CA - American Hotel Income Properties REIT LP (AHOTF) Q1 2023 Earnings Call Transcript
2023-05-05 18:55:20 ET
American Hotel Income Properties REIT LP (AHOTF)
Q1 2023 Earnings Conference Call
May 5, 2023, 1:00 PM ET
Company Participants
Jonathan Korol - Chief Executive Officer
Bruce Pittet - Chief Operating Officer
Travis Beatty - Chief Financial Officer
Conference Call Participants
Frank Lee - BMO Capital Markets
Dean Wilkinson - CIBC
Tom Callahan - RBC Capital Markets
Tal Woolley - NBF
Presentation
Operator
Good morning. And welcome to American Hotel Income Properties REIT LP’s First Quarter Results Conference Call. At this time, all participants are in listen-mode. Following the formal remarks, there will be a question-and-answer session for analysts only. Instructions will be provided at that time for you to queue up for your questions.
Before we begin the call, AHIP would like to remind listeners that the following discussion will include forward-looking information within the meaning of the applicable Canadian securities laws, which forward-looking information is qualified by this statement.
Comments that are not a statement of fact, including projections of future earnings, revenue, income and FFO are considered forward-looking and are based on certain assumptions and involve various risks and uncertainties.
Risks and uncertainties that if realized and assumptions that if false could cause AHIP’s actual financial and operating results to differ significantly from forward-looking information discussed today are detailed in AHIP’s public filings, which are available on AHIP’s website at ahipreit.com, as well as on SEDAR.
Participants on this call should not place undue reliance on such information, which is provided based on management’s expectations and assumptions as of the date of this call. AHIP does not undertake any obligation to publicly update such information to reflect subsequent events or circumstances, except as required by law.
On this call, AHIP will discuss certain non-IFRS financial measures. For the definition of these non-IFRS financial measures, the most directly comparable IFRS financial measure and a reconciliation between the two, please refer to the MD&A.
References to prior year operating results are comparisons of AHIP’s portfolio of 71 properties results in the period versus the same period properties results today. All figures discussed on today’s call are in U.S. dollars unless otherwise indicated. A replay of this call will be available on AHIP’s website.
Discussing AHIP’s performance today are Jonathan Korol, Chief Executive Officer; Bruce Pittet, Chief Operating Officer; and Travis Beatty, Chief Financial Officer.
I will now turn the call over to Jonathan Korol, Chief Executive Officer.
Jonathan Korol
Thank you, Operator. And thanks to everyone for joining us today for our first quarter financial results conference call. Bruce Pittet is here with us today, but I’ll be covering for him as he’s experiencing some challenges with his voice this morning.
We’re pleased with the continued strength in the topline performance of our 71 property select service hotel portfolio this quarter. In Q1, revenue grew 10% on a same-store basis compared to Q1 2022 as occupancy and room rate trends remain positive with broad demand from leisure, corporate and group guest segments. RevPAR for the quarter finished at $85, an 8% improvement over Q1 2022.
Our ability to control and manage daily rates continues to greatly benefit us as we achieved our highest ADR in the history of the company this quarter. Furthermore, we have posted an average daily rate -- daily ADR growth rate of over 10% over the most recent four quarters. For this quarter, rates ended at 111% of Q1 2022. This marked the seventh consecutive quarter where we have matched or exceeded 2019 rates and we expect this trend to continue.
In the past, we’ve cited the return of corporate demand as a near-term catalyst and we continue to see improvements in this segment demonstrated by the performance of our Embassy Suites portfolio this quarter, which saw a 30% increase in RevPAR compared to Q1 2022.
This quarter, we experienced meaningful disruption to our operations related to the effects of winter storms that occurred in late 2022. In addition, we completed three major hotel renovations resulting in guest displacement at each of those properties during the quarter.
Removing these impacted properties from our quarterly occupancy results in an upward revision to nearly 67% versus reported occupancy of 64.1%. Similarly, while reported NOI margins decreased by 100 basis points year-over-year to 28.6% for the quarter once we remove the impact of hotels, NOI margins were up 100 basis points on a year-over-year basis.
The challenging operating environment driven by inflation and labor shortages that plagued us throughout 2022, continued this quarter and put downward pressure on operating margins. To address these challenges, our asset management team, together with our external hotel manager have continued their efforts to hire more in-house labor, reduce turnover and improve overall productivity.
Although we have begun to see some positive results from these efforts, cost pressures and labor issues are expected to remain a challenge for most of 2023. We are confident in our ability to navigate this dynamic operating environment and to add long-term unitholder value.
In today’s higher interest rate environment, the fixed rate nature of our debt obligations provides a substantial benefit to us. Overall, 92% of our debt obligations are fixed rate coupons are subject to variable to fix swap arrangements.
We’ve made steady progress on our leverage reduction goals over the last 12 months, demonstrated by our debt-to-gross book value being reduced by 210 basis points and debt-to-trailing 12 months EBITDA down 0.6 times. We do not have any meaningful debt maturities until 2024 and are well positioned to manage potential economic volatility in the coming quarters.
Last year saw us return to our normal capital program as we invested heavily in renovating our portfolio. Assuming a stable operating environment, we expect a similar level of spend in 2023 as the number of planned projects are expected to generate a meaningful return on investment through the refreshment and upgrade of guest-facing items, ensuring that each property maintains its competitive advantage in the market.
We completed the renovations at the three hotels that I mentioned earlier at a total cost of $9 million and we believe that these incremental dollars will generate a meaningful return on investment.
After a year that saw us high grade our portfolio by executing on the dispositions of seven non-core assets, we continue to be active on this front in Q1 2023, as we entered into an agreement to dispose of a hotel property in North Carolina for gross proceeds of $11.7 million. This disposition is expected to close in the second quarter of 2023.
As I mentioned before, while our plan remains to grow the company, we will always explore opportunities to dispose of assets where the return projections lag the average return expectations for the remainder of our portfolio.
We do continue to evaluate growth opportunities that would expand our hotel portfolio and geographic footprint. As a result of the investment by BentallGreenOak and Highgate, we are aligned with two well-capitalized strategic partners who support the pursuit of attractive acquisition opportunities.
I’ll now discuss first quarter hotel operations in further detail. AHIP’s portfolio of premium branded select service hotel properties continued to demonstrate strong demand metrics in the first quarter of 2023, during what is traditionally the slowest demand quarter of the year.
As I mentioned earlier, during the final week of December 2022, cold weather, particularly in the Northeast U.S. and Texas caused weather-related damage at several hotel properties. Of the properties damaged, two continue to have a significant number of rooms out-of-order.
At the residence in Neptune in New Jersey, all 105 rooms have been out-of-order since December 25, 2022. At the Courtyard wall in New Jersey, all 113 rooms were out-of-order from December 25, 2022, through mid-January 2023, when about half of the 113 rooms returned to service.
These out-of-order rooms represent a loss of approximately 2% of total room inventory and are expected to return to service by the end of the second quarter of 2023. Two other hotels were also materially impacted by the storm. We anticipate those eight remaining out-of-service rooms to be back in inventory by mid-May.
As I mentioned earlier, we completed major renovations at three of our properties during the quarter. These projects were started in 2022 and were completed in March 2023. Given the operating disruption we experienced in four hotels from winter storm impacts and in three others from renovation activity during the quarter, for year-over-year comparisons, I will now state operating performance figures for our portfolio of 71 assets, as well as the 64 assets that did not see any disruption in an effort to provide a better sense of property performance in the quarter.
For Q1 2023, our 71 hotels had an occupancy average of 64% or 97% of 2022 levels. Excluding the seven disrupted hotel properties, occupancy was 67% or 102% of Q1 2022. ADR continues to be the catalyst for RevPAR increases across AHIP’s portfolio. Finishing had a record $132 for the quarter, above Q1 2022 levels by 11% for both the 71 assets and 64 asset portfolios. We continue to anticipate strong ADR performance across the portfolio going forward.
Q1 2023 RevPAR for our 71 hotels was $85 or an 8% increase over Q1 2022. Excluding the seven disrupted hotels, RevPAR was $89 for the quarter, a 14% increase over 2022.
We typically reference three distinct segments of our business; extended stay hotels, 23 hotels; select service, 43 hotels; and our Embassy Suites hotels, which number five. During Q1 2023, the extended stay segment achieved a RevPAR of $80 or 95% of Q1 2022, but this segment was impacted substantially by out-of-order rooms, as four of the seven disrupted hotels were extended stay properties.
The select service segment, which represents 43 hotels also achieved a RevPAR of $80. This represents 1.1 times 2022 levels.
The Embassy Suites segment achieved a RevPAR of $109, a 30% increase over the same period of 2022 and notably 3% above Q1 2019. The Embassies are a good barometer for the portfolio as it pertains to group and corporate segment demand recovery.
With regards to corporate travel, two measures that we often refer to as strong indicators of corporate business demand are the negotiated rate segment, which has seen revenue recover to 81% of 2019 levels, as well as the global distribution system or GDS channel, which is mostly driven by travel agents booking corporate travel for their clients. This segment has recovered to 92% of 2019 levels.
Finally, food and beverage revenues, which are another proxy for corporate demand are also continuing to improve against 2019 benchmarks. F&B revenues were 0.66 times of 2019 performance for the quarter compared to just 0.49 times in Q1 2022. For our portfolio of 71 assets, NOI margin finished at 0.97 times 2022 for the quarter, but this increases to 1.03 times Q1 2022 once you remove the seven disrupted assets.
We continue to see a challenging cost environment putting pressure on our operating margins. Inflationary cost pressures persist along with year-over-year wage growth. In Q1, margin challenges were amplified by the winter storm and renovation disruptions at the seven properties we talked about earlier.
We are seeing some green shoots related to cost mitigation across the portfolio. Supply chain disruptions, which we’ve talked about a lot over the last few quarters have generally subsided and stabilized and housekeeping productivity is improving, supported by brand service standards still being below 2019 thresholds.
Portfolio employee turnover improved compared to Q4 and we also had some success improving our labor mix as the percentage of our total workforce that is in-house increased to 88% versus 79% a year ago.
Our focus remains on margin performance initiatives, including the reduction of third-party contract labor, reducing overtime, increasing housekeeping productivity, reducing employee turnover and improving procurement program compliance.
Turning to AHIP’s capital program. The 2023 capital plan includes approximately $21.1 million in PIPs or property improvement plans and $12.8 million in FF&E capital improvements, which will partially be funded by restricted cash.
Total capital spend in Q1 2023 was approximately $4 million. Three of the four remaining projects from 2022 were substantially completed in Q1 2023, while one project was suspended due to impacts of the winter storm in late 2022. As each PIP completes, we expect to see increases to the hotel’s market share and RevPAR performance.
Lastly, initial results for April suggest strong topline performance with occupancy of 71%, ADR of $131 and RevPAR of $94 or 102% of April 2022 RevPAR levels.
I’ll now turn the call over to Travis to highlight key financial and capital metrics for the first quarter.
Travis Beatty
Thank you, Jonathan. Good morning, everyone. Normalized diluted FFO per unit was $0.07 for the quarter, compared to a normalized diluted FFO of $0.03 in the prior year. At March 31, 2023, AHIP had $22 million of available liquidity, comprised of $24, sorry, compared to $24 million at December 31, 2022. The available liquidity of $22 million was comprised of an unrestricted cash balance of $17 million and borrowing availability of $5 million under our revolving credit facility. AHIP has an additional restricted cash balance of $26 million at March 31, 2023.
Increase in unrestricted cash is primarily due to the transfer of $12 million from restricted to unrestricted as a result of improved operations during 2022 at three Embassy Suites located in Ohio and Kentucky. As of the date of this call, the borrowing base availability has increased to $15 million based on our Q1 2023 borrowing base submission completed earlier this week.
Debt-to-gross book value at March 31, 2023, decreased 60 basis points to 52% compared to year-end. AHIP is making steady progress on this measure and over time, intends to bring its leverage to a level closer to its peer group, which will be in the range of 40% to 50% debt-to-gross book value. This is expected to be achieved through a combination of improving operating results, a sustainable distribution policy and selective equity issuance in support of growth transactions. AHIP also improved leverage as measured by debt-to-EBITDA reducing this measure to 9.6% for the most recent 12 months.
Our weighted average interest rate for term loans and credit facilities was 4.48% at December 31, 2022, sorry, at March 31, 2022, compared to 4.46% at year-end. Short- and long-term interest rates have significantly increased over the last 12 months. AHIP does not expect a material increase in interest expense in 2023 since 92% of our debt is at fixed rates or effectively fixed by interest rate swaps until November 2023. Our financial position allows us to be patient as we have no maturities related to our debt or our swaps until the fourth quarter of this year.
In terms of upcoming maturities, AHIP has two CMBS loans totaling $15 million coming due in December 2023. One CMBS loan totaling $22 million due in the first half of 2024 and an additional three CMBS loans totaling $60 million during the second half of 2024.
On the revolving credit facility, $125 million [Technical Difficulty] of 2024 and the revolving portion can be extended at our option to the same date. The cumulative debt yield on these maturities is currently approximately 12%, which we expect to increase as the loans approach maturity and we are currently evaluating our refinancing options.
As a result of the weather-related damage, total write-down of hotel properties is approximately $9 million at March 31, 2023. This is comprised of remediation costs of $3 million and rebuilding costs of $6 million. At March 31st, we have spent about $7 million to remediate and rebuild these damaged properties.
For property damage insurance, AHIP expects most of the total cost of remediation and rebuilding to be reimbursed in 2023. For business interruption insurance, AHIP also expects to recover most of the lost income from the event in late December until the damaged hotel properties are fully operational, which is expected to be by the end of the second quarter.
At March 31, 2023, AHIP reported a $4 million receivable for a portion of the total expected insurance proceeds. This is comprised of $3 million for the property damage claim and an initial $1 million for the business interruption claim. The $4 million represents the initial advance of the total expected into proceeds [ph] and AHIP expects to receive additional business interruption of $0.5 million for lost income related to the first quarter. Business interruption proceeds are included in our FFO calculation.
Our distribution policy remains intact and we’ve now paid U.S. dollar monthly distributions each month since March of 2022. We are pleased to be in a financial position to continue to do so. Based on analyst consensus numbers, our next 12-month FFO payout ratio is conservative at under 50%.
At our current unit price, the yield supported by this distribution is approximately 10%, which continues to be among the highest in the Bloomberg Hotel REIT Index. The declaration and payment of each monthly distribution under our distribution policy remains subject to Board approval.
Lastly, we’ve had a number of inquiries regarding U.S. withholding tax. Given that AHIP is expecting 100% of distributions this year to be classified as income and not return capital as was the case in the past few years, these distributions are subject to a 15% holding tax and less held in an RSP account. Certain taxpayers can claim a foreign tax credit to recover this holding.
Also, we do not expect non-U.S. investors to be subject to U.S. withholding tax under Section 1446 asked on the sale of units. AHIP has not and does not expect to be engaged in a trader business within the United States. AHIP intends to issue and publish a qualified notice as applicable to indicate that this withholding does not apply. Please refer to our website for further information on these topics.
Now I’ll turn the call back to Jonathan.
Jonathan Korol
Thanks, Travis. In conclusion, I’m encouraged by the demand acceleration that is continuing across our portfolio in 2023. We are not seeing any evidence of a slowdown in demand trends for our leisure guests and all signs point to steadily improving business traveler demand.
We expect that our team’s focus on easing the effects of the labor challenges that are evident across the country will begin to narrow the gap to pre-pandemic operating margins, allowing for the permanent improvements to the select service hotel operating model to be increasingly evident. I would like to convey my appreciation to all of our teams at each of our hotel properties for their continued dedication to providing a great guest experience.
Last year, we were the first North American hotel REIT to reinstate regular distributions. This demonstrated the financial resilience of our portfolio, as well as the confidence that we have in the ongoing stability of our cash flows.
Our ability to provide our unitholders with a meaningful cash yield on their investment remains a top priority for us. We continue to be confident in distribution levels despite the current macroeconomic headwinds.
Our conservative payout ratio means we will have the capacity to increase the distribution as operations improve. Based on our closing price yesterday, the annualized U.S. dollar distribution of $0.18 per unit represents a cash yield of approximately 10% with an FFO payout ratio below 50%.
So, with that overview of our first quarter and recent initiatives, we’ll now open the call to questions from analysts. Operator?
Question-and-Answer Session
Operator
[Operator Instructions] Our first question comes from Frank Lee with BMO Capital Markets. Your line is open.
Frank Lee
Hi, everyone. Good morning and good afternoon. Thanks for taking my questions. So I just want to start with the April occupancy of the 71% you mentioned earlier. I wonder does that also address for business interruptions probably affected by the winter storm damage?
Jonathan Korol
Good morning, Frank. No. That number is -- does not -- is not normalized or is not adjusted and so if it were to be adjusted for the two hotels that we mentioned are still out-of-order to vary to varying degrees.
Frank Lee
Got it. Thank you. So, clearly, obviously, it has been trending higher than the 2022 levels. Could you provide some color on what has been driving the occupancy recovery thus far this year and should we expect this trend to continue for the remainder of 2023?
Jonathan Korol
Yeah. I’ll address the last part first. I would -- there’s certainly no signal of the opposite at this point. So we would expect occupancy to continue to improve. We’re still not at occupancy levels of 2019 and we would expect that to be the case.
In terms of what’s driving it, we talked about the strength of the leisure customer. That’s especially evident during some of the spring break and the holiday seasons. That is continuing to be the case. But we’re also seeing a steady improvement in the corporate demand, which I referenced earlier.
Frank Lee
Perfect. I guess, the RevPAR, if we’re adjusting all those noise from renovation and damage properties, it’s like pretty up 14% year-over-year. Should we expect for your RevPAR growth more than, I guess, last quarter, we touched on the range of like 8% to -- 5% to 8% for the full year. Should we expect a bit more than that given the strong Q1 results?
Jonathan Korol
Yeah. I would expect it to be within the range that we referenced earlier, Frank, because of the fact that, if you remember, Q1 last year, there was some demand disruption related to the Omicron variant through the first six weeks of the year. So that range that we provided guidance on earlier, I would continue to use.
Frank Lee
Got it. Perfect. So, I guess, we had an easier comp this quarter. Just lastly want to touch on the $130 million swap coming off. I’m not sure if I missed anything from your opening address, but is there any change of plan either to extend it or amended?
Travis Beatty
Frank, this is Travis. We’re evaluating that right now, but we don’t have anything to report on that. We’re looking at some extension options, but as of today, no change in status.
Frank Lee
Got it. Thanks, Travis. I’ll turn it back. Thank you very much. Have a great weekend, guys.
Jonathan Korol
You too. Thank you.
Operator
[Operator Instructions] Our next question comes from Dean Wilkinson with CIBC. Your line is open.
Dean Wilkinson
Thank you. Travis, on the business interruption insurance, the component that flows through as income, how do they calculate that? Is that based off of a model or is it historical? And are they paying you the topline or a net number?
Travis Beatty
So they triangulate it with a number of factors, Deane, they look -- at last year, they’ll look at budget, they’ll look at other hotels in the portfolio, they’ll look at STR information for comparison hotels in the market. It’s really all of the above. It’s no single amount and we do get paid on a net basis.
So the number that we reported was $1 million. We also disclosed we expect the actual number to be $1.25 million to $1.75, the million is just what we have so far. So if you take the midpoint of that, the $1.5 billion that’s really the best estimate as to what those hotels would have done if they were unaffected by the forums.
Dean Wilkinson
Right. And then you’ve got another $500, which is -- that comes through Q2 really attributable to Q1. So it’s almost like we’re looking at a normalized H1 as it were?
Travis Beatty
That’s right. By the time we get to Q2, it should -- the year-to-date number should be correct.
Dean Wilkinson
It should be trued up. Okay. And are there any larger amounts in terms of the physical damage that will flow through to FFO similar to Q1 or is that covered in the receivable?
Travis Beatty
I’m not sure you mean. We -- in Q2 we expect -- so the current damage estimate is 8.8% total.
Dean Wilkinson
Right. And you’ve got...
Travis Beatty
Recognized $3.3 million of that in the first quarter.
Dean Wilkinson
Yeah.
Travis Beatty
So in the second quarter, we’ll recognize most of the remainder. I’m not exactly sure where we’ll be at the end of Q2, but we’ll recognize most of that. And then on the BI side, we’ll recognize that Q2 amount for business interruption as well.
Dean Wilkinson
Right. Got it.
Travis Beatty
… 0.5 that we kind of missed in Q1.
Dean Wilkinson
On top of that. Okay.
Travis Beatty
Yeah.
Dean Wilkinson
And then just -- yeah, that’s what I meant.
Travis Beatty
Okay.
Dean Wilkinson
On the $11 million, $11.7 gross asset divestiture, is there debt associated with that?
Jonathan Korol
Yeah. There’s a $6.6 million CMBS loan associated with that.
Dean Wilkinson
Okay. And then you take the difference, would you be looking just to pay off your credit facility or given the yield that you’ve got on your units right now, perhaps, doing something around a buyback?
Travis Beatty
Yeah. Certainly, a portion of it will go to leverage reduction. We’ll look at something on the units, but we don’t have an NCIB in place right now, Dean.
Dean Wilkinson
Okay. Great. That’s it for me. Thanks, guys.
Jonathan Korol
Thank you.
Operator
Thank you. Our next question comes from Tom Callahan with RBC Capital Markets. Your line is open.
Jonathan Korol
Thanks and that was good [ph]
Tom Callahan
Hey. Thanks, guys. Just first one for me is you provided some good information there on kind of the recovery on the GDS and negotiated rate side of things relative to 2019 levels. Just curious, I think, those were revenue figures, is it possible to kind of get a sense of where occupancy through those segments would sit relative to 2019?
Jonathan Korol
Yeah. On the -- for the occupancy recovery versus 2019 would be about 0.86 times. That’s actually a pretty precise figure, 0.86 times 2019. For the -- and that’s for the entire 71 hotels.
Tom Callahan
Got it. Okay. And sorry, but just on the GDS and negotiated rate side, like that 0.86…
Jonathan Korol
Yeah.
Tom Callahan
Oh! I see. Sorry. I see what you mean. Yeah. Okay. Got it. Got it. And then in terms of booking windows, has there been any shift in terms of visibility there or is it still fairly short-term in nature?
Jonathan Korol
Okay. Yeah. It’s still pretty short. I mean, I think, we’d average like 10 days to two weeks on average.
Tom Callahan
Okay. Okay. So still like from that perspective. And then, Travis…
Jonathan Korol
Yeah.
Tom Callahan
…maybe -- yeah. Sorry, go ahead.
Jonathan Korol
If you recall, a couple of years ago, we were talking about one day to two days. So it’s moving in the right direction.
Tom Callahan
Right. Yeah. And then, Travis, on the debt side, I know there’s still some time, but can you just give a sense to what you’re seeing in terms of cost or yields in the CMBS markets there?
Travis Beatty
Yeah. I sure can, Tom. It’s pretty volatile still. Looking backwards -- first half of 2022 is pretty good, but then the market really got soft in the second half of 2022. In early 2023, I think, a lot of banks are starting to reopen and credit spreads were reverting to the normal, but then Silicon Valley Bank has been the latest shakeup. So it’s pretty volatile. I’m hearing 300-basis-point to 400-basis-point spreads over treasuries. So at the low end of that current CMBS refi would be in the mid- to high-6s.
Tom Callahan
Got it. Thanks. That’s a good color, guys. I’ll turn it back. Thanks.
Jonathan Korol
Thanks, Tom.
Operator
Thank you. Our next question comes from Tal Woolley with NBF. Your line is open.
Tal Woolley
Yeah. Just a quick housing question, the asset you’re intending to sell, do you have a trailing NOI figure?
Travis Beatty
We have a 2022 figure, which…
Tal Woolley
Okay.
Jonathan Korol
… if you back into it, would be an 8.7% yield on the purchase price of 11.7%.
Tal Woolley
Got it. Great. When you break down the rooms into select service extends day and the suites and you sort of offer the RevPAR for each. Can you just talk a little bit about the dynamics for RevPAR within each? Like are all of them being driven by rate, maybe growing rate and occupancy -- growing rate and growing occupancy or are there some different dynamics amongst the different takeaways.
Travis Beatty
Yeah. I think it’s safe to say that all three are being driven by rate and occupancy to varying degrees. And I’d put occupancy at a higher degree on the Embassy Suites. Those are bigger boxes. Those are 200 to 250 room hotels.
And the -- we’ve just experienced tremendous demand compression in those markets that’s allowed us to have more pricing power and growing occupancy -- accelerated occupancy at a higher rate than the extended stay and the select service divisions.
Tal Woolley
And then on the RevPAR side, is there one of the segments that’s seeing much more growth than the others or say another…
Travis Beatty
Well…
Tal Woolley
ADR I mean, The growth in ADR…
Travis Beatty
Yeah.
Tal Woolley
…just more…
Travis Beatty
Yeah. We have…
Tal Woolley
… higher or more on others.
Travis Beatty
Higher year-over-year growth rate. I don’t have the ADRs for each segment with me right now, but we can get back to you on that. The segment, of course, that is experiencing the higher growth is the Embassy Suite.
Tal Woolley
Okay. And then when you’re talking to your brand counterparts, obviously, so much of this has been led by rates and rates can -- it’s easier to move rates and not necessarily put people or more people or influenced occupancy. And so I’m just wondering, like, in terms of your conversation with brands, what the outlook they sort of have given the overall kind of macro uncertainty, because this demand has been pretty healthy coming out of COVID? And is there any concern that, that might soften up a little bit and maybe could impact average daily rates going forward?
Travis Beatty
Yeah. So Hilton and Marriott both reported in the last week and those are our two largest brand partners and they were -- each asked the same question and the answer was that they don’t see any demand slowdown for the rest of the year. Haven’t paid attention to some of the other brands, but those are the ones that we’re very interested in.
And the -- if -- going back to 2020, when you look at the resilience of the occupancy in this select service or this suburban select service business that we’re running. We’ve always had -- we always experienced a pretty darn good occupancy even in April of 2020. It’s just the rate that’s led the recovery and that trajectory just continues to be very, very strong. So no signs to indicate that there’s a slowdown in occupancy nor a weakness in rate.
Tal Woolley
And in terms of the brand standards, is all like the negotiating of what has to come back in terms of after it was relaxed in COVID. Is all that sort of like standard negotiating that’s been complete and like you sort of have visibility on what your costs look like going forward?
Travis Beatty
Yeah. The standards are still below 2019 and the standard that we always talk about is housekeeping. And Hilton is at housekeeping on demand. Marriott’s on every couple of days and IHG is back to what they were in 2019. We don’t see that changing for either of those three brands. And so you could basically say that that is set now and that’s the business plan going forward.
Tal Woolley
Okay. That’s great. Thank you very much.
Travis Beatty
Thanks, Tal.
Operator
[Operator Instructions] There are no further questions at this time. I’d like to turn the call back over to Jonathan Korol for any closing remarks.
Jonathan Korol
Thanks again everyone for joining us on our call today. I look forward to speaking with you in early August when we report our second quarter 2023 results.
Operator
Thank you for your participation. This does conclude the program. You may now disconnect. Everyone have a great day.
For further details see:
American Hotel Income Properties REIT LP (AHOTF) Q1 2023 Earnings Call Transcript