Ashford moving on from debt with new revenue initiative

DALLAS — Dallas-based Ashford Hospitality Trust (AHT) is launching a new initiative to drive EBIDTA and increase share value. The REIT says it will achieve this through layoffs, cutting executive compensation packages, assessing its F&B and adding new revenue streams.

AHT said the initiative called “GRO AHT”  will focus on reducing general and administrative costs, maximizing revenue and improving operational efficiency.

“GRO AHT represents a bold and focused plan to enhance performance and create value for our shareholders,” President and CEO Stephen Zsigray said in a news release. “While we expect to benefit from limited supply growth and other industry tailwinds in the coming years, we are targeting an incremental $50 million of EBITDA improvement to run-rate corporate EBITDA with this initiative, an increase of more than 20%, which we believe will have a transformative impact on our equity value and leverage metrics.”

As we near repayment of our corporate strategic financing – the primary focus of our efforts in 2024, we are excited to partner with our advisor and property managers to deliver on this next initiative. We are turning the page on COVID and look forward to beginning the next chapter for Ashford Trust.

Stephen Zsigray

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AHT’s parent company, Dallas-based Ashford, Inc., is advising the REIT on the initiatives, which include cutting corporate overhead, including substantial cuts for management and board compensation, negotiating to reduce advisory fees and reimbursable expenses with Ashford Inc., and reducing professional services and G&A expenses.

The REIT plans to maximize revenue with revenue-focused hires made by Ashford and its largest property manager, Dallas-based Remington. These efforts will drive aggressive sales efforts aimed at growing room revenue market share in 2025 by more than 2% (as measured by RevPAR index) and increasing ancillary revenues through pricing audits for F&B, gift shops, parking and other revenue streams. The company also said it will roll out new ancillary revenue across its portfolio.

In terms of operational efficiency, AHT said its property managers will implement several efficiency-focused measures, including reducing payroll expense through recently completed layoffs and upcoming changes to the company’s PTO policies, re-negotiating contracts and bidding out master service agreements, and lowering labor costs by reducing overtime and using contract labor.

“As we near repayment of our corporate strategic financing – the primary focus of our efforts in 2024, we are excited to partner with our advisor and property managers to deliver on this next initiative,” Zsigray said. “We are turning the page on COVID and look forward to beginning the next chapter for Ashford Trust.”

Paying off looming debt

AHT said during its third-quarter earnings call that it has made significant progress on its plan to pay off its debt with year-to-date asset sales of approximately $311 million and the REIT has paid off more than $100 million of strategic financing since the start of 2024.

The REIT continues to sell off assets, most recently earlier this month when it announced the sale of the 315-key Courtyard Boston Downtown in Massachusetts for $123 million, which is expected to be completed in January. Zsigray said at the time that AHT continues to have several assets in the market at various stages of the sales process.

Refinances are also a big part of the REIT’s strategy with the most recent being for the 703-key Crystal Gateway Marriott in Arlington, Virginia, which had a final maturity date in November 2026. The non-recourse loan totals $121.5 million and has a three-year initial term with two one-year extension options. It also announced in November that it had negotiated a 90-day forbearance for a $409.8 million CMBS loan for 17 hotels that matured earlier that month. AHT said it was working with the Morgan Stanley pool loan holder and expects to reach a multi-year extension agreement within the forbearance window. The loan originated from Morgan Stanley in 2017 for $427 million and has been paid down to $409.8 million.