Good morning, and welcome to the Hospitality Properties Trust Fourth Quarter 2018 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Katie Strohacker. Please go ahead.

Good morning. Joining me on today's call are John Murray, President; and Brian Donley, Chief Financial Officer. Today's call includes a presentation by management followed by a question-and-answer session with analysts. Please note that the recording retransmission and transcription of today's conference call is prohibited without the prior written consent of HPT. I'd like to point out that today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on HPT's present beliefs and expectations as of today, February 27, 2019. The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call other than through filings with the Securities and Exchange Commission or SEC. In addition, this call may contain non-GAAP financial measures including normalized funds from operations or normalized FFO. A reconciliation of normalized FFO and adjusted EBITDA to net income, as well as components to calculate AFFO are available in our supplemental package found in the Investor Relations section of the company's website. Actual results may differ materially from those projected in these forward-looking statements. Additional information concerning factors that could cause those differences is contained in our Form 10-K to be filed later today with the SEC. And once again in our supplemental operating and financial data found on our website at www.hptreit.com. Investors are cautioned not to place undue reliance upon any forward-looking statements. And with that, I'll turn the call over to you, John.

Thank you, Katie, and good morning. This morning we reported fourth quarter normalized FFO of $0.61 per share, an increase of 13% compared to the $0.54 reported in the fourth quarter of 2017, primarily due to lower incentive fees, which decreased by $20.9 million or $0.13 per share, offset by weaker hotel performance in 2018 versus 2017. Starting with performance in HPT hotel fourth Quarter 2018 comparable RevPAR decreased by 1.7% versus the 2017 quarter driven by a 1.7 percentage point decline in occupancy partially offset by 0.8% increase in rate. HPT is comparable RevPAR performance lagged industry results this quarter for several reasons, including ongoing hotel renovations, non-repeat business due to hurricane activity and increased room supply in various markets. Adjusting for hotel renovations, non-recurring hurricane HPT adjusted comparable RevPAR increased 2%. Among the factors that positively impacted fourth quarter results was lift associated with the 35 hotels that were renovated in 2018 through the third quarter. Particularly those hotels in Hyatt and Marriott to 34 portfolios. Overall, the group has recently renovated hotels increased RevPaR by 9.6%. On Marriott 1 portfolios RevPAR was up modestly this quarter is a 2.1% increase in rate was offset by 1.2 percentage point decline in occupancy. We had 15 hotels in this portfolio undergoing renovations during the quarter. Offsetting the negative impact from renovations was increased demands associated with the Massachusetts gas explosions, which boosted revenue at five of our suburban Boston Hotels. Non-repeat business from Hurricane Irma in Florida had a negative impact of the Courtyards in Atlanta Midtown, Miami Lakes and Boca Raton. Coverage of our minimum returns remained strong in this portfolio at 1.2x for the year ended December 31, 2018. Marriott 234 portfolio had flat RevPAR this quarter with a 1.1% increase in rate, partially offset by a…

Thanks, John. Starting with operating results at our 323 comparable hotels this quarter, RevPAR increased 1.7% GOP margin percentage decreased by 200 basis points and cash flow available to HPT minimum returns and rents decreased by 13.6% reflecting the negative impact of renovations, supply growth, difficult hurricane comparisons versus last year and increased operating costs. The 1.7% decrease in RevPAR this quarter resulted from a 1.7 percentage point decrease in occupancy, partially offset by a 1.8% increase in ADR. Our comparable Wyndham and Radisson portfolios have the weakest RevPAR performance with declines of 12.5% and 5.9% respectively versus the prior year quarter. Our Wyndham portfolio was heavily impacted by non-repeat hurricane-related business in 2017 and soft market conditions. Our Radisson portfolio at 6 out of 9 hotels under renovation during the quarter. The portfolio with the highest RevPAR growth this quarter was comparable and that's the portfolio with an increase of 1.8% versus the prior year quarter. GOP margin percentage for our comparable hotels decreased by 200 basis points from the 2017 quarter to 36% and gross operating profit decreased approximately $10.6 million or 5.8% from 2017 fourth quarter. Three of our portfolios are the primary drivers of this decrease, GOP margin at comparable IHG portfolio decreased around 327 basis points to 37.5% resulting in a $6.3 million decrease in gross operating profit driven by the closure of the Crowne Plaza Ravinia hotel, non-repeat hurricane business, wage and benefit expense increases. Our comparables Sonesta portfolio experienced a 280 basis point decrease in GOP margin resulting in a $2.2 million decrease in gross operating profit, primarily driven by wage and benefit expense increases. Our Wyndham portfolio experienced the 558 basis point decrease in GOP margin resulting in a $2.1 million decrease to gross operating profit driven by soft market conditions and…

[Operator Instructions] Our first question comes from Michael Bellisario with Baird. Please go ahead.

Good morning, everyone. John, just on the TA transaction, can you maybe give us your high level and strategic view on trading TA rental income for more volatile Hotel income at this point in the cycle?

Sure. We think it's a good transaction for HPT for a number of reasons. Really, since we entered into the transactions with TA and acquired two years ago, we've had investors concerned about rent coverage for travel centers, even though the coverage of the travel centers was higher than hotel leases and this gets TA up into the 1 - above the 1.8 level and I think if you look at other similar businesses that are owned by publicly traded REITs their coverage ranges tend to be the 1.8 to 2 in a quarter range. So we think that should provide more comfort to investors as we potentially head into some point in the next couple of years into a weaker economy. We think that investors, the majority of investors in HPT are more focused on hotels and travel centers and reducing our exposure to travel centers. We think is also something that will be well received by investors, notwithstanding the different volatility dynamics. This transaction, the sale of 20 locations represents the weaker performing 20 hotels in the portfolio. So we think that that's - that's a positive results in a significant gain of $160-ish million which is also a positive. So we think taken all those considerations into account and giving, given where our leverage levels, whereas the ability to dispose of some weaker performing travel centers and taken $300 million of capital for investment in hotels assuming that we can invest in them at roughly an 8% return is a good transaction for HPT.

Do you see an opportunity to do more with TA to further enlighten the exposure there going forward?

We are not currently considering similar transactions. This was somewhat opportunistic because TA made a strategic decision to exit the convenience store business and we happen to be their most expensive form of debt, and so their plans use of proceeds is to reduce leverage. And so I don't think that they have any other strategic initiative that's going to result in that type of proceeds and ability to just try to buy down our leases. So I think this is just a one-time event.

Got it. And then just on the CapEx front for 2019. I don't think you provided any round numbers for the portfolios, but could you maybe provide some guidance you're spending expectations for this year.

Yes, for 2019 $260 million adjustment for the hotels and 30 million for the travel centers.

Our next question comes from Bryan Maher with B. Riley FBR. Please go ahead.

Good morning, John. Quick question on your outlook on the acquisition front. You've kind of been going back and forth between select-serve and full-serve hotel acquisitions at kind of a moderate pace, maybe even arguably a slow pace more recently, particularly versus 2017. How are you thinking about 2019 skewing more towards live-service or full-service? And do you expect that activity to ramp up at all with renovation activity slowing somewhat versus last year?

Yes, I think that 80-ish, 85% of our portfolios of select service are extended stay. And so - and then the balance is full-service hotels. So we really look at all offerings of hotels that we've become aware of and we are open to buying either we really - we prefer to buy select service hotels or extended stay hotels in the portfolio transactions, not so much on a one-off basis. Since the Hotel Conference in Los Angeles back in, at the end of January. We've seen pickup in full-service hotel offerings, a more modest volume of select service activities. So, but I think it's - I don't know that I would give a particular way. Maybe I would go slightly more towards; we're seeing more full-service hotel opportunities. So maybe it's more likely that we'll buy more full service hotels than select service hotels. But we don't have a particular target, what's important to us is that we have geographic diversity that we have portfolio transaction. So when like, for instance when we bought the Palomar in Washington DC that was hotels that could be added to our portfolio of 100 other hotels that we have with IHG. So we wouldn't have we wouldn't have bought it on a standalone basis. But so, as long as we can identify opportunities that where the yield is acceptable to us and one of our major operators is willing to add it to their portfolio. Then I think probably we'll do a little bit more full service and select service.

I was just curious. When you do acquire properties, it seems like there's been a little bit of a skewing towards the Sonesta brand more recently. Can you tell us how that decision is made internally or with the board as to how that property is going to be branded?

Yes, we have - first of all, just a policy that if there is a hotel available in the marketplace. And one of the hotel operators that we do business with emailed us or call us and says, have you seen the X, Y, Z hotel is available in the marketplace. We'd love to add that to our portfolio. Then that's what we do. We focus on that acquisition opportunity with that operator, because it was that operator and that relationship that first contacted us about it and brought to our attention. If we become aware of a transaction, through our own networks with sellers that we've done business with previously or through the brokerage community, then we evaluate what it could be re-branded as often times the major brands already have a very significant presence in certain markets and the ability to get the type of secure transaction that we typically seek wouldn't probably be available with those other operators. And in those circumstances, if the opportunity is unencumbered by brand and management, we consider Sonesta as a viable opportunity because they wouldn't be a brand that over represented in the market and the fact that we may not get that, that we don't get credit support from Sonesta wouldn't be sort of a disadvantage versus what we would have been able to get from any of the other operators in those markets. So and then we presented to the independent trustees, any time we do a transaction with the related party the managing trustees reduced themselves from the decision making on the investment we presented to the independent trustees, we present the alternatives of what else, maybe you know what else, maybe the hotel could have been in terms of branding and then the independent trustees, make a determination whether to go with Sonesta or not.

Thanks. And then kind of going back to Michael's questioning on TAs. With the rollout of the TA Express brand in 2019, do you think HPT would be agreeable to assuming TA found a potential seller by handful or a dozen or so smaller truck stop travel centers to maybe team up with TA to acquire TA Expresses and put those into the portfolio? Or is there not something you're considering?

Well, it's not something where we are currently considering. We never say never here at HPT, but we believe and we - and I think that TA believes that the TA Express format is really a franchise product not - it's not type of travel center that TA intends to become a big lessee on and so I don't think that they would come to us with that type of portfolio. I think that they will be more likely to reach out to smaller travel center operators and existing franchisees to see if maybe they would be interested in operating those, but we think the competitive advantage that we have with our travel centers is that there are large format. They do have substantial parking, which attracts the professional truck driver as well as regular motorists, and it gives them a place to be during the 13 hours that they're supposed to be off-road and allows them to shop in our stores and eat in our restaurants and get their truck repaired. And that's what makes up 75% of the bottom line that we see from our travel centers and so we prefer to stick with that model.

And just kind of lastly, kind of maybe thinking a little bit out loud here. But given the size of travel centers that you own and the number, still 179, as you look towards growing the select-service portfolio over time, do you guys ever give any thought to actually developing or having somebody develop select-service hotels on an acre or 2 of those large parcels kind of across the country, to kind of grow out the portfolio on the hotel side even more?

That is something that from time to time we consider, we've been approached by a couple of our operators about doing exactly that and what we've - we haven't gone forward for a variety of reasons, one is because there's a lot of traffic moving around those travel centers and we want to be able to provide, if we had hotel on the site we want to be able to make sure that they were safe. For example walking from the hotel over to the restaurants, sort of the quick-serve - quick-serve restaurants and that just makes us a little bit nervous, given the amount of activity that goes on at these locations. Another factor is that our feeling is that the motorists in cars popping in to get fuel or to get a bite to eat, but generally they're in transit between locations, whereas the professional truck driver will park car for a long period of time overnight or for whatever period to comply with safety regulations, but often times they have to get insurance on whatever cargo they're transporting, the insurance carriers require they stay with their cargo that they have to sleep in their cabs. And as a result the hotels don't generally get as much business from the truck drivers as you might think they would. And so we actually when we first bought TA a number of our locations had hotel rooms in the upstairs area of the travel centers, and we've gotten rid of those over time. So it's something that we continue to take a look at, I would tell you that we've - because our MRs involved in a number of different types of real estate in some of the travel centers where we do have a fair amount of excess land we have evaluated other potential uses for industry - for example, there may be opportunities to develop Industrial buildings near these travel centers on the excess land. So that's again that's not something that is going to happen near term, but it's something along with hotels that we can - we will continue to periodically analyze and may do down the road.

This concludes our question-and-answer session. I would like to turn the conference back over to John Murray for any closing remarks.

Thank you all very much for joining us today.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.