Good day, ladies and gentlemen, and welcome to the Summit Hotel Properties Fourth Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. [Operator Instructions] As a reminder, this call is being recorded. It is now my pleasure to introduce Senior Vice President of Finance and Capital Markets, Mr. Adam Wudel. Please go ahead, sir.

Thank you, Andrew, and good morning. I am joined today by Summit Hotel Properties' Chairman, President and Chief Executive Officer, Dan Hansen, and Executive Vice President and Chief Financial Officer, Jon Stanner. Please note that many of our comments today are considered forward-looking statements as defined by Federal Securities laws. These statements are subject to risks and uncertainties both known and unknown as described in our 2018 Form 10-K and other SEC filings. Forward-looking statements that we make today are effective only as of today, February 27, 2019. And we undertake no duty to update them later. You can find copies of our SEC filings and earnings release which contain reconciliations to non-GAAP financial measures referenced on this call on our Web site at www.shpreit.com. Please welcome Summit Hotel Properties' Chairman, President and Chief Executive Officer, Dan Hansen.

Thanks, Adam, and thank you all for joining us today for our fourth quarter and full-year 2018 earnings conference call. We are pleased with our results for the fourth quarter which came in at the high end of our expectations despite the challenging year-over-year comparison from higher than normal occupancy created by the natural disaster related demand in the fourth quarter of 2017. On a pro forma basis, we reported a fourth quarter RevPAR decline of 1.3%, which was near the high end of guidance range of negative 3% to negative 1%. For the fourth quarter of 2018, we reported adjusted FFO of $31.3 million or $0.30 per diluted share which exceeded the high end of our guidance range of $0.26 to $0.29 per share. For the full-year, pro forma RevPAR increased 0.8% which exceeded our guidance range of 0.25% to 0.75%. The RevPAR gain was driven by a 1.3% increase in average daily rate and partially offset by a 0.5% decline in occupancy. Our pro forma portfolio once again gained market share amongst its competitive sets in 2018 with an average RevPAR index of 113.2, which represents a market share gain of 40 basis points despite significant renovations at several of our largest hotels. When excluding hotels under renovation, our pro forma portfolio posted an average index of 116.2 in 2018, resulting in a market share gain of 210 basis points. For the full-year, we reported adjusted FFO of $141 million which represents a 5.1% increase as compared to 2017. And our adjusted FFO of $1.35 per share exceeded the high end of our guidance range of $1.31 to $1.34 per share. As expected, Atlanta was one of our stronger markets in 2018 as RevPAR increased 19% for the full-year and 10% in the fourth quarter driven primarily by…

Thanks, Dan, and good morning everyone. For the full-year 2018, we reported pro forma hotel EBITDA of $205.9 million and margin contraction of 81 basis points to 37% in our pro forma portfolio. Margin contraction was primarily the result of rising labor costs which drove operating expenses on a per occupied room night basis of 2.9% for the year a 9.2% increase in property taxes driven by 2017 acquisition activity and 10 basis points of displacement from the renovation activity Dan just described. Adjusted EBITDA RE was $196.5 million the highest in the company's history which represented an increase of 9.1% from 2017. In the fourth quarter, our pro forma hotel EBITDA decreased just under 1% to $47.1 million compared to the fourth quarter of 2017 as a result pro forma hotel EBITDA margin contracted by 61 basis points to 35.5%. Our balance sheet continues to improve and is well positioned with no significant maturities until November 2022 and current liquidity of more than $300 million. At year-end, we had total outstanding debt of $965 million with a weighted average interest rate of 4.27%. We ended 2018 with net debt to pro forma trailing 12-month adjusted EBITDA of 4.7 times which has been slightly reduced by our recently closed asset sales. Today, more than 80% of our portfolio of EBITDA is unencumbered as we continue to make great progress assembling a highly flexible low-cost balance sheet. We were very active in the capital markets in 2018 as we were at $825 million of debt capital to replace existing term and mortgage loans. That includes the previously announced $600 million unsecured credit facility comprised of a $200 million term loan, and a $400 million revolver that we closed in December. The new facility increased our borrowing capacity by one and $150…

Thanks, Jon. In summary, we continue to be optimistic about the outlook for 2019 and for the future of Summit. And with that we'll open the call to your questions.

[Operator Instructions] And our first question comes from the line of Chris Woronka with Deutsche Bank. Your line is now open.

Hey, Good morning, guys. Dan, as you guys kind of scrub your markets and the pipeline in those markets do you get the sense that anything that's kind of on the board in terms of competitive supply, are you seeing any kind of projects getting delayed or deferred or canceled?

Yes. I think that while building costs haven't been rising as fast as they have in the past, they -- lumber clearly has been down significantly, but the actual cost to construct hotels has not gone down, so just that number in itself at some level changes a lot of the underwriting. So we do see delays in restructuring of deals and I think we're starting to see that pipeline slowing for the foreseeable future.

Okay, great. And then just on your acquisition pipeline, can you give us maybe an update on what the volume of that looks like and if pricing expectations have moved much at all?

Listen, Dan, pricing expectations really haven't moved much for us. It's very competitive. We're still active in the market. I think we expect to be more of a net seller this year, but as we kind of telegraphed and demonstrated in '18 and '19 that favorable transaction environment in pricing kind of leads us down that path to be a net seller. We do see opportunities from time to time and I think we'd expect dispositions really to reduce our leverage over time. And that'd be really a priority for sales proceeds, but to the extent that we have capacity as always, we certainly entertain ways to create long-term value through some acquisitions. But as far as the environment, we really haven't seen much change in pricing, it's been pretty stable.

Okay, great. And just a quick one probably for Jon, thanks, appreciate the introduction of EBITDA guidance, should we assume that margins are still probably running negative this year at the mid and lower points of the RevPAR range?

Yes, I think that's fair. I think we'd probably bracket flat to down 100 basis points depending on where we fall within our RevPAR guidance range.

Okay, very good. Thanks, guys.

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Hey, good morning, guys. Looking at your portfolio, you have the average age of 3.5 years, is there any more non-core assets left?

Wes, this is Dan. There's really not. I think the Charleston assets were probably the two that more specifically did look like the others. They were great assets for a great number of years. We don't look at it as much about non-core as we do the opportunity. If we see an opportunity to sell something at pricing that we see is fully valued and we can redeploy that either to reduce leverage or to look at other opportunities at greater returns, we look at it more that way. But I wouldn't look at anything in our portfolio at this point as non-core.

Okay, thanks. And then I received some questions regarding the underperformance of the upscale segment the last few quarters versus upper upscale. How much do you think is the function of the difficult storm comps versus actual maybe some structural issues?

I think the majority of it is either related to storm comps. You know, everything is much more market specific as the lines between [technical difficulty] service and upper upscale and upscale have blurred. So I look at it as more of a market-specific or event-specific softness.

Okay. Last one. When you look at your markets this year, what will be some of your stronger markets and weaker markets?

I think the usual suspects, clearly, San Francisco -- we've done a lot of renovation work there. So with a strong convention counter at the Moscone Center, I think, San Francisco should be a good market for us. Atlanta should continue to be a good market. In addition to having the Super Bowl, they've got a strong convention calendar. And then there's a few of our hotels that are coming online from renovations like Boulder, Marriott and then the Hyatt House in Orlando continues to ramp and be strong. So I think those are kind of the key ones that would jump out.

Okay. Thanks a lot.

Thank you. And our next question comes from the line of Michael Bellisario with Baird. Your line is now open.

Good morning, guys.

Good morning.

Good morning.

Dan, how should we think about the 0 to 3 guidance range for 2019? It's the same as last year, but results came in toward the low end. So maybe what's different today and what gives you more confidence that '19 should be better than '18 for your portfolio?

That's a good question Mike. I think, as we look today, there are some things that are a little different than last year. We're not faced with as much renovation disruption, which I think is helpful. And every year as we continue to cycle through some of these renovations and they start to come back online and our revenue and asset management team gets to work setting the strategy, I think that creates much more opportunity to kind of move the needle and manage the business. So I think certainly we've got about that at this point while it's still early in the year have a great confidence in the range.

Got it, and then just back to Chris's question on the transaction market, one of your peers talked about seeing a portfolio premium going to come back into the market. You agree with that and you think one off and two off transactions for you on the dispositions side are still best execution today? A – Dan Hansen: Yes, I mean, buyers come in all shapes and sizes, and each transaction at some level is fairly unique. It does appear there's at this point there's more of a market for a one off or a large portfolio, but that's really just this moment in time, and that could easily change. So I think we could see some smaller portfolios with the same aggressive pricing too. The reality I think is that the strong demand for these types of assets is the kind of validation that they do have a better operating model and much more desirable.

That's it from me, thank you.

Thanks, Mike.

Thank you. [Operator Instructions] Our next question comes from a line of Austin Wurschmidt with KeyBanc Capital Markets. Your line is now open.

Yes, hi, good morning guys. Just two questions on the guidance as well, you're predicting RevPAR growth to be consistent with the overall projections for the upscale segment despite the underperformance you had versus U.S. upscale hotels in 2018. And I know you mentioned market makes and renovations being some of the disruptive factors in 2018, but may be similar what gives you the confidence that you're going to achieve similar growth, is there something specific you see in your market this year?

Yes. Hey, Austin, it's Jon. Look, I think we really hit on that. I do think we've got a favorable market mixes you mentioned, I mean two of our top five markets from exposure perspective are Atlanta and San Francisco, which are both expected to be very strong markets. Renovation was headwind in 2018 we think that'll flip to be a slight tail wind for us in 2019 and I think we still kind of continue to see some of the benefits of what we've acquired over the last couple of years whether it's build out of the house or land, they continue the ramp of and continued ramp of the – in Atlanta Some of the other stuff that we bought in 2017 and 2018 I think those all those benefits continue to accrue in 2019 and we feel good about where the range I set.

Appreciate that. And then switching to expenses despite the fact that RevPAR growth was negative in the fourth quarter you really had one year best quarters on expense containment for the full-year and you're forecasting you know better RevPAR growth for the full-year in 2019 yet expect a similar type decline in expenses. So curious what the moving pieces are there between what you achieved in the fourth quarter and what your outlook is for the full-year 2019?

Yes, we did have a good fourth quarter, I think flow through retention was strong in the fourth quarter, I think the margin guidance reflect somewhat of a continuation of the same operating environment that we operate in for most of 2018. Labor markets are still tight, labor costs are going up we do expect to still see some increases in property taxes certainly not to the magnitude that we saw in 2019 but our expectation is property taxes increase in kind of mid-single digit range. So I think flat to down a 100 basis points is the right kind of margin range for us at this point. Obviously, hope we do better as we go throughout the year. But once again I think it's a very similar operating environment this year as we had in 2018 from an expense perspective.

I appreciate and would you care to or be willing to provide your RevPAR trends here to-date?

No, we typically don't do that I would say that as we see the market so far this year it does still stable, we haven't seen volatility at this point that would give us any concern about guidance or outlook but we do feel good about what we've seen so far.

Thank you. And I'm show no further questions at this time. So with that, I'll turn the call back over to Chairman, President and CEO, Mr. Dan Hansen for closing remarks.

Thank you all for joining us today, we continue to see opportunities to create value for shareholders through our thoughtful capital allocation in the premium hotels which today's guest loves. Our innovative properties and operational expertise continue to deliver strong results, and we are looking forward to 2019 and beyond. Hope you have a terrific day, and look forward to talking again next quarter.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone have a wonderful day.