Apple Hospitality’s Select Service Focus Core to Success Across Multiple Cycles

As it celebrates 25 years in the hospitality industry and a decade since listing on the New York Stock Exchange, Apple Hospitality REIT, Inc. (NYSE: APLE) sees its differentiated strategy as central to its success across various economic cycles—and the foundation for enhanced shareholder value in years to come.

That strategy incorporates a focus on upscale, rooms-focused hotels, alignment with the best brands, hiring industry-leading operators, geographic diversification, a strong and flexible balance sheet, and accretive, opportunistic acquisitions and dispositions.

The Richmond, Virginia-based REIT oversees one of the largest and most diverse portfolios of upscale, rooms-focused hotels in the United States. The company’s portfolio includes 221 properties with approximately 29,900 rooms across 85 markets in 37 states and Washington, D.C.

“Listing on the NYSE was a significant milestone for us,” says Justin Knight, CEO of Apple Hospitality. “It put us in a position where our activities were more broadly recognized within the investment community.”

Boasting a strong concentration of industry-renowned brands—97 Marriott, 118 Hilton, five Hyatt and one independent hotel—Apple Hospitality leverages its extensive network to deliver quality accommodations with broad consumer appeal across the country.

“Having a resilient and stable platform has been key,” Knight says. “The chain scales we have selected to invest in, primarily upscale select service, and the brands we have chosen to partner with offer robust loyalty programs and strong name recognition among the diverse consumers we are targeting. In turn, these brands drive a significant number of customers to our hotels.”

Creating Strong Value Proposition

The company today was formed in 2007 under the name Apple REIT Nine, Inc., though through its predecessor companies, the team has enjoyed a history in the lodging industry of 25 years.

“Over that time period, we created eight hotel-focused REITs, four of which we sold to private equity investors in three transactions, and the remaining four we consolidated into what is now our publicly traded company,” Knight says.

From the outset, Apple Hospitality’s mission has remained focused on owning and acquiring hotels that appeal broadly to consumers, diversifying its portfolio across various U.S. markets and key demand drivers, and partnering with leading lodging brands and top hospitality management companies in the industry.

“We began the development of a strategy to invest in the hospitality space with a core objective to provide investors with strong cash yields on their investment, and to provide them with returns that were relatively stable in what is otherwise a fairly volatile industry,” Knight says. “To that end, we developed a strategy that continues to differentiate us, investing in predominantly upscale select service hotels.”

Most importantly, Apple Hospitality’s strategy centers on continuous reinvestment in its properties to maximize value, made possible through disciplined capital allocation and preserving financial flexibility by maintaining low levels of debt.

“Our hotels have roughly equal contributions coming from leisure and business travel,” Knight says. “Maintaining the assets over time and making sure we reinvest in them is a key contributor to maintaining the strong value proposition for our customers.”

Making Moves

Over its history, Apple Hospitality has owned more than 450 hotels and draws on knowledge from its long track record to assess new hotel investments.

“Having bought and sold hotels through multiple economic cycles, we’ve developed a keen instinct that adds to a measured quantitative analysis as we look at potential additions to the portfolio,” Knight says.

“As we look to add hotels, we’re looking to invest in assets and markets that are likely to grow at a pace that exceeds the national average. And we’re looking to fill gaps. We are mindful of how we are building out the portfolio and are making sure we have an appropriate balance in different market types and geographic areas.”

Much of its acquisition activity in recent years has been focused on larger, newly built assets. However, in June, the company acquired the 126-room Homewood Suites by Hilton Tampa-Brandon for $18.8 million.