Good day, ladies and gentlemen, and welcome to Ashford Hospitality Trust Fourth Quarter 2017 Earnings Call. Today's conference is being recorded. And at this time, I'd like to turn the floor over to Joe Calabrese with Financial Relations Board.

Thanks, Rick. Good day, everyone, and welcome to today's conference call to review the results for Ashford Hospitality Trust for the fourth quarter 2017 and to update you on recent developments. On the call today will be Douglas Kessler, President and Chief Executive Officer; Deric Eubanks, Chief Financial Officer; Jeremy Welter, Executive Vice President of Asset Management. The results, as well as notice of the accessibility of this conference call on a listen-only basis of the Internet, were distributed yesterday afternoon in the press release that has been covered by the financial media. At this time, let me remind you that certain statements and assumptions in this conference call contained or are based upon forward-looking information that are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to numerous assumptions, uncertainties and known or unknown risks, which could cause actual results to differ materially from those anticipated. These risk factors are more fully discussed in the company's filings with the Securities and Exchange Commission. The forward-looking statements included in this conference call are only made as of the date of this call, and the company is not obligated to publicly update or revise them. In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in the company's earnings release and accompanying tables or schedules, which have been filed on Form 8-K with the SEC on March 1, 2018. It may also be accessed through the company's website at www.ahtreit.com. Each listeners are encouraged to review those reconciliations provided in the earnings release together with all our information provided in the release. Also, unless otherwise stated, all reported results discussed in this call compare to fourth quarter 2017 with the fourth quarter 2016. I'll now turn the call over to Douglas Kessler. Please go ahead, sir.

Good morning, and thank you for joining us to discuss Ashford Hospitality Trust results. We're extremely pleased with our most recent quarter's performance. Our fourth quarter comparable RevPAR growth for all hotels was 3.9%, while comparable RevPAR growth for all hotels not under renovation was 5.8%. These results were significant improvement from our third quarter performance and are a reflection of the benefits of our more diversified, high-quality lodging portfolio and the efforts of our management team. For the quarter, we reported AFFO per share of $0.24, a 50% increase over the prior year quarter. Additionally, we reported adjusted EBITDA of $92.4 million for the quarter, an increase of 10% over the prior year quarter. We generated an impressive hotel EBITDA flow-throughs of approximately 60% and a hotel EBITDA margin increase of 82 basis points for all hotels, while all hotels not under renovation experienced a 144 basis point increase in hotel EBITDA margin for the quarter. Lastly, regarding operating performance, we succeeded in growing our RevPAR penetration index for the fourth consecutive year, which is quite an accomplishment. Jeremy will have more to say later about achieving these impressive stats. This management team has a track record of diligently seeking to maximize long-term shareholder value. Our exceptionally high-insider ownership of 19%, which is approximately 6x the peer average, establishes a strong financial alignment with our shareholders and incentivizes us to excel in achieving the highest possible returns for our investors. Our strategy remains focused on our effort to enhance shareholder value. Here is a refresher on why we do what we do, which we think separates us from our peers. We will continue to own and acquire predominately upper upscale full-service hotels at a RevPAR of generally less than 2 times the national average or approximately $166. We are…

Thanks, Douglas. For the fourth quarter of 2017, we reported a net loss attributable to common stockholders, $47.7 million or $0.50 per diluted share. For the full year of 2017, we reported net loss attributable to common stockholders of $122.6 million or $1.30 per diluted share. For the quarter, we reported AFFO per diluted share of $0.24 compared with $0.16 for the prior year quarter, reflecting a 50% growth rate over the prior year quarter. For the full year of 2017, we reported AFFO per diluted share of $1.37 compared with $1.51 for the full year of 2016. Adjusted EBITDA totaled $92.4 million for the quarter compared with $84.1 million for the prior year quarter, reflecting a 10% growth rate over the prior year quarter. Adjusted EBITDA for the full year of 2017 was $419.2 million compared with $431.1 million for the full year of 2016. When comparing our results to the prior year, it's important to remember that our prior year adjusted EBITDA included hotel EBITDA of $2.5 million and $23 million in the fourth quarter and full year period, respectively, associated with hotels that we have sold. During the quarter, we received $600,000 in business interruption proceeds for lost profits at our Crowne Plaza Key West Hotel. At the end of the quarter, we had total assets of $4.7 billion, we had $3.7 billion of mortgage debt with a blended average interest rate of 5.7%. At end of the quarter, our debt was approximately 10% fixed rate and 90% floating rate. All of our debt is nonrecourse property-level debt, and we have a well-laddered maturity schedule. Including the market value of our equity investment in Ashford Inc., we ended the quarter with net working capital of $459 million. I think it's important to reinforce what Douglas mentioned earlier…

Thank you, Deric. Our portfolio grew RevPAR 3.9% during the fourth quarter of 2017. Those hotels not under renovation grew RevPAR by 5.8% during the fourth quarter. These RevPAR growth rates surpassed that of the upper upscale change scale nationally by 70 and 260 basis points, respectively. For the full year 2017, RevPAR for those hotels not under renovation grew 2.4%. Hotel EBITDA flow-through for the entire portfolio for the fourth quarter was 60%. Holidays had a positive impact this quarter with Rosh Hashanah and Yom Kippur shifting into September in 2017 compared with October in 2016. We are continuously identifying opportunities to create value throughout the portfolio. I'd like to take this opportunity to highlight how we add value to our portfolio through capital investments, both large and small. In 2017, we completed and hopefully, stand the benefit from in 2018 the following major capital expenditure initiatives: guestroom renovations at Courtyard Basking Ridge, Courtyard Tipton Lakes, Hilton Garden Inn Wisconsin Dells, Marriott Crystal City Gateway, Marriott Suites Dallas Market Center, and Marriott Omaha; public space renovations at Hyatt Regency Savanna and Marriott DFW airport; and guestrooms and public space renovations at Hampton Inn Parsippany, Homewood Suites Pittsburgh, Le Pavillon, Residence Inn Lake Buena Vista, Residence Stillwater and Residence Inn Tampa. Currently, we have 7 full-service hotels undergoing extensive renovations. Marriott Research Triangle Park, Le Meridien Chambers Minneapolis and Sheraton Anchorage are all undergoing guestroom renovations. The latter 2 are also undergoing public space renovations that began in 2017 and are scheduled to be completed this month. Embassy Suites Santa Clara and Westin Princeton are undergoing guestroom renovations, while Embassy Suites Walnut Creek has a public space renovation, all of which are set to be completed during the second quarter. Currently, one of our largest projects is the guestrooms, suites…

[Operator Instructions] First up from Deutsche Bank, we have Chris Woronka.

Hey. Good morning, guys. I want ask you - I appreciate the commentary about seeing a little bit more in the potential acquisition pipeline. But to the extent that if that doesn't come through for you, how are you may be thinking about share repurchase at your current stock level?

Thanks, Chris. Look, I think that we are seeing, first of all, in the pipeline more deals coming to the market. The flow of deals currently is much greater than it was at the end of the year, and I think that we will continue to bid. We'll continue to show the discipline. And we're focused on, I think, the right metrics that create value for our shareholders, which is why based upon what we've seen recently, we haven't been that active. But with more transactions, we think that it'll create more opportunities to be selective. So as to your question whether or not if we're not successful and what do we do with the excess cash, and specifically with respect to buybacks, I think that I believe this board and this management team have a very clear understanding of the potential benefits, and the timing of share buybacks is unquestionably evidenced by what we've done in the past with our track record. I mean, just look back to what we did during the global financial crisis. So I think we appreciate and understand what those benefits can bring. And recently, our board reauthorized an existing buyback subject to implementation. So we're constantly evaluating use of our cash. Buybacks can be meaningful if done at the right time and the right amounts. We also have to evaluate the impact on our liquidity given that our equity market cap is also small. So we are looking always at opportunities to make the best use of our capital.

Okay. Great. Probably a question for Jeremy. Can you maybe directionally tell us if there's going to be more - fewer or more hotels under renovation in '19 versus your '18 schedule? And then kind of a second part of it, are you - how are you kind of viewing the - some of the CapEx and the PIP plans from the brands these days? Are they becoming more or less onerous? And how does that kind of fit into your overall CapEx schedule?

Okay. Stay on for a second. I just want to clarify. You want '19 clarity versus 2018 on CapEx, right?

Just kind of directionally whether there's fewer or greater hotels that you expect to renovate, '19 versus '18.

Yes, it's early days on that. We go through - we actually spread out our approvals with our board throughout the year just so we can space out the capital of works we're not renovating all at the same time. But we haven't done any - we've done some approvals for as early as 2019. But if I were to guess now, I would estimate that it would be slightly down from our 2018 capital spend, but it's early days. But specifically to 2018, which I can give you, we've given you the guidance, it's mostly front-loaded in the first half and primarily in the first quarter. I do think when you get to Q3 and Q4, we have less CapEx, less hotels under renovation, and the severity of the capital expenditures should be less invasive than what we had in 2017 versus that second half of 2017. As it relates to the brands, yes, I think that - I definitely think that they're going to be a little bit more onerous across the board on our PIP requirements. We're - fortunately for us, we're pretty active. I mean, we're actually very active in extending our franchise agreements. And so we extend them - no - we try no later than 5 years out, so we have some optionality on when we want to enter into that agreement. And when we do it, we do it on extension that comes with a PIP, but we negotiate pretty heavily. And what I would say is that, specifically Marriott we're seeing that they're taking advantage of their larger platform and especially with some of the Starwood Hotels that probably have been undercapitalized, historically. And so I would expect them to be a little more difficult going forward, but we haven't really had any issues because we've maintained those assets pretty well. I would say that what we're seeing is probably more requirements on select service, more invasive requirements. I mean, there's some select service hotels that you're seeing in PIPs now, they're full shower conversions. I mean that - just I would never have guessed that a few years ago. As well as complete reenhancements of the facade just to modernize the building. So that's something we don't have in our full service hotels. So fortunately for us, we're predominantly still a full-service REIT.

Okay. Very good. Thanks, guys.

Our next question will come from Bryan Maher with B. Riley.

Good morning, guys. Just - can you - I know you touched upon this in your prepared comments on the calibrating your dispositions. But can you give us an update on what you're seeing with the select service hotels that you have for sale? Are there bidders? Is the gap just too wide? What are you seeing there? How should we be thinking about that?

Thanks, Bryan. We haven't commented on any select service assets that we have for sale. I think as evidenced here, we're just being selective and opportunistic in making sure that the analysis is, basically, one that is 360 degrees. I don't want to be repetitive with all the data points that we're looking at. But I think that's pretty clear in our comments that we have to weigh, for example, the fact that we have EBITDA that we would want to replace. And clearly, we have a track record of asset sales. We've been selling whether it's select. Or even last year and the year before we've sold, I think, over the past couple of years 3 full-service hotels. So we're looking at selling assets when we do so on a brokered basis as well as on a one-off unsolicited basis. And so I think we're just being opportunistic. And again, I think our strategy to sell assets is left dictated by fulfilling any sort of strategic objective and really just focused on the economic benefits of doing it. So that's really all I can say about selling, whether it's select or full service hotels in our portfolio.

Well, I guess to clarify, I don't know if it was a year or 2 ago, I mean, there was a goal to sell a chunk, if not all, eventually your select service hotels. Is that still a goal whether it's this year or within the next 5 years?

I think that was a comment that we made 3 years ago about monetizing, and obviously market conditions have changed quite a bit over time, and opportunities and cash positions, and redeployment situations. All that, I think, obviously has changed. That was a while ago. So when we say that our strategic focus is to be predominantly in the upper upscale full service segment, that again doesn't mean that we will pursue a strategy just for the sake of strategy implementation unless we feel that at that time and for the right dollar proceeds and the right value that we receive for the assets it will implement anything related to directional shifts or ownership changes in assets. We're pretty pleased with the performance of these assets. Although recently in the past quarter, the full service hotel RevPAR growth was stronger than select service, but that hasn't necessarily always been the case through 2017. And so we benefit from having these assets in the portfolio. We're not necessarily, in our opinion, losing value by having the assets. And I think as you've seen by the trade that we announced on this earnings call, when we sell, if we sell anything, we're going to try to do it at values that are attractive to our shareholders.

Thanks.

And next from Janney Capital Markets, we have Tyler Batory.

Yeah, thanks. Good morning. Thanks for taking my questions. So going back to some of the comments on the margins side of things, Jeremy, wondering if you can make some comments on what you're seeing on the OTA side of things, maybe with distribution costs. I'm not sure if anything has really changed on that front over the past year or so.

Sure. Yes, so it continues to change. I mean, as the contracts come up, the pricing as a percentage of revenue continues to come down. And so one of the things that we're benefiting is owning some Starwood hotels. They can get the benefit of Marriott's contract, which is more favorable. But what we are seeing from a distribution standpoint is that OTA volume is still outpacing brand.com volume. And so we're seeing more growth in the OTA channels. But again, that's on a much smaller overall percentage of revenue. So just to give you just kind of a ballpark, we're about maybe 11%, 12% of our volume is through OTAs on our entire portfolio, and that includes our independent hotels, and then our direct website contribution is about 30%. Total direct channel would be quite bigger than that. There's still some other direct channel subways and other lower cost direct channels. But we are seeing more growth in the OTA volume relative to other channels. I'd say in the fourth quarter, what was interesting is that every segment in our portfolio grew with the exception of just straight retail demand, and so it was nice to see an increase in business transient demand in the fourth quarter.

Got it. That's helpful. And then a question for you on the group business. I mean, can you talk about what you saw maybe in the fourth quarter? And I don't know if there's any general comments you can make on how group business talks next year?

Sure, yes. So our group pace for 2018 is up about 4% for the portfolio, so it's relatively strong. In the fourth quarter, it's a little bit - we are actually positive in group, but it's a little bit skewed because we had to mix a lot of group out of our national Renaissance hotel when the meeting space has been taken out. And so that's - in spite of that, we still have positive group contribution in the fourth quarter even though we had mixed out to transient.

Okay, great. That's all from me. Thank you.

[Operator Instructions] Next, we'll move to Michael Bellisario with Robert W. Baird.

Good morning.

Good morning.

Just kind of back on that the small disposition. Maybe what portion of your remaining select service hotels are kind of like this one, where it has CapEx needs and you kind of think about the multiple on the cash flow plus kind of expected CapEx needs thought process?

We have about 60 select service hotels, and we're constantly evaluating not just the CapEx but also just what's our expected RevPAR growth on those assets, as well as when we look at the spend. And I think your question is probably directed to: Because of that situation, would we trigger more sales? Remember, some of these assets are also in debt pools that are, at times, difficult to release assets. But Deric and his team are doing a great job of refinancing many of our existing loan pools in order to give us added flexibility. So it's fairly fluid analysis. I mean, obviously, the lower the RevPAR, the higher the CapEx spend to the extent that we can achieve an appropriate valuation, the more motivated we might be from a pecking-order standpoint to sell that asset over, let's say, one of our more urban select service hotels like in Boston or in Austin, as another example. So we - I think you've hit it right on the head in terms of if you were to prioritize, what sort of would be more on our pecking list if we were to consider selling more assets. And so we're thinking about those types of things, Mike.

Got it. That's helpful. That's where I was going with the question. And then just sticking to the transaction front, maybe on the buy-side, what are you seeing on the full service side? Any portfolios or opportunities out there that would maybe give you competitive advantage when bidding, maybe pairing up with Prime?

We haven't seen very many large portfolios. We've seen a few deals out there and obviously - Hyatt traded on one that was announced with Host. But most of the portfolios we've seen today so far have been 3 to 5 assets and with not much overlap with any sort of opportunity to join forces with Ashford Prime. But we do see, as I said earlier, a healthier flow of assets at prices that seem to make a little bit more sense. Again, it gives us really - our footprint gives us the opportunity to have a wider look, if you will, at investment opportunities just because of the types of assets that we're pursuing and the markets we're willing to engage in. And we really are trying to find a healthy balance between the accretion, the internal rates of return, the RevPAR of the asset; factors, all of which we think lead to a better share price performance. So for that reason, I think we feel at least better looking at the pipeline today than we did a quarter ago.

And then maybe as you think about the sources and uses of capital for those acquisitions, let's say you completed 1 or 2 or 3 deals, will that maybe trigger an increased focus on the select service sales? Or will that still also remain opportunistic?

We're sitting on a fair amount of excess cash, and so we feel like we've got capacity, given sort of the size of the pipeline right now if we find something of interest to utilize some of that excess cash. And you're right, we do also have the optionality of looking at possible future sales of whether it's select service or we'd also have some full service hotels that we might put on the radar to consider selling as well. And we have a good history throughout our past of recycling capital and redeploying that into a better yielding investment opportunities for shareholders. And so I think that, that's been a consistent theme with our platform, and certainly, could see that in the future.

Thanks. That's all from me.

Moving on, we have Robin Farley with UBS. Unidentified] Analyst: Hi, thanks. This is actually Arpine for Robin. So industry-wide RevPAR saw some support from hurricane aftermath activity in Q4. Could you perhaps go through how much of that impact is RevPAR for the fourth quarter and perhaps some spillover effect of that in Q1 as well? And then it sounds like the industry-wide cost inflation is in sort of the 2% to 3% range or more. But perhaps, you could identify some offsetting factors to that. What I'm trying to understand is how much RevPAR growth you need to keep EBITDA margins flat for 2018.

Sure. This is Jeremy. So specifically for the fourth quarter - I can't comment on the first quarter to back out any hurricane-related business. But for the fourth quarter, if you take out our Houston, Georgia and Florida hotels, it impacted our portfolio by positively about 150 basis points. So excluding those markets, RevPAR would have been up 2.4%. But I do think in some cases, they would have been - those markets would have performed well anyway. As it relates to margins, there's all sorts of initiatives not pertaining as we have that we do to maintain our margins. I think we've got a great track record of doing that over a long period of time, and our expectation is to continue to do that. I know that if you ask that same question, a lot of peers will say that it's maybe about 2% to 3% of revenue growth to keep the same margins. If you look at 2017 for Trust, our revenues were only up 28%, and we're able to grow our margin 7 basis points. So I think we've got a great track record of maintaining margins in tepid growth environments. Unidentified] Analyst: Thank you very much.

All right, and ladies and gentlemen, that concludes today's question-and-answer session. I'd like to now turn the conference over to management for any additional or closing remarks.

Thanks for joining today's call, and we look forward to speaking with you again next quarter.

All right, and ladies and gentlemen, that does conclude today's call. Thank you for joining us. You may now disconnect.