Ashford Hospitality Trust Inc. (AHT-PH)

What exactly is Ashford Hospitality, and how is it different from a hotel company like Marriott?

Ashford Hospitality Trust is a REIT — a real estate investment trust — that owns the buildings themselves. Marriott, by contrast, is an operator: it manages and runs hotels for owners who hold the real estate. Ashford bought or financed individual hotel buildings across the United States and leased them to operators, most often to franchisees of major brands such as Hilton, Marriott, or IHG. The cash Ashford collects flows from the properties’ revenue after operating costs and rent payments. Marriott collects management fees and franchisor royalties but does not own the bricks and mortar. The difference matters enormously: Ashford bears the risk of the real estate — if a property loses value or stops generating cash, Ashford’s equity suffers directly. Marriott’s franchise model transfers much of that risk to the property owner.

Why would someone own Ashford’s preferred shares instead of common stock or bonds?

Preferred shares are a hybrid security sitting between common equity and debt in the capital structure. They usually pay a fixed dividend, just like a bond pays interest, but that dividend is not legally promised the way interest is — if the REIT’s cash flow drops, the preferred dividend can be cut or suspended. In return for that risk, preferred shareholders get paid before common shareholders if the REIT does not generate enough cash for both. Preferred shares also typically have a call date at which the issuer can redeem them at par, ending your income stream but protecting the issuer if rates fall. For investors seeking higher income than bonds offer but unwilling to bear the full upside and downside of common equity, preferreds are a middle ground. For Ashford specifically, the preferred dividend is paid from the cash available after debt service; if hotel cash flows fall, that cushion erodes quickly.

What is RevPAR, and why does it matter so much?

RevPAR stands for revenue per available room. It is calculated as the average nightly rate per room multiplied by the occupancy percentage. If a hotel has 100 rooms, 75 percent occupancy, and an average rate of 120 dollars, RevPAR is 90 dollars. It is the single most important metric in the hotel business because it directly determines how much cash a property generates. Every point of occupancy loss or rate compression flows straight to the bottom line. Ashford’s cash available for distributions depends on the RevPAR trends across its portfolio. When RevPAR rises — because occupancy is strong or rates are climbing — the REIT’s distributable cash increases and preferred dividends are safer. When RevPAR falls, as it will during any recession or period of weak travel demand, the REIT’s cash available for distributions shrinks and preferred dividends face pressure.

How does the rise of Airbnb and short-term rentals affect Ashford?

Short-term rental platforms have fundamentally altered the competitive landscape for traditional hotels. A property owner can now rent out a house or condo to travelers on Airbnb or Vrbo, often capturing rates equal to or higher than a hotel while avoiding the operating costs and regulatory burdens of running a formal hotel. This has drawn supply out of the traditional hotel market and onto platforms where travelers can book directly. The result is pressure on occupancy and rates for traditional hotels, particularly in leisure destinations and cities where regulation is permissive. Ashford’s properties compete against this alternative supply for the same guests. In cities such as New Orleans or Austin, where short-term rentals proliferated, hotels saw occupancy and pricing power erode. Ashford must price competitively or invest to differentiate its properties (location, amenities, service quality) to defend occupancy. This margin pressure flows directly to the cash available for preferred distributions.

What makes a hotel REIT vulnerable during a recession?

REITs are typically leveraged — they borrow to buy properties because real estate is stable enough to justify debt and leverage magnifies returns to equity holders. But leverage is a double-edged sword. When RevPAR falls sharply — as happens in every recession — cash flow plummets while debt service obligations do not. The REIT suddenly faces tighter cash flow, tighter debt covenants (contractual limits on leverage ratios), and less flexibility. If occupancy crashes hard enough or rates compress, the cash available after debt service may disappear. At that point, the REIT must cut the common dividend, then the preferred dividend, or both. The preferred shareholder is safer than the common holder because they are paid first, but they are not insulated from a severe downturn. If the REIT cannot refinance maturing debt during a crisis, it may face restructuring or losses on asset sales, outcomes that can wipe out preferred equity entirely. The 10-K and quarterly filings lay out Ashford’s debt maturity schedule and debt-to-cash-flow ratios; during weak periods in the cycle, those become critical metrics.

How would I know if Ashford’s preferred dividend is at risk?

Watch the cash available for distribution relative to the preferred dividend obligation and the debt service requirement. Ashford’s 10-K and quarterly earnings releases show cash flow from operations, capital expenditures, and debt service. Compare the cash generated to the sum of debt payments and preferred dividends; if that ratio is tightening — meaning less cushion — the dividend faces risk. Also track RevPAR trends by market segment and occupancy rates. If occupancy is falling, rates are compressing, or both, distributable cash is under pressure. Watch the debt maturity schedule too; if large portions of debt come due in the same years, refinancing risk rises. Finally, monitor the company’s leverage ratios (total debt to cash flow). REITs typically target ratios around 5 to 7 times; if Ashford’s ratio is climbing above that, the REIT is becoming overleveraged and flexibility erodes. The SEC filings provide all this data. Management commentary on the quarterly earnings call reveals management’s own assessment of occupancy trends and competitive pressures.

Can Ashford call my preferred shares?

Yes. Most preferred shares are callable, meaning the issuer can redeem them after a specified date (the call date) at a predetermined price, usually par value. For example, a preferred share paying 6 percent might be callable at 25 dollars if it was issued at par of 25 dollars. If interest rates fall significantly, the issuer can refinance the preferred with new capital at a lower cost. When that happens, the issuer calls the preferred, you receive your par value back, and your income stream ends. This is a win for Ashford (it reduced its cost of capital) but a loss for you (you can no longer reinvest at 6 percent). Preferred shares that have appreciated in price above par are particularly vulnerable to calls, because the issuer’s incentive to call is highest. This is called call risk. Before buying any preferred share, check the call date and the call price in the prospectus or the investor relations section of Ashford’s website.