Fueled by its partnership with Singapore sovereign wealth fund GIC, Summit Hotel Properties has been riding a wave of hotel acquisitions, with $900 million in deals over an eight-month period and more than $1 billion in transactions for the year in 2021.
Now the company must complete the sizable task of digesting those deals and integrating those hotels, including the 26 closed on so far through a $776.5 million acquisition of hotels from NewcrestImage, into their platform.
Speaking with analysts during the company’s fourth quarter and full-year 2021 earnings call, President and CEO Jonathan Stanner said officials with the real estate investment trust are feeling optimistic about that deal.
“We’ve only owned the Newcrest portfolio for about 40 days, so we’re definitely well on our way to integrating that portfolio within the company,” he said. “I think we feel better today than we did even when we underwrote or even when we announced the acquisition about what the opportunity set looks like.”
In addition to the NewcrestImage purchase, noteworthy recent deals for the company include:
- transferring a six-hotel portfolio into the joint venture with GIC for $172 million;
- the $33 million buy, once again with GIC, of the 110-room Residence Inn Steamboat Springs for $33 million;
- the $25.5 million purchase of the 120-room Embassy Suites by Hilton Tucson/Paloma Village.
All but one of the hotels in the NewcrestImage deal closed in early February with the exception of the 176-room Canopy by Hilton New Orleans, a hotel still under construction that is expected to sell at its completion at some point in the first quarter. In all, that deal represents 27 hotels with 3,533 rooms, along with two parking structures.
The joint venture now holds 40 hotels in all, while Summit’s overall hotel portfolio sits at 101 properties.
Stanner said one of the appealing parts of that acquisition was the young age of most of NewcrestImage’s assets and the relatively little need for capital investment.
“It’s a very new portfolio,” he said. “There’s really one asset in the entire portfolio that needs an immediate renovation. The vast majority of those assets have been opened within the last three to five years, and we don’t have any real immediate capital needs.”
He said Summit still holds “nearly $450 million of liquidity,” which could allow the company to execute deals this year even outside the GIC joint venture.
“We do expect to exit our covenant waivers here over the course of the next year, and so we’ll have even greater flexibility to continue to pursue growth opportunities,” he said. “We prefer to be net acquirers early in a cycle. I wouldn’t preclude us from looking to sell some assets on an opportunistic basis.”
Staffing Update
Asked by analysts what staffing levels looked like at Summit’s properties, Stanner said the company's hotels are currently carrying roughly 55% of what they had pre-pandemic.
He said labor shortages still exist but are easing somewhat.
“I think we’ve started to see some improvements in the labor market,” he said. “The number of applicants that we’re seeing for positions has ticked up, but it’s still challenging out there.”
Stanner said the new normal of staffing levels is still a work in progress.
“I think, in fairness, we’re still working through with the brands what the normalized brand standards are going to look like, in part because we’re waiting to see this return of business travel and what effects that has on our overall business,” he said. “I don’t suspect that we’re ever going to go back to 35 [full-time employees] per asset.”
Fourth Quarter Performance
According to the company’s fourth quarter earnings release, Summit reached revenue per available room of $94.22 for the the final quarter of 2021 and $81.13 for the full year. Average daily rate his $144.99 in the fourth quarter, with occupancy at 65%.
The company recorded a net loss of $83.7 million for the full year 2021, and a net loss of $15.3 million in the quarter. The company had adjusted earnings before interest, taxes, depreciation and amortization for real estate of $90.5 million for the year.
As of press time, Summit stock was trading at $10.03 per share, up 2.8% year to date. The NYSE Composite Index was down 6.7% for the same period.