Apple Hospitality REIT Q3 Earnings Call Highlights

Key Points

• Apple Hospitality raised its full-year outlook after third-quarter comparable RevPAR grew 7.3% and adjusted EBITDA margins expanded 210 basis points to 37.1%. The company lifted its RevPAR growth midpoint to 5.6% and its adjusted EBITDAre guidance midpoint by $23 million.
• Stronger business and leisure travel, higher-rate bookings, and improved occupancy supported results; October RevPAR growth was about 10%, or an estimated 7%–8% excluding a comparison benefit from last year’s government shutdown.
• The company has contracted to sell five hotels for about $72 million and expects to direct sale proceeds primarily toward acquisitions, potentially becoming meaningfully more acquisitive in the coming months.

Apple Hospitality REIT NYSE: APLE raised its full-year outlook after stronger business and leisure travel drove a 7.3% increase in third-quarter revenue per available room and helped the hotel owner expand its profit margins.

Comparable hotel revenue per available room, or RevPAR, reached $134 in the quarter, up from a 5.4% growth rate in the second quarter. Average daily rate rose 4.3% to $171, while occupancy increased 210 basis points to 78.3%, Chief Financial Officer Liz Perkins said on the company’s earnings call.

Chief Executive Officer Justin Knight said the company shifted its business mix toward higher-rate bookings, including retail and group customers, while reducing discount business. Comparable hotel adjusted EBITDA margin rose 210 basis points to 37.1%, as hotel revenue grew faster than expenses.

Higher outlook follows strong October

Apple Hospitality now expects full-year comparable hotel RevPAR growth of 5.1% to 6.1%, with the 5.6% midpoint up 235 basis points from its previous outlook. It also raised the midpoint of its comparable hotel adjusted EBITDA margin guidance by 105 basis points to 35.25%.

The company forecast adjusted EBITDAre of $482 million to $493 million and net income of $177 million to $192 million. Perkins said the $23 million increase in the midpoint of adjusted EBITDAre guidance reflected approximately $12 million from third-quarter results exceeding expectations and $11 million from a stronger fourth-quarter outlook.

Preliminary October results showed comparable hotel RevPAR growth of approximately 10%. The month benefited from comparison with last year’s government shutdown, but Perkins estimated growth would have been 7% to 8% without that comparison benefit, assuming most of last year’s weakness was government-related or adjacent to it.

Knight said bookings for the remainder of the year support the increased outlook, with transient demand and particularly midweek business travel exceeding expectations.

Business travel supports rates and margins

Comparable hotel total revenue rose 8.2% to $394 million in the third quarter, while comparable hotel adjusted EBITDA increased 14.7% to $146 million. Companywide adjusted EBITDAre rose 13.3% to approximately $140 million. Modified funds from operations, or MFFO, increased 16.3% on a per-share basis to $0.50.

Perkins noted that Apple Hospitality began excluding share-based compensation expense from adjusted EBITDAre and MFFO on Jan. 1, 2026. Prior-year results were updated to make the growth comparisons consistent.

Same-store hotel revenue rose 7.1% in the quarter, compared with a 3.7% increase in total hotel expenses. Utilities and repairs and maintenance were among the main cost pressures, while fixed expenses declined following a favorable property insurance renewal and successful real estate tax appeals, Perkins said.

The company also reported a shift toward direct bookings. Brand.com accounted for 40% of room nights, up 80 basis points from a year earlier, while online travel agencies represented 13%, down 100 basis points. Perkins said direct bookings generally carry lower distribution costs, although the cost gap with online travel agencies is narrower than it once was.

Among individual markets, RevPAR rose 23% in Anchorage, 16.5% in Washington, D.C., and 12% in San Diego. Phoenix, the company’s largest market by hotel count, was roughly flat after a 5% decline in the second quarter.

Hotel sales and acquisition plans

Since the start of the third quarter, Apple Hospitality has contracted to sell five hotels in Santa Clarita, California; Davenport; and Sacramento, California, for approximately $72 million in combined gross proceeds. Knight said the company expects the sales to close by year-end.

Including a hotel sold in April, those transactions total approximately $81 million. The company has sold or contracted to sell 13 hotels for approximately $154 million since the beginning of 2025, recycling capital from older properties with lower growth prospects, Knight said.

In response to an analyst’s question, Knight said acquisitions are the most likely use of sale proceeds under current conditions. Assuming no change in the company’s share price, he said it would be reasonable to expect Apple Hospitality to be meaningfully more acquisitive in the coming months than it has been recently. Cash from operations would be its preferred funding source, followed by sale proceeds.

The company had approximately $1.5 billion in debt at Sept. 30, equal to about three times trailing 12-month EBITDA, along with $43 million in cash and $700 million available under its revolving credit facility. It expects full-year capital expenditures of $85 million to $95 million, including comprehensive renovations at 18 hotels.

Management optimistic about 2027

Knight said improving business travel and limited new hotel supply support the company’s outlook for continued growth in 2027, although management did not provide a numerical RevPAR forecast. Apple Hospitality will face a comparison against this year’s World Cup-related demand, but Perkins estimated the event’s full-year contribution at roughly 15 basis points of RevPAR growth.

Perkins said the company is still developing property-level budgets for next year. She cited utilities as a cost to watch and said continued declines in fixed costs would not necessarily be a starting assumption for 2027.

“While we won’t necessarily have some of the tailwinds that fueled the higher growth rates this year, the underlying fundamentals should continue to produce growth as we move into next year,” Knight said.

About Apple Hospitality REIT (NYSE:APLE)

Apple Hospitality REIT, Inc is a self-administered and self-managed real estate investment trust that owns a portfolio of upscale, select-service hotels across the United States. The company's properties primarily operate under well-known hospitality brands affiliated with Marriott International, Hilton Worldwide Holdings and Hyatt Hotels Corporation.

Apple Hospitality's hotels provide lodging and related guest services, including accommodations, meeting facilities, food and beverage offerings, and other amenities.

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