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 year 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.

On the expense side, hotel 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 decrease in expenses was primarily due to the hotel dispositions and the derecognition of the KEYS A and KEYS B properties.

Despite the revenue decline, Ashford Hospitality Trust’s operating income increased significantly from $130.4 million in 2023 to $259.2 million in 2024. This improvement was largely attributable to a $167.2 million gain on the derecognition of assets related to the KEYS A and KEYS B loan pools, as well as a $82.9 million gain on the consolidation of VIE and disposition of assets and 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 and the disposition of hotel properties. The company’s $167.2 million gain on the derecognition of assets related to the KEYS A and KEYS B loan pools, as well as the $82.9 million gain on the consolidation of VIE and disposition of assets and hotel properties, demonstrate the company’s ability to optimize its portfolio and unlock value.

Another strength is the company’s focus on cost control and operational efficiency. The significant reduction in hotel operating expenses, driven by the company’s hotel dispositions and the derecognition of the KEYS A and KEYS B properties, highlights the company’s ability to manage its costs effectively.

However, the company’s ongoing net losses, despite the improvements in 2024, suggest that it continues to face challenges in its core hotel operations. The decline in revenue, particularly in rooms, food and beverage, and other hotel revenue, indicates that the company is struggling to maintain its market position and profitability.

Additionally, the company’s high debt levels, with a net debt to gross assets ratio of 69.5% as of December 31, 2024, could be a weakness. The company’s ability to refinance its upcoming maturities and access additional financing on favorable terms will be crucial to its long-term success.

Outlook and Future Strategies

Ashford Hospitality Trust has outlined several key priorities and financial strategies to address its challenges and position the company for future growth. 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 (revenue per available room) generally less than twice the national average. The company believes that as market conditions change, it will be able to shift its investment strategy to take advantage of new opportunities.

One of the key near-term priorities for Ashford Hospitality Trust is to work with the lender of the KEYS A and KEYS B loan pools on a consensual transfer of ownership of those hotels to the lender. The company anticipates that this transfer could occur in 2025.

Additionally, the company has undertaken several debt-related transactions, including refinancing its mortgage loan secured by the Marriott Crystal Gateway Hotel, entering into a forbearance agreement for its $409.8 million mortgage loan, and completing a $580 million refinancing secured by 16 hotels. These actions demonstrate the company’s efforts to manage its debt obligations and improve its financial flexibility.

The company has also announced a transformative strategic initiative called “GRO AHT,” which focuses on three core pillars: G&A Reduction, Revenue Maximization, and Operational Efficiency. This initiative aims to drive outsized EBITDA growth and substantially improve shareholder value.

Conclusion

Ashford Hospitality Trust’s financial performance in 2024 was mixed, with a decrease in revenue but an improvement in operating income due to significant gains from asset derecognition and dispositions. The company’s strengths include its ability to optimize its portfolio and manage costs effectively, while its weaknesses include ongoing net losses and high debt levels.

To address these challenges and position the company for future growth, Ashford Hospitality Trust has outlined a comprehensive set of strategies, including preserving capital, disposing of non-core assets, acquiring accretive properties, and implementing initiatives to enhance operational efficiency and revenue generation. The company’s ability to execute these strategies successfully will be crucial in determining its long-term success.