Elisabeth Eisleben - Investor Relations Dan Hansen - President and CEO.

Ryan Meliker - MLV & Co. David Loeb - Baird Austin Wurschmidt - KeyBanc Capital Markets Wes Golladay - RBC Capital Markets Bill Crow - Raymond James Associates Jordan Sadler - KeyBanc Capital Markets.

Good day, ladies and gentlemen. And welcome to the Q1 2014 Summit Hotel Properties Inc. Earnings Conference Call. My name is Jemma, and I’m your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference.

(Operator Instructions) As a reminder, this call is being recorded for replay purpose. I would like to turn the call over to Ms. Elisabeth Eisleben. Please proceed, ma’am..

Thank you, Jemma, and good afternoon. I’m joined today by Summit Hotel Properties’ President and Chief Executive Officer, Dan Hansen. Dan have prepared comments related to our first quarter 2014 release and filing and following these comments we will have an opportunity to address any related questions you may have.

As a reminder, this conference call is the property of Summit Hotel Properties. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Summit is prohibited. Please also note that many of our comments today are considered forward-looking statements as defined by federal securities laws.

These statements are subject to numerous risks and uncertainties both known and unknown as described in our 2013 Form 10-K and our other SEC filings. These risks and uncertainties could cause the results to differ materially from those expressed or implied by our comments.

Forward-looking statements that we make today are effective only as of today, May 12, 2014, and we take no duty to update them later. Our earnings release contains reconciliations to non-GAAP financial measures referenced during this call. If you do not have a copy of our release you may view and print it from our website at shpreit.com.

Please welcome Summit Hotel Properties’ President and Chief Executive Officer, Dan Hansen..

Thanks, Elisabeth. And thank you all for joining us today for our first quarter 2014 earnings conference call.

On the call today, I’ll update you on operating and portfolio results, and provide more detail on our financial performance for the quarter, discuss our balance sheet, liquidity, and then finish up with a review of our outlook for the second quarter and the reminder of 2014.

Unfortunately, our CFO, Stuart Becker, will not be joining us today as he is recovering from back surgery. We do wish Stuart a speedy recovery. Let me begin by saying we are very pleased with the performance of our portfolio in the quarter, which finished at the high-end of our guidance.

Our same-store RevPAR growth for the quarter was 8.4% compared to the first quarter 2013. This was acceleration from the 6.1% increase we reported for the fourth quarter 2013.

RevPAR was driven by a combination of increases in average daily rates, which was up 4.6% and a 256 basis point increase in occupancy to 72.8%, compared to 70.3% in the first quarter of 2013. Our strongest markets in this quarter were Baton Rouge and the Phoenix/Scottsdale market, which posted 16.1% and 15.9% RevPAR growth, respectively.

Both of these markets are benefiting from the renovations completed last year and we anticipate strong RevPAR growth to continue. Our West Coast hotels were strong contributors as well, posting 7.6% RevPAR growth, despite the Holiday Inn Express in San Francisco being under renovation during the quarter.

Our same-store RevPAR growth exceeded the Smith Travel upscale average by 200 basis points in the first quarter. Our continued success in posting strong RevPAR shows the strength and quality of our portfolio and capital improvements we have made over the last two years.

This gives us great confidence in our portfolios ability to continue to deliver strong results over the remainder of the cycle. On a pro forma basis, including hotels acquired in the first quarter, we reported RevPAR growth of 7.5%. RevPAR was driven by 4% increase in average daily rate and increase occupancy of 233 basis points.

Our average occupancy in the first quarter was 72.1%, compared to 69.7% in the first quarter 2013. Growth in our EBITDA was driven by strong RevPAR growth, which was partially offset by operating expenses, property taxes and fees. For example, quarter-over-quarter, our same-store property taxes were up 8.7%.

In addition, our five New Orleans hotels experienced a RevPAR decline of 6.6% as a result of the Super Bowl that benefited the market in the prior year. Also our results were affected by 11 hotels that were under renovation in the first quarter.

Combined we estimate that these factors and energy cost due to the harsh winter resulted in a 200 basis points drag on our pro forma hotel EBITDA margins.

Moving on to acquisitions, as we previously announced, we acquired four hotels in the first quarter, comprising 591 guestrooms for a total purchase price of approximately $126 million or $213,000 per room. We continued expansion into the high growth West Coast markets with three of these acquisitions.

While we continue to see a steady pipeline of potential acquisitions, we remained extremely selective in targeting only the right hotel that fit our long-term growth objectives.

We have several potential acquisitions in various stages of due diligence and remain focused on the highest quality, premium, select service assets that will provide strong in-place yields and create long-term value. Turning to our renovation programs, in the first quarter of 2014, we invested $16.8 million in 11 properties.

Our largest renovation completed in the first quarter was in at the Holiday Inn Express & Suites located in San Francisco. The property was updated with a completely re-designed lobby and common area as well as an expanded and upgraded business center to accommodate our business travelers.

All guestrooms were updated with new furniture, carpeting, 42-inch flat screen TVs, wall coverings as well as new bathroom vanities and lighting. We also upgraded the fitness center, including state-of-the art equipment.

In addition, we renovated five Hyatt Places from our portfolio that we purchased directly from Hyatt back in 2012 and expect strong results that we’ve seen from our other Hyatt renovations.

Next, I will provide further detail on our financial and operating results for the first quarter 2014, followed by an update on the balance sheet and liquidity positions. I will conclude with our outlook for the second quarter and balance of 2014.

For the first quarter of 2014, we reported adjusted FFO of $0.19 per diluted share, which is at the high end of the $0.17 to $0.19 per share guidance range we provided for the quarter. This just reflects the 5.6% increase over the first quarter of 2013.

The increase in our adjusted FFO was due to higher hotel property income, driven by continued growth in our portfolio and solid RevPAR increases. Partially offset by higher G&A, increased interest expense, property taxes and higher share count after our equity offering late in the third quarter of 2013.

Pro forma hotel EBITDA for the first quarter was approximately $30 million, 6% increase compared to the first quarter of 2013. On a same-store basis, our EBITDA margin for the quarter was 32.9%, which was up slightly from 32.8% we achieved in the same quarter of 2013.

We continue to maintain a strong balance sheet and liquidity position, with ample capacity in excess to a variety of additional sources of capital to execute on our strategic growth objectives.

At March 31, 2014, we had total outstanding debt of approximately $567.4 million, with a weighted average interest rate of 4.61%, and a weighted average term to maturity of more than five years. At quarter end, we had $91 million outstanding on our $225 million unsecured revolving credit facility.

Including available capacity on our line and cash and cash equivalents on our balance sheet, we have approximately $150 million in our available liquidity to fund our investment growth objectives. At the end of the first quarter, our net debt to trailing 12-months adjusted EBITDA was 5.2 times.

For the full year 2014, we increased our RevPAR growth targets for our same-store and pro forma portfolios by 50 basis points on both the high and low end to 4.5% to 6.5% and 5.5% to 7.5% respectively. This change was based on our portfolio results in the first quarter, which were above the high end of our RevPAR guidance previously provided.

We are maintaining our full year adjusted FFO guidance range of $0.84 to $0.92 per share and providing adjusted FFO guidance for the second quarter 2014 of $0.24 to $0.26 per share. As a reminder, our guidance assumes no additional acquisitions in 2014 and no additional capital raise. In summary, 2014 is off to a great start for Summit.

We continue to execute and deliver on the plans that we communicated earlier this year. Our top priority remains on the organic growth of our existing portfolio through operational efficiencies, target renovation and upgrade programs to further capture the embedded growth.

We are thrilled with our freshly renovated hotels and look forward to the positive contribution these properties will add to our results, as we move through the balance of the year.

With our leading brand and an asset management team that is committed to extracting maximum values from our hotels, coupled with our strong balance sheet and sufficient capitals to support our growth strategies, Summit is poised to continue to deliver additional value for shareholders. With that, we will open the call to your questions.

Operator?.

(Operator Instructions) Your first question comes from the line of Ryan Meliker from MLV & Co. Please proceed..

Hey, good morning, Dan. I don't have too much going on here. But one thing I assume you can provide some color on was obviously, the quarter had great RevPAR. Margins were a little bit, probably disappointing to us.

I'm imagining it to you guys, although as you pointed out in your press release, New Orleans and the renovations had some pretty material impacts there. But for the full year, you've increased RevPAR guidance, but have basically maintained the FFO guidance.

Can you give us some color on that margins are coming in lighter than you had expected a quarter ago, despite the fact that RevPAR is coming in more robust? Just give us some color on what you are seeing?.

Thanks, Ryan, for the question. I think at this point, it’s just a little early for us to commit to bumping up the guidance. We did have some issues in the first quarter that many other have talked about, weather costs. We had the disruption that we telegraphed, feel real good about the year, feel very comfortable with our guidance.

Just a little bit earlier for us to be aggressive about changing our outlook..

All right, but then -- were 1Q guidance a little bit -- 1Q numbers a little bit lower than you were expecting on the margin front, or was that in line with your expectations?.

I think they were a little bit lower to the extent we had some increased energy costs, a few little things. When you -- we had some Hilton hotels that came out of renovation and we had double bonus points that added a little bit of extra costs as those ramped up.

So there were some little things that affected our margins, but we knew early in the year that first quarter was going to be a challenging quarter on the margin side. And I think we’ve talked on the first quarter call in the Q&A with guidance kind of 25 to 75 basis points for the year. At this point, we feel comfortable with that number..

Okay, that's good. And then just real quickly on the acquisition environment out there, any changes from a couple months ago when we last spoke? Obviously, it seems like the lending markets are loosening every day.

Are you seeing more competition for the assets you're chasing or less, any changes at all?.

That’s still for the one-off in transaction. We are not seeing a lot of competition. Obviously, there is a lot of movement on the portfolio side. There is some transactions that I think are all but done that just haven’t quite been announced yet, but all those are at the portfolio level at several $100 million or greater..

All right. That's it for me. I will jump back in queue with anything else. Thanks, Dan..

Thanks, Ryan..

Thank you. The next question comes from the line of David Loeb from Baird. Please proceed..

Good afternoon. Hi, guys, a couple of questions for you. And I'll be quick, I promise. The expenses related to improvements in internal controls, I see you’ve taken that out of adjusted funds from operations, which seems reasonable.

Can you give us an idea about how much is left of that to be expensed, either in the second quarter or through the balance of the year?.

Sure, David. I think if you look at whether we do had some outside resources to come in or as we slowly absorb those functions with new hires, maybe $150,000, $200,000 a quarter would be added costs, but nothing like we had for reconciliation in the first quarter..

Okay.

And then for the balance of the renovation capital that you are going to be deploying as the year goes on, what kind of disruption do you expect from that deployment?.

I think probably 60%, maybe 65%, almost two-thirds of that was in the first quarter. So, again relatively little disruption in the second, third quarter. And as you know, we do some renovation work in the fourth quarter. So we see a little bit of disruption in the fourth quarter..

Okay. And those were all of my questions. Please do give Stu our best..

We will do. Thanks, David..

Thank you. The next question comes from the line of Jordan Sadler from KeyBanc Capital Markets. Please proceed..

Hi, guys, its Austin Wurschmidt here with Jordan. Just really wanted to touch on acquisitions a little bit more. You discussed being extremely selective on acquisitions. And I was wondering just sort of where you are seeing the best opportunities.

And are there any markets that you would like that exposure to?.

Thanks, Austin, for the question. I think that we’ve always been somewhat market agnostic. All things being equal, we would like to be in the best markets with highest barrier to entry, but those also have to meet our underwriting criteria. So I wouldn’t say that you shouldn’t expect us in anyone market over the other.

We are still focused on top 50 markets with multiple demand generators, but no specific focus on any one market..

And then just thinking about plans to fund that, how comfortable are you today with leverage sort of towards the higher end of your range at 5.2 times, what are sort of your thoughts on funding future opportunities?.

I think there is maybe room for selectively two or three more acquisitions. It obviously depends upon the size and the cost. I think anything beyond that we’d expect to probably offset with some dispositions, but nothing other than the one hotel held in for sale that we have targeted at this point..

So would you consider sort of teeing those up and sort of balancing acquisitions going forward with additional dispositions, is that sort of what you’re saying?.

Yes, I want to be careful there. That’s essentially what I am saying, but we don’t -- we’ve already disclosed the hotels we believe are non-strategic for us for the cycle. Should we get offers that we believe we can reallocate that capital to better markets and better yields and long-term growth, we’d be inclined to do so.

But I don’t want to leave anybody with the impression that we’ve got a bunch more hotels for sale. We feel very good about our -- very good about our portfolio..

Thanks. Thanks Dan for color there.

And then just one last clarification, any update just on the internal control issue? Is there anything new to report there?.

No we have been working side by side with our auditors and have our plan in place that we’re executing on. So we feel very good about our ability to deliver the balance -- deliver the tie out of the balance sheets from the individual hotels to our corporate balance sheet..

Great. That’s all I have for today. Thanks..

Thanks Austin..

Thank you. The next question comes from the line of Wes Golladay of RBC Capital Markets. Please proceed..

Hey everyone. Looking at the balance sheet, it looks like you guys are carrying a bit of a line balance here but you have adequate leverage to low leverage.

Would you look to term that out with more mortgages at this time?.

We feel pretty good about where it stands right now. I don’t think we have any immediate plans to make any changes with the balance sheet..

Okay. But when you take on these additional acquisitions, I'm sure they go on the line first.

And then, I mean, you have -- should we assume more mortgages coming up this year?.

Yes, to the extent, we acquire hotels and either assume debt or have the ability to put a piece of paper, with today’s competitive interest rates, definitely we’d be inclined to do so..

Okay. And then you had mentioned that the -- I think it was five of the Hyatt hotels were under renovation this quarter. If you can correct me if I'm wrong but I believe those had much lower margins than your existing portfolio when you acquired those hotels.

How much runway do you have with those Hyatt Hotels, on the EBITDA, on growing the margins there?.

Yes. I think we’ve got several hundred basis points of margin improvement potential as a portfolio. Now each hotel is kind of unique that’s on market. But yes, we feel really good about our partnership with Hyatt, the capital we committed, the markets that we’re in the continued success of the brand..

Okay.

And then looking at your markets right now, do you see supply creeping into any of the markets or do you -- in aggregate, will it be below the, call it, the 2% historic average of supply of through probably ‘15 or ‘16? Do you have any concerns on that?.

No, we really don’t. I think at the margin, there is a hotel or two, that comes into the markets where we have hotels. But we do have 90 hotels in top markets across the country. So a little bit of supply here or there shouldn’t affect us materially.

I think the supply issue that continues to come up is one that needs to be balanced with also the reality that demand is increasing and demand is increasing in upscale hotels greater than it is in any other chain scale. So while there is greater supply, there is also greater demand.

So I think that kind of speaks to the quality of the new premium, select service hotels. And we think the supply, I think, Marriott talked about it on their calls, 65% of Marriott supply is outside the top 25 markets. And if you throw in New York and few of the other gateway cities, there is -- most of the supplies are in the market that we’re not.

So we still feel very good and think that amount of new supply is much lower than the headline numbers would indicate..

All right. Thanks for the color on that..

Thanks Wes..

Operator:.

:.

Hey good morning, Dan..

Good morning, Bill..

Are there any initiatives out there by the brands that we should look at as kind of amenity creep or anything accretive going on that the brands are starting to push, as you attend the brand -- the national meetings and you meet with the brand owners? What's out there that's new and different, now that we've gotten the, kind of, TB thing behind us?.

Yeah. That’s great question. It seems every year we sit back and have the thought that there is not much more they could ask you to do. But as the gap between full service and select service guest experience continues to narrow. I think it was apparent that the lobbies were big initiative from the brands over the last few years.

And I think the Millennial guest is something that has really woken up many other brands. And I think things that create better experiences and unique experiences from the Millennial guests are things that you would expect to see now. What those costs and what those exactly are, I think remains to be seen.

What we do know is that they don’t like to walk into a hotel and see a sea of sameness like a business traveler, like myself would like to see. That consistency is not as attractive to them. So bandwidth matters, experience matters, location matters and newer and cleaner usually wins.

So maybe as we think about it, it’s not so much as what things are going to cost, but what new things are and how you can deliver on that experience. And I think to spend the extra money for a real quality renovation pays off significantly over the balance of the cycle.

So long answer and I don’t know that I specifically answered if there’s any specific things. But most of the things, I think, would be around the experience for the Millennial..

As you think about the lobby reno -- which you're right, everybody is talking about that, are you on top of that? Are you behind in that curve? In other words, how much more do you have to do to catch up to the new brand standards?.

Yeah. I think, this year we should be through with the majority of our renovations, from not only our same-store but our acquired hotels, so that CapEx should drop off considerably next year. And we have as we talked about over the last year accelerated some renovations.

We spent a little bit more than the PIP would have required in a hotel like the Holiday Inn Express in San Francisco. The flow and get experience there matters considerably, and so we feel like we’re ahead of the curve in accomplishing those initiatives..

Okay. That’s it for me. That’s, Dan..

All right. Thanks, Bill..

Thank you. The next question comes from the line of Jordan Sadler from KeyBanc Capital Markets. Please proceed..

Hey, Dan. Just a follow-up on the RevPAR growth. Wanted to understand the drivers a little bit better. I know you mentioned Baton Rouge and Phoenix/Scottsdale in some of the big numbers.

But what outside of those, which I kind of feel where maybe a little bit more expected, were surprise to the upside, which markets were real strong for you?.

Well, I think that’s a great question. I think the West Coast would have been stronger had not Holiday Inn Express been under renovation, but it was fairly broad-based across the board. I will be honest with you. As we've talked about, we’ve been investing in these properties for the last couple of years.

And as these properties have come online and we continue to work with our sales teams and our revenue management teams, it’s been very broad-based.

So the outsized, I think we’re largely on those two markets, but it is really broad-based across the portfolio, which as we said really gives us confidence over the balance of cycle and the money we spent was well spent. And we’ve got a great runway ahead of us..

And with some of the -- so the upside in the overall 8.4% that we saw, I know occupancy was up a lot.

Was that a function of sort of Baton Rouge and Phoenix, as well, or was that also broad-based, the occupancy gain?.

Not to continue to use the broad-based answer, but one other things we’ve done is we've acquired hotels. Craig, our Chief Operating Officer and his team have really dug in and work at fixing the mix the business from business and leisure. And they’ve been able to find some opportunities to add occupancy, maybe on some soft periods over weekends.

So I think part of that is just a fixing the mix across a lot of our acquired hotels. I would say it’s just driven by rooms being out of service. I think part of it is the asset management process or revenue management process of extracting maximum value throughout the week..

Okay. And do you continue to see upside there to occupancy? I mean, I know that relative to historical standards, I mean you're pretty full..

Yeah. I think, once you start to get into the low-to-mid 70s, you start to get closer to peak occupancy. To get much higher than that, you need to have pretty strong leisure demand on weekend. So I think the biggest gains in occupancy have been had. And I think the majority of the gains we would expect going forward will be from rate..

Thank you..

Thanks, Jordan..

Thank you. I would now like to turn the call over to Mr. Dan Hansen for closing remark..

Thank you everybody for dialing in today. As we said many times before, we’re extremely proud of all the work we’ve done over the last couple of year, and especially over the last several quarters to drive increased value within our portfolio. We’re really looking forward to great 2014 and discussing our results with you again next quarter.

Have a great day..