Ashford Hospitality (AHT) Updates on Key West Hotel Conversion
Ashford Hospitality Trust, Inc. AHT recently provided an update on the conversion of its iconic Crowne Plaza La Concha Hotel in Key West, FL, to a Marriott Autograph Collection® property and noted that the process is on track.
Given the unique vision, design and environment of Marriott's Autograph Collection Hotels, which comprise a diverse portfolio of around 200 independent hotels around the world, the move is in line with AHT’s efforts to invest predominantly in upper upscale, full-service hotels. Also, the property will continue to be managed by Remington Hospitality, a subsidiary of Ashford Inc., post the conversion.
Shares of this Zacks Rank #3 (Hold) company lost 3.65% on Aug 22 normal trading session on the NYSE but later regained 6.44% in the after-hours trading session.
The conversion of this 160-room hotel, expected in 2024, will take place once the $35 million renovation or Property Improvement Plan (PIP) is accomplished. The hotel will be rebranded to Autograph La Concha and boast a distinctive theme and style that lives up to the upper-upscale/luxury Autograph product.
The lobby, bar and restaurant will be transformed per the PIP scope while the exterior, guestrooms, guest bathrooms, corridors, pool and meeting space are set for upgrade. In addition, the previously underutilized spa will be converted into premium roof-top suites.
The hotel, situated on Duval Street in the heart of Old Town Key West, is strategically located within walking distance of major attractions, shopping, entertainment and nightlife.
The new Autograph La Concha property, coupled with its strategic location, is likely to attract more customers, aiding its revenue per available room (RevPAR). Specifically, the company expects a 20-30% RevPAR premium compared with the pre-conversion.
Per Rob Hays, president and CEO, AHT, “Ideally located in Old Town Key West, the transformation of this landmark hotel to an Autograph Collection property is expected to elevate the property into a desirable niche in the high-barrier-to-entry, high-RevPAR Key West market. We remain focused on maximizing the value of our assets and look forward to realizing an enhanced financial performance from this property post conversion.”
Earlier this month, AHT reported adjusted funds from operations (AFFO) of 78 cents, surpassing the consensus mark of 45 cents. However, the figure declined 36.6% year over year. Although revenues increased 7.9% year over year, higher operating expenses during the quarter were an undermining factor.
The company’s comparable RevPAR for all hotels climbed 6.7% year over year to $144.25 during the second quarter, aided by a 3.8% and 2.8% increase in comparable average daily rate and comparable occupancy, respectively.
Nonetheless, softening of hotel industry fundamentals amid macroeconomic uncertainty and a high interest rate environment pose concerns for the company.
AHT shares have lost 40.9% in the year-to-date period compared with the industry’s fall of 5.6%.
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Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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