Executive Summary / Key Takeaways

• Ashford Hospitality Trust has successfully paid off its strategic corporate financing, marking a pivotal moment and allowing the company to focus on operational improvement and strategic capital management after navigating the challenges of the COVID era.
• The company's new GRO AHT initiative targets $50 million in run rate EBITDA improvement through G&A reduction, revenue maximization, and operational efficiency, with over $30 million already expected from implemented initiatives.
• Recent comparable hotel performance shows positive trends, with Q1 2025 comparable RevPAR up 3.2% and comparable hotel EBITDA up 8.7%, driven by strategic asset management and cost controls despite overall revenue declines due to portfolio changes.
• Strategic portfolio enhancements, including successful brand conversions (La Concha, Le Pavillon) and a new hotel opening (Le Meridien Fort Worth), are yielding significant revenue and EBITDA growth, exceeding initial expectations.
• While facing ongoing debt maturities and segment-specific demand softness, the company is actively managing its capital structure through refinancings, extensions, and strategic dispositions, supported by capital raised from its non-traded preferred stock offerings.

A New Chapter: Setting the Scene for Ashford Hospitality Trust

Ashford Hospitality Trust, Inc. (NYSE: AHT), a real estate investment trust, operates with a clear focus: investing predominantly in upper upscale full-service hotels across the United States. The company's strategy centers on properties with revenue per available room (RevPAR) generally less than twice the U.S. national average, pursuing investments through direct real estate ownership, equity, and debt. This approach is executed through its operating partnership, Ashford Hospitality Limited Partnership, advised by Ashford Hospitality Advisors LLC, a subsidiary of Ashford Inc. (AINC), and managed by third-party or affiliated companies like Remington Hospitality.

The recent history of Ashford Trust has been significantly shaped by the challenges of the COVID era, which necessitated strategic corporate financing. Addressing this financing became a central focus, culminating in a deliberate plan announced in January 2024 involving asset sales, mortgage debt refinancings, and capital raised through non-traded preferred stock offerings. This strategy saw the divestiture of seven assets in 2024 and the derecognition of 14 hotels securing specific loan pools, reflecting the complex debt landscape the company navigated. A major turning point was reached in February 2025 with the successful refinancing of a 16-hotel pool, which, combined with prior capital raising and sales, allowed for the full repayment of the strategic financing. This achievement is framed by management as opening a new chapter, freeing the company from corporate debt and enabling a renewed focus on core operational and strategic objectives.

In response to industry dynamics and to capitalize on its improved financial flexibility, Ashford Trust has launched the GRO AHT initiative. This transformative program aims to drive $50 million in run rate EBITDA improvement by focusing on G&A reduction, revenue maximization, and operational efficiency. This initiative is critical for enhancing profitability and shareholder value in the current market environment.

Within the competitive landscape, Ashford Trust operates alongside other lodging REITs such as Apple Hospitality REIT (APLE), Braemar Hotels & Resorts (BHR), DiamondRock Hospitality Company (DRH), and Pebblebrook Hotel Trust (PEB). While AHT-PI's focus on upper upscale full-service hotels provides a niche, it competes directly with peers in various markets and segments. The competitive analysis indicates AHT-PI holds an estimated 3-5% aggregate market share in its target segment, with a growth trajectory that has recently lagged some peers. Competition extends beyond traditional REITs to alternative lodging options like Airbnb (ABNB), which can pressure occupancy and revenue, particularly in urban markets.

While the company does not highlight a single, proprietary technological moat akin to a manufacturing process, technology plays a role in its operational strategy. Services provided by affiliates include mobile key technology and cash management services. Furthermore, management has noted leveraging technology to improve labor efficiency at the property level. In the broader competitive context, trends like AI-driven booking are noted as potentially favoring competitors with urban focuses, suggesting that while AHT-PI utilizes technology for efficiency and guest experience, it may face competitive pressures from peers leveraging advanced digital platforms for market share gains.

Performance, Capital Structure, and Strategic Execution

The strategic decisions and operational focus are beginning to show in the company's performance. For the first quarter of 2025, Ashford Trust reported a net loss attributable to common stockholders of $27.8 million and negative AFFO per diluted share of $0.98. However, total AFFO improved by $8.2 million over the prior year quarter, and Adjusted EBITDAre was $61.7 million, a $2.2 million increase despite a $26.5 million decrease in total revenue compared to Q1 2024. This highlights the impact of cost-saving measures at both the property and corporate levels.

Comparable hotel performance, which excludes properties not owned for the full periods, provides a clearer view of underlying trends. Q1 2025 saw a 3.2% increase in comparable RevPAR, a 3.6% rise in comparable total revenue, and a notable 8.7% growth in comparable hotel EBITDA. This performance was bolstered by strategic asset management efforts to capture demand from events like the presidential inauguration and strong group booking pace, which remains positive with 2025 group rates pacing ahead of the prior year. However, some softness was observed in the government segment, particularly in Washington D.C., attributed to policy changes, and continued softness in the leisure segment.

Operational efficiency is a key component of the GRO AHT initiative, contributing to the 131 basis point expansion in hotel EBITDA margin in Q1 2025. Initiatives include maximizing ancillary revenue, executing targeted expense management, reducing energy costs, optimizing contract labor, and cutting travel expenses. Specific examples of success include Renaissance Nashville, which achieved a 683% hotel EBITDA flow-through in Q2 2024, and Hilton Fort Worth, which saw a 69% increase in hotel EBITDA in Q2 2024 through labor optimization. The company also leverages an in-house property tax team, achieving significant savings through appeals, with estimated tax payment savings of $1.7 million from over $100 million in reduced assessments by Q3 2024.

Portfolio enhancement through strategic conversions and new development is also yielding results. The conversions of La Concha in Key West to Marriott's Autograph Collection and Le Pavillon in New Orleans to Marriott's Tribute Portfolio, following significant renovation investments ($36 million and $19 million respectively), are exceeding expectations. In Q1 2025, La Concha saw 27% total revenue growth, while Le Pavillon experienced 78% total revenue growth and an 87% RevPAR increase, contributing nearly $1 million in hotel EBITDA improvement. The new Le Meridien Fort Worth Downtown, opened in August 2024, also showed strong initial performance, with its first full month's revenue more than double underwriting. These projects underscore the company's ability to unlock value through strategic repositioning.

On the capital structure front, the company ended Q1 2025 with $2.6 billion in loans, with a blended average interest rate of 8.1% (taking into account interest rate caps). Approximately 23% of debt is effectively fixed, and 77% is effectively floating. Liquidity stood at $85.8 million in cash and cash equivalents and $139.2 million in restricted cash. Net working capital was $156 million, an increase from the prior quarter. The successful payoff of the Oaktree strategic financing in February 2025, using proceeds from asset sales (like the $123 million sale of Courtyard Boston Downtown at a 6.9% trailing cap rate) and refinancings (the $580 million pool refinancing), was a major step in improving the balance sheet.

However, managing upcoming debt maturities remains a key focus. While the company successfully extended the Morgan Stanley (MS) Pool loan ($409.8 million) in April 2025 and the Hotel Indigo Atlanta loan in February 2025, the Hilton Scotts Valley loan ($22.1 million) defaulted in March 2025. The company is in discussions for an extension. Cash trap provisions, affecting 29 hotels at the end of Q1 2025, continue to limit access to operating cash, and meeting debt yield targets for loan extensions may require significant prepayments. The company is actively raising capital through its new non-traded preferred stock offering (Series L and M) to support deleveraging and future growth, having raised $212 million gross from the prior Series J and K offerings.

Outlook, Risks, and Competitive Dynamics

Looking ahead, 2025 is anticipated to be a transformative year for Ashford Trust, centered on the execution of the GRO AHT initiative and continued capital structure improvements. Management expects fully implemented GRO AHT initiatives to contribute over $30 million towards the $50 million EBITDA improvement goal, with further corporate and property-level opportunities being pursued. Capital expenditures for 2025 are projected to range between $95 million and $115 million, focused on renovations, PIPs, and strategic brand conversions to enhance asset quality and guest experience. The company expects to continue paying dividends on its preferred stock but does not anticipate reinstating a common dividend in 2025.

Strategic priorities include pushing out remaining near-term debt maturities and exploring strategic dispositions. The focus for sales is shifting towards non-core assets at the lower end of the portfolio, with a disciplined approach to ensure optimal value, potentially waiting for further improvements in transaction and financing markets.

In the competitive arena, Ashford Trust aims to leverage its diversified portfolio and asset management expertise to drive performance. While peers like Apple Hospitality REIT may benefit from scale and strong brand partnerships leading to higher occupancy and efficiency, AHT-PI's focus on the upper upscale segment and value-enhancing initiatives like conversions and operational cost controls are intended to drive RevPAR and margin growth. The company's ability to navigate segment-specific softness (government, leisure) by backfilling demand with other segments and capitalizing on strong group pace will be crucial. The competitive landscape is dynamic, with improving transaction markets and limited new supply providing tailwinds, but macroeconomic uncertainty and competitive pressures on efficiency remain.

Key risks to the outlook include the ability to successfully refinance or extend upcoming debt maturities, potential impacts from cash trap provisions and non-recourse carve-outs, and the execution risk associated with the GRO AHT initiative and planned capital projects. Macroeconomic conditions and shifts in travel demand segments could also impact performance. Legal proceedings, while currently assessed as unlikely to have a material adverse effect, represent a contingent risk.

Conclusion

Ashford Hospitality Trust is at a critical juncture, having successfully addressed its strategic corporate financing and now squarely focused on operational excellence and capital structure optimization. The GRO AHT initiative represents a clear path towards significant EBITDA improvement, building on recent successes in comparable hotel performance and strategic asset repositioning. While challenges remain, particularly concerning debt maturities and navigating a dynamic demand environment, the company's proactive approach to asset management, cost control, and capital raising provides a foundation for potential value creation. Investors should closely monitor the execution of the GRO AHT plan, the successful management of debt obligations, and the company's ability to capitalize on favorable industry trends and competitive positioning in the upper upscale hotel segment.