Financial Performance Overview

Ashford Hospitality Trust, a real estate investment trust (REIT) that owns hotel properties, has released its financial report for the year ended December 31, 2024. The report provides insights into the company’s financial performance, key trends, strengths, weaknesses, and outlook for the future.

Overall, Ashford Hospitality Trust experienced a mixed financial performance in 2024. The company’s net loss attributable to common stockholders decreased from $193.7 million in 2023 to $82.5 million in 2024, a significant improvement. However, the company still reported a net loss, indicating ongoing challenges.

Revenue and Profit Trends

Ashford Hospitality Trust’s total revenue decreased by $195.1 million, or 14.3%, from 2023 to 2024. This decline was primarily driven by a $169.4 million, or 16.0%, decrease in rooms revenue, a $20.2 million, or 8.7%, decrease in food and beverage revenue, and a $4.9 million, or 6.8%, decrease in other hotel revenue.

The decrease in revenue was largely attributable to the company’s hotel dispositions and the derecognition of assets related to the KEYS A and KEYS B loan pools, which went into receivership in March 2024. These factors were partially offset by higher revenue from the company’s comparable hotel properties and the addition of the Le Meridien Fort Worth hotel, which opened in August 2024.

Despite the revenue decline, Ashford Hospitality Trust’s operating expenses decreased by $110.1 million, or 11.9%, from 2023 to 2024. This reduction was driven by lower direct expenses, such as labor and other costs associated with the revenue streams, as well as lower indirect expenses and management fees.

The company’s depreciation and amortization expense also decreased by $35.0 million, or 18.7%, primarily due to lower depreciation from the hotel dispositions and the KEYS A and KEYS B properties that went into receivership.

However, Ashford Hospitality Trust recorded a $59.3 million impairment charge in 2024, which was not present in the previous year. This charge was related to reduced estimated cash flows and changes in the expected holding periods of the Hilton Costa Mesa and Embassy Suites Portland hotel properties.

Strengths and Weaknesses

One of the key strengths of Ashford Hospitality Trust is its ability to generate significant gains from the derecognition of assets. In 2024, the company recognized a $167.2 million gain related to the derecognition of the KEYS A and KEYS B hotel properties that went into receivership. This gain helped offset the company’s net loss and improve its overall financial performance.

Another strength is the company’s focus on cost control and operational efficiency. Ashford Hospitality Trust was able to reduce its hotel operating expenses, property taxes, insurance, and other expenses, as well as its depreciation and amortization costs, contributing to the improvement in its financial results.

However, the company’s reliance on debt financing and the ongoing challenges in the hotel industry remain weaknesses. Ashford Hospitality Trust has a significant amount of variable-rate debt, which exposes it to interest rate risk. The company’s net debt to gross assets ratio was 69.5% as of December 31, 2024, indicating a high level of leverage.

Additionally, the company’s revenue and profitability continue to be impacted by the ongoing effects of the COVID-19 pandemic on the hotel industry. The decline in occupancy, average daily rate (ADR), and revenue per available room (RevPAR) at the company’s comparable hotel properties reflects the industry-wide challenges.

Outlook and Future Strategies

Looking ahead, Ashford Hospitality Trust’s management has outlined several key priorities and financial strategies to navigate the current environment and enhance long-term shareholder value. These include:

1. Preserving capital and maintaining significant cash and cash equivalents liquidity.
2. Disposing of non-core hotel properties.
3. Acquiring hotel properties that are expected to be accretive to the portfolio.
4. Pursuing capital market activities and implementing strategies to enhance long-term stockholder value.
5. Accessing cost-effective capital, including through the issuance of non-traded preferred securities.
6. Opportunistically exchanging preferred stock into common stock.
7. Implementing selective capital improvements to increase profitability and maintain asset quality.
8. Implementing effective asset management strategies to minimize operating costs and increase revenues.
9. Financing or refinancing hotels on competitive terms and modifying or extending property-level indebtedness.
10. Utilizing hedges, derivatives, and other strategies to mitigate risks.
11. Pursuing opportunistic value-add additions to the hotel portfolio.
12. Making other investments or divestitures that the board of directors deems appropriate.

The company’s current investment strategy is to focus on owning predominantly full-service hotels in the upper upscale segment in domestic markets that have RevPAR generally less than twice the national average. Ashford Hospitality Trust believes this strategy will allow it to take advantage of changing industry cycles and new investment opportunities as they arise.

Conclusion

Ashford Hospitality Trust’s financial performance in 2024 was mixed, with a decrease in revenue but an improvement in net loss compared to the previous year. The company’s ability to generate significant gains from the derecognition of assets and its focus on cost control and operational efficiency were strengths, but its high debt levels and ongoing industry challenges remain weaknesses.

Looking ahead, Ashford Hospitality Trust has outlined a comprehensive set of strategies to navigate the current environment, preserve capital, and enhance long-term shareholder value. The company’s success in executing these strategies will be crucial in determining its future financial performance and positioning within the hotel industry.