Apple Hospitality REIT, Inc. (APLE) Q1 2018 Earnings Report, Transcript and Summary

Greetings and welcome to the Apple Hospitality REIT First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kelly Clarke.

Thank you and good morning. We welcome you to Apple Hospitality REIT’s first quarter 2018 earnings call on this the 8th day of May, 2018. Today’s call will be based on the first quarter 2018 earnings release, which was distributed yesterday afternoon. As a reminder, today’s call will contain forward-looking statements, as defined by Federal Securities Laws including statements regarding future operating results. These statements involve known and unknown risks and other factors, which may cause actual results, performance, or achievements of Apple Hospitality to be materially different from future results, performance, or achievements expressed or implied by such forward-looking statements. Participants should carefully review our financial statements and the notes thereto, as well as the risk factors described in Apple Hospitality’s 2017 Form 10-K and other filings with the SEC. Any forward-looking statements that Apple Hospitality makes speaks only as of today, and the Company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law. In addition, certain non-GAAP measures of performance such as EBITDA, adjusted EBITDA, FFO, and modified FFO, will be discussed during this call. We encourage participants to review reconciliations of those measures to GAAP measures as included in yesterday’s earnings release and other filings with the SEC. For a copy of the earnings release or additional information about the Company, please visit applehospitalityreit.com. This morning, Justin Knight, our Chief Executive Officer; Krissy Gathright, our Chief Operating Officer; and Bryan Peery, our Chief Financial Officer. We will provide an overview of our results for the first quarter 2018 and an outlook for the sector and for the Company. Following the overview, we will open the call for Q&A. At this time, it is my pleasure to turn the call over to our CEO, Justin Knight.

Thank you, Kelly, and good morning. In just over a week, we will celebrate our third year of trading on the New York Stock Exchange. Since May of 2015, we have returned approximately $1 billion to shareholders in dividends and share buybacks. Our focus on providing investors with consistent dividends and appreciation in value of their underlying investments predates our listing by over a decade and a half and is based on a strategy we have proven and refined over multiple cycles. We own rooms focused properties with industry-leading brands, which generate strong, stable, relative margin. We work with established regional and national operators using innovative contracts that align management and ownership interest and preserve flexibility to sell assets unencumbered. We’re broadly diversified across markets to reduce volatility and provide the portfolio exposure to a variety of industries and demand generators. We consistently reinvest in our assets to maintain competitive positioning across our markets, yield strong guest satisfaction and provide for more predictable future capital needs. We refine and enhance our portfolio through tactical acquisitions and dispositions, and we focus on maintaining a flexible balance sheet that provides us with additional security during periods of volatility and the ability to pursue opportunities in the marketplace. Today, with 242 hotels diversified across 88 U.S. markets, we’re the largest publicly traded REIT focused on the select service segment of the lodging industry. Each element of our strategy contributes to our ability to make good on our commitment to our shareholders. Operational results for the first quarter were generally in line with our expectation. Comparable hotels RevPAR growth was approximately 1% with lingering storm related business in the quarter, offset in part by the Easter holiday calendar shift. With rates driving RevPAR growth and occupancies remain stable; we were able to achieve a comparable hotels adjusted hotel EBITDA margin of approximately 36%. Economic indicators remain positive, and strong leisure travel continues to boost shorter [ph] night demand on at our hotels. Business travel, which for our portfolio is most significant in the second and third quarters, was relatively stable in the first quarter. Current midweek booking trends provide some indication of increased business transient demand for the coming months and we are exceptionally well-positioned to benefit from strength in this segment. We continue to feel confident in the full-year 2018 guidance we provided with our year-end 2017 earnings. We acquired two hotels during the quarter, the Hampton Inn & Suites in downtown Memphis, and the Hampton Inn & Suites in downtown Atlanta for a combined purchase price of $63 million. In both instances, we transitioned management and anticipate that this, combined with significant renovation scheduled for 2019, will position the hotels to take advantage of exceptional locations within their respective markets. More recently, we acquired the newly constructed Hampton Inn & Suites in downtown Phoenix for $44 million. We entered into a forward commitment for the property prior to construction, and in so doing, were able to lock in attractive per key pricing in a rising cost environment. We have forward contracts on three additional hotels, with trusted developers, a Home2 Suites at the Orlando airport and a combined Hampton Inn & Suites and Home2 Suites in Cape Canaveral, Florida. We anticipate closing on the Orlando Home2 Suites in the fourth quarter of this year and the combo hotel in Cape Canaveral in 2020. While the transaction market continues to be challenging, we have confidence in our ability to continue to selectively source high-quality hotels consistent with our strategy which expand our reach into new markets and increase our presence in markets which we believe will benefit from current economic and demographic trends. We have also seen an uptick in interest for select service assets, fueled in part by continued strength in the debt markets and wide availability of financing for existing hotels, which could help to facilitate selected dispositions in coming months. Since the beginning of 2015, the year we listed on the New York Stock Exchange, we have acquired 73 hotels for a total purchase price of approximately $1.8 billion including our merger with Apple REIT Ten, and sold 22 hotels for total proceeds of approximately $316 million. Our team has nearly two decades of experience in hotel transaction and over that period has purchased 429 Hilton and Marriott hotels and sold 187. While broadly speaking, we see new construction starts beginning to moderate, at the end of the first quarter, 63.5% of our properties had one or more upper midscale, upscale or upper upscale new construction projects within a 5-mile radius, a slight increase from the percentage reported on our last call. Based on the supply outlook for our markets, we anticipate new construction starts will peak this year; and absent a significant decrease in construction costs, meaningful reacceleration in the economic growth or an increase in the availability of construction financing, we expect the industry will continue to see a deceleration in new construction starts. Although there could be headwinds in some of our markets this year, as a result of new hotel openings, we believe the strength of our hotel brands and the low effective and actual age of our hotels will enable us to remain competitive within our markets. We continue to be optimistic about the prospects for the year and remain confident in the fundamentals of our portfolio. Before I hand the call over to Krissy to provide additional detail on our performance across our markets during the quarter and the industry, I would like to commend her and her team for their dedication to our shareholders and the performance of our portfolio overall. Their combined experience, operational expertise and innovative approach to asset management play key role in driving our industry-leading margin performance in an increasingly challenging operating environment. I’m incredibly proud of the work they do. And with that, it is now my pleasure to hand the call over to Krissy.

Thank you, Justin. We are pleased to report that our first quarter results were largely in line with expectations. We are also encouraged by recent trends showing continued strength in leisure demand and improving business demand. Weekday RevPAR growth has accelerated each month since the start of the year and our expectation is for that trend to continue as we move in to the stronger business travel month. For the second quarter, we anticipate our RevPAR growth to be at or above the high end of our yearly outlook range. During the quarter, our occupancy remained strong at 75% with substantially all of our RevPAR growth coming in rate. Our RevPAR growth was entirely transient driven as same-store group revenue was down 2%. In some instances, the reduction in group was purposeful as our operators limited group bookings to take advantage of higher rated transient demand. In a few markets, we experienced group cancellations due to inclement weather and the government shutdown. Corporate-negotiated and government business represented 28% of our mix, consistent with the prior year, in spite of a slight decline in March related to the Easter holiday shift. RevPAR for our top 20 markets, representing 60% of our EBITDA, increased just over 2%. Of the three markets with an EBITDA contribution above 5%, Phoenix and Los Angeles continued their trend of solid RevPAR growth, while the San Diego market performance lagged coming off a tough comparison of 13% growth in the prior year. We expect performance in San Diego to improve over the course of the year, especially in the second half with more favorable comp, a solid citywide calendar, and increased government and sports related group bookings. We are excited about the prospects for our recently acquired downtime Phoenix Hampton Inn & Suites. This brand new hotel has a prime location near the ASU downtime campus, Fortune 500 companies, the convention center, and professional sports surf arenas, and should provide a nice lift in 2019 following its ramp-up. RevPAR outside of our top 20 EBITDA markets declined 50 basis points. In the first quarter of 2017, we benefited from Tornado recovery business, and Louisiana, Mississippi, Georgia, and Kansas with no such business in 2018. In addition, RevPAR for our Omaha hotels declined 16% with ramping new supply and one hotel under renovation. Increased demand is expected to improve Omaha’s market performance in the second quarter. As we enter the higher occupancy months, we are well-positioned to capitalize on improving corporate demand as the hotel revenue management teams can be more selective in managing the mix to drive the highest profit business into our hotels. We expect the fourth quarter to be the most challenging with seasonally lower business demand and a difficult storm-related comparison. However, we do feel the impact will be somewhat mitigated by a modest improvement in energy-related business in Houston and improved demand in Miami unrelated to the hurricane recovery. As a testament to the persistence and intense focus of our asset management team, working in conjunction with our operators, we were able to minimize the comparable hotel adjusted EBITDA margin decline to only 50 basis points and grow comparable hotel EBITDA, even with modest revenue growth. Targeted efforts focused on driving incremental parking, pantry and cancellation revenue resulted in a 12% or approximately $750,000 same-store ancillary revenue increase, contributing 20 basis points to margin. Cancellation revenues have risen with the movement in the cancellation dates further out and our asset management team has been extremely diligent in pushing a high capture rate on this growing revenue stream. As for expenses, our labor management technology initiative continues to produce favorable results. For the third quarter in a row, wages per occupied room grew less than 3% in the face of a challenging labor market. Total payroll increased 2.7% for occupied rooms and our operators managed other controllable expenses well, keeping growth essentially flat. Property taxes and insurance increased 5%, in line with expectations. Our team remains laser-focused on improving operational efficiencies in collaboration with our operators and using our expertise and scale to deliver industry-leading margins. I’ll now turn the call over to Bryan to provide additional detail on our financial results.

Thanks, Krissy, and good morning. To summarize a few of the numbers Justin and Krissy touched on, we finished the quarter with revenue of $298 million, adjusted EBITDA of $100 million, and modified FFO per share of $0.38 per share. Also, we invested approximately $18 million in capital expenditures in the first quarter with 15 hotels completing the renovation. We continue to reiterate our guidance for 2018 that we provided in February. Based on our operating performance to-date, our visibility into business drivers for the remainder of the year and announced transactions, we anticipate net income of between $198 million and $221 million, comparable hotels RevPAR growth between 0 and 2%, comparable hotels adjusted EBITDA margin percent between 36.8 and 37.8, and adjusted EBITDA between $437 million and $457 million. At the end of March, the Company had approximately $1.3 billion of outstanding debt with a current combined weighted-average interest rate of 3.7% for the remainder of 2018. Our debt is comprised of $499 million in property level debt, and $831 million outstanding on our $1.2 billion of unsecured credit facilities. At the end of the quarter, approximately 80% of our debt has an effectively fixed rate. During the first quarter, the Company paid distributions of $0.30 per share, to annualize the $1.20 per common share represents an annual 6.7% yield, based on our May 2nd closing price of $17.89. Also during the quarter, the Company repurchased approximately 250,000 common shares at an average price of $16.89 per share. Since the beginning of the year, we have returned approximately $96 million to shareholders through dividends and share repurchases. Finally, I wanted to highlight that our annual shareholder meeting is scheduled for May 17th, and we once again have a proposal before our shareholders that provides for amending our charter to destagger our Board. Although we have been unable to obtain the required votes past couple of years to pass this proposal, we continue to believe this is an important piece of corporate governance that is beneficial to our shareholders. We encourage each investor to consider these proposals and vote their shares accordingly. Thank you for joining us this morning. With some optimism as we have entered our strongest quarters of the year, we continue to execute against our core strategy and believe that over the long-term, we are well-positioned to meaningfully increase shareholder value. Thank you for joining us this morning. And we will now open up the call for questions.

[Operator Instructions] Our first question comes from the line of Austin Wurschmidt from KeyBanc Capital Markets. Please proceed with your question.

Hi. Good morning, guys. I wanted to touch on a comment you made Justin. You said you’ve seen an uptick in interest for select service assets, kind of paraphrasing here, fueled in part by an attractive financing environment, which you thought could help facilitate some select service dispositions in the coming months. Could you just expand on those comments and add a little context to what you’re seeing in the transaction market today that leads you to believe that we could see an uptick in the coming months?

Certainly, Austin. Good morning. And this isn’t inconsistent with comments that I’ve made on past calls. But we from time to time receive reverse inquiries for assets from a variety of different groups ranging from individual owners and operators to small private equity shops, and have continued conversations with some of the larger shops as well. What I was referencing in my prepared remarks was an uptick that we’ve seen in these reverse inquiries, which we think potentially position us and others to take advantage of an opportunity to dispose off a portion of our portfolio and recycle the capital. That’s been a consistent part of our strategy. And the driver, the key driver seems to be two-fold really, and I highlighted one. But I think, it’s increasing optimism as it relates to the industry overall; and then, two, continue to strengthen the debt markets. And when I say strengthen the debt markets, I mean specifically financing availability for existing assets to include potentially small portfolios. We are continuing to explore opportunities as they present themselves. But we don’t have anything to announce specifically at this time.

And you mentioned the small portfolios, but is there an appetite for potentially larger portfolio deals today from what you’ve seen? And then, how are you thinking about reinvesting proceeds today? Most of the deals we’ve seen new announced have been sort of these presale type deals recently. So, just curious how you are thinking about usage?

So, we’ve been consistent in our response to that question as well. In terms of use of proceeds, well, let me answer your first question first. We think that there potentially does exist an appetite for larger portfolios as well, based on availability of financing. And I think we’ve been clear in past calls that as we’ve assessed potential acquisitions, portfolio acquisitions, our competitor was the banks and a number of the private equity groups with larger portfolios have chosen, as I think is widely known publicly to refinance rather than pursue other alternatives. That same financing is available, should they decide to become more active in pursuing larger portfolios. And that certainly exists with some possibility. In terms of use of proceeds, we think we’ve been consistently attractive with these four commitment deals. And I think if you look at the relative per key price that we’re able to acquire high-quality, new assets in prime locations that we are hand selecting, I think you should anticipate that will continue to be a portion of our strategy. I think, you should also note that we’ve been more active in individual asset acquisitions for existing assets as well. And we highlighted in the quarter, two of those assets, the Memphis and Atlanta downtown assets, both exceptional locations in the heart of downtown marketplace with diverse matter, [ph] it’s both on the leisure and on the business side, really wholly consistent with the type of assets that we’re looking to acquire. We think -- and again, I’m not going to overstate the depths of the market right now but we have a high degree of confidence in our ability to execute on those and continue to evaluate larger portfolio transactions as well.

And then, just the last one for me. As we kind of move through the noise around the holiday shift and in the May, what are some of the emerging trends you’re seeing from corporate travelers in particular, maybe how -- in the quarter for the quarter trending at this time versus past years? And then, I think you’ve spoken to local negotiated rates being a particular focus on when you would feel more optimistic about the corporate travel. So, any thoughts around those would be appreciated.

Absolutely. Good morning, Austin. So, so far this year, and as I mentioned in my comments, the results have been in line, generally in line with expectations. As we enter into May and June, these are higher occupancy months that are more geared towards business travelers. So, we are going to really relying on those months to give us a better indication of business demand without the holiday shift. Forecasts for those months are encouraging with some improvement versus expectations. And it’s consistent with the anecdotal reports that we’re hearing from our operators in the field pointing to improvement in corporate demand. Now, at this point, I would say modest improvement in corporate demand but I also think it’s important to note it’s not any one particular industry; it’s a multiple different industries. So, for us, as we get through May and June and especially with our product type, which is much more geared towards businesses travelers, we’ll feel more comfortable with where -- with being able to comment further on a business travel. But looking at where we’re today, we do feel good about the remainder of the quarter. And then, you mentioned local negotiated account. So, yes, from a mix management standpoint, as we do see that pick up in business travel, then, our focus is with each of the individual managers on making sure that first we reduce discounts and reduce discounts on -- in multiple different levels whether it be government rates or whether it be different leisure type discounts to push or drop demand to higher rated, higher profit business. And then, what that also allows us to do is as we see that increased demand that can process the hotel, then we can be more selective on yielding out hotels that aren’t producing the volume that we would expect or might have a lower rate that is more needed in times like the first and fourth quarter on business travel and strong. [Ph]

Our next question comes from the line of Michael Bellisario from Robert W. Baird. Please proceed with your question.

I just wanted to focus on CapEx a little bit. I guess, just first housekeeping, are you still thinking $70 million to $80 million this year?

Yes. It might be a little bit on the low end of that range, because we have a couple of full-service renovations in that mix. And just depending on the timing of when those get executed, could be where we are right now and could be low end of that range but the range is still good.

Got it. And then, maybe on the two acquisitions in Atlanta and Memphis, how are you thinking about investing in properties like those? I think, you said, they require significant renovations. Are you more open to doing acquisitions that require some big renovations and the properties might not be as new when you acquire them?

Absolutely. We’ve been doing this for long enough that we feel we can effectively gauge the dollars necessary to position the hotels appropriately in the marketplace. We have in-house project management. As part of our acquisition due diligence, we send a team to the property, fully assess the opportunity. And that team includes our acquisitions folks who’ve been active in marketplace for an extended period of time, representatives from our asset management group and our project management group on the CapEx side. We take a holistic view to acquisitions and really look at the long-term potential within the markets. And as we look to acquire assets in urban markets, often times there are existing assets but have the prime locations in those markets. And location is extremely important, especially in an environment where we are seeing increasing levels of supply, as that might be the best opportunity for us. We feel that given our expertise on the CapEx side and the asset management side, we are able to position hotels that exist within marketplaces and that will create long-term value for our shareholders.

And then, how should we think about the big expected renovations at these two properties, impacting the first year pricing and return expectations that you guys underwrote?

Again, remembering both cases, as I highlighted in my prepared remarks, we transition management. In addition to the potential renovations, there is some disruption, immediately upon acquisition as we transition management teams, sometimes at the property level and look to right size staff. The actual renovation scope will be significant. And we will look to perform it as we do all of our renovations, at a time when we can minimize renovation disruption. Typically that ends up being end of fourth quarter, beginning of the first quarter in most markets. Obviously, in markets like Florida or Arizona where you have kind of inverse season from a demand standpoint, we would be looking at different time periods. And Atlanta has a larger plan [ph] for the beginning of next year [indiscernible]. But, you can have confidence that we will look to minimize disruption in the second quarter. And really, those assets we anticipate based on our acquisition price will perform well for us. And the first year coming out of the renovation is when we really anticipate we will see the numbers that we anticipated.

And then, last one for me on the revenue management side. You mentioned you’re holding back group business in the first quarter. Is this something that you are trying to do on a go forward basis? And then, how should we think about any potential RevPAR growth or margin boost because of this mix shift?

As a clarification on that certain specific markets that were actually doing very well and had good solid base business than in those markets where they had good base business, higher occupancy, there were strategic shifts to focus more on driving the higher rated transient. In certain other markets, the group business was needed and counted on, but due to the first quarter and unexpected, as I mentioned inclement weather or storms and just the colder first quarter in general, our hotels rely on group business that often is sports oriented. So, there was negative impact there as well as some of our hotels around the short-term government shutdown. There were some government groups that actually cancelled. Now, the good news on those groups is, several of them rescheduled for later in the year. And then, going forward, the expectations are that we would see group being pretty consistent when we have the opportunity -- when and if we have the opportunity to drive higher rated transient and we will do that. But we also have the option with those groups and we are constantly working with our revenue management team to make sure that they are dynamically adjusting pricing where they are layering on additional groups to make sure that they are driving group rates there as well. And traditionally, the warmer months in the spring and summer time do give us more opportunities to choose from the additional group business, whether it be family reunions, weddings, sports. And that will be working with our revenue management teams to make sure that we only take the group business when we need it. If we have strengths [ph] during the week, we’re going to try just layer it on, on the weekends at the right rate. So, hopefully that gives you a little bit more perspective.

It does. Thank you. That’s all for me.

Thank you.

Our next question comes from the Bryan Maher from B. Riley FBR. Please proceed with your question.

I have couple of quick questions. When you talk about the potential to have some dispositions maybe this year if financing and interest remain strong, what kind of characteristics are you looking for in the properties that you would sell, or is it simply opportunistic if you have an inbound interest and the price is right, you would sell it.

I would say yes to both. The inquiries that we get range from inquiries related to specific assets, at one extreme to more general inquiries from groups that are looking to build portfolios. In the case of the latter, we’re continually assessing our portfolio of strength individual markets and our concentration within those markets and look to dispose selective of assets as we continue to look to refine and enhance the value of the overall portfolio. Key considerations would be everything from age to brand and brand positioning within particular product to CapEx needs relative to long-term potential. We’re continually looking at relative growth rates for various markets within our portfolio and look over time to adjust the mix in order to really optimize the portfolio in the case of evolving economic and demographic trends within individual marketplaces. So, I think at a certain price, everything within our portfolio is for sale. And as we consider individual reverse inquiries for specific assets, there is nothing within our portfolio that we would not consider. But, as we receive these more broad inquiries, we’re extremely strategic in terms of putting together portfolios which we feel create value for the buyer, so that we can maximize value on exit but also open us to refine and enhance the value of our overall portfolio.

Okay. Thanks for that. And then, I think you guys made a comment that your property taxes were up roughly 5%. And this seems like a pretty big number, especially since there’s been a lot of effort in some states to control property tax expense. What are you guys doing to deal with that? I mean, you just can’t have sustained 5% every year.

Property taxes and insurance together were up 5%. Property taxes were actually up a little bit less than that; they were in the 3% to 4% range, and insurance was a little bit higher than that. But from the property tax standpoint, we actively work to appeal increases in real estate tax assessments and had very good success in that. And considering that the tax year -- the localities have been very aggressive to be able to try to maintain these real estate tax increases in that low to mid single digit range, is a challenge but we are definitely working to do that. As you also acquire additional hotels, there usually is an increase in property taxes associated with that which we have to underwrite as part of the deals. But for the most part, we’ve been pretty pleased with the results that we’ve had with appeals and the work that we’ve done on that.

And not to dilute the risk of increase in property taxes but last year -- the timing of appeal results can play into that too. And last year, the first quarter of 2017, we had a little bit more favorable results on appeals that hit in the first quarter.

And then, just lastly for me. I mean, you guys have been going at this destaggering of the Board for some time now. Can you just discuss for listeners why that’s so important to you?

I can speak to why it’s so important to us. And then, Bryan can speak to how strategically we are changing the playing field in order to increase our chance of getting sufficient votes to make it happen. Really for us, destaggering the Board is a visible signal that we as a management team believe in governance that’s consistent with the best interest of our shareholders. And while we can say that and we firmly believe it and it’s a part of our DNA here, there are certain things that create consistency in terms of what we say and public perception, and destaggering the Board is one of those things. We have tried for some time. Because of the large number of retail shareholders that we have within our stock, a portion of whom don’t see this as being an important initiative, we’ve struggled to get the number of votes necessary. But, as the mix of our shareholders changes and we increase an institutional ownership as well as some of the other things that we have done internally, we feel that we have increased the likelihood and have reasonably high degree of confidence that we will get through this time.

Yes. Historically, it’s been a super majority vote requirement and then this year it’s just a majority vote, based on one of the measures they got passed last year, the requirement was changed. To Justin’s point, we are more optimistic it will happen, and you won’t have to listen or hear about that anymore.

Our next question comes from the line of Anthony Powell from Barclays. Please proceed with your question.

On a business travel, some of the REITs commented that they saw a better corporate transient travel in the quarter, particularly in March, whereas your comments are more forward-looking. Could you maybe give us why your corporate business may have been a bit different than others in the quarter?

Well, in March, we definitely were impacted from the holiday shift. So, the last week of March was soft for. And then, we also have -- I think some of the other commentary was around group in the first quarter, and group is a smaller percentage for us. So, we would have less impact from that. Again, going back to the second quarter and third quarter, really the strongest the strongest business travel months for us. So, more of the commentary in terms of business travel is related to the forecast that we’re actually seeing there. And we were somewhat encouraged by the fact that even with the Easter shift, we were still able to maintain stable corporate negotiated and government travel as a percentage of our mix.

Got it. Thanks. How did April turn out in terms of RevPAR, if you can give that data?

April turned out in line with expectation in the mid to 2% range.

And Hilton has talked about debuting their flex pricing in the summer. How do you expect that to help your ADR and also how cancellation fees trended over the past couple of quarters? I think, you mentioned they were up this quarter. So, how do you expect that to impact the cancelation fee revenue you’re seeing?

So, on the first piece, the flex pricing has actually been released in quite a few of our markets. So, it’s too early to see the results yet. But just from -- it’s too early to make a definitive assessment. But from early indications, we are seeing that it is doing what we would expect it to do and lengthening that cancellation window. So, we do think that that is going to be a net positive for us as we continue throughout the year, and we’re highly supportive of that particular initiative. Cancelation fees, the late cancelation fees, we’re very -- as I mentioned in my comments, our asset management team who I’m extremely proud of, has been very diligent in working with our operators. And we have seen an increase in being -- in cancellations inside the 48-hour window, which we are able to go and collect cancelation fee revenue from. Now, I will tell you that it is a very manual process currently. And we’re working with the brands to automate that which will then improve the capture rates, but we do expect those -- we saw a nice lift in the quarter and we do -- our goal is to try to continue to drive that. And in terms of overall cancellations, I think from all these different policies that we’re talking about is having a positive impact there. And then that should further help us in the revenue management picture being able to have a better handle on, even though this booking window is extremely short-term and continues to get shorter, gives us more opportunity to resale those rooms in a short time frame.

Got it. Thanks. And one more for me on the share buyback. You bought some shares back in the quarter at a good price. What’s your overall outlook for buying back shares this year, especially if you’re able to sell some of these portfolios or hotels that you talked about earlier?

I think what we’ve shown is that our appetite for shares is directly connected to the pricing of the shares on a particular day. Given recent increase and volatility in share prices, within the quarter, we saw opportunity to acquire shares that will be viewed as a significant discount to both the implicit value of our portfolio and the relative value of acquisitions opportunities with the market. We also saw opportunity to acquire individual assets. And I think what you’ll continue to see is us assess and evaluate, both opportunities and use the strength of our balance sheet to pursue those opportunities, which we feel will provide our shareholders with the greatest value.

[Operator Instructions] Our next question comes from the line of Jeff Donnelly from Wells Fargo. Please proceed with your question.

Krissy, I am just curious, do you feel that the renovation cycle on hotels has changed in recent years, are brands pushing for more sooner or do you just think that maybe renovation cycle just kind of flexes with the hotel cycle itself?

I think, the renovation cycle has been pretty consistent for us. And we are renovating the same amount of hotels plus or minus a hotel or two each year. And with those renovations, I mean, we are looking -- we are going through a very detailed process every year when we determine which hotels we are going to renovate. And they are somewhere between the six and eight-year timeframe. If there has been more wear and tear on the hotel and there is more supply coming in and the hotel has gotten behind the competitive set, we might push that more towards the six-year timeframe or vice versa. If the hotel is doing well, guest satisfaction scores are great, that competitive landscape hasn’t changed that much in the market, we might push that one more to eight years. But, it’s been pretty -- you won’t hear us talk much about renovations on our calls, renovations disruption here or there because we are very consistent in how we renovate our hotels. And we think that that’s reflective, and we are very much appreciative of the work that you guys do and looking at trip advisor and the scores out there, because we renovate our hotels consistently because we’re proud and as part of our balance score card including guest satisfaction scores, we feel that those fairly reflect that we do maintain a consistent renovation cycle.

Dori will be happy, you mentioned that. Actually maybe a question for you and Justin. I’m just curious, the brands certainly have been spending more time I guess convincing owners the past one or two years that there numerous brands are sort of sticking in their respective swim lanes, I guess mainly in terms of price. I’m curious what your perspective is. Do you see situations where the Hampton or true [ph] and is encroaching more in Hilton Garden Inn or similar dynamic with Marriott products, maybe not surpassing on rate but maybe getting too close?

So, there are a number of factors that play into property’s ability to charge a particular rate within its marketplace. As you know, location is among those. Property condition, amenities or adjacency to amenities or demand generators within the pursuant market, we have seen brands, you highlighted Hampton that have certain brands within the larger brand families, have a tremendous amount of versatility. And in some markets, not only will the Hampton Inn be competing effectively with the Hilton Garden Inn in the same market but it may be competing very effectively with an existing Hilton full service product. On the Marriott side, we see similar instances where Courtyards are competing or even a Springhill Suites is competing very effectively with other brands within that chain scale. I think, what you’ll find is as we continue to refine and reposition our portfolio. We will be consistent in looking to identify the best product to meet demand within that particular marketplace. And I think over time, what we will begin to see is that the individual brands within the brand families become slightly less significant and the overall brand family and the associate loyalty program will become more significant with the individual brands being -- nuances within the product brand family. I think, we’re mindful of that. We’re looking at it and continuing again to look at our portfolio in that context and make adjustments, which we feel will help us to maximize returns for our shareholders in that changing environment.

Defiantly agree with all of what Justin said. The one thing, the additional piece that I would add is that as brands are -- as we work with the brands, we are very much vocal in helping them understand and to continue to grow their pipeline that we’re laser focused on looking at that contribution from our loyalty members and looking at brand [ph] contribution and all the different channel that these brands produce. And as long as we continue to see that that’s growing and growing more even with the additional supply, then we feel comfortable. And that’s what we’re currently seeing. And we’re going to continue to work with them on additional programs and additional strategies that preference brand direct contribution and bookings.

I guess, maybe building off that answer, if you think down the road that eventually becomes more about the brand family and maybe at the margin less about the brand, could you see things like radius restrictions changing or maybe less brand specific and more sort of super chain or family related as opposed to what they are today or is that sort to see, unlikely?

One thing that currently we get within our individual brands and we get notifications, so it’s a Hampton Inn, we’re still going to get notifications with them from Hilton on new hotels there been develop that are within the brand family that might not necessary be the same brand and the same thing with Marriott. So, we still look at and they still notify us based on being within the same brand family. So, that’s been something that’s been consistent. And then, we communicate back based on how much we think the impact would be based on the brands and the nuances of the brand and the mix of business.

I’d echo that. The conversation has already changed related to that. And brands are heavily focused on developing demand for the brand family within individual marketplace, much more focused on that than they are focused on creating demand for a specific branded product within that marketplace. And going back to nuances, top-line is only a piece of what attracts us to individual brands. As we look to acquire appropriate brands within marketplaces, we’re also looking at the operating model. And brands produce very different margins based on those models. And that continues to stay. So, in a market for example where we see significant opportunities for a perfectly priced extended stay, we are going to select the product that most efficiently operates with that type of demand within a market.

Actually just one more and I don’t want to leave Bryan out. On just destaggering, I guess maybe more of a statement. If I’m not mistaken, I think, last year, you guys received about 58% or 60% of the vote I think in favor of destaggering for the very reason that you said, it was a lot of those broker non-votes. So, it seems like the odds are pretty good that you are going to crossover simple majority. I guess, the question is, has anything changed in the composition of your shareholder base of record that would lead to think you are not going to clear 50?

You are right on point. We don’t anticipate; no real significant changes. If anything, we have slightly more institutional ownership now that we did last year. So that should help even push it further along. But, you are right. Those percentages are about right.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I’d like to turn the call back to Justin Knight for closing remarks.

Thank you. And thanks for joining us this morning. We hope that as you travel, you will take opportunity to stay with us at one of our hotels. Have a great day.

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.