Apple Hospitality REIT Q2 Earnings Call Highlights

Key Points

• Strong Q2 performance: Comparable-hotel RevPAR rose 5.3% to $136, driven by higher rates, improved occupancy and broad-based gains in business and leisure travel. Adjusted hotel EBITDA increased 9.7%, while the margin expanded 120 basis points to 38.1%.
• 2026 outlook raised: Apple Hospitality increased its full-year comparable RevPAR growth forecast to 2.25%–4.25% and expects a 33.7%–34.7% adjusted hotel EBITDA margin. Management cited strong forward bookings, transient demand and favorable comparisons.
• Balance sheet strengthened: July refinancing expanded the primary unsecured credit facility to approximately $1.3 billion, extended maturities through 2032 and moved the next significant unsecured maturity to 2029. The company had $1.5 billion of debt and no outstanding revolver balance at the refinancing date.

Apple Hospitality REIT NYSE: APLE reported stronger second-quarter operating results, citing broad-based gains in business and leisure travel, improved weekday occupancy and disciplined expense management. The lodging REIT raised its full-year RevPAR and hotel EBITDA margin outlook after comparable-hotel RevPAR increased 5.3% in the quarter.

Chief Executive Officer Justin Knight said approximately three-quarters of the company’s hotels posted RevPAR growth during the period, compared with roughly two-thirds in the first quarter. Comparable-hotel RevPAR reached $136, supported by a 3.5% increase in average daily rate to $170 and a 130-basis-point increase in occupancy to 80.1%.

“Weekday occupancy improvement outpaced weekend occupancy improvement during the quarter, indicative of strengthening business travel across our portfolio,” Knight said. Preliminary July results pointed to comparable-hotel RevPAR growth of more than 5.5%, he added.

Margins Expand as Revenue Outpaces Expenses

Comparable-hotel revenue rose 6.2% to $402 million in the second quarter, while comparable-hotel adjusted hotel EBITDA increased 9.7% to $153 million. Adjusted hotel EBITDA margin expanded 120 basis points to 38.1%.

Chief Financial Officer Liz Perkins said the company converted approximately $0.58 of each incremental revenue dollar into comparable-hotel adjusted hotel EBITDA. Operating expenses rose 3.5% against 4.7% same-store revenue growth, while fixed expenses declined. Wage growth moderated, with rooms wages rising less than 3%, or less than 1% per occupied room.

Utilities and repairs and maintenance were expense headwinds, increasing 9% and 6%, respectively. However, lower fixed expenses reflected a favorable property insurance renewal that took effect in April and successful real estate-tax appeals, Perkins said.

Modified funds from operations, or MFFO, was $123 million, or $0.52 per share, during the quarter, rising 9% and 8.3%, respectively. For the first six months of 2026, MFFO totaled approximately $204 million, or $0.86 per share, up 6.1% in dollars and 7.5% per share.

Business Travel and Group Demand Support Results

Management pointed to a strengthening mix of business transient and group demand. Same-store weekday occupancy increased 240 basis points in the second quarter, exceeding the 120-basis-point improvement in weekend occupancy. Brand.com accounted for 40% of room nights, up 80 basis points year over year, while global distribution system bookings rose 100 basis points to 18% of room nights.

Perkins said the increase in GDS bookings was a notable indication of business-travel strength. The company also saw business travelers booking at retail rates rather than negotiated corporate rates, helping support rate growth. Best available rate business rose 120 basis points to 33% of occupancy mix, while negotiated business fell 160 basis points to 15%.

Group business represented 18% of occupancy mix, up 60 basis points from a year earlier. Perkins said that was among the company’s strongest quarterly group contributions, compared with a historical range of roughly 15% to 16%, and noted that group was the company’s second-highest-rated segment.

Performance was broad across markets, according to the company. Kansas City RevPAR increased 17% and Fort Worth/Arlington rose 16%, with rate growth driving results in markets hosting FIFA World Cup events. World Cup activity contributed approximately 50 basis points to second-quarter RevPAR growth, including roughly 150 basis points in June, Perkins said.

Excluding World Cup host markets, Knight said portfolio RevPAR still grew nearly 5%. Other notable markets included South Bend, where RevPAR increased 24% on midweek group demand connected to Notre Dame; Anchorage, where RevPAR rose 17%; and Chicago and St. Louis, where RevPAR each increased 13%. Phoenix was an exception, with RevPAR declining 5% amid lower occupancy and rate, partly due to a pullback in semiconductor-related business.

Guidance Raised for 2026

Apple Hospitality raised its full-year comparable-hotel RevPAR growth outlook to a range of 2.25% to 4.25%. At the midpoint, the forecast represents a 225-basis-point increase from the company’s prior outlook. The company now expects comparable-hotel adjusted hotel EBITDA margin of 33.7% to 34.7%, with the midpoint implying a 25-basis-point year-over-year increase.

• Adjusted EBITDAre guidance: $453 million to $476 million
• Net income guidance: $152 million to $180 million
• Expected full-year capital expenditures: $85 million to $95 million

Knight said the revised midpoint still assumes more modest second-half growth than the company generated in the first half. Management cited continued forward-booking strength, potential benefits from comparisons with prior periods affected by reduced government travel and last year’s government shutdown, and stronger-than-anticipated transient demand.

Refinancing Extends Maturities and Adds Capacity

In July, subsequent to quarter-end, the company completed refinancing transactions that increased its primary unsecured credit facility to approximately $1.3 billion, extended maturities and improved pricing terms. The facility includes a $700 million revolver maturing in 2030, a $275 million term loan maturing in 2031 and a $300 million term loan maturing in 2032.

Apple Hospitality also increased a separate term loan to $160 million from $130 million and extended its maturity by seven years. Perkins said the transactions lifted the weighted average debt maturity to nearly five years, left the company with no outstanding revolver balance and pushed its next significant unsecured maturity to 2029.

At June 30, the company had approximately $1.5 billion of total debt, a weighted average interest rate of 4.8%, and approximately $602 million available under its revolving credit facility. During the quarter, it repaid a secured mortgage loan totaling about $19 million, increasing its number of unencumbered hotels to 207.

The company also said it has no acquisition agreements for 2026, as seller expectations have generally remained above levels it considers accretive relative to its cost of capital. It continues to evaluate asset sales and potential acquisitions, while maintaining forward purchase commitments for an AC Hotel in Anchorage expected in late 2027 and a dual-branded AC and Residence Inn project in Las Vegas expected in the second quarter of 2028.

About Apple Hospitality REIT (NYSE:APLE)

Apple Hospitality REIT NYSE: APLE is a publicly traded real estate investment trust that focuses on acquiring, owning and operating high-quality, upscale, select-service hotels. The company's portfolio primarily consists of properties operated under premium franchise agreements with leading lodging brands such as Marriott, Hilton and Hyatt. Apple Hospitality REIT is self-managed and internally advised, overseeing property management, revenue optimization and asset-level operations through its in-house team of hospitality professionals.

The company's holdings encompass over 200 hotels featuring more than 30,000 guest rooms across a diverse array of markets in the United States.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.

Continue following MarketBeat

Add MarketBeat as your preferred source on Google to see our latest stories in your feed.

Add As Preferred Source