Q1 2022 Xenia Hotels & Resorts Inc Earnings Call
Same property basis for 32 hotels, excluding Hyatt Regency, Portland at the Oregon Convention Center, and GW Nashville, an archive of this call will be made available on our website for 90 days I will now turn it over to Marcel to get started.
Thanks, Matt and good afternoon, and thank you joining our call today.
The pace of recovery aspect, though since our last earnings call in early March.
As reflected in the results we reported this morning.
And in March was strong and that has continued into April .
With a strong leisure base iron levels with business business transient and group demand allowed our properties to grow revenues above our expectations.
We expect this demand strength to continue in the months ahead.
Okay.
On a company wide basis, and a net loss of $5 $5 million in the first quarter.
Adjusted EBITDA was $49 9 million and adjusted <unk> per share was 25.
Okay.
Despite the tough operating environment in January and early February and the omicron bearing surged.
88% of our properties generated positive hotel EBITDA during the quarter.
Okay.
Revpar for the quarter was $149 60.
Or about 20% below the same period in 2019.
Which we believe is an excellent result, given the significant weakness we experienced in January and how seasonally strong the first quarter of 2019.
Okay.
When we reported year end results, we provided the information on both January and February .
As we outlined at that time, the omicron bearings impacted performance at the beginning of the year.
However, starting in mid February the recovery was back on track and this was reflected in our February and March results with Revpar of $157 28.
And $189 36, respectively.
Representing decreases to 2019 levels of 19, 1% and five 9% respectively.
Our March results were particularly encouraging as occupancy was almost 70%.
ADR was approximately 11% higher than March of 2019, and hotel EBITDA margin was approximately 220 basis points higher than 2019.
As a result, our March hotel EBITDA exceeded the level achieved in March of 2019.
Okay.
With ADR up seven 3% compared to the first quarter of 2019, we continue to be pleased with our operator's ability to drive rate growth at the demand mix evolves.
Corporate transient and group demand continued to show significant improvements and accelerated into April .
Our estimate of April occupancy of approximately 72% Mark the highest occupancy we have achieved since the onset of the pandemic.
And coupled with an approximately 18% growth in ADR over April of 2019 drove an estimated April revpar that exceeded 2019 April revpar by 4%.
Highly encouraging given the historical seasonal strength or the month of April within our portfolio.
Okay.
Our results during the early phase of the recovery have been evidence of the success of our long term portfolio strategy.
Allowing us to recover at a faster pace than many of our peers.
We continue to benefit from our geographic footprint as well as the high quality level of our portfolio.
We continue to be strong believers in the benefits of being located in higher growth sunbelt markets and having a diverse set of demand drivers for our assets.
Our long term strategy has allowed us to benefit from our demand mix geography, and property type advantage without having to make a change in our investment strategy.
While we have benefited from strong leisure demand throughout our portfolio.
We believe we are poised for continued growth as business transient and group demand recovers.
We have seen encouraging signs here over the past couple of months, which Barry will highlight in his remarks.
With a number of our assets being geared more towards the corporate and group travelers. We believe we remain well positioned to see substantial revenue and profit growth in the months or years ahead.
As demand from these segments further accelerates.
Okay.
While many of our hotels and resorts were successfully able to pivot and captured a leader demands throughout the early part of the recovery, including properties such as hydrogen C Grand Cypress <unk>.
Keith I agreed to see Scottsdale at Park Hyatt <unk>.
As well as our Houston and Dallas hotels.
We believe these assets to reap significant benefits from the recovery in the business transient and group demand and historically constituted a significant portion of overall demand at these hotels and resorts.
Adding the growing demand from these segments on top of continuing strong leisure demand.
Further allow our operators to optimize demand mix and drive both occupancy and rate gains.
Additionally, our hotels in markets that have been slower to recover such as Santa Clara San Francisco and Portland are.
We're not experiencing encouraging demand growth from all segments, providing further opportunities for meaningful revenue growth within our portfolio.
Okay.
I have spoken many times over the years of our desire to continuously grow the quality and growth profile of our portfolio.
We are steadfastly adhere to our strategy of primarily owning uniquely positioned luxury and upper upscale hotels and resorts and higher growth top 25 U S lodging markets and key leisure destinations.
Through our acquisition and disposition activities. Our current 34 property portfolio has improved substantially from the portfolio. We owned at early 2015.
We believe this not only reflected in shorthand statistics, such as portfolio Revpar and EBITDA per key.
But also in the way, we have been able to recover from the impact of Covid.
And our favorable positioning as the recovery continues.
Yeah.
Our recent investment activity and a continuation of the execution of our long term strategy.
As we discussed last quarter, we completed the opportunistic sale of hotel Monaco Chicago in January at attractive pricing.
Allowing us to exit a challenging markets and divestment of a hotel that we believe could struggle to returning private fleet performance.
Okay.
In March we completed the acquisition of W. Natural <unk>.
Transactions that we announced at the time of our previous earnings reporting.
We continue to be extremely excited about this acquisition and the earnings growth that we expect will be in Nashville to deliver over the next several years.
The property is ramping up well and the results during our first full month of ownership were highly encouraging as its revpar of approximately $270. During the month of April as was excited pretty busy season that lies ahead.
That's the hotel opened in October of last year.
This spring and summer season is marking the first time that the hotels offering all of its impressive amenities to guests and locals alike.
With a rooftop bar and its full facilities that are both second to none in the markets.
We believe the wholesale is poised to see significant growth in food and beverage revenues as well as the room revenues over the months ahead.
Nashville is a tremendous high growth market and we are thrilled to own what we believe that the most desirable hotel in Nashville.
In addition to the earnings growth that we expect to achieve affiliate Nashville. We are encouraged by recent results at some of our more recent portfolio additions such as park Hyatt <unk>.
At Hyatt Regency Portland.
As well as record performances at Hyatt Regency Grand Cypress, and the Hyatt Regency Scottsdale.
Our investment thesis for all of our recent acquisitions remains intact.
And we are excited about the growth opportunities. We believe we have created for our company.
Investment activities over the past several years.
Okay.
We remain focused on driving superior risk adjusted returns through ownership of premium hotels, and higher growth top 25 markets and key leisure destinations.
We remain focused on allocating capital to drive strong returns.
As we have shown consistently over seven years since our listing we will continue to execute on this strategy through both targeted capital expenditure projects and a combination of acquisitions and dispositions.
With that I will turn the call over to Barry who will.
I'll provide additional details on our performance during the quarter and an update on the significant capex projects, we have scheduled for this year.
Thank you Marcel and good afternoon, everyone.
For the first quarter.
Same property portfolio occupancy is 58%.
Average daily rate of $258 12.
Resulting in a revpar of $149 and <unk>.
On an absolute basis. This marks our highest revpar quarter since the storm dependent.
Seven 3% higher in ADR, and $19, 5% lower revpar compared to the first quarter of 2019.
The sequential improvement each month during the quarter.
Revpar was just five 9% below March of 2019.
We experienced significantly weaker than expected corporate and group business relate to the omicron Bernanke in January with occupancy coming in at 44, 1%, albeit at an average rate of $233 45.
Which exceeded the average rate in January 2019, 2%.
By mid February we saw a lessening impact from Alcon, and very strong leisure business over Valentines day Presidents' day with over.
February occupancy of 68% and an average rate of $258 53.
Which was 6% higher than the average rate achieved in February 2019.
By March leisure demand related to spring breaks short term corporate bookings and researches in corporate demand more than covered any omnicom group cancellations as we achieved 69, 2% occupancy and an average rate of $273 50 to four.
Were 11% higher than the average rate in March 2019.
On a revpar basis January was 36, 7% lower in January 2019.
February was $19, 1% lower than February 2019, and as I previously mentioned by March the gap to March 2019 has been reduced to just five 9% the smallest gap since the start of the pandemic.
During the quarter, we had five hotels achieve occupancies above 75%.
Hotels are leisure focus and drive to markets, including key West Savannah, Orlando, Birmingham, and Charleston, all of which continue to show remarkable strength.
We also had 22 hotels, representing nearly 70% of the portfolio achieved higher <unk> in the first quarter of 2022 and they did in the first quarter of 2019.
We continue to work with our hotels to identify opportunities to drive ADR and ensure that our properties are providing onsite amenities and services that satisfy our guests.
These cancellations in the first quarter amounted to approximately $10 $2 million of rooms revenue, which had been on the books for the first quarter of 2022 with these cancellations primarily related to the omicron variant.
We recognized approximately $4 $6 million in cancellation and attrition fees during the first quarter.
Ashish will discuss 2022 group pace in more detail shortly.
In terms of profit 28 of our same property hotels achieved positive hotel EBITDA for the quarter with nine properties exceeding results compared to the first quarter of 2019.
11 hotels achieve EBITDA margins greater than 30% from the first quarter and 14 hotels generating EBITDA margins greater than in the first quarter of 2019.
Our properties in the respective management companies continue to do a very good job in controlling margins.
The first quarter Hotel EBITDA was $57 million declined 27, 9% on a total revenue declined 28% compared to the first quarter of 2019, resulting in hotel EBITDA margin declined 275 basis points to 27, 8% due primarily to the impact of the very soft January and larger than typical food.
In beverage mix throughout the quarter.
Hotel EBITDA margin grew significantly during the quarter from 10% in January impacted by significantly lower than expected occupancy levels to 29, 6% in February and 36, 2% in March which exceeded March 2019 by approximately 220 basis points.
Our hotels, thanks to the efforts of our operators continued to work very hard at controlling expenses, while ensuring a high quality of the guest experience in the quarter. These expenses declined by over 18% compared to 2019, well undistributed expenses declined 14, 1%.
Within the undistributed expenses the greatest decline into Q1 of 2019 were seen in AMG and sales and marketing, which declined 15, 5% and 19, 5% respectively.
Our operators report that their recruiting efforts has improved and there seems to be increasing availability of labor and the large majority of the markets, where we owned hotels.
Our operators continue to focus on optimizing productivity and operating models and business levels and guest expectations increase.
For the month of March total hotel employee compensation as reported by our operators was approximately 5% higher on a per occupied room basis compared to 2019.
We continue to estimate that wage rates across the portfolio will increase in the mid single digits in 2022 versus 2021.
Leisure business continues to be strong throughout the portfolio with increased booking windows for our most popular drive to destinations in resorts throughout the first and second quarter.
Hyatt Regency, Scottsdale and high recent Grand Cypress, She had the highest ever levels of both revenue and profit during March.
Continue to be impressed with the performance ramp up the park Hyatt <unk>. So the hotel's ADR in March was over 50% higher than in March 2019, as the hotel continues to attract significant leisure and group business and understand the dramatic transformation at this property.
Hyatt Regency, Portland achieved nearly 56% occupancy in March as in housekeeping business, Portland Convention Center business and eventually the adjacent Lewis with significant occupancy contributors, we look forward to a strong summer this conference.
Beginning in mid February we began to see significant pickup in corporate volume accounts net production and our largest volume corporate accounts approximately doubled from January through March.
Business travel is continuing to pick up as evidenced by increases in occupancy level on Monday, Tuesday, and Wednesday nights and transient business for the remainder of the second quarter.
Do you use to increase overall.
Over a week.
Although it's still down in the 18 to 21 occupancy point range in March compared to 2019.
Monday, Tuesday, and Wednesday that Occupancies, we achieved in March representing an improvement of 712 points from the levels. We saw in February and I'm truly indicative of the acceleration in business travel.
Turning to Capex during the quarter, we invested $7 $5 million and portfolio improvements here.
We are pleased with the completed the renovation of the Guestrooms lobby and restaurant at the Waldorf Astoria, Atlanta, Buckhead and also the renovation of the meeting space at Marriott Dallas downtown.
We began a comprehensive renovation of the Kimpton Canary Hotel, Santa Barbara, including the commencement of renovations to the restaurant and bar These top lobby and meeting space.
Renovation of the public spaces is expected to be completed in the second quarter and Guestroom renovation is targeted to begin in the fourth quarter and be completed in the first quarter of 2023.
We've continued planning work on the comprehensive renovation of Grand Bohemian Hotel in Orlando.
Bleeding guestrooms with substantial tub to shower conversions restaurant and bar lobby rooftop pool area and meeting space, which is scheduled to commence this quarter and is expected to be completed in phases, including in the second quarter of 2023.
During the quarter, we continued planning work on a number of additional projects that will take place during 2022, including the renovation of the meeting space and conversion of the existing lobby partner with Starbucks outlet Fairmont Pittsburgh.
Renovation of the meeting space, a royal Palms resort.
Completion of bathroom renovations at Marriott woodlands.
<unk> the premium suites at the Ritz Carlton Denver, including the addition of three new <unk> Ts and renovation to meeting space restaurant and hotel Monaco Denver.
And part cannot be Ara, the comprehensive renovation of existing golf, which began in the second quarter. We continued planning work on a significant upgrade to the resort spa and wellness components.
We continue to focus our capex efforts are numerous building infrastructure projects. The particular emphasis on environmentally sustainable projects to enhance the life and resiliency of our physical structures, including six chiller replacements or upgrades in 2022.
With that I will turn the call over to Ashish. Thank.
Thank you Barry I will provide an update on our balance sheet and update on group pace and a bridge to pro forma 2019 earnings.
As to our balance sheet. It continues to be a strength of the company. We have no debt maturities until 2024 virtually virtually all of our debt is at fixed rates that pregnant.
With the cost of borrowing at just over 5%.
Relative to other lodging Reits, our leverage ratio is modest in part due to the decisive actions we took during 2020 and 2021.
And we have no preferred equity and our capitalization.
Presenting another tool that we could utilize in the future.
We expect our balance sheet to continue to be a tool to support the companys overall long term goals.
Turning to our corporate credit facilities.
Which consist of an undrawn line of credit and one one term loan we expect to exit the covenant waiver period around the time that we report second quarter results.
So in about late summer.
We expect that we will meet the amended and relax covenants that will be in place debt.
As such for the.
Our remaining restriction that is currently in place, namely a prohibition on share buybacks and dividends is expected to add.
As the past dividend practice by way of reminder, pre Covid, we had an annual payout ratio in the mid 60% of that range and we had been paying an annual dividend of $1 10 per share pre COVID-19.
Moving ahead to thoughts on 2022, we continue to be optimistic about the trends we are seeing.
Group revenue pace is strengthening with 2022 paid about 23% below 2019 levels.
This reflects room night pace down, 27% and rates up 6%.
The second half of 2022 continues to look better with the gap to 2019 shrinking and rates strength evident for the second half of 2022 paces down about 20% versus 2019. This reflects room night pace down 28% rates up 10%.
The group revenue pace numbers I, just provided where as of the end of March and we expect to have continued to improve in April based on commentary from our operators.
Finally, I would like to remind everyone about various puts and takes as you think about what 2019 earnings would have been on our current 34 hotel asset base. If it had been stabilized at that time.
On a same property basis for 32 hotels, we earned approximately $250 million and adjusted EBITDA already in 2019.
While 2019 does not reflect peak earnings for every property in our portfolio. It is a good target to use.
To bridge to a pro forma 2019 earnings there are few additions as follows.
First Hyatt Regency, Portland, which opened in late 2019, it is expected to earn $15 million of hotel EBITDA upon stabilization.
Second would be W. Nashville, which opened last fall, it's expected to earn $25 million to $30 million of hotel EBITDA upon stabilization.
And finally third earnings for ROI, driven Capex projects should also be included between 2018 and year end 2022, we will have completed about $250 million of these projects that includes projects at park Hyatt <unk>.
Regency Grand Cypress, Marriott Woodlands, Waldorf Astoria Buckhead.
Carlton Pentagon city and at several other properties.
Based upon our underwriting we expect this spend to earn at least $25 million of hotel EBITDA upon stabilization.
So reflecting these three items, we believe pro forma 2019 adjusted EBITA re.
If all 34 of our current properties had been stabilized would have been $315 million to $320 million.
<unk> continues to be positioned well to take advantage of the demand up cycle that we are beginning to see.
With limited levels of new supply growth on the horizon, increasing demand will result in.
Pricing power and we have just begun to see that dynamic our portfolio has some built in growth drivers and we expect to utilize our balance sheet to drive incremental growth over the next few years.
Before we turn to Q&A I want to welcome Amanda Bryant to our team. Many of you know Amanda from her time in New York and Chicago are delighted that she's joined US here in Orlando as of last week.
She will be helping lead our interactions with the investment community going forward.
And with that we will move to our Q&A session.
May we please have the first question.
Certainly.
Again, if you would like to ask a question. Please press star one on your telephone keypad. If for any reason you would like a question. Please press star followed by Tim and.
And as a reminder, if you're keeping a speaker phone. Please remember to pick up your handset before asking a question.
Our first question comes from the line of David Katz with Jefferies. Please go ahead.
Hi afternoon, everyone. Thanks for taking my question.
Well what welcome Amanda.
<unk>.
Look I wanted to just explore a little bit more Nashville, which has been such a strong <unk>.
Growing market.
If you could just shed a little more light on the segments within that market.
What specific opportunities should obviously, Jamie nice new asset.
But.
How does that sort of fit then.
As I said, a pretty dynamically growing market at this point.
Yeah.
Sure David This is Barry.
It really one of the things that attracted us most of the assets not just the growth that's been in the market and the physical quality asset both of which you mentioned, but I think it has the kind of mixed profiles that we've tried to seek across the portfolio, meaning that it had it does substantive has the opportunity to substantive group business, albeit in a rare.
Relatively small group.
Platform, it's very appealing to the group market and we've already seen that as a strength of the property even in the time, we've been there working with the property on how to identify additional group business, particularly music related business and where the property located geographically also gives us a really significant opportunity to participate in <unk>.
But demand from both the music business as well as the financial services business and the other businesses that have relocated and are relocating to Nashville, and then finally and I think people think of this as maybe it's primary demand driver, but it's really in our mind kind of the icing on the cake is the substitute leisure business with a property that is particularly that week.
Business, where you have people coming in from all over the country to celebrate events Bachelor and Bachelorette parties reunions group get together things like that so and we think over time, we will have the ability here to work with the property team to figure out how to best Flex those three components business to really drive performance based on whatever the market.
Conditions kind of dictate, but it's set up extremely well in all three segments.
Understood.
Just follow that up I think you gave us.
Pretty clear detail on what you expect it to earn or at least a range normalized.
What would have to happen.
For that number to say go up.
Is that just going to be a function of market growth or are there additional levers you can pull within it.
Yes, David as Marcel.
This is kind of piggybacking off of what Barry just SaaS.
We.
We underwrite these in a way, where we feel very comfortable with signs of extreme or another 25 to 30 megawatt range.
If we get all of these different segments kind of firing on all cylinders like 30, just talk about I think there is certainly upside on them. If you think about this hotels within them.
Ill cover.
And I mentioned the results on the top line as a percentage of room revenue in April .
Thank you that was the $270 in Revpar in April .
That's obviously very encouraging when you think about the fact that I believe I said on the last quarter, when we announced the transaction and we expect this property to stabilize.
Hello over $300 Revpar, so considering that we're at $270 here in April .
With all of the amenities still kind of putting in opening up now.
Opening up the pole facilities rooftop deck going into the summer season.
We are highly encouraged by that and I feel very very good about our underwriting at this time, obviously early where one month of inputs.
Nothing that we've seen so far as discouraged.
We're highly positive model what the potential is for himself.
And David I know youre going to be with us at the properties, but certainly the suites are an area the property at 60 suite. So.
The premiums we can get there the food and beverage spaces that Marshall talked about and then on the margin side.
<unk>.
Yes.
The underwriting that we could but there's potential there as well.
As the property really gets humming.
Okay.
Understood and if I can just squeeze one more in.
With respect to San Diego.
Is there.
Are there some comp issues or something in there.
I think we are observing that.
<unk> Revpar was up a lot versus 19.
And today it was a little bit different right it was down a little bit.
Is there a comp issue, we should be considering there.
It's not it's not a comp issue David it's more when you the numbers you see in those numbers in the in the earnings release are consolidated for both <unk> and beyond is San Diego downtown So theres, a little bit of noise and trade up in there.
Also the first quarter in particular, the first two months in <unk> and in that entire comps are quite weak primarily due to.
Weather and other issues.
We are very pleased with the performance and it was certainly in line with.
At Aviano certainly in line with the hotels Com set so.
It really just it's really more reflective of the seasonality I think from from Q4 to Q1.
Got it okay. Thank you very much.
Thank you.
Our next question comes from the line of Bill Crow with Raymond James. Please go ahead.
Thanks, Good afternoon folks.
A question on Dallas, which now has I think the largest.
Pipeline.
In the country and just sort of.
What are you seeing in Dallas, how much of that is competitive.
Tier downtown assets.
Yes, Bill having been in this business for a long time.
Seems like every year, you look at Dallas their level of supply going on.
So that's not something new.
Along with Amazon Dallas Metro is obviously properties are being developed in the suburban areas.
That arent directly competitive, but obviously still a lot of select service.
Select service supply.
Items being added as well there are certainly a few assets.
That are closer to us.
That.
Would have some impact on us we do feel like clearly Dallas doesn't have the same kind of leisure appeal open like some of the other markets.
When we were able to pivot more to the leisure demand. So that is a market, where we absolutely need to see some strengthening of corporate and group.
To kind of get back to those prior levels and we are seeing some encouraging results there.
Now Barry spoke about this a little bit in his remarks.
Certainly the midweek demand is improving in both markets.
April occupancy is.
It was up pretty significantly over where harsh was so we are actually seeing some signs of life in that market and are pretty encouraged by these recent trends.
Marcellus is that a long term hold market do you think or is that one that.
It was more of an opportunistic market.
Well no longer term, if you think about where we want to be.
We clearly we've talked a lot about wanting to be in the having a halving of sunbelt exposure.
Being located in certain markets in Texas, and it's for us something that fits fits within our strategy.
So that is not necessarily markets that we'd look to actively the south island now could we potentially look at a market like that to say hey, do we want to upgrade our presence even in the markets whether it's through the disposition of our acquisition of letters through additional investments in the assets that we do own there.
The assets in the market that has an extremely attractive.
Both of those hotels.
Earlier on in the last lifecycle.
So we feel really good about the basis that we have out there and frankly the returns that we earn on those hotels and we think theres more to come for US. There. So nothing that were actively looking looking to divest Donald and like I said.
You have a good diversified portfolio the geographic diversification that we aimed for a market like Dallas fits well into that.
Yeah appreciate it one for Ashish.
Any thing on the cancellation on attrition front for April or that you're aware of for the second quarter.
No not not certainly not to the same degree as the first quarter. So.
We don't expect.
Anything like quick scan of last couple of quarters.
Yeah Okay.
Alright, Thanks I appreciate it.
Great. Thanks Bill.
Thank you.
Our next question comes from the line of Dori Kesten with Wells Fargo. Please go ahead.
Hi, Thanks, good afternoon and welcome Amanda.
How long are you booking window changed of late for a leisure and business transient and group.
Okay.
Certainly we saw through the first quarter and we are seeing into early second quarter that leisure transient is booking further out the guests to really come to understand that if they want their first choice marketing first choice hotel they need to start thinking about vacations earlier I mean, obviously.
What what we all here and our personalized is certainly replicated by the hotels, which are guests who haven't thought about.
Planning, a vacation or often left with a third.
Third or fourth or fifth choice destination and in some cases, if there is market they're sold on a much lesser choice hotel than what than what they would have anticipated. So I think the leisure guests clearly understands that.
The volume corporate traveler.
So it is very close in and on group, it's very mix, we're seeing we still see a lot of in the month for the month group business even.
<unk>.
Companies, let's say, we need to have this meeting and we really want to have it now and hotels are really reacting very quickly to that.
At the same time, we're seeing probably equal amounts of business that are saying.
No we need to figure out a program by year end, we're booking that and then yet another equal amount so kind of in third and it's roughly in those amounts we weighted the property's describe it to us people looking to plan the programs for their preferred dates in 2023 and want to get on the calendar now before their preferred hotels get booked up.
Okay.
Goodbye.
The rate growth has been relatively strong for the last three quarters in a row are there certain markets, where you believe continued expansion may be less likely in the coming quarters.
And ultimately potentially because of seasonality when you look at we have some hotels that are seasonally strong in the first quarter I think in particular, when you think about.
Markets like key west in Scottsdale.
The strongest rate months of the year would have always stayed kind of behind us although weak we.
We saw substantial and.
Higher than normal strength in.
April went through late April than we would have seen some of that may have been too a little bit later Easter this year.
But what we're seeing in the markets that are ramping up a really good rate growth along with that occupancy growth and we're seeing that the.
Corporate traveler is a little bit more.
Not resilience.
Necessarily because there's nothing to be resilient from but we see rate accelerating from that segment as well as as properties and markets become more and more full.
Okay.
Okay, and lastly, what would you all need to see to to reinstate a quarterly or annual outlook.
A good question George.
We expect to reinstate.
Some type of operating guidance no later than when we report in August .
So that's where we currently intend to do.
Obviously subject.
Trends in our confidence level, but that's the current plan.
Okay. Thank you.
Thanks Terry.
Thank you.
Our next question comes from the line of Michael Bellisario with Baird. Please go ahead.
Thanks, Good afternoon, everyone.
Hi.
First question Barry if you if you kind of take March and April together.
How is demand and ADR look on a like for like basis. If you were just comparing group.
And leisure separately can you maybe give us the three different segments are performing on our ADR on demand basis.
So a little early for us to comment on that we're obviously working from a lot of estimates on on April .
What I, what I can tell you is that.
We saw continued occupancy strength in all of our drive to leisure markets. So I think that speaks to the leisure, which we also saw in the resorts.
Did see substantial demand pick up and most of what we would categorize as again, we don't we don't look at this as a sort of category, but in in the.
Large either urban or suburban markets markets like GC, Santa Clara Dallas.
Where we saw significant occupancy growth.
Primarily due to corporate business travel.
Okay.
Got it and then can you just remind us maybe today at point in time, what youre kind of rough customer makes sense.
And honestly, it's moved month to month, so I'm, a little reticent to put a number.
Out there and we haven't really talked about it through the pandemic in part because as you know also it's getting very hard to discern between that business and leisure traveler when they are on a combined state.
Okay.
We have historically been about a third group.
<unk>.
Just as a point of reference in the restaurants.
Transient whether <unk> or leisure.
And.
Long term I think we're probably had it Scott.
Tim.
Yeah.
Okay.
Okay Fair enough and then just last one for me a T shirt that initial.
The initial view on what you might do with your bonds.
Callable this summer and then.
Just your latest take on the recent capital market volatility impacted your options around refinancing hearts.
Yeah, I mean look we we obviously to some degree it's a math exercise.
And if it makes sense to call those I guess.
Something that.
We could do.
But.
Really the view Hasnt changed it we've got a good source of debt capital financing in the way of high yield.
I think thats a good tool for the company to utilize overtime, particularly as we continue to be opportunistic around transaction. So.
Despite the more recent volatility I think.
We continue to think of that as it is a good tool.
Thank you.
Thanks, Mike.
Yeah.
Question comes from the line of Bryan Maher with B Riley Securities. Please go ahead.
Good afternoon, maybe following up a little bit on <unk> question on rates are you seeing any pushback in any of the markets as you drive rate higher and then maybe thinking a little bit longer term.
As we continue to see inflation ramping kind of suck up dollars from leisure travelers.
What are your thoughts as we kind of get to the back half of this year and next year do you expect that that rate growth is going to start to slow down.
Across the portfolio and across segments, we have seen.
Very little if any great pushback that the rates, where our hotels are asking for they are typically getting and that's been true really across.
All segments.
We know how strong leisure has been.
<unk>.
Ashish gave some commentary about our rates being up on the group side, despite pacing down in <unk>.
So even with that even with a relative lack of demand.
We're able to the hotel has been able to drive.
A lot of rate.
As it relates to inflation impact on the consumer pocketbook certainly.
And what what we think about everything that we're seeing at least for the next three months as it relates to trade.
Transient booking pace is at <unk>.
Continued high and in many cases sequentially higher.
Right so.
Really hard to point to anything other than.
Anything other than conversation.
But that may be a factor down the road you mean, the operators continue to be.
The bullish about leisure strength into the summer.
Sure.
They look at not only forward bookings, but also.
The drivers of business, whether it's employment and economic growth household savings.
So.
We.
We obviously pay close attention to that feedback that we're getting from the operators.
That's our best indicator of how the summer shape up.
Correct correct.
Understood the benefits.
Out of our portfolio obviously.
We talked about a little bit.
One of the earlier questions is that we've always had a really good balance between the different demand segments within our portfolio.
The the way thanks for setting up for US now, it's very advantageous because we're building off of this casino in strong leisure demand thats out there.
And in the short term the consumers expect them to pay more for everything right now theyre seeing inflection everywhere. So that's not a surprise, but they are paying more for hotel rooms, too. So we're able to to capture dose Peter certainly here in the short term and we're feeling really good about where corporate transient.
And group demand is trending so it really gives us an opportunity to the extent that we need to pivot away from leisure a little bit.
We have the ability to really start accommodating more of that corporate transient and group again, which to various points.
<unk> is also coming at very attractive rates. So so far we're seeing nothing to suggest that we're going to get under lot of pressure.
Okay.
Okay. Just a second question for me on the acquisition appetite going forward and kind of what Youre looking at is the Debbie Nashville kind of representative of what might be the next property or are you still looking at smaller more niche type of hotels goodbye as well.
Well when you think about if you look at the W. In Nashville, and it's obviously it's.
A new property.
It's in our high growth markets, which obviously drove some of the pricing for warehouse Hello, Mike.
Just wanted to hi.
High quality, but when you think about the transactions that we've done over the last five six years, it's obviously very consistent with title quality level ourselves that we've been doing.
Where you will see us do.
Thanks for acquisition opportunities it could be a mix of assets, where there is more of a more of a project management component to it there is more of a capital component to it like there was for example.
Uh huh.
There are also assets, where we think we can that are in growth. Good conditional already where we think we can really use our asset management expertise to drive revenue and profit growth.
From our perspective.
Nashville was very consistent with the deals you saw at the back end.
2019.
During that timeframe.
And that's kind of how you should think about what our portfolio looks like longer term.
Cassini was moved to.
To have a high quality portfolio opportunity to upgrade the quality of the portfolio and continue.
To operate the the potential profits that we can derive from those assets.
Okay. Thank you.
Yes.
Thank you.
Our next question comes from the line of Ari Klein with BMO. Please go ahead.
Thanks.
On the group side it doesn't seem like a PE changed all that much from the last update can you talk to some of the trends that youre seeing there and maybe some color on individual market.
Yeah.
Yeah sure I mean, we continue to see strength, particularly around the rate side.
And you're right the pace did not change incredibly from from last time, we reported.
Couple months sort of the numbers stand with January versus the end of March.
We get a number of definite on the books with co ops and the double digit percentage range for the rest of <unk> 22, and 23, so that's a positive.
And the production is broad based I mean, certainly some of the bigger group oriented hotels in Texas, and Arizona, Georgia saw a lot of production some of our properties in California.
So.
The properties that you would expect to see the highest levels of production and where we have a lot of confidence is on the right side, where the hotels and the operators are properly navigating between.
I'm trying to get more group business on the books certainly there is there is capacity given that pace is still down relative to 2019.
But also preserving for what we expect will be continued strength in leisure and much higher levels of business transient as we get into later parts of this year.
So.
That's kind of how we look at it overall and continue to feel good about how things are shaping up on the group side.
Thanks, and then just maybe on the transaction market.
Now rates quite quite a bit here.
Or any change in investor appetite or.
Are you seeing any signs of cap rate movement, how do you think that evolves I guess yeah.
One on one hand, we have the recovery playing out but on the other hand.
So the tire.
Yes, Youre absolutely correct, you've got a lot of different type of factors that play and for US, there's clearly more comfort around the recovery and where.
Navios leisure driven book as we've talked about a lumpier during this call coming from different segments too.
Obviously Congress holiday it is really early frankly here with.
We've just seen now the more significant moves in interest rates, apparently reasonably here and in the short term here, we really haven't seen anything that.
That makes us so thanks.
So our expectation.
Sure.
Desires for pricing have changed so it's just early.
They change over time, we haven't seen it yet we certainly haven't seen a lot more product come to market, yet, which now could happen down the road to the extent that people say look it's getting more expensive to refinance and assets. Maybe it was the appropriate time is to potentially sell the hotel.
And that's why we we obviously will remain somewhat patient to us.
Next to traditional acquisitions.
Talking about that quite a bit really since since the early parts of a recovery.
We felt that the W. Nacho wasn't really unique and great opportunity for us to acquire an asset where we want to be longer term.
We're continuing to look at the pipeline and seeing if there are.
Additional transactions that could make sense for us in the short term.
To the extent that those arent there we are more comfortable with the pricing. We're also happy to.
To be patient to wait for the right opportunity.
Thanks.
Okay.
Thank you.
Our next question comes from the line of Austin <unk>.
Smith with Keybanc. Please go ahead.
Thanks, and good afternoon everybody.
When you guys spoke about the stabilization in hotel EBITDA and including the bridge you provided.
Stabilized total EBITDA at hotels like the park Hyatt <unk> Hyatt Regency, Portland, and some of the Capex other capex projects that you've completed since 19 at any of that changed from your initial underwriting given some of the moves in ADR as we've seen relative to the 19 and then maybe some efficiencies that's been achieved in the business.
Or do you think and I guess do you think there could be upside relative to that initial underwriting.
I know, we like to use 2019, as a milestone, but what's sort of the bull case I guess for exceeding.
Feeding those stabilized levels.
Yeah, that's a great question.
I think we continue to feel confident on the Portland underwriting at $15 million and hotel EBITDA Nashville is new to US you know obviously, we just acquired it so the $25 million to $30 million that we provided.
Best estimate at this point.
Spoke a little bit earlier about where there could be some upside.
I think on the ROI projects, Yeah, it's possible that there is more than.
And then the $25 million upon stabilization.
Just given some of the strength, we've seen particularly at <unk> and some of these other projects and how they've been received so.
I don't think it's necessarily all margin driven I think it's just more overall.
Revenue growth as well.
No.
Ancillary revenues and revenue growth.
That's how I would describe maybe the upside it's a little bit more on ROI capex type projects.
Got it and then.
Maybe another one for you you highlighted kind of the attractive leverage position relative to peers.
The potential use of press, perhaps you commented on.
Just overall plans use the balance sheet as the recovery per se. So.
Absent kind of the move in rates, how much dry powder do you have to pursue additional investments.
The near to medium term before you would need to tee up either dispositions or equity to fund.
To fund those those purchases.
Well I mean, I think some of it depends on kind of the cadence of that recovery rate, particularly after we get out of the covenant waiver period. So I mean, certainly one hundreds of millions of dollars, but exactly what don't know depends also on the timing of the.
Acquisitions of transactions I think the important point is.
We're coming out of this pandemic with as.
The healthy if not a healthier balance sheet.
Like some of the peers.
So we took the right decision to kind of strengthen the balance sheet. If during the course with that mix and the point on the preferred is just that.
Many of our peers have preferred equity in our capitalization.
It remains a tool that's available to us so that's something else, we could do with a yield to grow the company into the future.
And frankly, it is something that potentially could be attractive to us. So I think theres a lot of optionality in the balance sheet I think we designed it to support our strategic goals of the company and.
It continues to be intact and serve that purpose.
It has been a strength over the last many years and it continues to be a strength so.
That's how I look at it from.
From a big picture perspective, and as we get a little bit further past the covenant waiver period, we could probably get a little bit more into that.
Exactly how much capacity there is I will also say.
Long term leverage target, we had always wanted to be sub five times, we've been running the company kind of low three to low four times.
Net debt to EBITDA. So that continues to be our view going forward. We think that's the right level of leverage for the company.
Sure.
Hope that helps.
Yeah, No that's very helpful and just one last one for me.
Okay.
I know there was a question earlier about mix.
And I'm just curious, how we think or extrapolate the move in ADR, we've seen relative to 19 as you see group business that segment really pick up.
As a percentage.
And maybe some of these and these other segments like leisure.
I don't know, maybe stabilizes a little bit more relative.
But is there anything you can share I know you didn't give guidance at this point, but.
Anything you can share as we think about the middle of the back half of the year in terms of how that could progress.
I think <unk> touched on.
Group pace for the back half of this year with where rates are up 10% and I think that while not every group is going to book up 10% I think it's very indicative of of the pricing power that the hotels in general have right now as it relates to group, but we're seeing groups certainly is not inconsistent with what.
The brands have told us.
They're really trying to maintain the rates they put in place for 'twenty, what they're negotiated corporate accounts and they seem to be in good job of achieving that level of stickiness. So I would say, we take that as a as a as a plus as well and then I think.
As we've touched on a couple of questions today that that leisure customer seems to really be willing to spend I think you take all of that kind of in conjunction with as Marcel said in an environment, where people are paying more for everything and when you go and look at the other components of travel airfare car rental things like that in particular and I think it's great.
In the hotel business is able to hang in there with those other.
Travel players, who historically may have done a better job of driving rates in the hotel industry as for no reason other than that.
Hotels didn't have the sophistication of of systems and management to be able to really drive that so I think that all I think that bodes well for.
Right into the back into and through the back half of this year and hopefully in the next year.
No absolutely, but like maybe what's the disparity between what that leisure customers paying versus what youre getting on a group.
On an average group rate across the portfolio.
Again keep in mind that.
Breaking out of the business versus leisure is really really difficult.
So.
But what I can tell you is that.
That is the properties that are primarily leisure focused.
We have a lot of as you know and those drive to leisure markets, we've talked about.
A lot over the last couple of years in particular.
<unk> been showing significant rate growth, but.
The resorts have also shown tumor growth and again as we're seeing pickup in these kind of urban and suburban larger hotels that were seeing good rate growth out of those as well.
Thank you I appreciate the time.
Okay.
Yeah.
Our next question comes from the line.
The laboratory with Oppenheimer. Please go ahead.
Good morning, guys. This is Jonathan on for Tyler. Thank you for fitting me in and taking my questions.
Just one from me today, Barry you touched on this in the prepared remarks, but can you provide some additional color on the labor market. That's out there in terms of where you are on ftes, the hiring pool and how much additional staffing and looked at it I can see continue to ramp into the summer.
Yeah.
I think our operators have done a really good job of looking after labor in general.
As I've said in the prepared remarks, and I'll repeat it only because it ties into the latter half of the question is that we're certainly not seeing the same challenges in terms of either.
Identifying.
New hires in the hotels again as reported by our managers or the same kind of pressure on wage rates that we had seen.
In Q3, and Q4 of last year, so not that we filled all of our open positions in the hotels. The operators certainly have not and the biggest need areas continue to be in housekeeping and culinary.
And positions like that.
But there is a much more consistent and fluid applicant pool.
One of the reasons, we talked about the stat of.
Kind of total labor per occupied room, as we think it is very indicative of.
Where we are in the cycle in terms of number of employees.
Which is that.
Fixed costs are really covered I mean, when you think about our portfolio for Australia is run.
<unk>.
69%, 72% in the last couple of months.
The hotel's R R.
Nearly fully staffed as it relates to kind of a fixed position. So we're really now into the kind of the variable cost model as the operators look at that which is <unk>.
Adding enough housekeepers to be able to clean rooms, as we hopefully go up from the from the low <unk> and.
Banquet staff and culinary staff as we are able to drive more banquet revenue new into the hotel with more groups. So I think in terms of overall staffing again.
Thinking through kind of each of our conversations with each of our hotels and with each of our operating companies.
The labor situation is much more stable than it was.
Three months ago or six months ago.
And if the large large majority of the employees hotels need are on property and are working most every day.
Okay.
Okay. Thank you for all that color just one follow up on the bigger picture on the expense side, obviously, you're doing a tremendous job and now that you're on that variable cost side any expectations you have for longer term cost savings or potential margin expansion.
I can see fully repaired.
I think we need to see how it shakes out we're getting a little better direction of feedback from the operators in terms of what their plans are in terms of staffing models and I think in general will come through.
At least in terms of managed positions. The same we would come through other downturns, which goes with fewer management positions on the properties.
In general, which is going to be beneficial I think.
In terms of margins I think we really need to see kind of how.
The rate situation kind of compares to the wage situation as we move forward.
This year and into next year before we can really kind of settle around what what the overall margin improvement might be.
Cross the portfolio and across the industry.
Okay.
Very helpful. Thank you for all the color guys Thats all from me.
Thank you.
There are no additional questions waiting at this time I would like to.
So robust for any closing remarks.
Thanks, Bob.
Thanks, everyone for joining us today.
We're certainly encouraged by the trends we've seen over the last couple of months on.
We're looking forward to reporting next quarter, and we're going to hopefully hopefully will be positive results over the next few months look forward to seeing many of you over the next few months wholesale.
Various industry of understanding.
You will also be joining us in Nashville in a few weeks. So we look forward to seeing all of you personally.
Awesome.
Yes.
That concludes the Xenia hotels <unk> resorts Q1 earnings conference call I Hope you all enjoy the rest of your day you may now disconnect your lines.