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Sotherly Hotels Inc. (SOHO) Reports Mixed Q3 2023 Results Amidst Market Challenges

  • Revenue remained stable at approximately $39.2 million for Q3 2023 compared to Q3 2022.

  • Net loss attributable to common stockholders increased to approximately $3.9 million in Q3 2023 from a net income of $0.1 million in Q3 2022.

  • Adjusted FFO attributable to common stockholders and unitholders increased by 19.4% year-to-date.

  • RevPAR for the company's composite portfolio decreased slightly year-over-year for Q3 2023.

On November 9, 2023, Sotherly Hotels Inc. (NASDAQ:SOHO) released its financial results for the third quarter ended September 30, 2023. The company, which operates as a self-managed and self-administered lodging real estate investment trust (REIT), experienced a stable revenue of approximately $39.2 million for the quarter, mirroring the revenue from the same period in 2022. However, the net loss attributable to common stockholders widened significantly to approximately $3.9 million, compared to a net income of $0.1 million in the third quarter of 2022.

Financial Performance Overview

For the nine months ended September 30, 2023, total revenue increased to approximately $131.7 million from approximately $124.7 million during the comparable period in 2022. The net loss attributable to common stockholders for the nine-month period was approximately $1.4 million, a stark contrast to the net income of approximately $21.9 million reported for the same period in 2022. This decrease was largely due to a significant gain recognized in the prior period from the sale of the DoubleTree by Hilton Raleigh Brownstone University and a loss on the extinguishment of debt.

Operational Highlights and Challenges

Room revenue per available room (RevPAR) for the company's composite portfolio decreased to $102.82 for Q3 2023, down from $104.19 in the comparable period in 2022. This decline was driven by a decrease in the average daily rate (ADR) and a slight decrease in occupancy. Despite this, for the nine months ended September 30, 2023, RevPAR increased to $117.89 from $111.16 in the comparable period in 2022, driven by an increase in both ADR and occupancy.

Balance Sheet and Liquidity

As of September 30, 2023, Sotherly Hotels Inc. had approximately $29.4 million of available cash and cash equivalents, with principal balances of approximately $320.8 million in outstanding debt at a weighted average interest rate of approximately 5.41%.

Management Commentary

Dave Folsom, President and Chief Executive Officer of Sotherly Hotels Inc., commented on the results, "In the third quarter, we continued to witness RevPAR increases over the pre-pandemic results of 2019. Our wholly-owned portfolios overall RevPAR improvement over 2019 was 1.7%, with ADR up 15.0%. Occupancy still lags pre-pandemic levels, which we see as long-term upside potential for our portfolio. Revenue results for our wholly-owned portfolio, compared to prior year, showed RevPAR slightly up by 0.6% and ADR was up 1.5%. We continue to see improvement in the group and business travel segments. Transient leisure remains stable, albeit in the quarter, we did see demand fall off in our South Florida markets, much of which can be attributed to the decrease in international travelers coming to these markets. Concurrently, many domestic travelers opted for pent-up overseas leisure travel in 2023, rather than vacationing in Florida. Margins have returned to close to pre-pandemic levels. Our margins did not compare favorably to prior year, however, owing to our comprehensive resumption of service levels, staffing, and amenities at our full service hotels. Our current margins reflect a more normalized operating environment, and we believe our portfolio is well positioned to take advantage of occupancy gains, as well as servicing group and business travel demand."

Outlook and Future Events

The company provided guidance for Q4 2023, projecting total revenue to range between approximately $40.5 million and $42.0 million, with a net loss expected between approximately $1.7 million and $1.3 million. Adjusted FFO is anticipated to be between approximately $1.2 million and $1.6 million.

Sotherly Hotels Inc. will conduct its third quarter 2023 conference call for investors and other interested parties on November 9, 2023, to discuss these results in greater detail.

For more comprehensive information on Sotherly Hotels Inc.'s financial results, including reconciliations of non-GAAP financial measures, please visit www.sotherlyhotels.com.

Explore the complete 8-K earnings release (here) from Sotherly Hotels Inc for further details.

This article first appeared on GuruFocus.

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