Apple Hospitality REIT (APLE) Q1 FY26 earnings call: guidance and Q&A

Does margin guidance assume RevPAR growth is driven by occupancy or ADR? What are the flow-through implications if driven by ADR?

Liz Perkins explained that guidance took a measured approach, primarily incorporating Q1 outperformance. The balance between occupancy and ADR for the remainder of the year is similar to initial expectations, but they anticipate driving more rate as they lap easier comps, which could lead to stronger flow-through.

“That is not entirely built into the guide. When we look to revise guidance for Q1, we, given how close in proximity it was to when we reported at year-end and the fact that we're still early in the year, took a more measured approach and really, for the most part, exclusively incorporated the outperformance of Q1 and some improvement in April as well.”

asked by Joshua Friedland · answered by Liz Perkins

What is the current consumer price sensitivity? How might macro risks impact demand, and what scenarios are considered for the low/high end of guidance?

Justin Knight stated they are not currently seeing significant price sensitivity. The primary drag on ADR was tough year-over-year comps. Guidance is conservative, implying limited growth, but they expect growth to increasingly come from rate in higher occupancy months, driving incremental margins.

“We are not currently seeing significant price sensitivity with our customers. As Liz highlighted in her prepared remarks, as we move through the quarter, we were able to grow both occupancy and rate.”

asked by Joshua Friedland · answered by Justin Knight

Can management elaborate on potential upside from easier government demand comps, tariffs, and FIFA World Cup leisure demand? Will government demand remain strong?

Liz Perkins expressed encouragement regarding improved government demand and hope for its continuation. Justin Knight added that current guidance does not include potential World Cup upside, but they have observed strong bookings in some smaller markets that would be incremental.

“We're certainly encouraged by the improvement in government demand that we've seen as we lapped the most or the earliest comps from last year from the impact of DOGE and Liberation Day. So we are hopeful that we'll see that continue.”

asked by Jay Kornreich · answered by Liz Perkins

Can management provide more details on positive forward booking trends and why they are not fully reflected in current guidance?

Liz Perkins confirmed seeing improvements in occupancy and rate within the 90-day forward booking window, including some impact from World Cup advanced bookings. This aligns with management's conservative approach to guidance.

“As we look forward, we are beginning to see -- we typically look 90 days out or sort of rely more on what's closer in than further out. And within the 90-day window, you're starting to see certainly some impact from the advanced bookings around World Cup, which is positive.”

asked by Aryeh Klein · answered by Liz Perkins

What is the current state of the transaction market, and what conditions are needed for the company to become more active on the acquisition front?

Justin Knight explained a significant gap between seller expectations and their willingness to pay, as their stock currently screens better. More aggressive acquisition activity would require a reversal of this dynamic, likely a combination of a higher share price and reduced seller expectations. He emphasized their readiness to act quickly when conditions shift.

“The challenge has been a meaningful gap between seller expectations and what we would be willing to pay. We've spoken about this in the past, but our acquisitions model runs a comparative analysis to alternative uses of capital, including share repurchases.”

asked by Aryeh Klein · answered by Justin Knight

Can the company quantify the insurance savings and comment on the sustainability of the 2% expense per occupied room growth outlook?

Liz Perkins quantified the property insurance renewal improvement at approximately $900,000 for Q2-Q4 FY26. She stated that the 2% CPOR expense growth is a good run rate, reflecting strong cost controls and favorable trends in property insurance and taxes.

“Related to the property insurance renewal, what we assumed beginning in the second quarter through the end of the year was about a $900,000 improvement to the forward guidance for the last 3 quarters.”

asked by Michael Bellisario · answered by Liz Perkins

What are the inbound requests for properties the company might sell, and is the mix of buyers evolving?

Justin Knight noted increased interest and potential buyers in the disposition market, with local owner-operators being primary buyers based on revenue multiples and replacement costs. He anticipates increased interest from smaller private equity shops and potentially larger players if industry momentum continues, indicating an evolving buyer mix.

“Where we have been executing or successful in executing over the past several months, maybe even a couple of years, has been primarily with local owner operators who have the capacity to drive incremental margins because of their presence in market and lower operating -- cost operating model.”

asked by Kenneth Billingsley · answered by Justin Knight