Hersha Hospitality Trust (HT) Q4 2022 Earnings Call Transcript

Hersha Hospitality Trust (NYSE:HT) Q4 2022 Earnings Conference Call February 16, 2023 9:00 AM ET

Company Participants

Andrew Tamaccio – Investor Relations

Neil H. Shah – President and Chief Executive Officer

Ashish Parikh – Chief Financial Officer

Conference Call Participants

Bryan Maher – B. Riley Securities

Chris Woronka – Deutsche Bank

Tyler Batory – Oppenheimer

Anthony Powell – Barclays

Operator

Good greeting and a lukewarm invited to nan Hersha Hospitality Trust Fourth Quarter 2022 Earnings Conference Call and Webcast. My sanction is Candis, and I will beryllium your usability for today's call. All lines person been placed connected shut up during nan position information of nan telephone pinch an opportunity for question-and-answer astatine nan end. [Operator Instructions]

I would now for illustration to manus nan convention complete to your big Andrew Tamaccio from Investor Relations. The level is yours. Please spell ahead.

Andrew Tamaccio

Thank you, Candis, and bully greeting to everyone joining america today. Welcome to nan Hersha Hospitality Trust 4th fourth 2022 convention call. Today's telephone will beryllium based connected nan 4th fourth 2022 net release, which was distributed yesterday afternoon. Before proceeding, I'd for illustration to punctual everyone that today's convention telephone whitethorn incorporate forward-looking statements. These forward-looking statements impact known and chartless risks and uncertainties and different factors that whitethorn origin nan company's existent results, capacity aliases financial positions to beryllium considerably different from immoderate early results, capacity aliases financial positions. These factors are elaborate wrong nan company's property merchandise arsenic good arsenic wrong nan company's filings pinch nan SEC.

With that, it is now my pleasance to move nan telephone complete to Mr. Neil H. Shah, Hersha Hospitality Trust's President and Chief Executive Officer. Neil, you whitethorn begin.

Neil H. Shah

Good greeting and convey you for being pinch america connected today's call. Joining maine this greeting are Ashish Parikh, our Chief Financial Officer; and our Executive Chairman, Jay Shah. I'll statesman pinch our results successful nan 4th and a speedy recap of our strategical accomplishments successful 2022 earlier rubbing connected our superior allocation outlook for nan twelvemonth and discussing our position of nan portfolio going forward. Ash will return a deeper look astatine our first 4th guidance, talk done nan equilibrium expanse and talk our separator outlook. When we past said successful precocious October, contempt economical uncertainty and marketplace volatility, our affirmative outlook was driven by capacity connected nan ground, signaling a pickup successful recreation wrong nan halfway municipality markets, arsenic good arsenic a continuation of request for differentiated high-end leisure offerings and these trends continued passim nan 4th quarter. Our comparable edifice portfolio generated 71.2% occupancy and an ADR of $311.86, resulting successful RevPAR of $222.10 for nan 4th fourth of 2022.

The precocious value of our portfolio, coupled pinch nan ongoing request environment, allowed our gross managers to proceed to thrust complaint successful nan 4th arsenic ADR outpaced our 2019 complaint by 21.5% and each of our markets expanded ADR much than 15% compared to 2019. Our position connected complaint integrity remains unchanged arsenic we are presently experiencing robust ADR maturation passim February and expect continued pricing powerfulness arsenic occupancy returns. Our attraction connected driving complaint resulted successful a 5% summation successful RevPAR for nan 4th fourth pinch RevPAR maturation compared to 2019 successful each period since September to adjacent retired nan year.

As I modulation to our marketplace performance, I will commencement pinch our municipality portfolio. Urban request accelerated into October arsenic RevPAR pulled moreover pinch 2019 accumulation for nan first clip since nan onset of nan pandemic. In total, our municipality portfolio generated complete $9 cardinal of EBITDA, 67% of full portfolio accumulation successful October, seasonally our strongest period successful Q4. And momentum persisted passim nan 4th arsenic weekday RevPAR successful December outpaced 2019 for our municipality portfolio, weekday RevPAR, driven by a 4% summation successful Manhattan. Overall, Manhattan was our largest EBITDA producing marketplace for nan quarter, generating $9.6 cardinal aliases 31% of full portfolio EBITDA.

Our 2 highest EBITDA producing assets for nan 4th were nan Hyatt Union Square and nan Hilton Garden Inn Midtown East, each generating $2.7 cardinal successful EBITDA outpacing 2019 by 12% and 15% respectively. Manhattan's EBITDA accumulation was complaint driven arsenic our portfolio posted 16.8% ADR maturation for nan quarter. Our Manhattan December RevPAR maturation of 6% was driven by complete 20% ADR maturation for nan period from 2019. Now, while we are encouraged to spot our edifice surpassed 83% occupancy successful December, location is still important room for betterment arsenic our Manhattan marketplace is still 1,100 ground points beneath 2019 levels. Boston had yet different beardown 4th pinch 11% RevPAR maturation compared to 2019. This was driven by astir 17% ADR growth. The Boston Envoy outpaced 2019 RevPAR by astir 5% successful nan 4th while generating $1.7 cardinal successful EBITDA, a 21% summation to 2019.

Rounding retired our municipality portfolio, our Ritz-Carlton Georgetown continues to outperform posting astir 40% ADR maturation compared to 2019, resulting successful 67% EBITDA description for nan quarter. Urban luxury trends are impressive. Meanwhile, successful Philadelphia, our Westin generated astir $2.4 cardinal of EBITDA successful nan quarter, contempt disruption from a rooms refresh task that is presently underway. Our Rittenhouse Hotel successful Philadelphia outpaced 2019 RevPAR by 3%, driven by astir 30% ADR growth. Once again, South Florida's continued beardown tally drove our edifice capacity successful nan 4th quarter. The Parrot Key Hotel and Villas and nan Cadillac Hotel and Beach Club were apical 5 EBITDA contributors for our portfolio, generating $2.4 cardinal and $2.3 cardinal of EBITDA respectively.

South Florida was our 2nd biggest EBITDA contributor generating $6.5 million, complete 20% of nan full portfolio. For 2022, these 2 assets indebtedness generated almost $22.7 cardinal of EBITDA and are connected way to execute nan return connected finance we projected erstwhile we undertook nan transformational renovations astatine some of these assets backmost successful 2018. We besides upgraded nan Ritz-Carlton Coconut Grove pre-pandemic and Q4 achieved 37% maturation driven by 33% ADR growth. The Ritz-Carlton exceeded group gross by 20% successful Q4 and has a very beardown outlook for 2023. On nan East Coast, nan Mystic Marriott and nan Annapolis Waterfront Hotel generated $2 and $1.8 cardinal successful EBITDA outpacing 2019 by 76% and 47% respectively, intelligibly demonstrating nan net imaginable of best-in-class assets successful location edifice markets pinch aggregate request generators.

On nan firm beforehand present astatine Hersha, aft a strategical and transformational twelvemonth for our company, we statesman nan caller twelvemonth pinch important rate connected hand, entree to an undrawn revolver and a little leverage floor plan than we person had successful galore years. While we stay changeless successful our markets and our portfolio, we are further comforted pinch our financial position. While nan indebtedness and transaction markets stay muted, we will stay elastic and entrepreneurial successful our approach. We perpetually show nan markets and actively underwrite opportunities to grow our footprint. Given our financial elasticity and comparatively debased sensitivity to nan liking complaint situation successful a clip of economical certainty, successful a clip of economical uncertainty, we are peculiarly good positioned to enactment swiftly erstwhile nan correct maturation opportunities coming themselves.

Our guidance squad has worked diligently to correct size our equilibrium expanse and to adjacent nan important NAV spread that persists for our portfolio. We still judge that we traded successful an outsized discount to our backstage marketplace worth and are highly delicate to immoderate superior allocation decisions that would effect our NAV aliases leverage arsenic a waste and acquisition disconnected to growth. This is my first telephone arsenic CEO of nan company. And earlier turning nan telephone complete to Ash for a much elaborate look astatine our financials, I wanted to return a infinitesimal to make immoderate comments astir our portfolio coming successful ray of this NAV gap. Our capacity during 2022 was acold up of what galore had expected, not only from a RevPAR standpoint, but astir decidedly from our afloat EBITDA betterment versus 2019 highest we achieved during 2022. Although nan anticipated timeline of betterment successful our markets was estimated to beryllium sometime successful nan second half of 2024 aliases moreover 2025, we surpassed 2019 EBITDA accumulation successful each 4th of 2022. And pinch EBITDA description successful some our municipality and edifice markets, we delivered nan largest outperformance successful nan 4th fourth pinch comparable portfolio EBITDA of $31.4 million, a 12.6% summation to 2019.

This outperformance is simply a consequence of our execution, but importantly it is simply a consequence of our streamlined and focused portfolio. Through our deliberate activity to dispose of our non-strategic assets, we've created a precocious value purpose-built portfolio levered toward precocious maturation municipality markets, and a strategical operation of edifice markets. Our properties are located connected premium existent property and successful markets wherever we identified a multiplicity of request generators, and this refined portfolio continues to beryllium positioned to outperform arsenic nan manufacture continues its agelong recovery. We judge it is important to understand that seasonality of our portfolio is besides fundamentally different than nan portfolio we held earlier nan pandemic. With nan changes we person made since 2020, our edifice portfolio benefits from aggregate request generators. First, it has benefited importantly from an summation successful home leisure travel, which led to grounds EBITDA production. Second, successful summation to request for high-end experiential leisure travel, which we judge will continue, our purpose-built edifice portfolio is besides positioned to use from further gross streams and non-leisure demand.

All but 2 of our resorts are located successful markets that cater to further recreation segments including normal centers, firm headquarters, and universities. The astir notable lawsuit of evolving marketplace drivers tin beryllium seen successful Miami, which has knowledgeable a important influx of caller business and residential relocations successful nan past 3 years, arsenic good arsenic nan renewal of its normal center. Similar marketplace trends use to edifice markets successful Annapolis, California and New England. The exceptions are our resorts successful Key West and Monterey, California, which are much solely focused connected leisure.

We do expect these resorts to stabilize successful 2023 aft unprecedented performances successful 2021 and 2022, but we do not expect important retracement. Parrot Key successful peculiar is connected gait to importantly outperform 2019 and is still benefiting from its broad renewal pursuing Hurricane Irma. The Sanctuary Beach Resort will beryllium undergoing an ROI superior task this twelvemonth that will group nan spot up for different level of maturation moving forward.

In our municipality markets, we made nan determination to waste our municipality prime work portfolio, which reduced our reliance connected business transient. Our focused municipality portfolio is located successful markets pinch agelong runways for maturation and will use from nan further return of occupancy and request that we expect aided by an summation of group business transient and world recreation arsenic markets astir nan globe proceed to unfastened up from pandemic correction restrictions and recreation to cardinal gateway markets successful nan U.S. accelerates.

We admit nan macroeconomic outlook remains uncertain. But contempt nan changeless drumbeat of recessionary forecasts and antagonistic sentiment data, we spot existent economical activity arsenic measured by occupation gains, business accumulation and unit income still indicating growth. This is surely existent for what we are seeing connected nan crushed successful our edifice capacity arsenic well.

In summary, our portfolio is exceptionally good positioned to grow rate travel procreation done operations arsenic it benefits from nan broader trends we spot crossed nan market, including nan maturation of experiential recreation and request for differentiated high-end leisure recreation and nan continued pent-up demand, particularly from business recreation and nan world segments, each successful an situation of very debased proviso growth. The setup successful fundamentals is very encouraging.

With that, fto maine move it complete to Ash to talk successful much item our financial outlook, separator performance, and our updated guidance for nan quarter.

Ashish Parikh

Great. Thanks, Neil, and bully morning, everyone. During nan 4th quarter, nan institution completed nan waste of nan Courtyard Sunnyvale, nan only remaining plus of nan Urban Select Service portfolio that closed successful August 2022. In summation to nan waste of nan Hotel Milo Santa Barbara, Pan Pacific Seattle, Gate Hotel JFK Airport and our associated task liking successful nan Courtyard South Boston.

In total, nan plus dispositions completed during 2022 generated astir $650 cardinal successful rate proceeds – successful gross proceeds. And nett proceeds from these income reduced our full indebtedness by astir $510 million, while generating unrestricted rate of astir $120 million.

In conjunction pinch our strategical dispositions, we completed a broad refinancing complete our in installments facility. As of year-end, nan in installments installation consisted of a $373 cardinal word indebtedness and an undrawn $100 cardinal revolving in installments statement astatine 2.5% complete nan applicable adjusted word SOFR. The installation matures successful August of 2024 and has 1 12-month hold action to August 2025.

As portion of our refinancing, we utilized an existing switch to hedge $300 cardinal of nan caller word indebtedness astatine a fixed complaint of astir 3.93%. As of year-end, 73% of our outstanding indebtedness is either fixed aliases hedged, and contempt nan caller surge successful liking rate. Our 4th fourth weighted mean liking complaint was astir 5% pinch a weighted mean life-to-maturity of astir 2.6 years. We closed nan twelvemonth pinch $230 cardinal successful rate connected manus successful summation to our $100 cardinal undrawn revolver.

Since nan onset of nan pandemic, guidance has been focused connected reducing our leverage and creating further financial elasticity pinch a stated extremity of 3 times to 4 times indebtedness to EBITDA. Our transaction and refinancing activity successful 2022 allowed america to execute this extremity arsenic we ended nan twelvemonth pinch conscionable complete 3 times indebtedness to EBITDA connected a TTM basis.

As a consequence of our reduced indebtedness profile, we were capable to prevention $2.5 cardinal successful liking disbursal successful nan 4th fourth compared to nan 3rd quarter, contempt nan rising complaint environment. In fact, we were capable to make $1.4 cardinal successful liking income connected our rate reserves successful nan 4th via short-term deposit.

Moving forward, we will beryllium capable to return advantage of expanding rates utilizing akin deposits, which will make further – important further rate travel arsenic we measure optimal uses of our rate connected hand, which could see further indebtedness aliases preferred salary downs depending connected really nan opportunities unfold successful nan upcoming year.

As Neil noted, we person begun a renewal astatine our Sanctuary Beach Resort successful Monterey this year. And we expect this will importantly amended rate travel for nan edifice successful years to come. With this renewal and a fewer lifecycle refreshes connected platform to nan portfolio, we task CapEx walk of astir $35 cardinal to $40 cardinal successful 2023, up only $10 cardinal arsenic compared to 2022 owed to our important finance successful nan portfolio earlier nan pandemic and our selective disposition of assets that required awesome superior investments, which did not meet our soul return requirements

As successful erstwhile years, we’ll effort to complete nan mostly of these renovations successful nan first 4th of nan year, which is seasonally nan slowest 4th of nan twelvemonth for our portfolio. And this will effect our first 4th results astatine a fewer of our hotels, including nan Western Philadelphia, wherever we are undertaking a afloat refresh of nan rooms aft completing nan nationalist areas a fewer years ago, a complete edifice renewal astatine nan Mystic Marriott and renovations astatine some Hilton Garden Inns successful Manhattan that are receiving nationalist abstraction upgrades.

With that, I’ll modulation to nan portfolio’s capacity and our outlook. Our consolidated portfolio generated EBITDA of $31.8 cardinal for nan quarter. This is only $1 cardinal near than our accumulation successful nan anterior quarter, contempt a reduced spot count pursuing nan closings I discussed earlier, which was offset by nan beardown pickup successful our municipality portfolio.

Our firm rate flow, however, accrued 20% quarter-over-quarter to $16 cardinal arsenic a consequence of reduced liking disbursal and a much businesslike equilibrium sheet. In nan 4th quarter, EBITDA separator for nan comparable portfolio was 33.1%, a 209 ground constituent summation to 2019 wrong our projected scope of growth. Both our municipality and edifice markets exceeded 2019 EBITDA and GOP margins successful nan 4th quarter.

After surpassing 2019 EBITDA separator by 383 ground points successful nan 4th quarter, nan edifice portfolio has achieved separator maturation successful each 4th of 2022. Meanwhile, our municipality hotels realized EBITDA separator maturation of 124 ground points compared to nan 4th fourth of 2019. This marks nan first 4th of EBITDA separator description for nan municipality hotels compared to 2019 and is up sequentially from a nonaccomplishment of 833 ground points successful nan first 4th of 2022. Quite a singular betterment during nan twelvemonth for our municipality hotels pinch much maturation connected nan horizon.

I would for illustration to reiterate that we presently forecast maintaining separator maturation successful 2023 compared to 2019 levels connected an yearly ground pinch 2019 representing nan past normalized twelvemonth of capacity earlier nan effect of nan pandemic. We will proceed to measurement separator capacity successful 2023 against that baseline.

Look astatine quality capital, though immoderate of nan staffing challenges nan manufacture knowledgeable complete nan past 2 years person abated, title for talent remains strong. On nan affirmative side, we are mostly filling roles much quickly and retaining labor longer than earlier successful nan pandemic, but labour costs stay elevated.

In summation to nan use of ADR driven RevPAR and gross growth, we person been capable to offset overmuch of that summation and nan broader effect of ostentation pinch operational efficiencies and staffing exemplary changes, which we were capable to execute successful portion done our franchise operating exemplary and adjacent alignment pinch our affiliated guidance company.

As we look astatine nan changes we made complete nan past fewer years, while galore of our pandemic correction staffing models and offerings were not intended to beryllium sustainable complete nan agelong word aliases to beryllium permanent, we are pleased that galore of nan semipermanent efficiencies we achieved arsenic a consequence of caller staffing protocols and uses of exertion are sustainable complete nan longer term.

Looking ahead, now that we person returned to a much normalized offering environment, we will beryllium capable to support nan precocious level impermanent acquisition that our customers are accustomed to astatine our hotels while continuing to make manufacture starring margins and rate flows.

As we move into nan adjacent limb of nan recovery, overmuch of our portfolio’s separator maturation will beryllium driven by nan acceleration successful our municipality markets. While we are very pleased pinch our 4th fourth performance, our municipality portfolio was still 1,400 ground points beneath 2019 occupancy. We expect important further return of occupancy and request successful nan municipality marketplace aided by an summation of group business transient and world travel. The further – nan resulting further gross will person a higher travel done to profitability arsenic nan mostly of our fixed labour and managerial unit person returned to our hotels, and we will only require adaptable labour to meet this further demand.

Looking up to 2023, though nan first 4th is seasonally nan lowest contributor for our portfolio, accounting for astir 14% to 16% of afloat twelvemonth EBITDA connected a humanities basis. Performance done mid-February has exceeded our soul forecast, contempt nan disruptive ongoing renewal activity that I highlighted. Our January results were very encouraging pinch our comparable portfolio RevPAR up of January 2019 by astir 4%. And period to date, our February RevPAR is up of February 2019 by 5.5%.

And we proceed to spot a patient pickup successful our booking gait for nan remainder of nan quarter. Our existent scheme is to supply comparable 2023 results versus our comparable 2019 results arsenic agelong arsenic it remains applicable and meaningful alternatively of comparing against our 2022 results.

As we look astatine our January results, our comparable portfolio RevPAR was up complete 65% for each of our municipality markets, versus January of 2022. And our comparable portfolio was up complete 35%. And astatine this time, we don’t find these results to beryllium meaningful to our stakeholders.

While analysts forecast for nan broader system successful 2023 alteration significantly, results connected nan crushed person been affirmative frankincense far. And our portfolio is positioned to thrust rate travel astatine higher margins than earlier nan pandemic. This dependable and improving rate travel coupled pinch our existent equilibrium expanse and debased liking load comparative to historical levels, allows america to enactment nimble and accommodate to nan system existent time.

As Neil noted, guidance remains committed to maximizing shareholder worth and closing nan spread betwixt our NAV and nationalist marketplace value. Whether that is done superior investments successful our portfolio, salary down of indebtedness aliases acquisitions, we will position each firm activities done a lens of shareholder value, while striving to support little leverage and flexibility.

So this concludes my information of nan call, and we're happy to reside immoderate questions that you whitethorn have. Operator?

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] So our first mobility comes from nan statement of Bryan Maher, B. Riley Securities. Your statement is now open. Please spell ahead.

Bryan Maher

Great. Good morning. I admit each those comments, very thorough. We've been proceeding that later this year, successful nan New York City marketplace successful particular, location is apt to beryllium immoderate owners pinch refinancing problems fixed nan existent authorities of nan superior markets, peculiarly arsenic it relates to indebtedness and liking rates. Are you guys reasoning that location mightiness beryllium immoderate opportunities for Hersha there? And what are your thoughts of that and possibly immoderate different markets wherever you're seeing that perchance happening comparative to your vulnerability already successful that market?

Neil H. Shah

Sure, Bryan. Bryan, this is Neil. You asked astir New York successful particular, New York, absolutely, we do deliberation that location will beryllium opportunities successful – not only successful New York, but successful each awesome marketplace successful nan country. We do deliberation that location will beryllium – location is presently a important benignant of deficiency of in installments retired location for hospitality. It's nan marketplace has decidedly thawed since say, October, November, December, and location are immoderate lenders retired location that are spot – aliases that are providing quotes connected nan edifice transactions, but very fewer and acold between. LTVs are a batch little than they were 1 twelvemonth ago. And nan costs of financing and conscionable liking disbursal levels are 300, 400 ground points higher than they were a twelvemonth ago. So location is intelligibly a situation for anyone, immoderate owner, who has a maturity coming up.

If they don't person a maturity and they person conscionable a switch aliases a headdress expiring, that's a awesome issue. I deliberation that we haven't seen a immense influx of imaginable distressed opportunities yet. But I would opportunity that by nan clip we were astatine ALS precocious January, location were now much and much deals appearing successful nan brokers books. There was still existent mobility connected whether thing could get done, whether nan sellers were realistic aliases whether nan buyers are leaning successful enough. But I do consciousness for illustration crossed nan adjacent 4th aliases two, until nan in installments markets really commencement moving and transacting and spreads travel in, I deliberation nan adjacent mates of quarters location is an opportunity for REITs aliases for different buyers to – that person condemnation and are consenting to beryllium little levered aliases each cash, each equity connected a transaction whitethorn beryllium capable to find immoderate bully opportunities.

So we're retired location looking. You mentioned New York versus different markets. We do person a very important position successful New York and we're – frankly, we're very grateful for it. In 2022, it was a very beardown performance, but successful 2023 and 2024, we deliberation location is simply a very beardown outlook for New York performance. Supply remains very low. Demand fundamentals are very strong. But it is astir 30% of our EBITDA, aliases 25% of our EBITDA connected an yearly basis. And so, we are astir apt much apt to look astatine different markets wherever we tin get further exposure. We deliberation that location is different municipality markets successful our existing portfolio, there's different edifice location destinations successful our existing portfolio, and there's besides immoderate caller markets that we return a look at.

So that's a agelong answer, Bryan, but we'll proceed to look astatine various markets and various opportunities. We haven't seen thing yet that's highly compelling, but we are seeing opportunities conscionable to reinvest successful our existing portfolio to thrust nan incremental maturation this year. And again, we're very – pinch our marketplace exposures, we deliberation our integrated maturation is going to beryllium very awesome this year. So we don't consciousness for illustration we person to make acquisitions and deals, but we do person nan elasticity and superior to do so.

Bryan Maher

Thanks. That's helpful. And possibly conscionable a speedy travel up for Ashish. In 2023, wherever successful your disbursal items are you reasoning you're going to person nan astir separator pressure? Is it still labour aliases mightiness it beryllium elsewhere? We're seeing crossed our sum companies, existent property taxes continuing to push higher. Any thoughts you tin springiness america connected that would beryllium great. And that's each for me.

Ashish Parikh

Sure, Bryan. Yes, I think, labour is our azygous top disbursal connected nan operating side, truthful we do forecast that to beryllium up successful nan mid azygous digit scope for nan year. So that – that surely puts unit connected margins. I deliberation different areas that we are – we would beryllium concerned pinch is utilities, which person gone up a batch successful nan past fewer years. Natural state prices are down beautiful importantly because of nan mild winter. We're going to look astatine hedging immoderate of those costs arsenic we ever do. Insurance expenses, spot security expenses are mostly successful statement isolated from successful hurricane prone markets and wildfire effective markets, wherever we're seeing – we're not seeing it yet. Our security is locked up done mid-year, but we are proceeding that those could beryllium beautiful important increases this year. So utilities, spot insurance, taxes are going up, but successful markets for illustration New York wherever you're backwards looking and it's a 5 twelvemonth average, our spot taxes are still forecasted to beryllium little than 2019 successful 2023, 2024, and moreover 2025 astatine this point. So those are immoderate of nan puts and takes.

Bryan Maher

Okay, convey you.

Operator

Thank you. Our adjacent mobility comes from nan statement of Chris Woronka of Deutsche Bank. Your statement is open. Please spell ahead.

Chris Woronka

Yes. Hi, bully greeting guys. I wanted to drill down a small spot connected nan – what you've talked astir is nan opportunity that benignant of get backmost to anterior occupancy levels. I mean, really do you deliberation complaint plays into that, right? I mean, I think, location seems to beryllium if we triangulate everything, arsenic we spot occupancy recover, we spot rates peculiarly astatine nan higher extremity going antagonistic year-on-year. And I cognize there's a mixed displacement constituent to that, but, I mean, is it really reasonable to expect that if we get backmost person to highest occupancy, that it's going to beryllium astatine these aforesaid rates? Or do we person to benignant of waste and acquisition occupancy for rates?

Neil H. Shah

Chris, obviously, that's nan cardinal dollar mobility for nan assemblage if you're trying to make for illustration benignant of a thematic telephone connected that answer. But if you look astatine – I deliberation if you break it down to beryllium to your portfolio and your marketplace positions and your assets, I deliberation that you tin get a small spot much assurance successful nan expertise to thrust complaint successful and a marketplace of expanding occupancy. Like if you return nan illustration of assets for illustration nan – our Ritz-Carlton successful Coconut Grove, that's an plus that has enjoyed leisure transient business really driving nan edifice for 2021 and a batch of 2022, but past it was – arsenic nan backmost half of nan twelvemonth group really started to prime up. And by nan 4th quarter, we were up very meaningfully connected group ADR. And now group occupancy is starting to prime up and we'll person benignant of our champion twelvemonth group occupancy successful nan first 4th this twelvemonth successful 2023.

And that's allowing america to push transient ADR moreover higher. So we're capable to task moreover higher ADR for this twelvemonth based connected conscionable that nan transient conception arsenic we capable successful nan group. And group ADR is 20%, 30% higher than pre-pandemic. We're seeing that aforesaid business successful Annapolis. As authorities recreation comes backmost and we get nan guidelines business backmost from legislators that are autographed Waterfront Hotel, we're capable to now thrust transient ADR 20%, 30% higher successful Q1 and Q2 of 2023 than we were past year. And so, there's – those opportunities successful nan portfolio wherever you are adding group astatine precocious rates because these aren't large container hotels, these are very differentiated and benignant of a – tie a very premium customer wherever we are capable to proceed to thrust ADR some connected nan group broadside and connected transient.

In cities, successful nan municipality markets for illustration New York City, wherever we utilized to tally benignant of 90% to 95% occupancy, January done December, we do for illustration this situation wherever we're moving successful nan 70s and 80s, but pushing overmuch higher rates. I deliberation that is simply a usability of – location is little proviso successful nan marketplace. Our portfolio is differentiated successful precocious value successful nan correct locations. And truthful we're capable to proceed to thrust ADR maturation coming and passim December. And arsenic we look done January, February, our visibility is not that crisp arsenic you get beyond nan 2nd half of this year. But successful nan first and 2nd quarter, our gait and ADR gait successful each of our municipality markets remains very precocious arsenic we are building occupancy. And truthful travel throughs aren't going to beryllium for illustration they were past twelvemonth because location will beryllium occupancy driving immoderate of this, and we will person immoderate restaurants and bars reopening. But arsenic you remember, our portfolio is chiefly leased F&B. And so, we are expecting important ADR maturation and separator maturation comparative to 2019 crossed this year.

Chris Woronka

Okay. Yes, thank, Neil. Super, ace helpful. And past conscionable to benignant of travel up connected the, I guess, connected Bryan's past question. If you do spot acquisition opportunities astatine immoderate constituent this year, whether it's New York aliases location else, understand nan comments astir perchance looking astatine different markets. Is that a business wherever you mightiness look to usage equity and arsenic a measurement to further benignant of deleverage nan equilibrium sheet, is that thing that's connected nan table?

Neil H. Shah

We would improbable to rumor equity until our costs of equity and our costs of superior is – reflects our NAV, but we coming person a mates 100 cardinal of rate connected nan equilibrium sheet. We person $100 cardinal of statement capacity. We person 2 aliases 3 hotels successful our portfolio that we've identified successful past calls arsenic non-strategic for us. They are assets that are having a very bully betterment successful 2023, 1 plus successful Miami and 2 successful Manhattan aliases 2 successful New York, 1 successful Queens and 1 successful Manhattan. And so, we are expecting to ramp those up crossed nan adjacent 4th aliases 2 and see them arsenic imaginable income successful nan backmost half of nan year. So we person – we deliberation we person plentifulness of liquidity to beryllium acquisitive without issuing equity, if that was nan question, Chris. And so, I think, it would beryllium what we've done, what we've demonstrated astir apt really crossed not only nan past 3 to 5 years, but really going back, I think, our past communal equity issuance was successful 2012. So it's been 11 years.

And we person alternatively – now you cognize we've transformed nan portfolio a mates of times since past and we've demonstrated consistently that recycling is simply a measurement to – you tin execute nan aforesaid extremity pinch recycling and our portfolio is very liquid and highly attractive, moreover our non-strategic assets will beryllium very charismatic connected nan waste market. So short-term it would beryllium rate connected hand, mid-term it would beryllium benignant of recycling arsenic we waste hotels. And we are still truthful acold distant from our NAV being reflected successful our banal price, that's very difficult for america to deliberation of communal equity.

Chris Woronka

Okay. Very helpful. Thanks guys.

Operator

Thank you. Our adjacent mobility comes from Josiah Choy of Baird. Your statement is each open. Please spell ahead.

Unidentified Analyst

Hi, acknowledgment for taking my question. I'm connected for Mike. I conjecture conscionable nan first 1 astatine a precocious level, now that nan equilibrium expanse is successful a amended place. How do you guys deliberation of nan champion ways to create shareholder worth going forward?

Neil H. Shah

Mike, there’s – pinch our equilibrium expanse successful bully shape, we deliberation nan – successful nan short term, it’s integrated maturation from this portfolio. And demonstrating to nan marketplace, nan quality, nan composition, nan segmentation of this portfolio and demonstrating nan net maturation floor plan of it, I deliberation is measurement number one. Step number 2 is being opportunistic. We deliberation of uses of our superior successful – we’ve looked astatine a batch of different opportunities that we talked earlier – pinch immoderate of nan earlier questions astir acquisitions. We’re besides ever looking passim our portfolio, what nan – for opportunities to reinvest successful nan existing portfolio to thrust meaningful returns.

And we’ve had now crossed nan past 5 to 7 years, we’ve transformed astir 9 hotels connected nan equilibrium expanse benignant of timing it successful seasonally slow quarters and getting it done and past creating a batch of worth from that. That’s nan maturation that we’re achieving successful Annapolis and Mystic and South Florida is simply a usability of those kinds of upgrades. And truthful we spot a batch of opportunities passim our portfolio. Ash mentioned, nan activity we’re doing astatine nan Western correct now aliases nan caller edifice astatine Mystic and St. Gregory, we person immoderate awesome projects starting astatine nan Sanctuary Beach Resort.

So there’s immoderate awesome opportunities to reinvest successful nan existing portfolio to thrust incremental EBITDA. We besides look astatine salary downs of debt. We are fortunate to person a chiefly fixed aliases capped superior structure. But we do person astir 20% to 30% of our financing is floating rate, and coming floating complaint financing is northbound of 7%. So that’s ever easy usage of superior for us. But nan world’s truthful uncertain today. We’re not successful a unreserved to do that conscionable yet. But we’re seeing what opportunities are retired location comparative to nan paydown of debt.

I cognize immoderate of our – immoderate investors person asked astir our preferred and I cognize immoderate of our peers person bought that back. Ours was issued benignant of successful nan 6.5% range. Maybe coming it’s trading astatine 7.5%, 8%. But comparative to wherever indebtedness financing is for lodging. Perpetual preferred pinch nary covenants astatine 6.5% feels very bully – feels for illustration very bully paper. [Ph] So we’re really not looking astatine that. If we were capable to bargain it astatine a discount successful a meaningful size that it made consciousness to spell done each nan costs of that effort, we would see it. But coming we thin much towards paying down floating complaint indebtedness aliases acquisitions, and what we’re doing correct now is reinvesting successful our portfolio pinch nan other flexibility.

Unidentified Analyst

Got you. Thank you for that. And past 1 conscionable speedy follow-up, tin you punctual america again really you guys deliberation of your JV liking going forward?

Neil H. Shah

Yes, absolutely, Joe. We’re down to 2 associated task investments astatine this time, some pinch 1 partner successful South Boston. We’re happy pinch those assets. But we would look to perchance liquidate those interests successful nan adjacent 12 months to 18 months arsenic good arsenic those municipality assets proceed to ramp up. I deliberation it’s a cleaner story. We are almost 25% of our EBITDA astatine 1 constituent historically was generated from our JV portfolio. But I deliberation it’s conscionable from a simplicity standpoint, we’ll look to exit those successful nan adjacent fewer years.

Unidentified Analyst

Got it. Thank you. That’s each for me.

Operator

Thank you. [Operator Instructions] Our adjacent mobility comes from Tyler Batory of Oppenheimer. Your statement is now open. Please spell ahead.

Tyler Batory

Good morning. Thank you. Just 1 multi-part mobility for me. I conscionable wanted to put a finer constituent connected expectations for separator successful 2023. And it sounds for illustration you’re expressing a diminution successful separator year-over-year. But compared pinch 2019, you put retired that 150 ground points to 250 ground points range. I mean, for 2023, are you reasoning you whitethorn beryllium connected nan higher extremity of that potentially? And past erstwhile you look astatine imaginable capacity successful your edifice versus your municipality markets connected nan separator broadside versus 2019, you’re reasoning there’s more, still much opportunity for maturation connected nan edifice broadside aliases possibly possibly municipality fixed immoderate of nan opportunities connected nan complaint broadside of things fixed we could expect a small spot much separator maturation location compared pinch edifice side.

Ashish Parikh

Sure, Tyler. Let maine commencement pinch a mates of stats there. So you mentioned nan resorts. I mean, erstwhile we look astatine our resorts for 2022, we ran astir 800 ground points higher from nan EBITDA separator standpoint than we did successful 2019. We do not expect nan edifice EBITDA separator going up from 2022 to 2023. I deliberation that immoderate of that was conscionable pinch unfastened positions, protocols, nutrient and beverage offerings. So no, connected nan edifice broadside is wherever we really deliberation that location will beryllium immoderate backtracking for 2023 versus 2022. But still we are importantly caput of 2019 margins.

We deliberation that nan maturation that’s apt to travel erstwhile you get past nan first 4th pinch each these renovations and disruptions is really going to beryllium much successful nan municipality markets. The municipality markets, erstwhile you deliberation astir erstwhile they really started performing, you person markets for illustration New York that started coming backmost Boston successful Q2, but almost each of nan municipality markets were disrupted, DC, Philadelphia done nan full year. So arsenic those commencement to ramp backmost up and really build immoderate momentum, we deliberation that nan separator maturation is successful nan municipality portfolio complete 2022 whereas successful not successful nan edifice portfolio.

Tyler Batory

Okay. And conscionable a speedy follow-up connected this taxable and specifically to nan labour broadside of things. Just punctual america wherever you are connected staffing levels versus pre COVID aliases possibly versus perfect levels. And I’m besides willing what stock of your labour and worker guidelines is statement labor?

Ashish Parikh

Generally, we are astatine backmost to wherever we were successful 2019 connected nan managerial side. Well, I wouldn’t want to opportunity backmost to 2019, but wherever we want to beryllium connected nan managerial side. We’re still beneath 2019 levels and we don’t expect immoderate of those positions to travel back. On nan spot level, we’re astir 85% to 90%. Looking astatine occupancies for 2023, we still are forecasting occupancies successful astir of these markets to beryllium beneath 2019 levels. So not anticipating that our staffing levels spell up excessively overmuch from wherever we are today. I hope, was location different portion to that question, Tyler?

Tyler Batory

I’m conscionable – I’m judge if I’m having a follow-up offline. I’m conscionable not judge nan statement labor, what percent of your worker guidelines is statement labour correct now and really that compares pinch pre COVID?

Ashish Parikh

Yes. I don’t person that offhand. I cognize that successful immoderate markets, we usage a batch much statement labour than others. We mostly effort not to. But conscionable pinch nan readiness of housekeeping, we are astir apt utilizing much statement labour coming than we did successful 2019.

Tyler Batory

Okay. Very helpful. Thank you for nan detail. That’s each for me.

Operator

Thank you. Our last mobility comes from Anthony Powell of Barclays. Your statement is now open. Please spell ahead.

Anthony Powell

Hi, bully morning. Thanks for taking nan question. I conjecture different separator question. Over nan agelong run, I guess, what RevPAR maturation do you deliberation you request to support margins not needfully this year, but going forward? I deliberation group utilized to opportunity it was 3% to 4%. Is that still nan case? And really is that compared to what it was pre COVID?

Ashish Parikh

I deliberation it’s a bully baseline, Anthony. I mean, you person to look astatine wherever it’s coming from, right? If each of that 3% to 4% is coming from occupancy, I deliberation it would beryllium reliable to get accordant margins. I deliberation moreover if you person a equilibrium of ADR successful occ aliases surely nan much you tin push nan ADRs. Yes, I deliberation astatine 3% to 4% you could decidedly person separator growth. But if it’s chiefly occupancy, I deliberation that makes it challenging.

Anthony Powell

Right. And that leads to my 2nd follow-up I guess. Is it nan main I conjecture opportunity for you and I conjecture a batch of peers occupancy growth? I deliberation astir – edifice rates are 10% aliases beneath benignant of 2019 levels. And if that’s nan lawsuit doesn’t make it harder to push margins if you’re really gaining backmost business travelers and whatnot who are coming successful midweek and really pushing up that midweek occupancy,

Ashish Parikh

Yes, it does make it harder. But if you tin support your rates and push rates because of that occupancy. You’re really bringing backmost conscionable adaptable labor. If you’re going from 70% to 80%, you’re not bringing backmost immoderate managerial staff. You’re really bringing backmost a fewer table agents and housekeeping. So nan travel connected that isn’t excessively bad. And that’s really what we’re looking astatine for this twelvemonth is perfectly occupancy is going to beryllium nan driver of a batch of nan RevPAR. But nan costs associated pinch those incremental room income shouldn’t make america spell backwards connected nan [indiscernible].

Anthony Powell

Got it. Thanks. Maybe 1 much speedy one. And sorry, if you talked astir this before. What’s your updated outlook connected leisure pricing? And I deliberation it’s remained beautiful robust but there’s – location needs to beryllium worried astir leisure pricing passim nan equilibrium of nan year. What are you seeing correct now? What is your anticipation for nan remainder of nan year?

Neil H. Shah

Leisure pricing, we person not seen a retracement of astatine this time. In nan 4th – we mentioned that successful nan 4th fourth and moreover into nan first quarter, we person a small spot of softness successful 2 resorts, our Key West, Parrot Key Hotel & Villas and nan Sanctuary Beach Resort. They person gone backwards connected RevPAR from 2022. ADR has held beautiful adjacent successful some cases. And arsenic we look guardant into nan mates quarters ahead, we are still projecting and pushing ADR maturation successful our gait successful those markets. And truthful it is difficult to support pushing ADR, but pinch definite assets and pinch nan correct business mix, we are capable to thrust it. And nan immense mostly of our portfolio successful leisure assets, I made nan illustration of Annapolis, it’s conscionable you are capable to push transient ADR if you person a important guidelines of business.

And if that guidelines of business is coming successful astatine ADR levels that are higher than two, 3 years ago, we are capable to proceed to push that benignant of level of ADR growth. And I deliberation it [indiscernible] it is circumstantial to various portfolios and various assets. But ADR maturation successful nan extremity is simply a usability of an plus being differentiated and being a target for this premium customer that is demonstrating successful each sectors of nan system willingness to salary much than they person successful nan past. And we are seeing that successful our luxury hotels. We’re seeing successful our manner hotels, some successful nan edifice abstraction arsenic good arsenic nan municipality space. We tin only stock what we’ve seen truthful far. Thanks, Anthony.

Anthony Powell

Understood. Thanks. Yes.

Operator

Thank you. As location are nary further questions waiting astatine this time, I will walk nan convention backmost complete to Neil Shah for closing remarks.

Neil H. Shah

Great. Well, convey you each for your clip today. I cognize there’s a mates of different calls coming that whitethorn return group offline. But consciousness free to springiness america a ringing passim nan time coming and successful nan coming weeks. We look guardant to speaking to everyone aft nan extremity of nan first 4th if not astatine immoderate investor meetings successful between. But convey you for your time.

Operator

Ladies and gentlemen, this concludes today’s Hersha Hospitality Trust convention call. Have a awesome time ahead. You whitethorn now disconnect your lines.