Q4 2019 Earnings Call

Both of these metrics represent an increase of over 25% versus the portfolio. We own at the time of our listing and while these aren't the only metrics to consider when determining portfolio quality. They are dead demonstrate the improvements. We have made to our portfolio over the past five years. We have created a diversified portfolio that we believe will with fans and future challenges and create value for shareholders in the long as we can see him to optimize our assets many of which are recent additions to our portfolio through our asset management and project management initiatives.

Portfolio consists of primarily branded hotels and resorts which we expect will continue to serve as well particularly during times of volatility.

We have a significant concentration in strong Sunbelt markets, which we believe to be well positioned for the long-term as they have strong demand drivers and on average less expense headwinds versus that our primary logic Market.

In the fourth quarter of 2019. We continued our process of portfolio Improvement through to completion of three on strategy transactions the seals to non-strategic hotels and the acquisition of hydrangea February Convention Center in December. We sold Marriott Chicago at Medical District the UIC for ten million dollars and Marriott Lexington Griffin Gate for 51.55.

Both of these properties were Legacy assets at the low end of the quality Spectrum within our portfolio.

On average the hotel is a cheaper car and he would upper key is were 35% and 45% respectively the lower remaining portfolio.

Additionally, the hotels are located in markets that have proven to be challenging.

Supply increases and cost pressures significantly impacted the Chicago hotel while competitive Supply increases and difficulty raising rates commensurate with ongoing Capital requirements. Wait on the outlet for the Lexington property.

The sales Marriott Griffin Gate allowed us to avoid an estimated Thirty million dollars and near-term capital expenditures.

Significant additional investment because we did not view as an appropriate Capital allocation within our portfolio also allowed us to exit through Sherry Market that was inconsistent with our strategy of primarily for calling uniquely positioned luxury and upper-upscale hotels and resorts in top 25 lodging markets and pilu destinations.

On the acquisition side. We were thrilled to acquire the 600-room hydrating to Portland for $190 or approximately $317,000 for key a very attractive basis for his high-quality newly-developed Hotel.

The development of the hotel was partially facilitated through public investment of nearly seventy-five million dollars through a combination of bonds and grants for which the hotel is no direct repayment obligations.

This contribution to the development costs. A lot of the purchase is outstanding Nu hotel in an immediate quantifiable and substantial discounts or replacement costs.

In addition to supporting the development of the hotel local authorities made a significant Investments to renovate and upgrade the Oregon Convention Center, which prior to the opening of the Hyatt Regency Portland did not have a headache hotel or any large group of its vicinity.

The renovation of the convention center coupled with the opening of the Hyatt Regency to the naval port on to attract new and bitter convention and Group business with the city and we are encouraged by the early result of the hotels group sales efforts.

Over the past few years. We have continued to strengthen and expand our relationship with highest and we have seen strong operating results at our Hyatt Hotels and Resorts.

Excited to have been able to further their relationship through the acquisition of the hotel that has the largest in the state of Oregon and is unrivaled in quality in a minute. He's in the Borderlands and reasonable group Hotel markets.

As a result of this acquisition, we further improve our portfolio diversity by increasing our exposure in the Pacific Northwest while also increasing our prospective group and Convention exposure.

As an office in our earnings release yesterday subsequent to quarter-end. We entered into an agreement to sell Renaissance Austin Hotel for $125.

It's completed. This sale will further improve our overall portfolio metrics as the hotel perform significantly lower remaining portfolio averages.

Renaissance Austin is a legacy asset located in a Suburban setting in a market where meaningful amount of supply has been and continues to be added to the hotel room inventory additional Hotel will require a significant amount of near-term capital expenditures to improve its competitive positioning as we last renovated the guest rooms in 2013. And the competitive Supply is either new or more wage operates, then the rooms product offered at the Renaissance based on these and other factors. We believe the timing and market conditions were appropriate to unlock value from this asset at this time.

Expect the sales hotel, which is subject to customary closing conditions to be completed by the end of the first quarter.

We believe that our strong balance sheet continues to provide us with the ability to take advantage of compelling investment opportunities as they arise in the future a conservative leverage profile and healthy balance sheet continues to be a long-term Frank of our life and we intend to utilize the proceeds from the sale of Renaissance Austin to further solidify our capital structure. We intend to pay down a portion of the outstanding balance on our line of credit with the proceeds would reduce our net debt-to-ebitda below four times as a result of this transaction.

Looking ahead to the remainder of twenty-twenty based on current market conditions. We are more likely to be a net seller than an entire this year given the fact that our expectations for appealing acquisition opportunities remain elegant partially due to financial markets and raining open and providing attractive alternative options. We currently do not expect to be very active on the acquisition from in 2020 unless we see a shift in market conditions.

However, we continue.

to view transactions of an important way through which we create long-term shareholder value and this is more likely to manifest itself through additional opportunistic disposition if you're in a balance of the year

The number and amount of dispositions we have completed Center leasing have been significant and we believe that these assets sales have been have been as instrumental as our Acquisitions in shaping the future growth of our company.

The sale proceeds have been an effective way for us to raise capital for exciting additions to the portfolio and we've been able to do this in an efficient manner both from a cost of capital and tax planning perspective.

Believe that given the continued interest of private Capital sources and high-quality assets additional opportunities may exist to take advantage of the disparity between private and public market logging valuations off to the extent. We are successful in doing so further Franklin the balance sheet will provide us even more flexibility as we evaluate the various Capital allocation tools at our disposal is we have done successfully over the past five years.

as in

Past we will provide updates on additional transactions if and when any come to fruition.

We believe our recent transaction activity is strategically appropriate for the long-term success and trajectory of the company.

Despite near-term impacts resulting from renovation disruption particularly as Park Hyatt Aviara and ramp up at several recently acquired hotels including Hyatt Regency, Portland.

As a result we anticipate the 2020 will be a transitional Year from an earnings perspective as we build on the solid foundation. We have established over the past several years.

As outlined in our earnings release we expect a slight decline in same property requiring twenty-twenty as well as I'm more significant decline in the just read and it just says FL which reflects our recently completed of dispositions as well as renovation disruption at several of our hotels and resorts.

Definitely went to spend more significant expense growth primarily resulting from higher wage and benefit costs and greater real estate tax and insurance and taxes.

We are extremely excited about the opportunity to Park Hyatt Aviara following the transformative renovation that we commenced late last year and expect to complete in early 2021.

As we finalize the design and planning of the renovation we decided to compress the project into a tighter time frame.

As a result we out performed our underwriting and 2019 but will experience increased disruption in 2020 as we as we strive to complete the vast majority of the significant project by the end of this year.

It seems will provide additional detail on our 2020 guidance and discuss the various components of disruption related to Park Hyatt Aviara as well as other properties in the portfolio later during the call log.

a modernized and upgraded Park Hyatt Aviara along with a fully renovated and expanded Hyatt Regency Grand Cypress, the exciting potential of my newly-acquired Hyatt Regency cord with the teenagers expectations related to other recently acquired hotels as well as our strong balance sheet are a few of the important drivers that provide substantial earnings growth potential for our company in 2021 and Beyond

We believe we have building.

Tremendous portfolio with exciting and better opportunities for growth and are looking forward to what lies ahead for our company with that. I will now turn the call over to Barry.

Thank you Marcel. As a reminder call portfolio information. I'll be speaking about is reported on the same property basis the 38 of the 39 Hotel going to your end which excludes higher wage recently commenced operations. This past December will be excluded from driving portfolio in 2020.

Same property report calling 0.4% of the quarter as a result of a 7 basis-point decrease in occupancy and a 0.38 decrease in rate.

Grab bar was down 3.4% in October due primarily to Jewish holiday shift of 0.5% in November and I'm 3.4% in December translate the quarter go to point one person or group reported client 6.2%

Don rooms revenues continue to be a strength for us at 1.2% contributing to a 0.3% increase in the same property total revenues for the court.

When looking at our top ten markets based on 2019 Hotel, he batao our top performance of the quarter. We're San Francisco a 4.6% phoenix up 3.2% Napa of 2.9% of Atlanta of 2.8% and Orlando of 2.6% the overall San Francisco Market benefited from strong city-wide compression during the quarter which enabled the merits and school airport to drive rates. Just my flat occupancy opinions performance was driven entirely by higher Regency Gainey Ranch, which grew up farming games share with strong transient production which off sets off to agri-business.

Who's Napa property saw strong demand just lights off to Ray stood nearby fires in Atlanta renaissance Atlanta Waverly saw strong group performance with several high-quality meeting events and the Waldorf Astoria Bank. Improvement as a stronger group base and changes in properly leadership allowed the hotel to meet our expectations all three of our Orlando properties and rough our growth in the fourth quarter of the overall Market rebounded was strong City wage in December after a soft rocktober in November as well as good fans seem to me.

Top 10 marks. The quarter was San Diego down 9.2% due in part to the commencement of the Park Hyatt Aviara renovation results. We nearly 5,000 out of order rooms and a lack of city-wide Group business, which is San Diego Dallas Market was also a challenge down 6.2% for the Fairmont struggle as expected with week or group business than last year throughout the quarter while the Marriott Dallas downtown game with strong group base and increase transient demand albeit at a lower ADR

for the full year our same property portfolio experience 2% growth as a Dr. Increased 0.9% and often see increased 80 basis points our group extended the year at approximately 33% of total revenue a slight decline from 2018.

For the full year 2019 the strongest of our top ten markets in terms of revpar growth. We're San Francisco about 6.9% Houston a 5.8% Dallas of 4.3%. 4.2% Phoenix 3.6% other markets providing positive real part of the Year included Atlanta and Boston in total 15-25 markets experience positive Revenue growth in 2019. The most challenge of our top ten markets for the year where Santa Clara now one and a half percent San Diego John 1% in Orlando with flat Red Fort.

As Marcel discussed earlier. We continued our track record margin growth parking the fifth consecutive year of margin growth in our same property portfolios and introspective year-end same property ebitda margin through Thursday appointment with total same property Hotel offering senses. That will be 1.7% despite a 6.4 increase 6.4% increase in real estate taxes personal property taxes and insurance wage continue to find operational efficiencies and incremental savings elsewhere just by using top-line growth.

Our ability to find Opportunities on the margin side comes from both the integration of our recent acquisitions into our asset management platform as well as continued implementation of our property optimization process and aggressive Asset Management across the portfolio.

On average for hotels be acquired in 2017 at 31 basis points in 2019, which is on top of the almost 140 basis points of margin expansion. These hotels collectively achieved in 2018 off the smart growth that despite significant labor cost headwinds. He faces in Orlando.

as a reminder

In 2017. We acquired Hyatt Regency Grand Cypress Hyatt Regency Scottsdale Royal Palms in Phoenix and the Ritz-Carlton, Pentagon City.

For hotels be acquired a 2018 each went through our detailed property optimization process for the identified numerous revenue and cost to any of the initiatives these pop Saga detailed Play Books. We've developed in our performance real life are unique ability to find and recommend operational efficiencies in hotels need to our platform.

Although Fairmont Pittsburgh experienced a 10.8% decline in red Farm 2019 performance exceeds our underwriting as we anticipated this decline the hotel Works to remix its corporate and transient dead.

Despite the significant decline of our our asset management team was able to work with the hotel management team to limit the decline and ebitda. Margin told me thirty seven basis point cuz they did a tremendous job in identifying opportunities to grow food and beverages revenues streamline the operation for the long term.

For Hyatt Aviara was transformational renovation. I will touch on a bid for going very well and particularly from expense control standpoint. The property had substantially improved performance compared to Prior year before the commencement of the renovation off the hotel GOP margin of 245 basis points through October and Eva. I'm 13.1% as the property put in place and number of programs to optimize operations, which will continue through and following a transformational renovation.

Cross in Denver our team also work closely with the local management team to identify and Implement meaningful opportunities to grow revenues minimize costs and still provide an outstanding guest experience these efforts Reserve margin Improvement of 120 basis points.

Waldorf Astoria Atlanta Buckhead continues to show progress from the hotel's rebranding if we completed immediately upon acquisition. We continue to work with Hilton to optimize the performance of the hotel. We are pleased to the hotel's ability to wage margin by 470 basis points. I'm not positive essentially flat your 2018.

As you know, we're extremely enthusiastic about the acquisition of the higher Regency Hotel open 2 months ago. We have been pleased to talented local operating team and their understanding of the dynamic Portland Market. We are thrilled to have gained 80% of our Budget Group bookings for the year already on the books and we are seeing a very active sales pipeline as local Regional and National Meeting Planners now have the ability to see and feel is high-quality meetings focused Asus first-hand.

Your 2019 property optimization process of dedicated in-house team completed visits that are for 2018 acquisition. They focused on the implementation of our new program top 2.0 Turbo, which we visited previously reviewed properties with a focus on both retention of previous savings as well as identification of New Opportunities. Particularly DSG Arena where we are continually seeking opportunities for energy and Water Conservation off during 2019. We identified nearly 3 and 1/2 million dollars in potential net benefits of those properties bringing our total identified opportunities to approximately 13 million dollars, and probably we currently own since we began this program fourteen.

You're particularly proud that we've been able to work with our management nearly 75% of these recommendations today resulting in approximately 9.4 million dollars a penalized ongoing that benefit.

A major ongoing Initiative for a pop team has been transitioning our hotels from single-use of entities to bulk amenities in guest rooms. As of year-end fifteen of our hotels have made this transition and we expect eight to ten hotels to transition to Thursday. We look forward to continue this program an additional hotels in future years.

they're also

Pakistan make the green Choice other similar initiatives which Port are Hotel guests the opportunity to forgo housekeeping services typically with an offer or incentive for them to do. So as of your end 33 of our hotels offer this program primary focus in this area is for our hotels to increase the capture rate of guests taking advantage of this opportunity benefiting the environment while also helping us reduce cost.

I would now like to turn to a review of our capital projects completed last year in 2019. We spent $93 on Capital across the portfolio. The biggest product of the year was the completion of the new twenty five thousand and thirty two thousand square feet of pre function of support space at Hyatt Regency Grand Cypress. The project came in on budget for the total project cost of $32.

This new facility closes its first events in December 2019 and Resorts management team is enthusiastic about both the quantity and quality of business. They're putting on the books for this new facility in addition to the new Ballroom. We also completely renovation of Hemingway's Resort signature restaurant other notable capital projects completed in 2019 included Lobby Renovations at Hotel Monaco, Chicago Hotel Monaco, Denver Marriott downtown and Westin Oaks Houston and a more substantial Lobby restaurant and bar renovation and creation of a market at Hyatt Regency Santa Clara. Additionally. We completed the renovation of the Casitas and Suites at Hyatt Regency Club sale guest rooms in Hotel Monaco Chicago meeting space at Hotel Palomar, Philadelphia and the final phase of the meeting space renovation in creation of two additional guest rooms. Had Merit Woodlands.

Finally we complete.

The renovation of the alvadore spot Royal Palms as well as renovation of the Daily Grill Restaurant a Westin Galleria, Houston.

In 2020, we expect to spend between 110 and $130 on Capital expenditures putting several significant projects.

Our largest project issue will be the continued renovation of Park Hyatt Aviara. We commence the renovation during the fourth quarter of 2019 with the renovation of the guestroom corridors as well as the meeting space both of which are expected to be completed off the second quarter of 2020.

Exterior amenity upgrades across the resort including the major renovation of a pool area and water amenities renovation of the outdoor meeting space and upgrade to the exterior Landscaping. Also come in late last year with an anticipated completion date of the third quarter of this year.

The renovation of the public spaces and food and beverage Outlets will be the next begin and include a major renovation of all areas in the lobby lobby bar and expanded outdoor Terrace converting existing specially restaurant to place a restaurant in conversion of the using three Mill Restaurant in the meeting space this portion of the renovation is also anticipated to be completed during the third floor.

Course renovation We Begin an early spring with anticipated completion of the fourth quarter the spawn golf facilities Renovations will be the final portion of the project and will commence in late 2020 and are expected to be finished in the early part of 2012 just renovation of the resort is expected in total the cost approximately $55, which will bring our investment in the property to cost me $220 for approximately $690,000 per key. We will basis relative to other luxury, California Coastal resorts.

We are excited to modernize the resort and enhance its appeal to a broader range of market segments through this transformational renovation. We can choose to believe strongly in this renovation will be very well aligned with the park is Brandon customers who bought the resort extremely well against its competitors set.

Other notable capital projects scheduled for twenty twenty-two guest room renovation and the creation of a new input Lounge in the lobby level at Marriott Woodlands Waterway as well as a meeting space on restaurant on a vacation at the Ritz-Carlton Palm City, which we believe will enable the hotel to attract additional business related to Amazon's hq2.

Additionally we were rather busy.

This Administration Hyatt Regency Grand Cypress, which will align the design with that of the new bottom.

discuss the disruption anticipate of these projects and with that I will turn the call over to a t h

Thanks Barry. I will cover two topics today first. I'll discuss our 2020 Outlook and then I will turn to a brief review of our balance sheet progress over the past year as the 2023 currently expect overall demand to generally be stable across our portfolio. But we expect this year to be a transitional year that prepares us for solid growth in 2021 and Beyond specifically we are expecting profitability relative to last year to be moderated by three main items.

First Renovations second, the impact of transactions on a net basis and third higher expenses. I'll speak about each of these items individually.

As to renovation activity this year is scheduled to be a busy one. We expect this year's renovations to generate strong growth for the company in 2021 and Beyond just as the renovations that we completed in 2018 generated strong growth for us last year this year. We expect displacement due to renovations to cause about a hundred basis points of negative impact too same property revpar wage. Also expect these renovations to displace non rooms revenues such as food and beverage and ancillary revenues.

Negative impact that you would. Margins from Renovations is expected to be approximately 65 basis points. We expect renovations to negatively impact adjusted ebitda diary by approximately $50 million dollars and this impact will be more concentrated in the first half of the year.

Secondly, the three transactions completed last year as well as the one announced yesterday are expected to result in a net 8 million dollar year-over-year decline in ebitda off. The breakdown is as follows, the two dispositions we completed in December generated eight million dollars in Eva. In 2019. The Portland acquisition is expected to generate $7 of ebitda this year, which is consistent with our underwriting.

Given the expected timing of the Renaissance often disposition we expect that sale to result in a year-over-year decline of approximately seven million dollars in David.

Moving had to hire expenses consistent with other owners in the industry. We expect to be challenged by Rising costs relative to last year wages and benefits which represent nearly 50% of our expense base are projected to increase in the 3 and 1/2 to 4% range.

Our managers are increasing wages to maintain parity with other hotels and businesses.

Additionally, we expect non operating expenses to increase at a higher rate as to property insurance expense. We expect an over 40% increase relative to 2019 and has two real estate tax plan to your budgeting and 8% increase versus 2019.

Overall owned ebitda margins exclusive of the impact of Renovations are expected to decline approximately 85 basis points.

Same property Hotel again, excluding the impact of Renovations is expected to decline approximately two and half percent.

Additionally, we expect the total -5 million dollar year-over-year variance from a few other items. These items are a business Interruption insurance, which was received in June 2019 be extraordinary real estate tax credits and settlements recognized in 2019 and see higher G&A expense.

Now I'd like to turn some overall thoughts on our business excluding the impact of Renovations rap artist projected to grow modestly over last year industry occupancy as well as that of our portfolios home is expected to remain strong.

Despite that we together with other owners have had limited pricing power.

As to our group pays it continues to be healthy as of year-end 2019 just over two-thirds of our expected 2020 group Revenue was definite Thursday same Property Group Revenue Pace after excluding Park Hyatt. Aviara is up three and half percent. Our group Next is an important attribute of the company. Our properties have high-quality J space drive internal group demand. Our group mix is expected to grow as our property's in Portland, Carlsbad and Orlando continue to ramp up host opening and expenditures of birth.

as to our recent

Trans January red part excluding Park Hyatt Aviara declined approximately 2% This was on track with our expectations as we Face the difficult comparison to last year.

As to covet 19 or guidance includes cancellations and attritions known to date we have estimated that this approximately 1 million dollars of negative impact to ebitda wage disruption in our portfolio is primarily been at Hyatt Regency Santa Clara and at the Marriott SFO and married sfor Airline crew contract business has declined. We all anticipate this submarket could be soft given that about 10% of sfo's previously scheduled international flights have been canceled until the end of March.

We're closely monitoring the situation but cannot predict. What if any further impact there might be some other items that I would like to provide include are expected seasonality and hotel Supply growth in our service for 2020. You expect to earn approximately 23% of our adjusted ebitda. Sorry during the first quarter 29% in the second quarter 28% in the third quarter and 26% in the fourth quarter this waiting reflects Renovations and net transaction activities.

moving

Has to supply growth in our markets as of year-end 2019 expected waited Supply growth in our Market tracks for 2020 is approximately 2.7% off Supply growth in the market tracks of our top five ebitda hotels which over 30% of our hotel ebitda is about up 2% this year.

Finally about 20% of our rooms are located in Market tracks that have no new Supply growth this year.

Moving to my second topic are recent balance sheet activities and over overall balance sheet status during 2019. We further optimize our balance sheet. We completed the final draw on our long-term loan that matures in 2023 and lowered the pricing grid on another term loan and paid off to secured loans at year-end. Approximately 70% of our debt was sick or hedge to fixed are weighted average duration is approximately four years or weighted average interest rate declined approximately 10 basis points as compared to your end 2018 month and that was due to a shift in the mix of debt and the decline in variable rates.

our leverage ratio

That's adjusted ebitda was 4.1 times a year end pro forma for the pending sale of Renaissance. Austin our net debt-to-ebitda is approximately 3.9 times. We continue to have well-staffed of debt maturities with no maturity this year in addition our balance sheet continues to be strong. We have 31 unencumbered assets that together represent over 70% of our annual Hotel Eva. That's inclusion. The company is well-positioned for the current operating environment. We continue to be active and make progress and matters in our control such as asset and project management transactions and other forms of capital allocation. We remain focused on creating value long-term value to our strategy of owning high-quality luxury and upper-upscale lodging assets in top 25 markets and key Leisure destinations.

That concludes our prepared remarks turn the call back over to our operator date. So we take our first question, please.

We will now begin the question-and-answer session to ask a question. You may press * then one on your telephone keypad. If you're using a speaker phone, please pick up your handset before pressing the keys to withdraw your question, please press star then to our first question is from David Katz from Jefferies.

Go ahead. Hi. Good morning, everyone.

Thank you for the copious detail. Look. I wanted to just go back to the one comment earlier Marcel about being you know, much more like a seller then a a buyer which makes you know, certainly makes perfect sense today. Can you to talk about the boundaries or parameter of how you're thinking about the criteria for for you know what you would sell and any, you know indications on order of magnitude or size and kind of what the key barriers are wage to getting things done as you see them right now.

Sure gave it's really not much has changed in the way that we look at potential dispositions from and what we've talked about over the past few years, which is a lot of dispositions that we have that that's kind of fit into a bucket where we viewed assets being, you know, somewhat optimized under our asset management expertise situations where there is a pretty significant amount of capital that needs to go up asset that we don't view as a as an appropriate return locations that just don't fit with our long-term strategy of where we really kind of focus our strategy on at this time. So, if you look at what we've done historically, you know, most of the most of the dispositions we've done it really fit into that those type of categories and and I would say that Renaissance Austin which we just announced is is another example of that type of disposition pretty significant amount of capital that needs to go into the asset. So we're pleased with the execution and pricing assuming that the obviously move forward to closing off.

currently anticipated

That'd be acceptable. Also look at whether it makes sense to opportunistically sell some Assets in the portfolio, you know particularly current in the current situation. Like I said where you really do see a private Market valuations, that's that show pretty good disparity with public market valuations and we've done some of that in the past to you know, when we sold the the Aston Waikiki that was really kind of looking at that situation aside from Context it was going to be needed at the asset. But also some of the select-service assets we saw, you know, the end of end of 18 when we sort filter bar near Residence Inn, uh dead, you know don't already kind of fell into that bucket. So, you know, we continue to look at whether we can create value for sure. It will exclude those separate transactions to

Right and at the risk of asking an extremely short term question, you know these past couple of days have been you know, categorically negative is there, you know any up-to-the-minute information that's you know shareable with respect to the, you know, financing markets or any behavior. That way you can point to either qualitatively or specifically

No, thanks specific to your point. It's I mean, obviously there's been a lot of movement in the market the last couple of days, but from what we've seen really in, you know, the off season passes that fancy markers have stated, you know, we very much open for transactions and for refinancings, very aggressive financing terms have been available. So I really haven't seen any changes there of anything. It's it's been you know more open than ever before. So most of your work out any kind of short-term impact here is going to change that to a very significantly but obviously too early to tell as well as

For sure. Okay. Thank you very much.

Our next question is From Austin Will Smith from keybanc Capital markets. Go ahead.

Good morning, everybody. Just touching on you know, the the big renovation at the the Park Hyatt Aviara, you know, assuming virtually, you know that goes to two zero contribution this year. I'm just curious. How how did you with all the moving pieces arrived at at you know, the the significant disruption from that, you know overhaul and renovation there and then as you think about the ramp into 12 a.m. Does that get back to the 2019 level of of call at eight to nine million or could you potentially see it exceed that level into twenty twenty-one?

Yeah, awesome. Obviously, that's why we allude it's probably all three of us in some regards during our prepared remarks talked about the significance of the renovation and and the disruption that it will come back on twenty-twenty and my, as I pointed out we really kind of compressed the time frame as much as possible into twenty-twenty which will obviously create some more disruption this year it all she has frankly that we all performed our underwriting and nineteen also means that it's it's worth the end of twenty. There's going to be very little work that hopefully still needs to be done going into twenty one, which really sets a very well for us to age Twenty-One and you know, certainly it is approved short-term impact that we're seeing here where we absolutely expect to see not only the numbers that you're referencing for less significant growth coming off of that what it all starts hitting in twenty one. That's obviously we'll talk start talking about as we get deeper into the year, but it is something where our asset management team and our operating wage.

At the property are very much focused on what this Resort will look like coming out of the renovation including the appropriate type of business on the books coming out of these renovation. So nothing that we've seen a s s

S the VIN our enthusiasm for for this property and how we expect to stabilize this property in the next few years.

Thanks for that. And then as you you look into twenty Twenty-One any assets that have big capex requirements coming up and then with kind of tying that to your comments on on being a net Samsung. How would you prioritize potential uses today?

Is it related to Capital requirements are obviously looking at our current five-year Capital plan? There aren't a tremendous amount of room Renovations that we will be dead in twenty one. Clearly what we're doing this year is is much more impactful than what you'll see going at Twenty-One. So it will be you know, relatively limited next year or so certainly would expect too much disruption to drop off significantly certainly would expect to see the growth coming off of the things that we talked about, you know, the assets that are being disrupted this year and month in the growth coming from some of the newer assets and that's you know, it doesn't only mean growth coming off of Portland's which we expect to start stabilizing over time. But also some of the other newer assets we bought over the last few years. So Thursday, we think Twenty One cents up very well for us from that perspective as I as I talked about before we

mentioned the current disposition that we have under contract if and when their future transactions on the disposition side, you know when the time is

We will we will talk about those and clearly our view is is if if and when we do some of those transactions to my points to my prepared remarks to we would look to Fergus off the balance sheet and and be in a position to use all the different Capital allocation tools that we have at our disposal and as we've done historically, you know, we've been active on on share Buybacks in the past. We've been obviously very active in in Iraq now sets and you know, we also have an active in managing our balance sheet overall from that perspective. So all those tools could be at our disposal and you know to the extent that we do this with this position that it reads off and on the the number and amount of those to see where the priorities my life.

All right. Thank you.

Our next question is from Ari Klein from BMO Capital Market. Go ahead. Thank you. Just following up on the Park Hyatt Aviara Thursday. I believe on when you acquire the property on Project stabilization. You are targeting Seven Seventeen to twenty 1 million dollars and in ebitda. Is that still still your target?

Yep.

Absolutely. Like I said in my earlier answer to the earlier question, nothing we've seen as the minutes our our view of where we think this has to stabilize isn't you know, I think it's it's really worthwhile to kind of talk a little bit about our our investment basis in this asset to you know, we're we're going to be in after the renovation at about the 225 million dollar number that's very referenced and if you look at a cost per key for our asset compared to comfortable resorts in particularly in California that was sold for well in excess of a million dollars apiece, you know, I think we're going to be extremely well-positioned with our basis and not very competitive with those type of resource and and drive a very good return off of our investment there.

Okay, and then maybe turning to expenses you mentioned the Sunbelt markets have maybe lower lower expense headwinds and some of your other markets. Can you talk about the differences you're seeing seeing across your markets from suspense growth perspective and maybe how you see that trending Beyond this year.

Yeah, sure. So.

She, they are wage growth this year. We're looking at between three and half and 4% which is probably about a hundred basis points higher than we experienced in 2019. And I think that's certainly a big part of that. When you look at the relative number of our hotels where our managers have the ability to really both we're we're in markets where there may not be as significant wage growth is there maybe in some of the major Urban centers combined with our managers ability to really continue to effectuate the ability to control expenses through that are scheduling and things like that. It's it's really pretty consistent across our Port bow. There are a couple of outliers. We're we're we're seeing wage wage growth into the the mid and even low upper Lounge a single digits this year really in cases where our managers are identified for us reasons to kind of match. To the market which in some markets is simply more competitive than others as it relates to log.

Food Service businesses and other

Service industry businesses and we've we've generally listen to their recommendations and improved those within the budgets.

Thank you.

Our next question is from Bryan Mayer from B Riley. FBR. Go ahead. Yes, good morning. When we look at asset pricing from a sales standpoint. I mean, I think most people would agree if we listened to most of the lodging RI conference calls that asset sales have been done at fairly attractive prices for the wreath. But what's with what's going on with you know, kind of coronavirus and the the significant sell-off in the shares of the public companies over the past, you know, a couple of days a couple of weeks. Do you anticipate that will change and thus impact your ability or desire to sell assets in 2020.

On General I think my answer day would be Brian. That's it's obviously early days for really figuring out what the overall impact of coronavirus is going to be over all throughout the economy and in the lodging industry particular, so, you know the way we look at it. It's certainly we're expecting, you know impact on operations and it's highlighted some of the the immediate impact that we're seeing and we like everyone else are I'm hopeful that the that the impact is going to be relatively short lives and there's something that will get under control fairly quickly werewolf light and and not impact things to to dramatically change from that perspective the our view of it is that's as we sit here today that's really hard to say, whether there's going to be significant to make a significant impact on on valuation for assets off our view is that if you look historically, you know, these type of these type of issues have popped up in the past obviously and depending on where where it happened with the overall impact was dead.

Theater, you know shorter or kind of a medium-term impact, but over all this is something that's you know, once it's in the rearview. Hopefully, it's something that

Hasn't the overall impact of the long-term kind of trajectory of some of these some of these valuations and then my second question is you guys have done a really great job at controlling costs and you know much better than most of the lodging reach the that we cover. Where do you think that there's still some of the biggest opportunities to kind of offset the increases you're seeing on the wage side home and property taxes still to come?

Thanks Brian. I think we continue to see it in largely again employed is relatively new to us. When we look at the volume of assets be acquiring and Seventeen eighteen a no nineteen Q Portland. So we think properties are new to most certainly have a much greater opportunity for us to really dig in whether it's through our day-to-day asset management or are specific property optimization process and identify areas for opportunity. I think continue continually certainly the biggest opportunity is in labor not necessarily on the wage side not send the body side of scheduling which our managers we think are getting better and better at and we're finding opportunity to assist them with that. We think there are still going to be benefits in the near to mid-term from

The in part related to Brandon consolidation, but where their system fees.

Are in fact lower costs and they've been historically we think we'll continue to be as a beneficiary of that. And then I think you know depending on what happens kind of in the world and it changes over time. But certainly we're seeing in the case of of food and beverage pricing. We're seeing very competitive markets the ability to purchase those items at costs that are generally not rising and emotionally levels right or rather any relation or levels which in the case certainly relative to other parts of the p&l is beneficial to us.

Hey, thank you.

Our next question is from Michael Bellisario from bear. Go ahead.

Hey, good morning. Everyone. Just one more on Park Hyatt Aviara. Just send the accelerated renovation there. How much are the change is often very specific and then you know, maybe related to the 2019 high performance that that you referenced versus any change in your broader industry view that you're seeing kind of towards $21,000 that you want to get this project done sooner.

In general as men very talked about this a little bit. We we went through a very detailed and uh and and thoughtful way of looking at how we just schedule this renovation and and took it earlier really came to the conclusion to try to try to compress it as much as possible into twenty-twenty that really wasn't driven as much by looking at overall market demand factor of thing like that more as it was more based on controlling the cost of the project overall making sure that this was all a very consistent and congruence renovation. We're we're really, you know hit it right away after the renovation is Dawn would have very refreshed product that we can really in some ways and we rely on the higher to to relaunch it as a very different product and what was before so it was much more driven by by our views of the overall project and managing the project and and getting ready for that rebalance. Now that being said I think what you said.

Is that it may not be a bad year or two to do it this year more so than in to 21 and 22, which should only help us in hopefully, you know limiting the 3rd.

Option a little bit more getting it done this year and really being able to be in a great position going into 21.

That's helpful. Thank you.

Our next question is from Tyler battery from Jenny Capital markets. Go ahead.

Hey, good morning. Thanks for taking my questions and I appreciate all the detail here. Thus far just a few quick follow-ups for me, you know on the Portland acquisition you talk a little bit more about Citywide and Convention calendar in Portland both this year and in the next couple of years then also just talk about any competitive Supply in Portland as well.

Yeah, I'll talk a little bit about the Federal Supply first and and variable jump in with with more of the the group of Citywide info. So on the Federal Supply peace, as you know, there's been a good amount of Supply that's going to add it to Portland over the past few years and I'm frankly very still a good amount of Supply to seeing at it right now. The bulk of the new Supply coming in right now is obviously are six hundred rooms with our hotel were added to this month and what I'll say there is that our hotel is very different from the majority of the the other type of additions. You've seen to the room inventory there. There has been a very significant increase in more of the lifestyle Boutique. The assets in the market and that's certainly watered-down one of those type of assets in the market. Our hotel is very different. I talked about, you know, both location next to the Oregon Convention Center the synergies with the Oregon Convention Center. This is absolutely Far and Away the best group hotel in the market. So the way we viewed is dead.

It's a great opportunity with hired excreted increasing its exposure here having a hotel that is going to be not only the best group hotel in the market, but also be a great alternative overall in the Pacific Northwest and frankly.

Throughout the West Coast as a as a meeting alternative to some of the other locations on the west coast. So from that perspective. Yes, there are Supply that has been added to Portland. Yes, they're still am coming in but it's all over very different nature than this asset, which is going to be a pretty unique assets and in the market and I like Barry talk about some of the from the overall group dynamics in the market. Yeah. Sure. So tomorrow we're in and and that we track of them are so the markets were in Portland for twenty-twenty has by far the highest group page. Now, you would expect that that group pays on for Citywide in June 2020 is up in the mid 20% range. Now you'd expect that because they're getting for the first time and Tru Head Quarters Hotel, but Jason the convention center. So so we think that we think it's positive want to overstate the case because it's it's a little different environment. So what we do know and and what I think we have a lot of confidence in is really some of the pieces Marcel said is that this is the first time you had a convention.

Centerhotel attached to the Convention Center event center was renovated. Portland is has very very good airlift particularly on the west coast. We think that opens up lots of opportunities for we're not just objects protections that particularly Regional and West Coast wide and even ultimately we think they can be a player the National Convention Market with this 600-room convention center hotel and mention the status of our group bookings of the hotel relative to our budget for years. So we feel very good about 20 20 right now city-wide Paces a little softer for twenty Twenty-One, but we've got a full year now that the hotel Zone Meeting Planners can see it and they can really have the opportunity to book the hotel you're out and have some sales teams focus on now every day is showing that meeting planner who they never really believed. It should see it opening now walk into an absolutely gorgeous 600-room meeting hotel that can use the convention center. But also is designed very efficiently and has exactly the right meeting space to be able to do in-house group when we thank God.

It with the highest system and being really the premier being property in the city. It's going to have a great opportunity to be able to do that.

Okay, perfect. And then just to follow-up you're wondering if you can talk to trends that you're seeing at your Resort assets more urban located hotels. Just curious if you're seeing any known no differences in performance.

I think if you look at 2 for our largest Resort assets, we're set up for relatively softer Group business than what than what they did in the prior year and I was pretty consistent across our larger group hotels in October and November they were able to very well back feel that with transient business and we saw through the holidays as good a transient business around the Christmas holidays as our hotels of generally ever seen at that time of year. So we think that speaks well to the strength of the the strength of them were particularly true consumer and their ability to

Continued at least through the data that we have, you know through through your end, but we're also seeing that continued a little bit into kind of the winter season as well desire to book quality Resort and good money. Not just on rate, but also a lot of ancillary spend while they're at the properties as well.

Okay, great. That's all for me. Thank you.

Our next question is from Bill Crow from Raymond James. Go ahead despite its dead Orlando number one any change in Leisure demand in the market is being reported based on coronavirus off interesting very very little Bill. We had one large group International group of Grand Cypress that had a very small contingent from China not attend that convention but in terms of overall Transit business, we are not hearing that and our Resorts or at our hotel could be minded to one of our hotels plays in the downtown Orlando market wage and the other two while they are certainly transgender Giles. They generally have not relied on International transient, but we're not seeing or hearing anything in the market overall at this point.

Okay, and the second question on that market is just now that your Ballroom is done.

Talk about the bookings that you've been able to generate and how that compares to your expectations.

Really? Well really well as a simple answer the more detailed answer is you know, we've got group paste growth. Hi Teresa Grand Cypress well into the double digits for this year and which was always kind of we've been tracking toward that extremely well. It's been very well received the hotels able to juggle multiple groups in multiple bars the same time frame operations perspective, which I was good and I think we're certainly in terms of our overall expectation for the resort this year very much on track in terms of return week's kind of the ballroom and are already seeing tough scene for quite some time pays for 21. Also look really really good over twenty which again to some extent planners are always going to be a little hesitant. We found to book that space and then we actually see it but it's just doing it a ton of fans getting a ton of Meeting Planners in there and response has been very very good.

Second question second topic is the cap for the renovation repositioned efforts this year a big red.

Is being able to get the ff&e from asia-pacific area this year? Yeah. So we've spent a lot of time working on that as you can imagine. I think it goes to one of the benefits of of us having our entire project management function in house with our 9 person team and project managers that are in touch with the purchase of an agent and the properties every single day. So I guess just to mention on the our three largest projects. We have very very little risk and Aviara because we essentially the the longest off my lead time items being the guest rooms and the meeting space has all has all been obviously ordered in Warehouse here and we're going through that process of finish those two choices the project up there's some small Furniture pieces that potentially could be delayed the project that we're tracking. The most closely is our Marriott Woodland guest room renovation a log.

Furniture is manufactured in China. We have a lot of lead time on that seal and we're we're getting answers. It's obviously not where we don't have 100% confidence in the answers. We're getting at this point every week. We do know that we have had some shipments go out on on items in the last week or two for some smaller pieces of project and some pieces light carpet, for example that are critically important projects and then we have other projects like our meeting space renovation at 3 and Cypress Ballroom where we are not using an asian-based vendor for that at all. We using to lead vendor for that. So feel pretty good about it so long, it's something we're watching very closely in most cases. It's any delays at this point would seem to be in smaller Goods. It can be easily replaced or repurposed with existing wage if we needed to

great, and and finally from

I think a t show it was you that mentioned the challenges from crew business in San Francisco pieces quantify your exposure to the crew business office across all your markets. I mean not individually, but just yeah, I mean it's going to be the one where we've actually got a little bit more crude business and other than other markets and it's you know less than 10. Other than that on there. Uh, so that's that's how I would characterize it, you know, the the to date impact that we talked about the 1 million dollars suggested even thought about half of that would be Santa Clara half of the SFO. So that's what we've seen so far in terms of, you know, lower crude business at s f l and then in Santa Clara it's just uh, it's been off-and-on some group business tech-oriented Group business where folks from you know, Asia or not not able to come in

That's it for me. Thanks.

I would now like to turn the conference back over to Marcel for bath for closing remarks. I would like to thank everyone again for joining a call today and like to reiterate how excited we are about the portfolio that we have built and the embedded opportunities for growth in the future. We continue to believe we are good allocators of capital demonstrated by the potential of our new life hotels are recent and anticipated Capital expenditures and our strong balance sheet and pass. These have provided us the ability to outperform and will be the important drivers that we believe will prevent potential for the company and twenty Twenty-One and Beyond and we look forward to updating you in the quarters ahead.

Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

This concludes our question-and-answer session.