Hello, and welcome to the Ashford Hospitality Trust Third Quarter 2023 Results Conference Call. All lines have been muted to prevent background noise. After the speakers' remarks, there will be a question-and-answer session. I will now turn the conference over to Jordan Jennings, Director of Investor Relations.

Good day, everyone, and welcome to today’s conference call to review results for Ashford Hospitality Trust for the third quarter of 2023 and to update you on recent developments. On the call today will be Rob Hays, President and Chief Executive Officer; Deric Eubanks, Chief Financial Officer; and Chris Nixon, Executive Vice President and Head of Asset Management. The results as well as notice of the accessibility of this conference call on a listen-only basis over the Internet were distributed yesterday afternoon in a press release. At this time, let me remind you that certain statements and assumptions in this conference call contain or are based upon forward-looking information and are being made pursuant to the safe harbor provisions of the federal securities regulations. Such forward-looking statements are subject to numerous assumptions, uncertainties, and known or unknown risks, which could cause actual results to differ materially from those anticipated. These factors are more fully discussed in the company’s filings with the Securities and Exchange Commission. The forward-looking statements included in this conference call are only made as of the date of this call, and the company is not obligated to publicly update or revise them. Statements made during this call do not constitute an offer to sell or flotation of an offer to buy any securities. Securities will only be made at our registration statement and prospectus, which could be found at www.sec.gov. In addition, certain terms used in the call are non-GAAP financial measures. Reconciliations of which are provided in the company’s earnings release and accompanying tables or schedules, which have been filed on Form 8-K with the SEC on November 7, 2023, and may also be accessed through the company’s website at www.ahtreit.com. Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release. Also, unless otherwise stated, all reported results discussed in this call compare the third quarter ended September 30, 2023, with the third quarter ended September 30, 2022. I will now turn the call over to Rob Hays. Please go ahead, sir.

Good morning, and welcome to our call. After my introductory comments, Deric will review our third quarter financial results, and then Chris will provide an operational update on our portfolio. The main themes for our call today are: first, we are very pleased with the strong operating performance and RevPAR growth we achieved in the third quarter. We are clearly seeing the benefits of a broadly diversified high-quality portfolio that is balanced across leisure, corporate, and group demand sources; second, our liquidity and cash position continued to be strong. We ended the quarter with approximately $271 million of net working capital, and our non-traded preferred stock offering continues to ramp up nicely; third, we are now focused on paying off our corporate financing and have listed several assets for sale. We believe proceeds from these potential asset sales, along with the capital raise from our non-traded preferred offering, may be sufficient to completely pay off our corporate financing during 2024. Now for some additional details on these three themes. RevPAR for all hotels in our portfolio increased by 4% in the third quarter compared to the prior year quarter. This RevPAR growth was led by average daily rates, which increased by 2.2% over the prior year quarter, and we also saw strong growth in occupancy, which increased by 1.7% over the prior year quarter. In addition to our solid hotel performance, the vast majority of our hotels are now out of their respective cash traps. This is an important step for our company as it allows us the flexibility to use cash to optimize our capital structure, pay down debt, or invest in growth opportunities. Looking ahead, we believe our geographically diverse portfolio consisting of high-quality assets with best-in-class brands and management companies is well positioned. We also believe that our relationship with our affiliated property manager, Remington, really sets us apart as they have been able to consistently manage costs and optimize revenues aggressively. Regarding asset management, I will provide some highlights that Chris will cover in more detail shortly. We continue to engage in beneficial strategies that we believe will create long-term value. During the quarter, we announced that our Crowne Plaza La Concha Hotel in Key West, Florida, is on track to convert to a Marriott Autograph Collection property in 2024. It will be rebranded as La Concha Key West, an autograph collection hotel, as we anticipate the conversion will create a distinctive theme and style for the hotel. With its prime location right on Duval Street in the heart of Key West, the upbranding of this historic landmark hotel should elevate the property into a desirable niche in a very attractive, high barrier to entry, high RevPAR market. We also recently announced a new franchise agreement with Marriott International to convert our Le Pavillon Hotel in New Orleans, Louisiana, to a Tribute Portfolio property. We have had great success with the Tribute Portfolio with our La Posada Resort and Spa in Santa Fe, New Mexico, and are looking to capture similar upside at Le Pavillon. This up-branding includes transforming the lobby bar and extensive exterior work as well as upgrading the restaurant, guest rooms, guest bathrooms, and corridors. The hotel is in a prime location and is very close to major demand generators in downtown New Orleans. And post-conversion, we believe the new Tribute Portfolio property should realize a 10% to 20% RevPAR premium compared to pre-conversion. The planned conversions of Le Pavillon and La Concha are both excellent examples of how we go about unlocking embedded value in our portfolio. Turning to capital markets, during the quarter, we made significant progress on our loan extensions and made the strategic decision not to make required paydowns on our KEYS A, B, and F loan pools in order to meet extension debt yield tests. This was a prudent economic decision that reflected a comprehensive capital management process by the company, which explored and assessed multiple options for these assets, including refinancing, extensions, and potential asset sales. We have been committed to deleveraging the company over time, and this is a significant step toward a long-term goal of creating a more sustainable capital structure. Additionally, capital recycling remains an important component of our strategy, and we continue to pursue opportunities to sell assets. During the quarter, we sold a small asset in Orlando for nearly $15 million and have six other assets that are currently being marketed for sale. We have also identified several additional assets that we may bring to market for sale if market conditions warrant. We expect any net proceeds from these sales will primarily be used for debt paydowns. We also continue to be excited about our non-traded preferred stock offering and believe this offering will not only provide an attractive source of capital but will allow us to accretively grow our portfolio over time, subject to future market conditions. We believe access to this growth capital is a significant competitive advantage, particularly given the fact that lodging REITs are currently trading at material discounts to net asset values. Our preference would be to use that capital for future growth, but we may use some of the capital to pay down debt or other corporate uses as needed. We continue to build our selling syndicate and currently have 40 signed dealer agreements representing over 5,402 reps selling the security. We are still early in the capital raising process and, to date, have raised approximately $77 million of gross proceeds, including $28 million during the quarter. We believe that we have the right plan in place to move forward and maximize value at Ashford Trust. This plan includes continuing to grow liquidity across the company, raising attractively priced capital as possible, optimizing the operating performance of our assets, improving the balance sheet over time through asset sales and deleveraging, and looking for opportunities to invest and grow our portfolio. We ended the third quarter with a substantial amount of cash on our balance sheet, and with the launch of our non-traded preferred stock offering, we are excited about the opportunities we see in front of us. I will now turn the call over to Deric to review our third quarter financial performance.

Thanks, Rob. For the third quarter, we reported a net loss attributable to common stockholders of $68.6 million or $1.99 per diluted share. For the quarter, we reported AFFO per diluted share of $0.08. Adjusted EBITDAre for the quarter was $82.5 million. At the end of the third quarter, we had $3.6 billion of loans with a blended average interest rate of 7.9%, taking into account in-the-money interest rate caps. Considering the current level of SOFR and the corresponding interest rate caps, 94% of our debt is now effectively fixed as almost all of our interest rate caps are now in the money. During the quarter, we extended our KEYS pool D loan secured by five hotels with a paydown of approximately $26 million, and our KEYS pool E loan secured by five hotels with a paydown of approximately $41 million. As Rob discussed, we also elected not to make the required paydowns to extend our KEYS Pool A, B, and F loans, which in total are secured by 19 hotels. The required paydowns needed to extend these loans totaled approximately $255 million. By not extending these loan pools, we not only save the $255 million in required paydowns but also approximately $80 million in capital expenditures at these hotels through 2025. Many of the properties and the non-extended KEYS pools are in markets that have experienced significant headwinds throughout their post-pandemic recoveries, and a number of these markets are not forecasted to reach pre-pandemic top line levels until 2025 or 2026. Further, the non-extended KEYS hotels only generated approximately 10% of our hotel EBITDA, and our portfolio RevPAR will increase approximately 3% by removing these lower RevPAR hotels from the portfolio. We continue to work with the servicer on a consensual transfer of these assets to the lender and expect that to be completed sometime in the fourth quarter. With the KEYS loan pool extensions behind us, our next significant extension test was our Morgan Stanley loan pool secured by 17 hotels, which we recently extended for one year with no pay down. We ended the quarter with cash and cash equivalents of $185 million and restricted cash of $158 million. The vast majority of that restricted cash is comprised of lender and manager held reserve accounts and $2 million related to trapped cash held by lenders. At the end of the quarter, we also had $24 million due from third-party hotel managers. This primarily represents cash held by one of our property managers, which is also available to fund hotel operating costs. We ended the quarter with net working capital of approximately $271 million. As of September 30, 2023, our consolidated portfolio consisted of 100 hotels with 22,316 rooms. Our share count currently stands at approximately 36.6 million fully diluted shares outstanding, which is comprised of 34.5 million shares of common stock and 2.1 million OP units. In the third quarter, our weighted average fully diluted share count used to calculate AFFO per share included approximately 1.7 million common shares associated with the exit fee on the strategic financing that we completed in January 2021. While we are currently paying our preferred dividends quarterly or monthly, we do not anticipate reinstating a common dividend for some time. Our liquidity position is solid, and we are pleased with the progress that we have made on our loan extensions and the pace of our non-traded preferred capital raising. While it continues to be a challenging market for hotel debt financing with the increase in both credit spreads and base rates, our portfolio is performing well. From a capital structure and balance sheet perspective, we will continue to focus on raising capital through our non-traded preferred stock, potential asset sales, and paying down our corporate financing. This concludes our financial review, and I would now like to turn it over to Chris to discuss our asset management activities for the quarter.

Thank you, Deric. For the quarter, comparable hotel RevPAR for our portfolio increased approximately 4% over the prior year quarter. This RevPAR growth compared favorably to the national industry averages for both the upscale and upper upscale chain scales. Despite challenges due to rising wages and costs, we were able to grow comparable hotel EBITDA for the quarter. I would like to spend some time highlighting some of the initiatives from our team, including optimizing performance through increased group demand, propelling growth at urban properties, and maximizing ancillary production throughout the portfolio. We continue to experience a resurgence in the group segment. Portfolio group revenue pace for the full year 2023 is ahead of the prior year by 19%. Group revenue is also pacing ahead for 2024, exceeding the prior year revenue on the books by 9%. During the quarter, we saw a 5% lift in group ADR compared to the prior year quarter, and we are pacing ahead 8% in ADR for the full year compared to last year. In addition, our two largest hotels, Marriott Crystal Gateway and Renaissance Nashville finished the quarter with a combined $11.1 million in group revenue, a 9% increase over the prior year quarter. In fact, through the third quarter, Renaissance Nashville generated more group room revenue year-to-date than any other year in the hotel’s history. An added benefit is the additional ancillary banquet revenue that comes with the group business. Banquet revenue is up 25% in Nashville through the first three quarters of this year compared to last year. Our urban assets are performing well as travel demand returns. This is evidenced by a 43% increase in peak nights during the quarter over the prior year quarter. We define peak nights as any individual night with occupancy greater than 95%. For the quarter, transient ADR at our urban hotels increased by 5%. This increased demand in peak night performance allowed us to drive rate for transient business in major hubs such as Atlanta and Nashville, where transient ADR for these urban hotels grew by 33% and 16%, respectively, during the quarter relative to the prior year quarter. Our revenue optimization team has also partnered with the brands on corporate pricing strategy to ensure that we are aligned on our target, 25 by 25. This strategy is an effort to drive corporate rates to a 25% increase over 2019 by the year 2025. As a portfolio, our other revenue department, which includes minor departments as well as ancillary revenue streams, grew by 9% during the quarter over the prior year quarter. Parking has been a major contributor to the success. We negotiated nearly every outsourced parking valet contract within the portfolio, which resulted in a 680 basis point increase in our revenue share. We also rolled out new parking charges at 12 properties. Additionally, we completed price benchmarking and capture audits across all other ancillary revenue streams to ensure we were top of market. One of our best performing properties this quarter was the Hilton Boston Back Bay, a 390-key full-service asset in downtown Boston. For the quarter, comparable hotel RevPAR increased by 20% over the prior year quarter. For comparison, the entire Boston market's comparable hotel RevPAR growth for the quarter was 8% relative to the prior year quarter. Additionally, comparable hotel EBITDA during the quarter increased by 22% over the prior year quarter. We partnered with Remington to create new housekeeping processes, which identify schedule risks and other inefficiencies. These changes resulted in labor hours per occupied room for the quarter improving by 9% compared to the prior year quarter. This initiative helped propel the comparable hotel EBITDA margin to 43.6%, 133 basis points higher than the prior year quarter. Moving on to capital expenditures. We have noted in previous calls how we have taken a strategic approach to renovating and repositioning our hotels. So far in 2023, we have completed the renovation of the lobby and bar at the Ritz-Carlton Atlanta, the meeting space at Embassy Suites Crystal City, and relocated the concierge lounge at Renaissance Nashville. We have started the transformative conversion of the Crowne Plaza Key West to an Autograph Collection hotel, which will enable the property to grow in a high barrier to entry market. In addition, we are converting the Le Pavillon in New Orleans to a Tribute Portfolio hotel, which will allow the hotel to benefit from Marriott’s booking system. Lastly, we are currently renovating the old concierge lounge located on a premium guest room floor in Renaissance Nashville into a spacious suite overlooking downtown Nashville. For 2023, we anticipate spending between $110 million and $120 million on capital expenditures. Looking forward, we are considering several new initiatives across our portfolio, including additional brand conversions at various hotels, accretive key additions, and executing high-margin ROI projects. I would like to finish by emphasizing how optimistic we are about the future of this portfolio. As mentioned earlier, group business continued to show growth. We are seeing more and more markets rebound, and our team’s concentrated efforts have helped maximize additional revenue streams. The portfolio is well diversified geographically, allowing us to continue to capitalize on the industry’s continued recovery. This concludes our prepared remarks. We will now open up the call for Q&A.

Your first question comes from the line of Bryan Maher with B. Riley Securities. Your line is open.

Just a couple of questions this morning. Maybe continuing upon the discussion of the upgrades to, let’s say, Key West and New Orleans. Rob, how are you thinking about allocating not insignificant amounts of capital to those projects still in the face of debt maturities that you have over the next couple of years? Can you walk us through how you are thinking about that?

Yes. Bryan, I think there are a handful of things that we are all trying to do simultaneously, which is the combination of trying to deleverage, which we have obviously taken some pretty big steps over the past few quarters to do that, yet at the same time, trying to keep an eye towards what we want this portfolio to look like in three years or five years’ time. We do have assets that we think are great long-term holds that we think are kind of underserved in the market that have opportunities to push RevPAR in ways that need some investment. And so, I mean, it is a balancing act, and there is a reason why we are only doing a handful of these and not ten of them because we do see other opportunities like this in some of our other properties. But at least in Key West, that is a property that we think has a significant amount of potential upside just given that market, and on Le Pavillon, it is a great asset that needs renovation anyway. And so, the ability to put a little bit of incremental capital in it to reposition it is one that we thought made sense. But it is a balancing act. And that is why it is a couple here and a couple there. And at the same time, we will be selling assets to raise capital. So I would just say it is a balancing act.

Okay. And shifting gears and maybe for Deric. When we think about pulling out the 19 hotels from the KEYS pools that you did not extend, I’m assuming that that hasn’t happened already as we sit here in early November. I think you said in your prepared comments sometime in 4Q, do you suspect it is much later in 4Q so that we shouldn’t be modeling for those assets in, say, 1Q, but still keep them in there for 4Q? And what is the rough impact on RevPAR? I think you commented that the kept hotels have a higher RevPAR. But can you quantify maybe in dollars terms, round to the nearest five, what we should uplift our modeling RevPAR assumption to?

Yes, Bryan, in terms of timing, all those hotels are still in our portfolio. Everything these days just seems to be taking longer transaction-wise. I think from a modeling perspective, look, I would say halfway in the fourth quarter probably is a good estimate, somewhere between 50% and 100% during the quarter because I expect it will happen sometime between now and the end of the year. So hopefully, by the end of the year, all 19 of those hotels will have been transferred over to the lender. Some of that might happen in November. Some of that might happen in December. In terms of impact on the remaining portfolio, we anticipate that our net debt to gross assets will decrease about 500 basis points. So we will have a pretty decent decrease in our overall leverage of the portfolio. And from a RevPAR standpoint, we anticipate the RevPAR of the remaining portfolio to go up by about 3%. So I think in terms of round numbers, that is kind of where we land in the portfolio post transfer of these 19 hotels.

While you are still owning these hotels, do you get to keep any profits from these hotels? Or do any economic interest up or down go to the lender at this point?

Yes. We are not doing anything other than our management companies continuing to operate the properties. So there is really very little oversight from our perspective at these properties at the moment. And for all intents and purposes, they’re basically lender-owned.

Okay. And then just last for me. I think Chris talked about this on the asset management side. The layering on of certain ancillary costs like charges like parking, how are you thinking about that, Chris or Rob as it relates to kind of slightly waning leisure demand and those costs tend to put off people who don’t want to pay $20 or $30 a night to park? Are you kind of bifurcating weekday charges versus weekend charges to maybe not put off that leisure traveler who may opt to go somewhere else instead of paying those fees?

Yes, that is a great question, Bryan. So I think regarding kind of those ancillary charges, it is critical that there is appropriate value for the customer in terms of what you are charging. Our two major streams are really resort charges and then parking make up the lion’s share of that ancillary revenue. For our resort charges, we have gone back and looked at the value propositions of all of those inclusions to make sure that it truly is additive to the customer and to the experience. When we look at kind of what margin we are running on those revenue streams, it is lower than we historically have because we are adding more value to the customer. How we display those charges is also becoming more important. So we are working with the brands, and we are very mindful of that. In terms of parking, many of our providers do offer dynamic rates. They flex based on periods in the year, based on the day of the week, based on events. So where we have rolled out parking charges, we have also often rolled out parking gates, added security, and added presence. There are cameras. So it is not just an additional parking charge, but there is added security for the guests as well.

Your next question comes from the line of Tyler Batory with Oppenheimer. Your line is open.

This is Jonathan on for Tyler. First one from me on the operating cost side, any color you can provide on what you are seeing on the labor costs that are out there? What’s the hiring situation look like right now? And any other areas of cost inflation that are worth calling out besides potentially labor?

Yes. Jonathan, this is Chris. I will take that. So in Q3, this was really the first quarter where we saw meaningful signs of improvements within the labor market. I think that was something that we were optimistic we would see earlier this year. We really saw the first real signs of improvements this last quarter. Our contract labor reduced in the quarter versus where we have historically been running and kind of where we were last year. That is kind of the first side. So we are less reliant on more expensive contract labor. For the quarter, we brought on about 400 additional associates across the portfolio, and we shifted some of that contract labor in-house. From a wage standpoint, we haven’t seen much movement there. Our hourly wages are still up about 5% to 6% year-over-year. Again, we were hoping to see that come down kind of earlier this year. It has been fairly steady. We think sequentially kind of the first step is a reduction in contract labor as we are still being very aggressive to hire internal folks to service those roles. Kind of thereafter, we will see wages start to come down, and that is kind of what we have expected. Now we are finally starting to see signs of that.

Okay. Very helpful. And then switching gears to asset sales. Any updates there in terms of that process and its timing? And I believe there is a possibility of bringing more assets to the market. Any kind of early indication or updated thoughts on how you are thinking about using that avenue?

Sure. I think we have got, I would say, a smaller asset that we are hopefully will be done here shortly. Some of the bigger assets that we are contemplating are in process; those probably won’t be to the extent that we move forward with those, it is probably not until a first quarter close. Those just have been taking a little bit longer. Depending upon we have got some call for offer dates coming up in the next few weeks. I think depending upon how those look and how the market looks, we will probably impact the decision or not, whether to add additional assets to the portfolio, both on one sense is are we finding certain niches of available capital types of assets that people are interested in and on the other side, what are the cash proceeds we are going to be getting from those asset sales. How does that look as we are trying to pay off this strategic financing? The purpose of all this is to both pay off the debt financing and at the same time, try to improve our portfolio and deleverage over time. There are a few moving pieces there. We will probably know more here in the next month to six weeks.

Your next question comes from Michael Bellisario with Baird. Your line is open.

Rob, just a follow-up to that last question. You mentioned being able to pay off Oaktree at some point next year. I guess, for that to happen, is there a dollar amount or number of hotels that you think need to get sold for that to happen? And what needs to happen first in order for that to be paid off at some point in 2024?

Well, we have got $180-something million left on it. Again, we have got some asset sales that are coming up here. But I think at the end of the day, it is a combination of generating enough proceeds to be able to both pay that on and have enough kind of working capital that we feel comfortable. We have got kind of the working net working capital and cash numbers that we reported in the quarter. Again, we are probably not quite to a point where we had paid that off today. We feel comfortable paying it off today, but the combination of those asset sales, and it also depends on the non-traded preferred as it comes in because, again, it is continuing to do well. So, again, it is just a lot of moving pieces. So I don’t have a specific number because it is kind of dynamic. But I do think we need the proceeds to probably be $100 million or more in order to feel like we have got everything that we needed to get.

Got it. Understood. And then just on CapEx, any initial thoughts on 2024 spending, maybe at least directionally versus what you plan to spend in 2023? And then could you provide any more details just on the cost of what you are going to spend in Key West and New Orleans?

Sure. On the first question, we are still in the midst of negotiating with some of the brands on exactly what the CapEx will look like. I don’t think it will be higher than this year. I mean, it will likely be comparable or maybe even a little bit less. So that is kind of where—when we have a better number, we will put that out. In terms of La Concha, I think we put in the press release about $35 million all-in project, which has already started, and the goal is to have it done in the third quarter of next year. Le Pavillon is somewhere between $15 million and $20 million, and it is starting right now and also will be kind of a similar time frame in terms of its opening.

This concludes the question-and-answer session. I will turn the call back to management for closing remarks.

Thank you, everybody, for joining us for our third quarter call. We look forward to speaking with you next quarter.

This concludes today’s conference call. Thank you for joining. You may now disconnect your lines.