Q1 2022 Host Hotels & Resorts Inc Earnings Call
Good morning, and welcome to the host hotels <unk> resorts first quarter 2022 earnings conference call.
Today's conference is being recorded.
At this time I would like to turn the call over to Jamie markets Senior Vice President of Investor Relations.
Thank you and good morning, everyone.
We begin please note that many of the comments made today are considered to be forward looking statements under federal Securities law.
As described in our filings with the SEC. These statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed.
And we are not obligated to publicly update or revise these forward looking statements.
In addition on today's call we will.
We'll discuss certain non-GAAP financial information, such as <unk>, adjusted EBITDA and hotel level results.
You can find this information together with reconciliations to the most directly comparable GAAP information in Yesterdays earnings press release and our.
Our 8-K filed with the SEC and in the supplemental financial information on our website at host hotels Dot com.
With me on today's call will be Jim <unk>, President and Chief Executive Officer.
<unk> Executive Vice President and Chief Financial Officer.
With that I would like to turn the call over to Jim.
Thank you, Jamie and thanks to everyone for joining us this morning.
We kicked off the first quarter of 2022 with meaningful outperformance and once again substantially beat all consensus metrics for the quarter.
We delivered adjusted EBITDA.
$306 million and adjusted <unk> per share of 39 cents during the quarter.
All owned hotel pro forma EBITDA of $330 million in the first quarter was just 18% below 2019 and March pro forma hotel EBITDA came in 8% above 2019, driven.
Driven by significant rate growth at our resorts.
Pro forma total revenues in the first quarter increased 10% sequentially over the fourth quarter, while pro forma hotel level operating expenses grew 5%.
The increase in revenues was driven by improvements across rooms, F&B and other departments.
Pro forma revpar for the first quarter was $167, an 11% improvement from the fourth quarter as rates continue to increase in our sunbelt markets and holdup at our urban hotels.
This is our highest quarterly revpar, we have seen since the onset of the pandemic, bringing our revpar to approximately 18% below first quarter 2019 levels are.
Our recent acquisitions dispositions and renovated properties continued to contribute to our performance during the first quarter and notably we had five hotels with ADR of over $1000.
Preliminary April Revpar is expected to be approximately 225 to $230.
Which is up slightly to our March revpar.
It is worth pointing out that our preliminary April monthly revpar. It represents the first time that our monthly Revpar is expected to exceed 2019 levels since the onset of the pandemic.
However, consistent with historical monthly trends, we expect to see a pullback in may and June relative to 2019 levels.
In addition to Maui and San Diego, we are pleased to see urban markets, such as New York, Washington, D C and San Francisco driving the outperformance to our forecast.
In short all business segments and markets are trending in a positive direction and we are very pleased with our performance.
Subsequent to quarter end, we sold the 1700, ADT Sheraton, New York Times Square hotel for $373 million or 28 times 2019 EBITDA when.
When calculating the EBITDA multiple we included $136 million of an estimated <unk> capex over the next five years.
In connection with the sale, we are providing a $250 million bridge loan to the purchaser.
In addition, we sold at 243 key hotel E Miami for $50 million, including $1 billion for the FX any replacement funds were $23 two times 2019 EBITDA.
When calculating the EBITDA multiple we included $95 million of estimated four guard capex over the next five years.
This brings our 2021 2022 year to date total dispositions to approximately $1 4 billion.
At a blended 17 eight times EBITDA multiple including estimated <unk> capital expenditures of $435 million.
Which compares favorably to our $1 6 billion of acquisitions at a blended 13 times EBITDA multiple.
Our 2021 acquisitions continued to perform substantially ahead of our underwriting expectations.
Based on first quarter performance EBITDA from our seven New hotel acquisitions, and two golf courses is on track to meaningfully outperformed our underwriting expectations.
Looking back on our transaction activity since 2018.
We have acquired $3 $2 billion of assets at a 14 times EBITDA multiple and disposed of $4 $9 billion of assets at a 17 times EBITDA multiple including $938 million of foregone capital expenditures over the next five years.
Comparing pro forma 2019 results for our current portfolio to 2017.
<unk> increased the revpar of our assets by 11%.
EBITDA per key by 25%.
EBITDA margins by 190 basis points and avoided considerable business disruption associated with capital projects over the past two years.
As we continue to evaluate capital allocation opportunities. Our efforts will remain focused on assets that have the potential to bolster our EBITDA growth profile.
Turning to first quarter operations, our total portfolio of pro forma revenue was up 10% sequentially to the fourth quarter, driven by 16% rate growth.
Transient revenue was up over 1% compared to the fourth quarter and rate was up 18%.
Putting this into perspective first quarter transient room revenue was 97% our first quarter 2019.
Transient was again driven by our Sunbelt in Hawaii hotels, where revenue was up 17% sequentially with a 21% improvement in rate.
Once again exceeded prior peak levels for the fourth quarter in a row.
Drilling down to the resorts outperformance continued as ADR grew by 48% leading to a transient revenue increase up 42% compared to 2019.
One hotel South Beach, and four seasons, Orlando grew transient revenue over $10 million, each with ADR up 60% to 2019.
Group business continue to improve at our hotels during the first quarter.
Group revenue was up 33% driven fairly equally by rate and demand growth compared to the fourth quarter. Despite.
Despite a weak January we were encouraged by net booking activity in the quarter for the quarter, which resulted in 682000 group rooms sold for the quarter.
We saw meaningful improvement in banquet and AV revenue as group business continues to return.
In the first quarter banquet, and AV revenue increased by $24 million up 17% over the fourth quarter.
As groups get back to in person meetings, we expect the trend of higher out of room spend to continue.
Looking forward to our expectations for group in 2022, we currently have 3 million definite group room nights on the books, which compares favorably to the $2 7 million group room nights, we had on the books for 2022 as of the fourth quarter.
After adjusting for our recent dispositions.
Group rate in 2022.
4% to the first quarter of 2019.
300 basis point increase over the last quarter with 1 million definite group room nights on the books in the second quarter.
This represents 82% of second quarter 2019, actual group room nights.
Last quarter, our 2022 definite group room nights on the books represented 60% of 2019 actuals.
Adjusted prior transactions and including bookings from the first quarter 2022 definite group room nights now stand at approximately 70% of 2019 full year actuals.
Remainder of the year 2022 definite group room night pace is down 14% to 2019.
Total group revenue pace is down just 8% to 2019.
So rob will get into more detail on business mix and market in a few minutes.
In addition to delivering significant operational improvements we continue to execute on our three strategic objectives, all of which are aimed at elevating the EBIT growth profile of our portfolio.
As a reminder, our objectives include redefining the hotel operating model with our operators gaining market share at hotels through comprehensive renovations and strategically allocating capital to development ROI projects.
As a reminder, we are targeting a range of $147 million to $222 million of incremental stabilized EBITDA on an annual basis from the initiatives and projects underlying our three strategic objectives.
$100 million to $150 million is expected to come from potential long term cost savings over time.
Just on 2019 revenues from redefining of the operating model with our managers, we have achieved approximately 60% to 70% of these savings to date.
Another 22% to $37 million of incremental stabilized EBITDA is related to our goal of gaining three to five points of index growth at the 16 Marriott transformational capital program hotels and eight other hotels world comprehensive transformational renovations have been.
Recently completed or underway.
Starting with the Marriott transformational capital program portion of our renovations during the first quarter, we completed the Marina del Rey Marriott and the Houston Marriott Medical Center.
This brings the number of completed properties to 12 out of 16, and this program with 89% of the work complete and we expect to be substantially complete by the end of 2022.
The remaining Marriott transformational capital program properties include the Boston Copley, Marriott, San Diego Marriott Marquis.
<unk> Marriott in Houston, which will be substantially completed by year end and the Marriott Metro Center in Washington, D C, which we expect to complete in the first half of 2023.
We expect to receive over $11 million and operating profit guarantees for Marriott This year related to these renovations.
In total we expect to invest approximately $750 million on the Marriott transformational capital program assets.
As a reminder, we were planning to invest approximately 70% of the $750 million as part of our routine cycle base renovations.
The remaining 30% is ROI focus capex and includes renovation scopes brought forward from future years to create comprehensive transformational renovations.
We believe these renovations allow us to capture incremental market share.
As is the case at the Ritz Carlton Amelia Island, where we have seen a revpar index share gains of eight points since may 2021.
The Ritz Carlton Amelia Island is now the number one hotel in its competitive set.
Up from three or four historically.
In addition to the 16 Marriott transformational capital program assets, we have eight hotels, where we have completed or are in the process of completing major renovations.
The completed hotels include the dances, our Hyatt Regency, Maui, and Hyatt Regency coconut point.
The Ritz Carlton Naples Beach resort in Miami Marriott Biscayne Bay are both expected to be completed by year end and the Westin Denver downtown the Westin, Georgetown and Washington D C and the Fairmont Kea Lani and Maui are scheduled to be finished by mid 2023.
In total we expect to invest approximately $420 million on these eight assets over four years $157 million of which we expect to spend in 2022.
And finally, we are targeting another 25% to $35 million.
Of incremental stabilized EBITDA from four major development ROI projects.
During the first quarter, we completed and opened the two acre River Falls Aquatics Park and substantially completed the 60000 square foot meeting space expansion.
At our Orlando World Center Marriott.
Both of these projects came in ahead of schedule and under budget.
As mentioned by year end, we expect to complete the expansion at the Ritz Carlton Naples Beach resort.
Which adds to the Andaz Maui villas and AC Scottsville north both of which are complete these.
These four assets make up the current development ROI projects and our third strategic objective.
We continue to identify new development projects that will unlock value within our portfolio.
In total we expect to invest $216 million on these four assets.
Stabilization of these projects is expected to occur within two to three years of completion, but we are seeing early signs about performance.
In addition to the incremental stabilized EBITDA from our three strategic objectives, we expect approximately $120 million to come from the seven hotel and two golf course acquisitions, we completed in 2021.
All of which are meaningfully outperforming our underwriting for 2022.
In closing, we continue to improve the quality of our portfolio with our recent dispositions.
And we are very pleased with the $1 6 billion of acquisitions, we closed on in 2021.
As the lodging recovery continues to accelerate we believe host is very well positioned to capture a greater share of demand given the investments we have made in our hotels, our improved portfolio quality and our balance sheet strength.
With that I will now turn the call over to Suraj.
Thank you Jim and good morning, everyone.
Building on Jim's comments I will go into detail on our first quarter topline performance margins and balance sheet before wrapping up with an update on our dividend.
Starting with topline performance fourth quarter pro forma Revpar of $167 was the highest it has been since the onset of the pandemic.
The quarter was a tale of two months with March revpar of $221 more than double that of January .
Improvement in the quarter were driven by leisure travel and some of those markets and Hawaii.
These markets achieved a first quarter revpar of $251.
<unk>, 6% increase over the fourth quarter.
Other markets experienced the brunt of the omnicom impact in the first part.
Half of the quarter, but swiftly recovered ending March on a high note.
For comparison March Revpar at our urban hotels was $132 up nearly 25% for the fourth quarter of 2021.
Turning to trends in mix holidays in the first quarter drove steady sequential growth in both occupancy and transient ADR with President's day, achieving the highest holiday occupancy since 2019.
Which was driven by our Sun belt markets are urban hotels achieved 76% occupancy over Easter, which is nearly double that of the MLK holiday weekend.
Holiday occupancy in our urban markets outperformed our sunbelt markets for the second time since the onset of the pandemic.
With the rate of improvement of 26% over the MLP a holiday weekend.
Business transient revenue was up 2% in the first quarter with a 4% increase in rate.
Despite the impact from on the Con and winter storms in January .
Business transient room nights.
<unk> record in March breaking the 100000 level and encouragingly half of those room nights sold were in the urban markets.
For comparison.
Represents a 28% increase over October 2021, which had 78000 business transient room nights and was the previous high watermark.
Providing a little color on it.
A few of our urban markets in San Francisco, we saw leisure demand starting to pick up and much business transient volume was slow for the first two months of the quarter, but all hotels saw a significant spike in March from consulting firms and tech clients.
New York traditionally strong leisure periods have rebounded to levels approaching 2019.
While trends in demand remains short term in nature, we are starting to see the booking window stretch beyond 30 days.
In March business transient rooms in New York with a post Covid high and as offices continue to reopen we expect business transient demand to continue to do that.
Early in the first quarter, Washington, DC experienced declines related to cancellations, but all of our hotels saw a meaningful improvement in demand in March due to Cherry blossoms and spring break.
Our government offices, we open we expect business wins and volume to continue to improve.
Turning to group revenue increased 33% over the fourth quarter, driven by 14% demand growth combined with a 17% improvement in rates.
Most of the room night increase came from our hotels in Orlando, Maui, and San Diego, where we saw incentive business from corporate groups come back into the mix.
As it relates to overall group business.
Banquet and catering revenue was up 17% over the fourth quarter and clearly showed that groups are willing to spend when they meet in person.
Banquet revenue per group room night exceeded 2019 levels in the first quarter for the first time in the recovery ending.
Ending 7% higher.
With much absolute banquet and catering revenue down just 10% to 2019.
Corporate group revenue increased 41% over the fourth quarter, driven by 17% demand growth and a 21% increase in rates.
Corporate group room nights picked up meaningfully each month in the quarter and ended at 70% of 2019 levels in March.
Orlando and San Diego hotels drove most of the demand growth in this subsegment.
Association groups also showed steady sequential improvement first quarter Association group room nights increased 26% over the fourth quarter with a 13% increase in rate.
Shifting gears to expenses total pro forma expenses were down 17% to first quarter 2019 in line with the total revenue decline.
Staffing at our hotels remained at 94% of desired levels based on business volumes versus <unk>, 97% historically.
Hotels that pause on hiring doing omicron and were unable to keep up as demand sources back in February and March.
While our hotels continue to fill open roles a lag between demand and staffing levels still exists.
This has acted as an offset to wages and benefits expense quarter over quarter.
Briefly touching on our efforts to redefine the operating model, we have made meaningful progress on evolving brand standards with our operators.
Marian recently announced over 200 brand centered revisions that aim to reduce costs align standards across brands and segments enable greater operational flexibility and eliminate our data centers.
Some examples include removing alarm clocks printed compendium and premium channels from Guestrooms.
Our operators have also moved to residential style amenities and luxury hotel rooms, and revamped the food and beverage options.
Hours of operation and many hotels to align with customer preferences.
We expect brand centers to continue to evolve as we work with our operators to enhance efficiencies.
Taken together.
Our strong top line and expense controls have allowed our margins to continue to meaningfully improve.
Our pro forma hotel EBITDA margin in the first quarter was 31, 4%, which is just 10 basis points below that of the first quarter 2019.
For comparison this represents a 350 basis point increase to our fourth quarter Hotel EBITDA margin, which was 27, 9%.
First quarter margin improvement was primarily a result of strong ADR and cancellation revenue.
As demand and rate quickly recovered from a decline in January .
<unk> had the highest monthly hotel EBITA margin and host history for today's pro forma portfolio at 41%.
Turning to our outlook for 2022, we are still unable to provide full year operational guidance given the continued volatility surrounding COVID-19.
That said, we believe sequential quarterly Revpar improvements will continue as declines to 2019 diminish throughout the year.
We expect second quarter, revpar to be between $195 and $205 or down 8% to down 3% relative to 2019.
This revpar range implies an adjusted EBITDA range.
375 million to $410 million for the second quarter.
We expect sustained strength and leisure as well as business transient and group demand.
Accelerating in our urban markets as companies get back on the road and groups get back to meeting in person.
We have seen a recovery in international travel, particularly from Canada, Germany and the UK.
New York remains the top destination market, followed by San Francisco, and Seattle, and we expect sequential improvements in international demand over the course of this year.
Given the cadence of the lodging recovery.
Difficult to provide an accurate forecast for the year.
While we expect sequential revpar improvements relative to 2019 seasonality and changing market and business mix are expected to lead to lower revpar and margins for the second half of the year relative to the second quarter.
For reference the third quarter has typically been our weakest quarter of the year and as is historically the case, we would expect third quarter revpar and margins to be below that of the second quarter.
Turning to our balance sheet and liquidity position our weighted average maturity is five three years at a weighted average interest rate of three 4% and we have no significant maturities until 2024.
After accounting for our two hotel dispositions in April we now have $2 billion in total available liquidity comprised of approximately $439 million of cash $162 million of <unk> reserves and a full availability of our $1 5 billion credit facility.
Wrapping up I am pleased to share that the board of directors authorized a second quarter dividend of <unk> <unk> per share on <unk> common stock a 100% increase over the prior quarter.
All future dividends are subject to approval by the Companys board of directors, but as the operational recovery continues we expect to be able to grow our dividend to a sustainable level.
To conclude we are optimistic that 2022, we'll continue to build on the strong momentum of the past few quarters.
We remain very well positioned to execute on our goal of increasing the EBITDA growth profile and improving the performance of our portfolio.
With that we would be happy to take your questions to ensure we have time to address as many questions as possible. Please limit yourself to one question.
Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time, we do ask that we're posing your question. Please pickup your handset if you're listening on speaker phone to provide optimum sound quality.
Once again, if you have any questions or comments. Please press star one on your phone please.
Please hold while we poll for questions.
First question is coming from Christopher <unk> from Deutsche Bank. Your line is live.
Hey, guys. Good morning, Thanks for all the data points.
I guess I'll ask the obvious one which is the <unk> guidance.
With what you said about April and I understand there is normally seasonally a drop in may and June but.
I think the basic math is suggesting a bigger than normal drop like a like a double digit drop versus 19 can you just give us a little bit of color on how youre thinking about that.
Okay.
Sure Chris.
We.
I have talked a lot about.
The Q1 performance in April performance.
Internally at host.
<unk>.
We just.
Don't think we're going to be able to sustain.
The.
The level of rate that we achieved in <unk>.
Q1, and in the month of April at our resort properties.
The spring break.
That occurred this year was.
The charts it really was very very very strong.
<unk>.
We expect to see some moderation.
Back to the mean.
As.
As we see a rotation from.
Spring Breakers.
Back into the urban markets group and.
Business transient coming back.
So that's that's the reason why we brought the.
The guidance down for Q2 strong April , but we expect May and June to moderate Bay is definitely going to be lower than April June maybe slightly above may at this point in time.
Okay.
Thanks, Tim.
Sure.
Thank you. Your next question is coming from Neil Malkin from capital One Securities. Your line is live.
Hi, everyone. Good morning.
Jim question for you kind of on the same lines, but in terms of.
Maybe just.
Leisure.
Resorts are probably more so than the other urban our group hotels can.
Can you just talk about what out of room total spending looks like.
From our expectations as continued to just be.
Really strong and I know that people I think alluded to even though right. It may not be sustainable some of these resorts. The other side of the revenue equation should should pickup as group and various other.
Core travel segments come back. So can you just talk about what youre seeing there on the total out of room and how to think about that maybe as we go forward in terms of auto room spending on a per occupied level. Thanks.
Sure.
At our 16 resorts in the first quarter, Neil we had.
Outlet outlet outlet revenue per available room of $180.
Which is clearly a high watermark.
For our portfolio and I would say probably industry wide, it's a high watermark.
As we look at how that revenue in the aggregate.
It was just 7% below quarter, one of 2019, and that's all driven by private resorts at this point in time I think.
Our resort performance was plus 40% on a pro forma basis to quarter one of 2019.
And so Rob touched on this in.
In his prepared remarks, the same with respect to banquets at.
At our hotels that are driven by group.
Banquets were plus $24 million.
Quarter four.
The per group room night.
Banquet dollars exceeded 2019 by 7% so what we're seeing on court right, it's mostly driven by corporate group at this point in time.
And what we're seeing is.
<unk>.
The groups that are signing up.
Are being cautious rig.
Regarding what commitments, they're making.
On a spend basis, both from a rooms perspective and out of room spend.
Given what happened with Amazon in January and February and the attendant attrition and cancellation fees, but when they arrive at the hotels. They are spending a lot more money than they contracted for.
Which makes it a little bit difficult.
To forecast going forward, that's one of the reasons why we're not comfortable talking about the second half of the year, but im talking about.
The second quarter at this point in time does that answer your question.
Yeah.
I think though I mean, I'm just curious again I understand like the decline in Revpar, but I mean, you do expect just to be clear.
Especially given your guidance in terms of bookings or room nights on the group side.
The out of room or the non room related revenue trend to continue its upward tact correct.
Absolutely so I already touched on outlet revenue and banquet revenue.
We have seen.
A very strong upward trajectory.
On golf revenues.
<unk> revenues.
Parking is relatively flat.
We expect we expect that to pick up as people get back on the road and.
And start traveling again we.
We see no downturn whatsoever in golf or small revenues.
One area of that.
It did have an impact on our first quarter performance, where attrition and cancellation fees.
About $26 million.
And thats relative to $13 million that we collected.
Q1 of 2019, so I wouldn't expect to see.
That level up.
Kent cancellation and attrition fees going forward, but the other out of room spend should continue to grow.
Thank you.
Thank you. Your next question is coming from Smedes Rose from Citi. Your line is live.
Alright, thank you.
I just wanted to ask so Rob as you think about.
I get some margin going forward.
Martin Im very close to pre pandemic levels in revpar, so quite a bit below at Revpar continued to improve even if it's somewhat seasonal and more choppy going forward. How do you think about the flow through.
Mental revpar gains.
And would it be fair to assume that they might be more occupancy driven at this point versus rate driven or how you cope with FERC.
So I would say take a look at sort of how we performed in 2019 on a quarterly basis.
And given that we have.
Come back much quicker than expected.
In terms of.
Getting back to normal seasonality and that's obviously, what's impacting our Q2 guidance when you look at margin performance.
Would be very similar to what we saw back.
Back in 2019, the only thing I would say is obviously when you are.
Growing revenues rooms revenue is more driven by rate that will flow through better. So in other words, you can expect sort of Q2 margins are no different from Q4.
Horsepower of 19.
It's slightly better than the first quarter, but then if you look at the third quarter of 2019, there is a marked difference in.
What happens in margin just because rate drops back in 19, if I remember correctly rate dropped.
Close to 10% and there was a margin drop of about 600 basis points. So similar in terms of seasonality is what you would expect that you would still expect sequential topline growth relative to 19, but you will see the absolute.
Revenue numbers sort of follow the same patterns that we saw back in 2019.
Okay and can I just ask you. One quick question you mentioned 3 million group room nights on the books for 'twenty three that looks like somewhere between maybe 18 to 19 points of occupancy where would you be Daryl.
On a pre pandemic going into the following year in terms of sort of points of occupancy on the books.
No what I would say is where we were pre pandemic is at about $3 9 million group room nights at the same time.
Okay.
What's important to keep in mind here is.
Youre talking about the full year right. So Q1, obviously was impacted because of <unk>. So the way to think about it as more the remainder of the year remainder of the year, we have $2 3 million group.
Room nights. So that's Q2 to Q4 at the same time back in 2019 for the remainder of the year, we had $2 7 million group room nights.
Does that make sense.
So obviously.
Thought you were talking about for 'twenty, three youre talking about for good out of group room nights, Okay I'm sorry.
Okay.
Got it thank you sorry I misunderstood.
Good.
Okay.
Thank you. Your next question is coming from Bill Crow from Raymond James Your line is live.
Good morning, Thank you.
Jim just to put a little finer point of this whole sequential discussion.
Much of this change in Revpar is mix driven more group on the books for June for example than there was in the first quarter.
So more mix more business transient group or how much of it is just.
Travel demand in some of those sunbelt markets that caused all the compression of the pricing has just been more.
Dispersed to New York, Boston and Chicago.
I think it's a combination of all of the above.
Clearly.
I don't want to give the impression that our 16 resorts in those five properties that had over $1000.
Hi.
And ADR.
For the.
For the quarter are going to fall off the face of the Earth there, they're not I mean, the demand is still there we're still seeing it but I think as we get past we got past April .
Going to get.
As we get into June we have some seasonality issues associated with the resorts as.
As an example.
The one hotel South Beach in Miami, the Ritz Carlton Naples.
Four seasons Orlando.
Just natural seasonality, we think will may temper some of the.
The demand at those properties and then.
We are seeing a group and business transient come back which is going to.
Clearly result in.
A a revpar that in the aggregate is lower than what we saw in the first quarter and in the month of April . So we're delighted to have the business make no mistake about it.
We're very excited to see.
Group in BT come back as strong as they have been coming back.
And.
No.
Having the resort portfolio that we do and having.
With $1 $6 billion to work last year with assets that have really meaningfully outperformed our expectations has that.
Our mind served as a good bridge to get us to the point, where business transient and group recover so it's a combination of all of the above.
If I could just ask a follow up on kind of the health of the consumer I'm curious, whether you're seeing points redemptions picking up.
So is that does that represent.
Resent some pushback.
On these rates.
The resorts are or may be a concession that the inflation thats start to eat away at the consumers' wallet.
Now I'll, let rob get into it but the short answer is no we have looked at redemption.
The numbers and we don't think that that is <unk>.
Having an impact at all at this point in time in fact.
As an example for our Lela Ventana delay.
We're delighted that that hotel as.
Part of the world of Hyatt because thats a.
The redemption.
Numbers at that property really go a long way to allowing us to drive outsized Revpar just given the.
Small number of rooms that are there and when we can really revenue manage.
The last down to the last room that is how our redemption.
Rate is set so it's been very positive for us and dropdown and you want to add a little bit of color on what we're seeing.
Sure.
Net net it's actually incremental for us because if you think about sort of where we are getting those redemption room nights there primarily in the resort destination.
Very high occupancy and majority of our hotels in our portfolio.
On a high redemption hotel and.
And we actually get a higher reimbursement rate at those hotels, and obviously at a higher occupancy thresholds. It ends up being incremental in terms of revenue thats being driven by those redemption of nitrogen.
Okay. Thank you all for your time.
Thank you. Your next question is coming from David Katz from Jefferies. Your line is live.
Good morning. Thanks.
Thanks for taking my questions.
Jim.
I wanted to.
Talk quite a bit about the strength of the balance sheet and I think the presumption is that there would be other properties out there.
It would be viable targets.
The next 12 months and I'm just wondering.
If we can expand that view a little bit.
Whether there are portfolios or even.
Whether corporate M&A would even be within or outside the boundaries.
We are.
Consequently.
Evaluating investment opportunities.
David and John .
I think what has happened at least through our lenses as we view the view of the world.
Today.
As other hotel owners have.
Seeing the cadence of the recovery.
We're seeing one or two things happening.
Pricing expectations for a number of the properties that had been in the market early in this year have been beyond our reach we just have not been able to pencil the underwriting to make sense.
Other assets that we would like to buy.
And that's because everyone is expecting a strong recovery.
Obviously, our first quarter results in our April numbers are are validating.
As we move.
Into 2022 and beyond.
Other assets that are.
That we might want to acquire just arent available for sale right now as owners sit and wait until cash flow recovers.
So.
We are very well positioned there is no question about it.
$2 billion of available liquidity today.
As the as the year progresses that liquidity position will grow and it puts us in a.
A very strong position as we get later into this year and opportunities become available.
To really pivot.
Pivot and.
Again be the buyer of choice as we were last year.
And take deals down all cash and not.
Not have to worry about.
The state of the debt capital markets today, which have gotten a little bit choppy.
Less loan to proceed.
The value proceeds.
Higher interest rates given the.
<unk>.
The commentary and actions that the fed has taken and I think that patience is warranted at this point in time, we clearly youre going to use the balance sheet. The light beyond delighted that we were able to do what we did last year.
And get ahead of the curve and put $1 6 billion to work early in the cycle. So.
I think everything's on the table.
But it's very difficult to speculate on.
What might become available that.
That meets our underwriting criteria.
I appreciate that and if I can follow up.
Briefly.
With respect to the kinds of markets.
If you would or wouldn't be.
There is an argument right.
We see where companies are buying more sunbelt oriented.
I Wonder if there isn't a contrarian view.
There are some markets that may be.
Some pressure or addressed today or underperforming today might be some places to hunt for value I just wonder what your thoughts are on that.
Okay.
Let me start by saying that we don't have a red line through any market.
And it really is dependent upon our view of value.
And likely performance going forward so.
I agree with you.
That Deb.
I think the puck is still going to the Sun belt markets I don't think thats going to change and.
Our resorts in particular.
For a number of reasons number one it's.
Very very low levels of supply.
In those markets in the resort markets in general, but if opportunities presented themselves and some of the markets that.
Our.
At the bottom of the recovery list and we thought that.
They were priced fairly and that we could add value.
And that the investment woods.
Served to elevate the EBITDA growth profile of the portfolio, which is what we're really focused on doing.
We would certainly be prepared to transact.
Understood. Thank you very much I appreciate it.
Thank you. Your next question is coming from Ari Klein from BMO. Your line is live.
Thanks, and good morning.
Just following up on the resort right.
Clearly it seems like Theres some seasonality at play over the next few months, but as you look further ahead in comps begin to get much tougher kind of in the second half of the year and I guess, the beginning of next year.
Are you expecting rates actually decline a bit.
Our thoughts are up so I think.
While rates will Tampa.
It will be just Nashville business mix and market mix of shifting of demand to different markets as opposed to the strength of the lesion rate in those specific markets. So we will we still expect and just based on the demand that we're seeing.
Into the next quarter and even the second half of the year.
We are of the belief that the visa rates are still going to hold pretty strong and probably frankly well into next year, there's still a lot of pent up demand and once international borders really open up.
To the U S. We think there is.
A meaningful amount of demand that's that's.
Of note help sort of sustain those rates, obviously very difficult to tell to what magnitude.
It will be tempered as sort of the market mix takes place, but we still feel pretty strong about the leisure rates going to the rest of this year and into next year.
Great. Thanks, Thanks for the color.
Sure.
Okay.
Anthony Powell from Barclays. Your line is live.
Hi, good morning.
Focusing on this leisure performance in May and June , but I kind of want to ask another question on that so we've seen strong pricing and demand on holiday weekends out there for two weekends coming out of Memorial day, and also June teeth, just checking some of your properties on both of those weekends they seem to be.
For very high pricing. So what are you seeing in the booking window for those two specific weekends and are you seeing any incremental weakness or softness or price resistance as we approach those time periods.
As specifically for Memorial day.
Again going back to sort of still in the short term.
Lead time, we are seeing actually paced.
12% above 2019 levels, so still holding very strong.
For holiday.
Sunbelt markets are pushing rates really nicely with rates on the books up 44% versus the same time 2019.
But overall still very.
Our strong performance for the upcoming holidays.
And what about June teeth.
I don't specifically have juneteenth numbers handy, but we can certainly get back to you.
So I guess youre not really seeing you guys in the upcoming week holiday weekends any kind of guess.
Relative price softening versus what you saw in April or are even present today is that fair.
We're not seeing any softening.
Alright, thank you.
Thank you. Your next question is coming from JJ coinage from SM BC. Your line is live.
Hey, good morning, its Jay.
But.
Tim a follow up to a previous question with the strong recovery in business transient urban demand was interesting to see your Boston and New York asset dispositions. So kind of just curious how you think about your Hudson asset allocation plan and what it may shift back to preserving your urban footprint, which is recovering.
<unk> may be disposing of those markets and focusing more on the outperforming sunbelt and resort assets.
Sure Jay.
Two assets were.
They each had a unique set of circumstances surrounding them that drove us to.
Dispose of the properties.
In Boston.
Let me, let me say before I get into specifics about each of these two two assets, we still have a healthy presence in both markets.
Boston, we have the Boston Copley, Marriott, which is.
Part of the Marriott transformational capital program.
Sure.
Just have a complete renovation of that asset so.
Clearly.
We are committed to the Boston market, but the Sheraton.
Given its location in the back Bay and the size of the hotel.
<unk>.
The plans on the part of the state of Massachusetts to sell behind Center.
Which the hotel was very dependent upon.
For groups.
It doesn't have an adequate meeting space platform.
Service groups.
The group business in Boston now has moved to the main Convention Center hotel needed a lot of capital.
A significant amount of deferred capex at that property. It just made a lot more sense for us too.
Both of that asset and.
No.
Similarly, with the Sheraton in New York.
We have the time, the New York Mare Marquee in times square and the financial Center Marriott.
Downtown New York Bolter in incredible shape. They were both part of the Marriott transformational capital program.
The assets are.
Well trying to really outperform as the recovery continues.
<unk> continues to pace, whereas the Sheraton again a.
An older hotel and need a substantial capex so.
And that part of the Sheraton was.
Forecasted to lose $15 million at the EBITDA line.
Two.
2022 so.
Yeah.
I think those two dispositions.
We will go a long way to allowing us to elevate the EBITDA growth profile of the company.
Taking the capital from those sales.
And investing that capital either in our existing portfolio.
Through ROI projects.
Or making additional acquisitions going forward.
As part of our capital allocation strategy.
Great that's really helpful and if I could just ask one follow up.
A nice recovery in the business trend. It all day every markets can you just give us a little perspective on how San Francisco is shaping up and how are you.
How do you expect that market to perform in the second half of the year.
Yes sure.
It is actually shaping up better than we were expecting.
San Francisco, Given example, San Francisco Marriott Marquis.
Actually had a thousand rooms per night midweek.
Last three weeks of March.
The <unk> on the books for the last week of April is almost flat to 2019, so overall pretty good.
For San Francisco in terms of BT pickup.
Okay. That's really helpful. Thanks, Thanks very much.
Thank you. Your next question is coming from Floris Van did come from Compass point. Your line is live.
Great. Thanks, guys for taking my question.
If I look at your EBITDA numbers.
Particularly if I look at your resort markets relative to 19.
Obviously, the resorts have been really strong.
San Francisco has been lagging Dcs has been lagging in New York is not really that big but.
That has that has also been a troubled market.
Yeah.
As you think about the recovery that we're seeing in the urban markets.
<unk> is in your view I know that people are talking a little bit about sequential.
<unk> growth here, but you are pretty ear and 83% of your EBITDA Hotel EBITDA already in the U S. In the first quarter.
Some of your competitors.
Think they can achieve that by the fourth quarter of this year are you is that your house view potential I know youre, not giving guidance, but certainly is that.
How comfortable are you.
Being able to achieve those kinds of levels by the fourth quarter of this year.
I don't I don't think were really comfortable talking about the.
The second half of the year, it's very difficult at this point in time too.
Forecast, how this recovery is going to continue to unfold.
So much of the business is being booked short term, although we are starting to see the booking window extend.
As I mentioned.
It's a very valid point, we think is on the corporate group business that we're seeing.
The contracts that are being signed are for.
Lower levels of food and beverage spend and.
Smaller numbers of attendees that are then that are showing up because they just don't want to be dealing with attrition and cancellation fees.
If if they have to cancel where if they if they are.
There is another event that.
As we saw in January and February so.
At this point in time.
I think we're confident.
And we feel really good about.
What we're seeing in terms of group bookings.
For the balance of this year.
We had a nice pickup over Q4.
Where we had.
$2 7 million definite sort on the books at the end of Q1.
We had 3 million definite room nights on the books that compares I think to $3 9 million in Q1 of 2019 for 2020. So we continue to close the gap going forward and the.
The same with business transient.
It's coming back.
It's going to continue to evolve as offices open.
<unk>.
We feel good about it but we're just not in a position to give any guidance for the balance of the year.
Fair enough.
Our goal is to add I mean, if there was any indication in terms of what we did in March.
<unk> of where we see the trends heading I think we mentioned in our prepared remarks March was over 100000 room nights.
Now the high Watermarks I can remember back in 2021, we have the last high watermark was at 78000 group room nights in October of 'twenty. One so that's a 28% increase in what we can say is we see that trend continuing into April and as Jim said simple lead times are short it's difficult to have visibility on BT.
Into the second half, but the trends are at least positive and much ADR.
<unk> was $223 down only one 6% to 2019.
Thanks, Rob appreciate it.
Thank you. Your next question is coming from Chris Darling from Green Street. Your line is live.
Thanks, Good morning.
Just to put a finer point on what Youre seeing on BT and group demand I'm, hoping you could just walk through how weekday occupancy specifically is trending relative to 19 in Senegal.
Major urban markets.
So for the major urban markets the weekday occupancy is that.
It's still lower than what we would like it to be but it's principally in the right direction I think that's the important point.
From the last time, we spoke of in the fourth quarter call. There has been like a 4% to five point improvement in midweek Occupancies. So that's where we've been focused.
Weekend occupancy has obviously improved meaningfully in those urban markets, but that trend continues.
Fair enough and I don't know if you have the numbers in front of you, but just curious how that might compare to.
Kind of pre Covid levels.
We are.
<unk> down I would say about sort of high <unk>.
Digits.
In 'twenty.
Percentage points of occupancy in those markets.
We got you I appreciate it.
Thank you.
Okay.
Thank you that concludes our Q&A session I will now hand, the conference back to Jim <unk>, Chief Executive Officer for closing remarks. Please go ahead.
Thank you and I would like to thank everyone for joining us on our call today, we appreciate the opportunity to discuss our quarterly results with you.
And we all look forward to meeting with many of you in person in the coming weeks and months. We really appreciate your continued support have a great day.
Thank you ladies and gentlemen. This concludes today's event you may disconnect at this time and have a wonderful day. Thank you for your participation.
Okay.