American Hotel’s Earnings Call: Growth Amid Challenges

American Hotel (($TSE:HOT.UN)) has held its Q1 earnings call. Read on for the main highlights of the call.

In the recent earnings call, American Hotel Income Properties REIT LP (AHIP) presented a mixed sentiment. While the company reported positive revenue growth and successful execution of its disposition program, there were notable weaknesses in financial metrics such as NOI margin and FFO. The achievements in debt refinancing were commendable, yet the increased expenses and reduced cash reserves pose ongoing challenges for the company.

Revenue Growth

AHIP reported a 1.2% increase in total revenue, with RevPAR finishing at $93, marking a 2.4% improvement over the previous quarter. This growth was primarily driven by increased occupancy in extended stay and select service properties, showcasing the company’s ability to capitalize on market demand.

Successful Disposition Program

The company successfully completed the disposition of three hotel properties, generating total gross proceeds of $41.2 million. Additionally, AHIP has nine more properties under purchase and sales agreements, expected to bring in an estimated total gross proceeds of $49.7 million. This strategic move is part of AHIP’s efforts to optimize its portfolio and strengthen its financial position.

Debt Refinancing Achievements

AHIP completed two significant refinancings, totaling $144.3 million, which allowed for the full repayment of their senior credit facility. This achievement means that the company has no further debt maturities until the fourth quarter of 2026, providing a stable financial outlook in terms of debt obligations.

Stability in Labor Costs

The company reported stability in labor costs, with wages, turnover, and productivity having stabilized. The dependency on contract labor has also tapered off, indicating a more controlled and predictable labor expense environment.

NOI Margin Decline

Despite revenue growth, AHIP experienced a decline in NOI margin by 107 basis points to 27.5%. This decline was attributed to higher operating expenses, largely driven by general cost inflation, which continues to impact the company’s profitability.

Negative FFO

The company reported a negative normalized diluted funds from operations (FFO) of $0.02 per unit for the quarter, a decrease from $0.02 per unit in the previous quarter. This negative FFO reflects ongoing financial challenges that AHIP needs to address.

Reduced Cash Balance

AHIP’s unrestricted cash balance saw a reduction from $27.9 million at the end of 2024 to $17.8 million at the end of March 2025. This decrease in cash reserves highlights the need for careful financial management moving forward.

Increased Undistributed Expenses

Undistributed expenses, particularly in labor, remain elevated. The company also faced significant increases in utility expenses and repairs, which continue to pressure the overall cost structure.

Forward-Looking Guidance

Looking ahead, AHIP’s CEO Jonathan Korol highlighted plans to address future obligations by raising capital through potential further hotel sales and recapitalization efforts over the next 12 to 18 months. Despite the challenges, the company has no debt maturities until Q4 2026, providing some breathing room to implement these strategies.

In summary, American Hotel Income Properties REIT LP’s earnings call presented a mixed bag of achievements and challenges. While revenue growth and debt refinancing were positive highlights, the company faces ongoing financial pressures from increased expenses and a reduced cash balance. The strategic disposition program and forward-looking plans to raise capital indicate a proactive approach to navigating these challenges.