tiprankstipranks
Trending News
More News >
Advertisement
Advertisement

AHIP Earnings Call: Mixed Results and Strategic Moves

AHIP Earnings Call: Mixed Results and Strategic Moves

American Hotel (($TSE:HOT.UN)) has held its Q2 earnings call. Read on for the main highlights of the call.

Elevate Your Investing Strategy:

  • Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.

The recent earnings call for American Hotel Income Properties REIT LP (AHIP) painted a mixed picture. While the company has made significant strides in asset sales, debt refinancing, and maintaining a strong cash position, it faces challenges with declining revenues, RevPAR, and NOI margins. Despite these headwinds, AHIP remains optimistic about its long-term prospects.

Record Highs in Average Daily Rate and RevPAR

AHIP reported achieving all-time highs in average daily rate and RevPAR, with the RevPAR index increasing by 70 basis points to nearly 115% during the quarter. This milestone underscores the company’s ability to optimize pricing strategies and maintain competitive positioning in the market.

Successful Asset Sales and Debt Refinancing

In a strategic move to enhance financial stability, AHIP sold 16 hotel properties in 2024 for $165.2 million and an additional 11 properties in the first half of 2025 for $73.5 million. These transactions have significantly reduced leverage and improved the quality of the portfolio’s assets.

Strong Cash Position and No Secured Debt Maturing Until Late 2026

AHIP’s financial health is bolstered by a stable cash position, with no secured debt maturing until late 2026. This provides the company with ample time to explore alternatives for addressing future financial obligations.

Positive Long-term Prospects

The company remains confident in its diversified portfolio’s ability to generate long-term value for unitholders. AHIP has made great progress on its strategic plan to strengthen the balance sheet, positioning itself well for future growth.

Decline in Same-Store Revenue and RevPAR

Despite the achievements, AHIP experienced a 1.7% decline in same-store total revenue and a 2.3% drop in RevPAR compared to Q2 2024. This decline was primarily driven by contractions in the government and group segments.

Decrease in NOI Margin

The NOI margin decreased by 157 basis points to 33.8% for the quarter. This was attributed to inconsistent operating performance, operational disruptions, and elevated undistributed expenses, highlighting areas for operational improvement.

First Quarterly Year-over-Year RevPAR Decline in 5 Quarters

AHIP’s portfolio experienced a 2.3% decline in RevPAR, marking the first quarterly year-over-year decline in five quarters. This signals potential challenges in maintaining growth momentum in the near term.

Drop in Funds from Operations

Normalized diluted FFO decreased to $0.06 per unit from $0.10 per unit in Q2 2024, reflecting the impact of the operational and market challenges faced during the quarter.

Guidance and Strategic Initiatives

Looking ahead, AHIP continues to focus on strategic initiatives, including marketing approximately 20 more hotels and assessing offers based on net proceeds and certainty of closing. The company has transitioned its U.S. REIT to a taxable C corporation for greater flexibility in asset management and switched its external auditor from KPMG to MNP. AHIP also purchased close to 2 million units under a normal course issuer bid at an average price of $0.62 per share.

In conclusion, while American Hotel Income Properties REIT LP faces some challenges, particularly in revenue and margin declines, the company is taking proactive steps to strengthen its financial position and optimize its portfolio. With a focus on long-term growth and strategic asset management, AHIP remains confident in its ability to deliver value to its unitholders.

Disclaimer & DisclosureReport an Issue

Looking for investment ideas? Subscribe to our Smart Investor newsletter for weekly expert stock picks!
Get real-time notifications on news & analysis, curated for your stock watchlist. Download the TipRanks app today! Get the App
1