During an earnings call with analysts Wednesday, Ashford Hospitality Trust officials said special programs to boost non-rooms revenue and cut costs are going to be key to success as revenue growth flatlines.
DALLAS—Increasing costs and decreasing revenue growth make a dangerous recipe for hotel owners, and executives with Ashford Hospitality Trust said their focus in 2020 will be on finding new revenue streams and creative ways to reduce costs.
Speaking during the real estate investment trust’s fourth-quarter and full-year 2019 earnings call with investors and analysts, President and CEO Douglas Kessler said his company will “leave no stone unturned in finding ways to enhance performance.”
COO Jeremy Welter outlined those efforts, which include but are not limited to:
- better revenue management of F&B and banquets pricing based on prices charged by competitors;
- increasing revenues from cell towers;
- outsourcing amenities like airport transportation;
- developing a new productivity tool to reduce staffing costs;
- installing wall-mounted soap and shampoo dispensers in hotels; and
- energy reducing initiatives.
Kessler said many of the operational advantages the company enjoys come through their work with Remington, an affiliated company through their external advisor Ashford Inc.
“There’s a proactive effort that the asset-management team along with Remington engages in,” he said. “When market conditions are tepid on the top line with more pressure on the bottom line, this is a real advantage for us.”
Welter said these efforts have already paid off for recently acquired hotels, such as the Embassy Suites by Hilton New York Manhattan Times Square, in terms of outperforming their competitive sets.
Projecting smaller coronavirus impact
Ashford officials said their portfolio has a smaller exposure to international inbound travel than other hotel REITs and is unlikely to see major impacts from the spread of the new strain of coronavirus called COVID-19 unless the illness starts spreading in the continental U.S.
“We have no heavy concentrations in international destinations, so we’re a little bit insulated,” Kessler said. “But that can all change if something becomes different in terms of spreading in the U.S.”
Kessler said the company has seen $550,000 in cancellation directly attributable to concerns about the coronavirus, although he noted there could be more cancellations that can’t be directly tied to it and some of that business could be replaced.
He noted even outside of decreasing international travel, there could be a domino effect that could hurt hotel operations.
“If it leads to supply chain (issues) and a reduction in the growth of the economy, there will be a spillover effect into lodging,” he said.
Q4 and full-year performance
The company reported full-year 2019 RevPAR up 2.9% from 2018 on an actual basis and up 1.4% for comparable hotels. Ashford reported revenues of $1.5 billion for the year with a net loss of $142.7 million.
Ashford had adjusted earnings before interest, taxes, depreciation and amortization for real estate of $89.1 million for the fourth quarter and $425 million for all of 2019.
Ashford stock was trading at $2.16 a share as of press time, a year-to-date decrease of 22.6%. The Baird/STR Hotel Stock Index was down 16.9% for the same period.