Hersha Hospitality Trust, owner of high-quality upscale and lifestyle hotels in urban gateway markets and resort destinations, today announced results for the second quarter ended June 30, 2020.
Second Quarter 2020 Financial Results
Net loss applicable to common shareholders was approximately ($67.5 million), or ($1.75) per diluted common share, in the second quarter 2020, compared to net loss applicable to common shareholders of approximately ($0.4 million), or ($0.02) per diluted common share, in the second quarter 2019. The decrease in second quarter 2020 net income and net income per diluted common share is due to the unprecedented impact on the travel industry from the COVID-19 pandemic.
AFFO in the second quarter 2020 decreased by $60.3 million, or 180.2%, to ($26.8 million), compared to $33.4 million in the second quarter 2019. AFFO per diluted common share and OP Unit in the second quarter 2020 was ($0.62). An explanation of certain non-GAAP financial measures used in this press release, including, among others, AFFO, as well as reconciliations of those non-GAAP financial measures, to GAAP net income, is included at the end of this press release.
Mr. Jay H. Shah, Hersha’s Chief Executive Officer, stated, “The second quarter proved to be one of the most challenging in history and will mark the trough for the U.S. economy during this crisis. The hotel industry continues to be significantly impacted by the pandemic, but we saw encouraging relative performance from the portfolio as a result of the immediate and aggressive measures implemented in collaboration with our operating partners to limit our losses. We remain focused on liquidity preservation and minimizing our cash burn rates through attentive corporate and hotel level operating strategies that were executed at the onset of the crisis. Our relationship with our independent franchise operators allowed us to enact cost-saving initiatives in real-time to maintain operations at 21 comparable hotels with a nominal staff in the initial months following the demand shock. Our unique owner-operator relationship allowed us to immediately kickstart reopening strategies in our markets as demand trends improved over the balance of the second quarter and July. As of August 1st, we have 33 of 48 hotels open including sought after drive-to properties such as the Sanctuary Beach Resort in Monterey and core urban assets such as The Envoy in Boston.”
Mr. Shah continued, “We remain encouraged by the performance of our drive-to hotels and resorts, which account for 25% of our portfolio EBITDA. We are happy to have this asset mix in our portfolio during this challenging period, but we remain confident in the long-term fundamentals of our purpose-built clusters in core gateway markets. Visitation to urban destinations is not currently top of mind for travelers, but these cities are battle-tested in prior demand shocks such as September 11th and the Great Financial Crisis, and their resiliency was proved out with visitation returning in short order following these catastrophic events. We expect to have substantially all of the portfolio hotels operating by the end of September and now more than ever, our ability to stay nimble and leverage our flexible operating model in close connection with our independent franchise operators allows us to reopen and operate our hotels in a cost-efficient manner, gives us the opportunity to reduce our cash burn rates and breakeven levels, and sets up our portfolio to generate cash flow as we continue to navigate this recovery.”
Second Quarter 2020 Operating Results
The Company had 21 comparable hotels fully open and operational throughout the second-quarter, which generated 33.7% occupancy and an average daily rate of $133.47. Our open New York City hotels, which constitutes the 5 boroughs, generated 61.0% occupancy during the second-quarter, highlighted by our select-service offerings in the JFK sub-market and our Hampton Inn Seaport which ended the quarter with 94.9% occupancy. On the West Coast, The Sanctuary Beach Resort just north of Monterey, ended the second quarter with an average daily rate of $340.28 and occupancy of 71.2%.
As of August 1, 2020, 15 of the Company’s 48 hotels continued to have suspended operations due to the COVID-19 pandemic. We anticipate all but 4 of these closed hotels will be open by mid-September. Please find additional details of Hersha’s hotel reopening plan in the quarterly supplemental report published along with this release on our corporate website.
Cash Burn
Entering the second-quarter, the Company anticipated it would lose approximately $11 million per month based on forecasted trends. Burn rates throughout the quarter improved from $10.5 million in April to $7.8 million during June, a 26% decline, bringing the total cash loss for the second quarter to $26.9 million, approximately 13% better than forecasted at the beginning of the quarter.
Financing
The Company completed the second quarter 2020 with approximately $23.2 million of cash and cash equivalents. At the end of the second-quarter, the Company had drawn $95 million of its $250 million Senior Revolving Line of Credit. As of June 30, 2020, 85.0% of the Company’s consolidated debt was fixed rate debt or hedged through interest rate swaps and caps. The Company’s total consolidated debt had a weighted average interest rate of approximately 3.70% and a weighted average life-to-maturity of approximately 3.2 years.
Rest Assured™
During the second quarter, Hersha launched its health and safety program, Rest Assured™, at each of its portfolio hotels. The newly implemented cleanliness program is focused on utilizing advanced cleaning practices to ensure the well-being of guests, associates, and the communities in which the Company operates. These protocols are complemented by innovative technologies to streamline the guest experience and support transparent communication before and throughout the duration of guests’ stays.
Full-Year 2020 Outlook
Due to the uncertainty surrounding the lodging industry stemming from the COVID-19 pandemic, the Company has suspended its full-year 2020 guidance.
Second Quarter 2020 Conference Call
The Company will host a conference call to discuss these results at 9:00 AM Eastern Time on Thursday, August 6, 2020. Hosting the call will be Mr. Jay H. Shah, Chief Executive Officer, Mr. Neil H. Shah, President and Chief Operating Officer, and Mr. Ashish Parikh, Chief Financial Officer.
A live audio webcast of the conference call will be available on the Company’s website at www.hersha.com. The conference call can be accessed by dialing 1-888-317-6003 or 1-412-317-6061 for international participants and entering the passcode 9039763 approximately 10 minutes in advance of the call. A replay of the call will be available from 11:00 AM Eastern Time on Thursday, August 6, 2020, through 11:59 PM Eastern Time on Saturday, September 5, 2020. The replay can be accessed by dialing 1-877-344-7529 or 1-412-317-0088 for international participants. The passcode for the replay is 10145491. A replay of the webcast will be available on the Company’s website for a limited time.
About Hersha Hospitality Trust
Hersha Hospitality Trust (HT) is a self-advised real estate investment trust in the hospitality sector, which owns and operates high quality upscale and lifestyle hotels in urban gateway markets and resort destinations. The Company’s 48 hotels totaling 7,644 rooms are located in New York, Washington, DC, Boston, Philadelphia, South Florida and select markets on the West Coast. The Company’s common shares are traded on The New York Stock Exchange under the ticker “HT.”
Non-GAAP Financial Measures and Key Performance Metrics
Common key performance metrics utilized by the lodging industry are occupancy, average daily rate (“ADR”), and revenue per available room (“RevPAR”). Occupancy is calculated as the percentage total rooms sold compared to rooms available to be sold, while ADR measures the average rate earned per occupied room, calculate as total room revenue divided by total rooms sold. RevPAR is a derivative of these two metrics which shows the total room revenue earned per room available to be sold. Management uses these metrics in comparison to other hotels in our self-defined competitive peer set within proximity to each of our hotel properties.
An explanation of Funds from Operations (“FFO”), AFFO, Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), EBITDAre, Adjusted EBITDA and Hotel EBITDA, as well as reconciliations of such non-GAAP financial measures to the most directly comparable U.S. GAAP measures, is included at the end of this release.