Q4 2022 RLJ Lodging Trust Earnings Call
Speaker 2: Ladies and gentlemen, thank you for standing by. The RLJ lodging trust call will begin in just two minutes.
Speaker 2: Please continue to hold our program will begin in two minutes.
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Speaker 1: Oh.
Speaker 3: As a reminder, all participants are in list-nomi mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. If anyone should require operator assistance, please press star zero on your telephone keypad. I would now like to turn the call over to Nikiil Bala, RLJ Senior Vice President Finance and Treasurer.
Speaker 3: Please go ahead.
Speaker 4: Thank you operator. Good morning and welcome to RLG lodging class.
Speaker 4: 2022, fourth quarter and full year learning score.
Speaker 4: On today's call, Leslie Hale, our President and Chief Executive Officer, will discuss key highlights for the quarter.
Speaker 4: Sean Mahoney, our executive vice president and chief financial officer, will discuss the company's financial results. Tom Bagnette, our chief operating officer, will be available for Q&A.
Speaker 4: Forward-looking statements made on the call are subject to numerous risks and uncertainties that may lead the company's actual results to differ materially to what had been communicated.
Speaker 4: Factors that main factor results of the company can be found in the company's 10K and other reports filed with the SEC.
Speaker 4: The company undertakes no obligation to update forward looking statement.
Speaker 4: Also, as we discuss certain non- GAAP measures , it may be helpful to review the reconciliations to GAP located in our press release. Finally, please refer to the schedule of supplemental information which was posted to our website last night, which includes performance operating results.
Speaker 4: for our current hotel portfolio for 2019, 2021 and 2022.
Speaker 4: I will now turn the call over to LL.
Speaker 5: Thanks, Nikhil. Good morning, everyone, and thank you for joining us today. We were pleased that lodging fundamentals, strength and throughout last year, with significant improvement across all segments of demand, demonstrating the resiliency of the industry. Against this positive backdrop, we successfully executed on our key priorities, including capturing strong operating performance, driven by the accelerating recovery and urban
Speaker 5: acquiring a high-quality hotel and Nashville in attractive growth market. Further strengthening our balance sheet by addressing our 2023 maturities and exiting all COVID restrictions.
Speaker 5: and returning capital-tour shareholders to an increased dividend and discipline share repurchases.
Speaker 5: The successful execution has positioned us to realize incremental EBITDA from our embedded growth catalyst in 2023 and beyond, and underscores our ability to leverage the optionality or strong balance sheet provides.
Speaker 5: Turning to our operating performance.
Speaker 5: In the fourth quarter we saw sustained pricing power across our portfolio.
Speaker 5: outsized growth in urban markets and continued recovery of business travel in addition to strong group booking activity.
Speaker 5: During the quarter, our hotels achieved 94% of 2019 rep-part levels, driven by ADR, that achieved 105%.
Speaker 5: Our performance was led by Urban Markets, which had been a fitted from improving corporate demand trends.
Speaker 5: increase citywide attendance and the continuation of bleezard amount as well as the early recovering of international travel.
Speaker 5: Our urban hotels outperform our overall portfolio, achieving 97% of 2019 repart, driven by ADR, which achieved the 107% reflecting a sequential improvement.
Speaker 5: This outperformance was broad base with our hotels and markets such as Southern California, Atlanta, Boston and Austin, exceeding 2019 Repar.
Speaker 5: Further validating our strong position relative to improving trends in urban markets.
Speaker 5: In terms of segmentation.
Speaker 5: The momentum and corporate travel that we saw throughout last year carried into the fourth quarter.
Speaker 5: which achieved 70% of 2019 BT revenues, the highest since the pandemic.
Speaker 5: This represented an increase of 300 basis points from the Friar Quarter and an improvement of over one and a half times from the first quarter.
Speaker 5: SME travel continued to be the main driver of corporate demand, while our larger core accounts from industries such as entertainment, energy, consumer goods, services, and aerospace saw increased demand throughout the quarter.
Speaker 5: We also saw strong production of new small groups, which continued to contribute at elevated levels to our overall group mix.
Speaker 5: These positive trends drove pricing power, as Group ADR achieved 105% of 2019 for the quarter.
Speaker 5: Although booking windows were short, momentum and group demand remained strong, as demonstrated by our total in the year for the year bookings last year, which were over 30% higher than a typical year.
Speaker 5: as it relates to the laser.
Speaker 5: Although trends return to normal seasonality, demand remained healthy, and indication that consumers continue to overweight experiences in their spending decisions.
Speaker 5: We can NDR for entire portfolio achieve the 116% of 2019 during the quarter, improving 200 basis points from the third quarter. These positive trends let our overall weekend rep are to achieve 107% of 2019 levels during the quarter.
Speaker 5: Urban measure trends were especially robust as demonstrated by our weekend urban rev part achieving 111% of 2019 led by ADR are achieving 118% during the fourth quarter.
Speaker 5: Relative to the bottom line, excluding our three conversions, which are ramping, our portfolio achieved hotel EBITDA of over 91% of 2019 levels and margins that were only 128 basis points lower.
Speaker 5: This performance speaks to the efficiencies we have obtained in a high operating cost environment.
Speaker 5: Now turning to capital allocation.
Speaker 5: Our internal and external growth catalysts have created multiple channels to drive EBITDA growth throughout this cycle.
Speaker 5: With respect to internal projects.
Speaker 5: We are pleased with the relaunch of our three conversions and are seeing significant momentum. Specifically, the Mills House in the historic District of Charleston is also a great start after completing a comprehensive reimagination of the entire hotel, including repositioning all food and beverage outlets.
Speaker 5: and the transformation of the hotel's rooftop pool and bar. The hotel's repositioning and affiliation with Hilton's Curial Collection is driving significant ADR premiums and early results or exceeding our expectations.
Speaker 5: With the car is doing to take full advantage of its transformative resort ride renovation.
Speaker 5: and it's attractive beachfront location on the California coast. Additionally, we are benefiting from the enhanced operating model, which is driving meaningful out of room spend and savings of approximately $1 million from annual cost related to the elimination of comp services.
Speaker 5: We recently launched the Piercite Hotel in Santa Monica, which converted from a windom following a transformative renovation of guest rooms and public spaces.
Speaker 5: and the addition of a new open air FNB outlet.
Speaker 5: The hotel has a prime location at the entrance of the famous Santa Monica Pier with sweeping views of the iconic Pacific Wheel.
Speaker 5: The repositioning will allow us to attract higher-rated experiential travelers to this irreplaceable location.
Speaker 5: The relaunch of these three conversions not only validates our ability to unlock the significant value embedded in our portfolio, but also enhances the overall quality of our platform.
Speaker 5: We expect these properties to significantly exceed 2019 levels of EBITDA.
Speaker 5: This year, as they continue to ramp, and we remain confident in their ability to meaningfully exceed our initial underwriting, which supports our conviction and our ongoing value creation initiatives.
Speaker 5: Looking forward, we have tremendous optionality with one of the strongest balance sheets among publicly traded peers.
Speaker 5: which is allowing us to continue to pursue multiple channels of growth such as additional brand repositioning.
Speaker 5: In 2023, we will build upon the successful execution of our recent conversions and are excited to announce two additional conversions, including the Wyndham Houston Medical Center, which is being repositioned as a double tree by Hilton Brand. This property is ideally located across from one of the largest medical complexes in the world.
Speaker 5: Given the initial ADR lift, this property is already achieved following its soft launch.
Speaker 5: We are confident that an opportunity exists to capture significant incremental ADR lift and market share after completing a comprehensive renovation this year.
Speaker 5: Also in 2023, our end-to-go in New Orleans will join the Marriott Tribute portfolio.
Speaker 5: The hotel benefits from its primalization within the New Orleans famous Garden District and is expected to generate incremental ADR as a tribute.
Speaker 5: The hotel renovation is scheduled to begin later this year.
Speaker 5: It's scheduled to begin later this year. With regard to external growth.
Speaker 5: We are continuing to build a pipeline of off-market acquisition opportunities.
Speaker 5: Given the current backdrop, where transactions are being constrained by limited lending capacity, and all cash buyers are preferred, our strong balance sheet is a significant advantage. That said, we remain highly disciplined given the current uncertain environment.
Speaker 5: Now looking ahead to 2023, while we acknowledge the overall macroeconomic uncertainty.
Speaker 5: With the continued acceleration of business travel, group booking momentum and growing urban leisure demand, we believe that urban markets will outperform the industry on a relative basis. This will benefit our portfolio, which generates over two-thirds of EBITDA from these markets.
Speaker 5: Can you'd acceleration of business travel, group booking momentum, and growing urban leisure demand? We believe that urban markets will outperform the industry on a relative basis. This will benefit our portfolio, which generates over two-thirds of EBITDA from these markets. With respect to our 2023 outlook.
Speaker 5: In general, we expect 80-yard remains healthy in all segments, while the man growth across each segment will differ.
Speaker 5: We expect leisure demand to remain above 2019 levels with seasonality continuing to normalize.
Speaker 5: However, we expect urban leasier to see stronger performance due to continuation of bleager demand from hybrid flexibility.
Speaker 5: Business transient recovery should continue to improve during 2023, with demand from larger corporate accounts increasing, which we are already seeing.
Group will remain strong as citywide attendance increases and more to city wide are held in key markets such as San Francisco, Boston and San Diego.
Additionally, we expect small group to continue to see elevated contribution levels.
We remain encouraged by the Healthy Booking Activity since the beginning of the fourth quarter, where we booked over $55 million in group revenues, with approximately 70% related to 2023.
The strong booking activity allowed us to enter 2023 with our group booking pace at 76% of 2019.
And finally, inbound international travel should improve throughout the year, which will further benefit urban markets.
Overall, we expect the strongest growth during the first half of the year due to easier outcomes.
We have already seen this in January , which achieved year-over-year repart growth of 43.5%. Benefiting from improving corporate business travel, strong attendance and city-wise, such as JP Morgan's health care conference in San Francisco, and continued pricing power.
February is projected to see an increase of over 20 percent from last year.
Given these trends, we believe our rep-part hotel EBITDA should increase over 2022 throughout the year and achieve performance ahead of the industry.
Our confidence in our growth profile is supported by our favorite footprint in our unique growth catalyst.
As we look at the overall cycle, our outsized EBITDA growth will come from our concentration in urban markets which have additional run-moving for growth, or high-quality portfolio benefiting from many lifestyle properties that have seven-day a week demand locations.
ramping of our four high-quality acquisitions, which are pacing ahead of our underwriting. Completion of our Margin Expansion Initiative.
and incremental growth from embedded catalysts, including the ramp over three recently completed conversions and our two newly announced projects and our pipeline of future opportunities.
Additionally, our overall positioning will be enhanced by our strong balance sheet, which provides significant optionality to drive growth while also driving shareholder returns.
Furthermore, our balance sheet provides valuable liquidity to mitigate risk during the current macroeconomic uncertainty.
I am incredibly proud of the hard work our team has done over the past several years, and not only successfully navigating one of the most challenging periods in the history of the lodging industry, but also positioning RLJ to take advantage of multiple channels of growth to maximize shareholder value.
I will now turn the call over to Sean. Sean.
Thanks, Leslie. To start, our comparable numbers include our 96 hotels owned throughout the fourth quarter.
Our reported corporate adjusted EBIDA and FFO include operating results from all sold and acquired hotels during ROJ's ownership period.
We were pleased with our fourth quarter results, which were in line with our expectations.
Fort Quarter Portfolio Occupancy was 66.9%, which was 89% of 2019 levels.
an average daily rate was $190, achieving 105% of 2019.
Specifically, as previously mentioned, fourth quarter ADR in our urban markets was the highest with respect to 2019 as urban markets continued to benefit from pricing power.
Fourth quarter ADR exceeded 2019 levels by approximately 20% or more in a number of key urban markets.
including San Diego, Manhattan, Tampa, Pittsburgh, and Orleans.
Our fourth quarter rep was 94% of 2019 levels, which was in line with the third quarter.
Monthly rev-par achieved 95%, 91% and 96% of 2019 levels during October , November and December respectively.
The November results were impacted by difficult comps to 2019 due to an additional travel week in 2019 as a result of the later timing of Thanksgiving compared to 2022. December re-accelerated, which was primarily driven by our urban markets such as New York, Washington, DC,
Tampa and New Orleans. Our fourth quarter operating trends led our portfolio to achieve hotel EBITDA of $87.6 million, representing 87% of 2019 levels, and hotel EBITDA margins of 29%.
which was only 229 basis points below the comparable quarter of 2019. For the full year 2022, our RevPAR was $129.61 representing 89% of 2019 levels. And Hotel Ibadah was $370 million, representing approximately 83% of 2019 levels, which underscores the incremental Ibadah potential in our Irvin-centric portfolio.
This year has started off well with January Rep. increasing by approximately 44% from 2022, with occupancy of nearly 60%, and ADR of approximately $188.
Turning to the bottom line, our fourth quarter adjusted EBITDA with $79 million, and adjusted FFO per share with 33 cents. While demand remains strong during the fourth quarter, our operating costs continue to normalize.
underscoring the benefits of our portfolio construct and tangible results of the initiatives to redefine the operating cost model. Our total fourth quarter and full-year hotel operating costs were below 2019 by approximately 3% and 8% respectively. We are proud of our ability to maintain operating costs below 2019 as a frame of reference.
The aggregate core CPI growth rate since 2019 equates to approximately 14%, which is meaningfully above our fourth quarter operating costs, which remained approximately 3% below 2019. There are many factors that influence these positive results, with the most significant contributors being the recent successful restructuring of many of our third-party operating
Our portfolio remains better positioned for the current labor environment due to the need for fewer FTEs given our lean operating model.
The LLU remains better positioned for the current labor environment due to the need for fewer FTEs given our lean operating model, smaller footprints,
limited F&B operations and longer length of stay. During the fourth quarter, our hotel's continued operating with approximately 20% fewer FTEs than pre-COVID.
Overall, while the labor market remains tight, we are encouraged that the hiring environment is showing signs of improvement, and we believe that the inflationary pressures on hourly wages are stabilizing. We remain active in managing our balance sheet to create additional flexibility and further lower our cost of capital during 2022.
These accomplishments include entering into a new $200 million term loan to address 100% of our 2023 debt maturities and proactively address $100 million of our 2024 debt maturities.
Exiting all restrictions under our corporate credit facilities, which lowered our consolidated weighted average interest rate that resulted in annual interest savings close to $9 million. Exercising extension options on $425 million in maturing debt and maintaining an undrawn corporate revolver. The execution of these transactions is a testament to our strong lender relationships and favorable credit profile. Our current weighted average maturity is approximately four years and our weighted average interest rate is 3.6%. We are benefiting from 85% of our debt that is either fixed or hedged under valuable swap agreements, which protects us in the current interest rate environment.
We continue to maintain significant flexibility on our balance sheet with 81 of our 96 hotels unencumbered by debt. Turning to liquidity, we ended the year with approximately $481 million of unrestricted cash.
$600 million of availability on our corporate revolver and $2.2 billion at debt. Turning to capital allocation, we were active under our $250 million shareboard purchase program last year, where we repurchased approximately 4.9 million shares for $57.6 million.
at an average price of $11.75 per share, including $7.6 million in shares were purchased during the fourth quarter, at an average price of $10.66 per share.
So far in 2023, we've repurchased $0.5 million of stock and an average price of $10.49 per share. Additionally, given the embedded growth in our portfolio, our lean operating model and the strength of our balance sheet, our board recently authorized the increase of our quarterly dividend by 60% to $0.8 per share starting with the first quarter.
representing the second dividend increase since last summer. We continue to view dividends as an important component of the total return we seek to provide investors and that recent increase validates are ongoing commitment to enhancing shareholder returns. We will continue making prudent capital allocation decisions to position our portfolio to drive results during the entire lodging cycle while monitoring the financing markets to identify additional opportunities to improve the laddering of our majorities.
reduce our weighted average cost of debt and increase our overall balance sheet flexibility. Based on our current view, we are providing first quarter guidance that anticipates the continuation of the current operating and macroeconomic environment. For the first quarter, we expect comparable rep bar between $133 and $137.
Comparable hotel EBITDA between $85 million and $91 million. Corporate adjusted EBITDA between $76 million and $82 million.
and adjusted FFO for diluted share between $0.29 and $0.33. Our outlook assumes no additional acquisitions, dispositions, refinanceings, or share of purchases.
Please refer to the supplemental information, which includes comparable 2019 and 2022 quarterly and annual operating results for our 96 hotel portfolio. Finally, we estimate ROJ capital expenditures will be in the range of $100 million to $120 million during 2023.
Thank you and this concludes our prepared remarks. We will now open the line for Q&A.
our prepared remarks. We will now open the line for Q&A. Operator?
Thank you. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Our first question comes from the line of Austin Worshmit with Keybank Capital Markets. Please proceed with your question. Great thanks and good morning everybody. I realize you guys didn't provide full year 2023 guidance and don't have a crystal ball on how economic growth is going to shape up for this year but can you just share based on the citywide calendar and...
and some of the various demand generators you see that you know of today through the balance of the year, how we should maybe think about generally speaking the cadence of rev-part growth through the year? Sure, good morning, Austin. Let me frame for you our general expectations.
You know, we expect our performance to correlate to the performance of urban markets in 2023. And as you know, urban markets are expected to outperform the industry by 300-400 basis points in 2023. We expect year-over-year growth each quarter, 23 versus 22. And clearly, Q1 is going to have the most significant growth, which is well known. And we expect the other quarters to moderate, but to remain positive year-over-year.
In general, we expected build upon the trajectory we had in 2022, you know, with some growth quarter of course. Got it. And then, you know, second, with the upside, you guys continue to highlight across the portfolio from occupancy, the ability to drive ADR, presumably as occupancy improves.
maybe most notably within that urban portion of the portfolio. But when you marry that with Sean, I think he said, stabilizing wages and other costs. I mean, how do we think about the operating leverage you have today and the margin upside potential without asking you to put a timeline around that? Sure. Thanks, Austin. I think I'll start with just talking about quickly the advantages of our model.
into ROJ specific catalyst, right? We've got, you know, the initiatives that we talked about, the prepare remarks with respect to the operating agreements and property taxes. In addition, we have the benefit of the COVID era synergies, you know, particularly around sales and marketing and how we've complex successfully complex hotels, all of which will help us on a relative basis. And so what is,
helps you think about the relative positioning.
Yeah, that's very helpful. Thanks for the time. Thank you. Our next question comes from the line of Michael Belisario with Baird. Please proceed with your question.
Yeah, that's very helpful. Thanks for the time. Thank you. Our next question comes from the line of Michael Belisario with Baird. Please proceed with your question. Good morning, everyone.
Lauren, Mike. Leslie, you talked about a bunch of the levers that you could pull this year, and I know you can sort of do all of them given the strength of the balance sheet, but maybe what would be at the top of the list today in terms of incremental spending as we sit here today? So Mike, obviously you saw us be very active.
we were active on buybacks. We did it on a leverage neutral basis with disposition proceeds. We were active from a standpoint of internal investments, and you saw us deliver our conversions, and we're poised to deliver to more. We also were active in the right window from an acquisition perspective and entered the growth market of Nashville.
these levers have benefits. The key thing is the remaining discipline and focus on finding the right window to exercise those options. Got it, I'm going to sit on those two new conversions that you just announced. Could you share if you could the total cost of each project and how you're thinking about incremental IRRs returns from those investments?
Sure, Mike, this is Sean. We haven't talked specifically about what the aggregate cost are for those conversions. When I think about the incremental to a normal run rate, renovation at somewhere in incremental cost of 2 to 4 million dollars of incremental capital for each one of those renovations. I'm sorry, so I converged in addition to a normal cycle renovation.
from a return perspective, I think the returns we're expecting are similar to what our similar attributes to what we have on the first conversion, which is we expect to have rate driven gains as a result of the change of the brand affiliation. Now, we expect the unlevered IRR to likely be lower than the first set of conversions, but still be well into the low double digits. It's a function of the Norelline's market and the Houston market relative to Charleston and Santa Monica. They're just higher rate of markets.
But we still expect those to be significant rate ADR gains and significant returns. It's just a function of sort of where they are. But attractive and likely to be layered in over the next, you know, call it one to two years is when we, you know, post conversion as we expect them to ramp up similar to the first set, you'd expect the benefits to be earlier in that one to two year ramp up period because of the benefits of the brand affiliation. And Mike, this is a frame of reference, you know, the first commercial that we did, we expect it returns at a well north of 40%.
And that was, you know, when we were writing pre-COVID, underwriting pre-COVID, we now expect to materially exceed that. And so while we expect to be lower, I mean, keep in mind, that's the relevant benchmark I got it. And then just last one for me on the acquisition pipeline that you referenced. It's not a little more optimistic. Maybe then you have recently, are you seeing more deals or has pricing come in on the deal that you were previously looking at where?
Any particular deal might cancel better today than I did say 90 or 120 days ago. Yeah, Mike, I think that the optimism you heard of my voice is just recognizing that in an environment where transactions are constrained and a debt market, you know, while it's loosening, you know, is still relatively tight, all cash buyers are going to have an advantage. And so I'm excited about our balance sheet and what will provide, but from an overall transaction perspective, deals remain, you know, still relatively low. What I would say is is that what's happening is that, you know, assets are not being taken out to the market on a broad basis. What's happening is is that sellers and brokers are calling buyers so they believe can actually execute on the basis.
Thank you. Our next question comes from line of Flores and Icom with Compass Point. Please have a question basically about the capital allocation. You've got a lot of financial flexibility with the cash and the line obviously.
I guess what people are trying to get a sense of is what portion of your liquidity could people assume to be spent on share buybacks versus some of the newer acquisitions versus some of the other potential rebranding of high-profile assets like the San Diego Renaissance, as well as some of the more maintenance.
repositioning like the Hilton Cabana. This one, I think when you think about the liquidity that we have, we appreciate the comments. We are happy with our liquidity position at 1.1 billion and a little under 500 million that is cash. I think how we will specifically allocate that is based on what the relative return is on the opportunity. As well as we mentioned share purchases are attractive today and you would expect us to follow a similar tack that we did in the last year or so is that we will be opportunistic on deploying proceeds in the shares.
the acquisition market, we also showed that we were active when the market was appropriate. There we think that liquidity provides us with a first mover advantage when the market reopens to get access to the most attractive deals as a preferred buyer. And so I think that is certainly an option. And then thirdly, we continued to have a pipeline of internal opportunities. The two conversions we talked about this morning as well as incremental ROI initiatives. And so the answer is we have liquidity to do all of them. We don't specifically take that cash and allocate it between the two. We look at it more on a long-term basis because our portfolio is generating free cash flows.
A level....
equal to or greater than the buybacks that you did during the past year? I'm not going to put a number on it, but you would expect us. We continue to view share purchases as attractive. Our house view continues to be that we're going to do it on an opportunistic basis, an elaborate neutral basis. And so the volume and cadence of share.
include Silicon Valley and Oakland as well. Maybe if you can give some comments on what you're seeing in that market and what kind of growth potential lies ahead for you there. Yeah, I think I'll start and I'll let Tom add some color as well. What I would say for this is that when we look at San Francisco, we're encouraged by what we're seeing.
half of the year on city-wide for San Francisco. They're actually above 2019 levels for the third quarter and fourth quarter. We're starting to see international demand obviously be it very early, but we're seeing positive signs associated with that. So the momentum that we're seeing in San Francisco is encouraging. We ended the fourth quarter, the full year at 2X, where we started at as the percentage of 2019.
And we think the momentum is continuing to build in San Francisco, but we acknowledge that it's going to be a slower build overall. But we do see that the markets that are outside of the CBD are moving at a faster pace than CBD San Francisco. And I would add just a couple things and that is through the RFPCs and we were focused on trying to get average rate lift over the last few years. It was just rolling over rates. And we felt good about the negotiations specifically for that market with...
As our reminder, if you'd like to join the question, please press star one on your telephone keypad. Our next question comes from line of Gregory Miller, which is security, please proceed with your question. Thanks, good morning, all. First question, what trend that has arisen in recent months is soft business travel for four weeks?
after a major holiday, such as Thanksgiving. I'm curious if you think such trends are likely to continue in 2023. Good morning, Greg. I would say always the holidays are a unique time frame where people are thinking about other things outside of business travel. But what I would say is when you match up the calendar and you look at 23 versus 2022, 2022.
We think that there's going to be some growth in some of those weeks depending upon how the holiday falls. Examples of that would be the date of Halloween or what we've seen already in January , February , where we had Martin Luther King, we had President's Day, it was in a long day to weaken. So again, that was...
on the weekend itself and then immediately on Tuesday Wednesday we ramped back up on both those weeks when it came to BT. So I think it's more around the holidays as in Thanksgiving and Christmas is where it's a little bit more unique on BT. And I don't think it's a norm that you're going to be able to look at in 23 versus 22 based on what you might have seen in Q4. And then you know one one thing to add Greg the way we're looking at it you know we are seeing that same trend for the specific weeks. The way we're thinking about is you really have to look at the weeks surrounding the holiday too and look at those two weeks and I get it and we think net net because.
on that day after the holiday you're seeing on Thursday nights and we're capturing that as well. And so I would say that our portfolio more than others is built to capture whatever movement and the new normal looks like.
Okay, I appreciate all that. As my follow-up at the ALS conference last month when some of you and your colleagues are on the stage, the unit team spoke very positively to soft brands as a growing presence. Your portfolio today is full primarily comprised of hard brands. If I were to look at your portfolio five to ten years from now, roughly what percentage of your portfolio would you, I do, like to see as soft brands. Even if that doesn't mean some disposition activity.
Yeah, Greg, I would say that I don't have a number and I think it's important to think about the characteristics of an asset as opposed to actual physical label of the software as a hard band. I go back to who the asset that we bought in Atlanta. It's a 20 story rooftop or sky lobby, Hampton Inn. And it functions just like a lifestyle asset because of its construct, because of the finishes, and who the traction where it sits.
And so it's less about hard versus soft and more about the dynamics of the asset. So if you think about what we acquired, you think about the conversions that we've done, all of those would mean that it's going to be a higher percentage overall, but I don't have a specific number for you.
And so it's less about hard versus soft and more about the dynamics of the asset. So if you think about what we acquired, you think about the conversions that we've done, all of those would mean that it's going to be a higher percentage overall, but I don't have a specific number for you. Okay, very fair. Thank you very much.
Thank you. Once again, it's Star 1 to join the question, Q. Our next question comes from line of Chris Starling with Green Street. Please proceed with your question. Thank you. Good morning, everyone. I just want to follow up on some comments you made earlier around staffing. And I'm curious, are you more or less or your operators more or less running at the right head count today relative to the level of demand you're experiencing? Do you think there's more work to be done in terms of hiring? Yeah, I would generally say that and we said this before, you know, that we generally expect to settle out at about 85% in 2019 levels from left to e perspective. We ended 2022 at 75 on a full year basis, but we ended fourth quarter at 79.
So we're nearing that. We do think that the labor market has improved from a hiring perspective. It's still not there yet. But we think that we are nearing kind of where we think we stabilize that. I would also say again that goes back to why we expect to have a more favorable margin profile. And again, kind of leading back into Sean's earlier comments around our expense management and how we're able to be under 2019 level. Yeah, and then the, Chris, the driver of that incremental 500 basis points roughly is.
Yeah, I would say that everybody across industries experiencing that given the tight labor market. I don't think there's anybody who doesn't have higher contract labor today, but you know, as the labor market improves, hopefully that will subside and come down. But you really have to look at it from a standpoint of not only the wage, but also compare that to the fact you have...
When you hire somebody, you're not only paying wages, but you're paying benefits, etc., etc. So on a relative basis, and someone in line, you know, an aggregate.
And the last thing that I would add to that is it really comes down to productivity. And when we look at how we size up, you know, when we look at our's preoccupied room and the workforce that we're using, we want to make sure that our productivity is in line. And that we feel very good about in comparison to, you know, just 2019 versus where we're at today. We're still below on an ours preoccupied room.
Thank you. Our next question comes from line of Anthony Powell with Barclays. Please proceed with your question. Hi, good morning. This question on urban leader, which you've talked about a lot on this call, where is that versus 19 in terms of either room rate, room demand, and just curious how much more is to match roll recovery?
is left in urban leisure. Yes, I'll kick it off, Anthony. Good morning. Urban leisure in the fourth quarter was 111% of RevPAR compared to 2019 and the primary driver that was we were at 118% on the ADR side.
real movement above and beyond our portfolio numbers that we shared around Q4. And you think about weekend, weekends have been real positive compared to 2022 with Redpar over 106 percent and ADR 113 percent. What's interesting about urban leisure though, the dynamics that Leslie was talking about, who's coming to the hotels in regards to where they're staying. Many times we're seeing Thursday night as a check-in day.
And there's a lot of activity around urban leisure with concerts and venues, as well as all the things that they might have in their backyard as far as demand-generated around corporate universities and even medical. So the locations, as well as the desire of the consumer going to those locations, is really what's driving that. And that's benefiting us because urban is going to be the significant growth 23 versus 2022. So it sounds like you believe that there's still more year-of-year growth in urban leisure, whereas it may be in...
Resort leisure to be some more moderation. Is that that a fair comment that is a fair comment We think that urban leaders are still evolving as a new normal shakes out Anthony and I think what Tom is trying to say is that where our assets are situated and the nature of our assets It's easy to flip from from that BT experience into the weakened leisure And we think that that's still evolving and there's more room there and we're seeing those trends that Tom talked about carrying at the January in the first quarter so we're actually net positive.
conversions doing more, I guess, up-rupt scale brands, a soft brand. Do you think you'll be, we'll do more, I guess, up-rupt scale hotels, whether they're soft branded, boutique, hard branded over time, versus kind of the more urban up-scale, less room-spoken product that you've been known for historically?
What I would tell you is that our team does an incredible amount of work to determine what is the right brand for an asset and to think about what's going to perform well. So for example when we think about the two announcements that we just had we made here. One you know was moving to a double tree.
And that was the right brand for that asset for where it sits, what the demand driver is all of. And so, you know, we can't sit here today and say we're moving in an X direction or not. We're looking at the market, we're looking at the physical asset and we're determining what's kind of performed best there and we'll achieve the greatest returns. And that's the way to think about it. There's a tremendous amount of underwriting that goes into this. We have a very experienced asset management team and a fantastic designing construction team that's executing these conversions.
And so I don't want to give this impression that we just picked the north to north. We are analyzing and studying and determining and working with the relevant bands to make sure that we've got the right asset, the right brand for the right asset. All right, thank you. Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Ms. Hale for any final comments. I would like to thank everybody for joining us today and we look forward to delivering positive results for the year and we look forward to seeing many of you all at the city conference next year. Next week.
Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Thank you.