarters of 2024, Ashford Trust’s property managers are aggressively driving sales and managing expenses, Zsigray said. October saw the highest monthly top-line growth of any month this year, with revenue per available room growth of 4.6% compared to October 2023.
The company should also start to see the benefits of additional expense management initiatives in the fourth quarter and throughout 2025, he said.
Portfolio update
Ashford Trust has imminent conversions of its Crowne Plaza La Concha hotel in Key West, Florida, and Le Pavillon Hotel in New Orleans this year, Zsigray said. The La Concha hotel will join Marriott International’s Autograph Collection, undergoing a renovation that will focus on the lobby bar, restaurant, exterior, guestrooms, guest bathrooms, corridors, pool and meeting space.
“The transformation is expected to elevate the property into a desirable niche in the high-barrier-to-entry, high-RevPAR U.S. market post-conversion,” he said, adding it should realize a 20% to 30% RevPAR premium compared to before the conversion.
The Le Pavillon hotel in New Orleans will join Marriott’s Tribute Portfolio by the end of the year as well. The conversion includes a renovation to guestrooms, guest bathrooms, restaurant, lobby bar and exterior work. The converted hotel should realize a 10% to 20% RevPAR premium.
Ashford recently opened the 188-key Le Meridien Fort Worth Downtown following the redevelopment of a 13-story historic building, he said. The hotel is located within easy walking distance to the Fort Worth Convention Center and near local landmarks, such as Trinity Park and Sundance Square. The hotel features a rooftop lounge, French-inspired cuisine and more than 5,000 square feet of function space.
“It's already running well ahead of expectations, and we're very excited about the prospects for this property,” he said.
Ashford Trust is looking at further asset sales and some refinancing, Zsigray said, adding he was hesitant to comment prematurely on those potential deals.
“I think as you watch over the next couple of weeks, we’ll have plenty to announce as it relates to those,” he said.
Following the Federal Reserve’s decision in September to cut interest rates, there has been an uptick in transaction interest, particularly from institutional buyers, he said. That includes interest in hotels Ashford Trust has marketed for sale as well as for off-market deals.
The uncertainty around the U.S. presidential election also had an impact on deals activity, Zsigray said.
“Hopefully, with that largely behind us here, we start to see continued tightening of that bid-ask spread and continued improvement, both in the financing markets and the transaction markets that rely on it,” he said.
Quarterly performance
During the third quarter, Ashford Trust’s comparable hotel RevPAR decreased 1% year over year in its portfolio, said Chris Nixon, executive vice president and head of asset management. Achieving RevPAR growth has been challenging, but its team has been working with property managers to roll out plans to grow ancillary revenue, which increased 15% per occupied room year over year.
Transient demand has improved year to date, with corporate revenue up 9% compared to the same period last year, he said. There has been an acceleration in attendance at major events while price sensitivity for those events has decreased. Ashford Trust also benefited from non-annual events, such as the Silversmith Hotel in Chicago enjoying an 85% boost in group room revenue and 50% increase in group average daily rate during the Democratic National Convention.
Many of Ashford Trust’s historically group-dominated markets are operating at full steam, beating 2019 levels, Nixon said. Group room revenue for full-year 2024 is pacing ahead of last year by 2%, and group room revenue for full-year 2025 is pacing ahead by 8%, with all quarters ahead the prior year. Group lead volume has increased by 4% year over year.
“Our revenue optimization team has worked diligently with the hotel teams to capitalize on the positive 2025 group outlook seen across the industry, to grow group block sizes and extend the booking window,” he said.
The team has set optimal group mix targets across the portfolio for the sales teams, and they’re meticulously auditing spending for digital channels and event space demand generators, Nixon said. That has put its two largest hotels, the Marriott Crystal Gateway and Renaissance Nashville, in favorable positions with group room revenue pacing ahead by 14% and 7%, respectively.
In late September and early October, several of Ashford Trust’s markets and hotels dealt with the effects of Hurricane Helene and Hurricane Milton, Nixon said.
“As always, we believe it's important for our hotels to stay open as a place of refuge and service the communities during these storms,” he said. “We have a lot of experience here, and we prioritize the safety and well-being of the hotel employees and guests.
“We've seen time and time again that keeping our hotels open not only provides a safe haven for the local community, hotel staff and disaster relief crew members, but positions the properties to be able to quickly mitigate any damage and capitalize on demand.”
During the third quarter, all Ashford Trust’s hotels remained open, he said. The risk management team proactively handles hurricane procedures by identifying and notifying potentially affected hotels, giving the teams time to prepare. They’re able to put procedures into action to make the properties safer and prevent damage.
“These procedures have helped us to form strong relationships with disaster relief companies who provide quick aid to our hotels with cleanup overall, despite minor damage occurring at some of the hotels,” he said. “Our approach towards the hurricanes resulted in minimal operational impact and positive financial results during the quarter.”
By the numbers
For the quarter, Ashford Trust reported a net loss of $59.1 million with total revenue of $276.6 million, according to the company’s earnings release. Adjusted earnings before interest, taxes, depreciation and amortization for real estate amounted to $52.4 million. Comparable hotel EBITDA was $70.4 million.
The portfolio achieved comparable RevPAR of $133, down 1.4% year over year. Comparable ADR grew by 1.7%, but comparable occupancy fell 3%.
During the quarter, the REIT spent $22.6 million on capital expenditures.
Ashford Trust ended the quarter with $119.7 million in cash and cash equivalents with $114.3 million in restricted cash. Most of the restricted cash comprises lender and manager-held reserves. There was $26.7 million due from third-party hotel managers which is primarily Ashford Trust’s cash held by one of its property managers and is also available to fund hotel operating costs.
Ashford Trust had total loans of $2.7 billion with a blended average interest rate of 8%, which takes into account in-the-money interest rate caps. Based on the current level of the secured overnight financing rate and its corresponding interest rate caps, roughly 83% of its consolidated debt is effectively fixed while the remaining 17% is floating.