RLJ Lodging Trust Q1 2023 Earnings Call
Welcome to the R. L J lodging Trust's first quarter 2023 earnings call.
As a reminder, all participants are in a listen only mode and the conference is being recorded.
After the presentation, there will be an opportunity to ask questions. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad I would now like to turn the call over to the Q Hello, Arnaud Jays Senior Vice President Finance and Treasurer.
Please go ahead.
Thank you operator.
And welcome to artisan logging cop 2023.
Quarter earnings call.
On today's call.
Hale, our president and Chief Executive Officer will discuss key highlights for the quarter.
Sean Mahoney, our executive Vice.
President and Chief Financial Officer will discuss the company's financial results.
Tom Bartlett, our Chief operating officer.
That would be available for Q&A.
Forward looking statements made on this call are subject to numerous.
And uncertainty that may lead the company's actual results to differ materially from what had been communicated.
Factors that may impact the results of the company can be found the Companys 10-Q, and other reports filed with U S.
The company undertakes no obligation.
Forward looking.
Also as we discuss certain non-GAAP measures.
It'd be helpful to review the reconciliations to GAAP located in our pet.
Finally, please refer to the schedule.
Another information.
Just to add that type of thing.
We conclude the formal operating result, the garden.
And now I'll turn the call over to that.
Thanks, Nikhil good morning, everyone and thank you for joining us today.
We are encouraged that the positive momentum in lodging fundamentals.
Throughout the first quarter as Revpar for the industry sequentially improved each month on both an absolute.
And relative to 2019.
As we expected.
Quarter Revpar in urban markets.
What pace the industry relative to last year and achieved a significant milestone reaching 2019 level for the first time post the pandemic.
Against this constructive backdrop, we achieved strong fourth quarter operating results.
Exceeded our expectation.
Made tangible progress on our 2023 conversion.
The ramp of our 2022 conversion.
And at maturity of $425 million of debt.
Opportunistically repurchased $40 million of stock.
And increased our quarterly dividend by 60%.
Our strong performance during the first quarter underscore the overall benefits of our urban centric portfolio and also demonstrate the optionality that our balance sheet provides to accretively deploy capital to enhance shareholder return.
Turning to our operating performance.
During the first quarter the ongoing recovery in our urban markets led our revpar to increase by 27% over last year and achieved 95% of 2019, representing an improvement of 100 basis points from the fourth quarter.
Notably our revpar growth not only benefited from increased demand, yielding a 12% year over year increase in occupancy, but also achieve incremental ADR lift as continued pricing power, but our ADR grow more than 13% above last year.
The men increased throughout the first quarter.
Let our operating adult accelerate each month.
March revpar between 99% of 2019.
We are encouraged to see this momentum continue into April .
Our urban hotel, which represents two thirds of our EBITA.
The highest revpar growth within our portfolio during the first quarter.
These results outperformed our expectations with revpar, increasing by nearly 37% over last year and achieving 96% of 2019 for the quarter.
With March achieving 101%.
Demand growth was broad based across all of our urban markets, including Southern California, Despite the impact of severe weather during the quarter.
Our urban portfolio benefited from continued improvement in business travel.
Stronger demand healthy leisure rising international travel.
This increased demand drove a 17% year over year increase in ADR during the first quarter, our urban portfolio, which continues to have significant room for growth.
Strong performance at our urban hotels underscores our conviction that our portfolio is set up to outperform on a relative basis, given the outsized growth expectation for urban market.
With respect to segmentation, we remain encouraged by the continued recovery of business transient demand.
We are seeing corporate demand brought it to include industry, such as aerospace automotive and an insurance health care and consulting.
Is it reflected in our first quarter business transient room night, which improved by 10 points in the fourth quarter, 85% relative to 2019.
We saw sequential improvement throughout the quarter, but our special corporate revenues, which achieved 75% of 2019 levels in March the highest level post the pandemic.
Positive momentum in business transient can also be seen in our weekday revpar, which achieved 93% of 2019 during March.
Our group segment continues to exceed our expectation.
During the first quarter revenues achieved nearly 100% of 2019 levels.
Group revenues were driven by ADR growth of strong demand with social groups and improving corporate allowed us to achieve an 11% increase in ADR over 2019.
The highest premium to date.
Current year bookings robustly in the first quarter as we booked approximately $48 million and group revenues for 2023, representing more than half of the total in the year group revenue booked during all of last year.
It's enabled us to drive higher group rate across our portfolio, including at our regional powerhouses, such as Louisville and Tampa.
Given the appeal of our property types. The small group our hotels were able to book more self contained.
Rather than rely largely on citywide.
This has allowed our end of year or the year.
To increase the 95% of 2019 level Kurt.
Presenting a 13% improvement over the beginning of the year.
Despite the normalization of demand patterns.
These are demand remained elevated across our portfolio, which further strengthen our leisure ADR to 125% for 2019, representing a new high watermark.
The strength in leisure demand and our portfolio was bolstered by the continued recovery of urban which is benefiting from hybrid work flexibility our urban lifestyle properties, which are located in seven day, a week demand sub markets with multiple demand generators are especially well positioned to benefit from this growth. Additionally, with a reason.
Renovated resort assets, including our Sakari dunes on Mandalay Beach resort properties achieved 120% of 2019, ADR, which improved sequentially from the fourth quarter.
We believe that our leisure ADR will be more sustainable on a relative basis going forward given our concentration in urban lifestyle hotel, which are well positioned to capture who'd been leisure demand from experiential traveler looking to combine work and play.
The positive momentum we achieved during the first quarter, but our hotel EBITDA to increase by 44% over last year and achieved 87% of 2019 level.
As we expected our lean operating model allowed us to achieve efficient and mitigate some of the inflationary pressure on hotel operating costs, what's let our hotel EBITDA margin increased by more than 280 basis points on the prior year.
Our strong operating performance and the overall margin profile of our portfolio enabled us to generate significant free cash flow during a seasonally slower quarter.
Moving on to capital allocation.
We continue to make progress on our internal growth opportunities our 2022 conversions are on pace to meaningfully outperform our overall underwriting that.
This year, we expect the EBITDA generated by these reconversion to accelerate throughout the year and exceed our 2019 EBITDA by over 25%.
We are also making progress on our two new converts.
The comprehensive renovation and repositioning of our Houston Medical Center Hotel is expected to begin during the second quarter, which will position the hotel to capture incremental rate its affiliation with Hilton Doubletree.
And we are pleased to announce that our Garden District Hotel in New Orleans recently joined Marriott's tribute portfolio as hotel Cornell.
We expect the hotel to immediately benefit I'm enjoying a powerful Marriott bond voice system with additional ADR lift to come after we complete the repositioning and renovation scheduled for later this year.
These conversion underscore the significant embedded value in our portfolio and our ability to unlock incremental EBITDA.
We expect these conversions to be highly accretive and further enhance our portfolio quality.
Additionally, we have one of the strongest balance sheet, among our publicly traded peers, which allows us to pursue multiple channels of growth.
We have demonstrated the optionality that our balance sheet provides by pulling multiple levers such as deploying capital towards our new conversion.
And Opportunistically repurchasing shares.
So far this year, we have redeployed free cash flow to repurchase $40 million of our shares on a leverage neutral basis at an attractive average price of $10.22 per share.
Given our strong balance sheet and free cash flow profile, we will continue to evaluate incremental share repurchases on a disciplined and a leverage neutral basis.
Past quarter, we also utilized multiple to return capital to our shareholders, which included raising our quarterly dividend by 60%.
Looking ahead, while we recognize that the current macro environment is uncertain. There are a number of indicators that allow us to remain constructive for the remainder of the year.
We believe that urban markets to continue to outperform the industry during the second quarter, which will benefit our portfolio as reflected in our second quarter outlook.
For the full year, we continue to expect year over year revpar growth to be the strongest during the first half due to easier comps.
And we also expect to achieve year over year growth each quarter for 2020 three given that.
Leisure performance should remain healthy against positive leisure demand dynamic.
The recovery of business transient to continue throughout the year corporate demand broadening as we experienced in the first quarter.
Group demand should continue to strengthen especially small social and corporate groups.
As previously mentioned our group segment will benefit from the improving in the year or the year booking trend.
Our confidence is bolstered by our second quarter group pace, which is nearly at 2019 level.
Also as international travel in.
It should drive incremental demand throughout the year, especially in gateway urban markets.
And finally, the ramp of our three recently completed conversions will further bolster our performance.
We believe that these positive trends to further amplify the performance of our urban markets, allowing us to achieve Revpar ahead of the industry.
We are already seeing these trend taking shape during the second quarter.
Longer term, we believe the outlook for lodging fundamentals remains very positive given the secular changes in the nature of travel demand, which will drive strong growth.
This dynamic will be especially beneficial for our portfolio, which is uniquely positioned to drive outsized EBITDA growth.
Given our concentration in urban markets, which have significant run room for growth given the multiyear favorable demand supply imbalance.
Our high quality diversified portfolio that benefits from seven day, a week the man the upside from our conversions and recent acquisition and the execution of incremental internal growth opportunities, including the completion of our next two conversions and our pipeline of future opportunities.
By our strong balance sheet.
Overall, we are encouraged with our relative strong position.
I will now turn the call over to Sean Thanks.
Thanks Leslie.
Our comparable numbers include our 96 hotels owned throughout the first quarter.
Our reported corporate adjusted EBITDA and F. O include operating results from all sold and acquired hotels during R. O J ownership period.
We were pleased with our first quarter results.
Which exceeded our expectation.
First quarter portfolio occupancy was 68, 5%.
Which was 90% of 2019 level.
Average daily rate was $199 a.
Achieving a 105% of 2019.
Par was $136, which was 95% of 2019.
First quarter, ADR exceeded 2019 levels by 10% or more.
Number of key urban markets, including San Diego, New York Miami.
Our Washington D C Pittsburgh in New Orleans.
Monthly revpar accelerated throughout the quarter and achieved 91%, 93% and 99% of 2019 levels During January February and March respectively.
March recovered to 99% 2019, which was the highest month of the pandemic and was driven by a combination of occupancy at 93% of 2019 level in ADR of 106% of 2019.
Our outstanding March results.
Merrily driven by Revpar exceeding 2019, and most of our urban markets such as New York at 105%.
Los Angeles at 110%.
San Diego at 108%.
Chicago at 111%.
Washington D C at 106% Tampa at 132%.
The Annapolis at 133% and Louisville at 122%.
Our first quarter operating trends.
Our portfolio achieved hotel EBITDA of $99 million.
Presenting 87% of 2019 level.
Hotel EBITDA margin of 28, 9% increased 283 basis points above the comparable quarter of 2020 two.
Monthly results accelerated throughout the quarter with March hotel EBITDA at 94% of 2019 level.
The positive momentum from March continued into April we're forecasting revpar is approximately $156.
Presenting a 7% increase from 2020 two.
April Revpar was driven by occupancy of 75% and ADR of approximately $207.
Representing 91% and 108% up 2019 levels.
At 100% and 107% of April 2022.
Accordingly.
Cast at April Hotel, EBITDA is expected to exceed 95% of 2019 level.
Turning to the bottom line, our first quarter adjusted EBITDA was $82 $7 million.
Adjusted <unk> per share was 35%.
Both of which exceeded the high end up our guidance ranges.
While demand remained strong during the first quarter.
Operating costs continued to normalize.
Underscoring the benefits of our portfolio construct.
And the success of our initiative to redefine the operating cost model total first quarter hotel operating costs were only 1% above 2019 level, which.
Which is meaningfully below the aggregate core CPI growth rate in 2019 of approximately 16, 5%.
There are many factors that influence these positive results with the most significant contributors being a successful restructuring of many of our third party operating agreement.
And reductions in property taxes, both of which are expected to continue benefiting our operating costs.
First quarter wages and benefits.
Our most significant operating costs at approximately 40% of total cost.
Remain below 2019 level.
During the first quarter, our hotels continue to operating with over 25% you were F T and pre COVID-19.
Which moderated 500 basis points from the fourth quarter, despite higher occupancy during the first quarter.
Demonstrating the flexibility of our labor model in the post Covid environment.
Our portfolio remains better positioned for the current labor environment.
The need for you, we're FTE given our lean operating model.
Waller footprint.
Limited F&B operation and longer length of stay.
We remain active in managing our balance sheet to create additional flexibility and further lower our cost of capital.
Including extending for $125 million of debt to 'twenty 'twenty four.
Replacing $94 million of maturing term loan with a delayed draw proceeds from the term loan that we entered into in late 'twenty or 'twenty two.
Our balance sheet is well positioned with an undrawn corporate revolver.
Our current weighted average maturity is approximately three and a half years.
81 of our 96 hotels are unencumbered by debt.
Our weighted average interest rate is at an attractive 398%.
At 93% of debt is either fixed or hedged.
Turning to liquidity, we ended the quarter with approximately $474 million of unrestricted cash.
$600 million of availability on our corporate revolver and $2 $2 billion of debt.
With respect to capital allocation as.
As Leslie said to date in 2023, we remain active under our $250 million share repurchase program and have repurchased approximately three 9 million shares for $40 million at an average price of $10.22 per share.
Including 12, and a half million dollars repurchased so far during the second quarter.
At the end of April our board approved a one year $250 million share repurchase program, which will provide us with an additional tool to take advantage of future volatility in the capital markets to repurchase shares.
Turning to the dividend.
The embedded growth in our portfolio, our lean operating model and the strength of our balance sheet.
Previously you know our board increased our quarterly common dividend to eight cents per share starting with the first quarter.
We continue to view, both share repurchases and dividends as important components of the total return we seek to provide investors and their recent use of both of these capital allocation tool validates our ongoing commitment to enhancing shareholder return.
We will continue making prudent capital allocation decision to position our portfolio to drive results during the entire lodging cycle, while monitoring the P&C market to identify additional opportunities to improve the lateral lumbar maturity.
Our weighted average cost of debt and increase our overall balance sheet flexibility.
Turning to our outlook based on our current view, we are providing second quarter guidance and anticipate a continuation of the current operating and macroeconomic environment.
For the second quarter, we expect comparable revpar doing $155 and $159.
Comparable hotel EBITDA between $121 million and $130 million.
Corporate adjusted EBITDA between $112 million and $121 million.
And adjusted <unk> per diluted share between 51 and 57 cents.
Our outlook assumes no additional acquisitions dispositions refinancings or share repurchases.
Please refer to the supplemental information, which includes comparable with 2019 and 2022 quarterly and annual operating results for our 96 hotel portfolio.
Finally, we continue to estimate our O J capital expenditures will be in the range of $100 million to a $120 million during 2023.
Thank you and this concludes our prepared remarks, we will now open the line for Q&A operator.
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One moment, please while we poll for questions.
Our first question comes from the line of Austin, where Schmidt with Keybanc capital markets.
Please proceed with your questions.
Great. Thanks, and good morning, everybody I appreciate your guys' comments around the B T broadening across sectors, but curious if you're seeing any slowdown in velocity of the recovery in B T. And then specific to your urban portfolio, how how did it perform in the context of your April results.
So so first of all good morning, Austin, and I would say that as it relates to B T. A we're not sweet a slowdown we're seeing a grind for it if you will.
Yeah, we talked about in our prepared remarks that our that room nights are up 10 points quarter over quarter, we saw sequential improvement during the quarter, where we ended the quarter at 85% of 2019 room nights March actually ended at 92% room nights.
I would also say is that we saw sequential improvement in revenues and ended with March at 75% of our total revenues for 2019, if I drill down even further on mid week numbers. We ended the quarter with Revpar, 89%, which is 100 basis point quarter over quarter improvement, but March ended at 93.
Per cent and so as I think about that moving into April we're seeing that momentum carry forward and in fact, you know the court is off to a good start and you know on April .
April we expect overall to be in line with March, but we saw ADR overall pick up 200 basis points relative to the 19 month over month relative to March. Additionally.
You didn't ask about group, but you know group pace is at 2019 levels for the second quarter and then what I would say about B T. In in the second quarter is that typically may and June are the stronger B T. Moms. So the second quarter and so we would expect to build on the momentum we saw in the second half of April relative to.
T and so we're seeing it grind board, we're not saying, it's often oh awesome.
Yeah.
And then I'm curious, what the latest trends and sort of pace updated crusher, Northern California. Submarkets are you know for various demand segments do you continue to see a recovery.
You know in any specific submarkets that are that are outperforming.
Yeah. Good morning, Osten, it's Tom So in Northern California, as you know our footprint we have a couple in CBD couple out in Emeryville over at the airport a S. F O in Burlingame, and then out in Silicon Valley and so what we're finding is we are seeing significant project.
And new hires that are coming into our Silicon Valley hotels accounts like Tesla Apple accounts that you know Leslie referred to in her BT are also as you know still hiring some folks that are on the interim side and we're seeing that type of business come in we just booked some short term group.
Business with Micron for instance, and so it's encouraging what's happening out in Silicon Valley and starting to see that as a ramp more in Q2 and Q3 than Q1, and then in our Northern California C. B D. Obviously, JP Morgan really kind of led the charge out of the gate in January was one of the best events, where we're going.
See great attendance, there and then in the back half of Northern California, It's better comps for Q3, and Q4, where we know that the city Wides are double the amount of 2022, even though theres still chasing 2019, we feel like there's going to be compression because of the amount of attendance. That's expected in lets say 16.
Out of the 33 citywide theres going to be pretty significant attendance in the back half of this year, which should be encouraging because that type of compression helps emeryville and south San Francisco when city Wides come into San Francisco.
No that's helpful. Thanks, Tom Thanks Elisa.
Yeah.
Yeah.
Our next question comes from the line of Tyler.
With Oppenheimer. Please proceed with your question.
Hey, good morning, Thank you or questions on the on the guidance I'm just interested when you look at the range you provided for Revpar.
Q2.
Are we thinking that's more occupancy driven maybe more rate driven maybe more 50 50, I mean, certainly the rate growth in Q1 was very strong it sounds like April was strong as well so just interested what you're what you're expecting for the balance of Q2.
Sure.
Patterns that was as you mentioned sort of are split between rate knock was about 50 50 for the first quarter I would say that in general for the second quarter. We're looking at about two thirds right now versus off but in April it was largely right.
And you know we just generally believe that there's still ability to push out you know overall pricing power.
Okay, and then in terms of the capital allocation and nice to see the the repurchase.
How do you view that option versus some of the other opportunities that might be out there.
You bought back stock on a leverage neutral basis to me is that perhaps a governor as you think about applying more capital towards towards buybacks in the future.
The average price was kind of about where the stock is right now so should we expect you to continue to be active in the market at the current levels.
So I wouldn't sort of helicopter overall I'll just say that you know you. Obviously saw that we were very active across a number of fronts I'm Tyler and that we've consistently demonstrated a thoughtful and disciplined approach to leveraging the optionality that our balance sheet provides given the liquidity. We have we can pull more than one trigger.
And so we've done that for the last several quarters here and as you mentioned, we were active on the buyback side, we did utilize free cash flow in order to buy the shares at a leverage neutral basis, which is something that's important to us, but if you look at our at our margin profile in our free cash flow generation is that something that we're gonna be.
But to continue to leverage them as we go forward, we continue to obviously invest in our portfolio. We launched the two new conversions, which are already performing.
Head of our expectations, even without the capital that we're going to put in later this year, we increased our dividend as well and we continue to cultivate a pipeline of potential acquisitions, but recognizing that buybacks today remain the most attractive and accretive deployment of capital today, we'll continue to monitor that you know our general.
Approaches to to have a view on where we think fundamentals and they are you don't have a view of macro perspective, as well because where do you think that's headed ultimately impacts. Your your perspective on a you know sort of volume of complexity around you know buybacks and so I think we've been thoughtful we're going to continue to be thoughtful, but we do acknowledge that buybacks remain attractive.
Okay, Great I appreciate that detail that's all for me. Thank you.
Our next question comes from the line of Michael Bellisario.
With Baird. Please proceed with your question.
Thank you good morning, everyone.
Uh huh.
Good morning.
First question for you you mentioned an improvement in our head count lower Ftes.
How much of a driver of <unk> outperformance on the EBITDA line was that maybe how sustainable do you think that the.
Got a run rate is for the remainder of the year and does that change your your earnings outlook at all or at least your internal earnings outlook for the remainder of 'twenty three.
Yeah, Mike This is Sean I think on the on on the Ftes you know what we what we saw for the benefit of the sort of our footprint is despite occupancy going up quarter on quarter. We were able to you know to flex. Our you know the ftes in light of sort of.
Where you know, what where the demand wise and sort of and take advantage of back. This quarter. I think you know our long term approach to where we think Ftes are gonna land has not changed we think that's in our in the low to mid 80% of 2019 levels and we think that the ramp back to that is going.
Be influenced by our occupancy rebuilding and so as occupancy rebuilds, we would expect ftes to normalize, but we think that they that the opportunity. There is still at the 80% to 85% of 2019 levels. So our view has not changed I'm on that for the year and then from a margin perspective on sort of how.
You know labor is 40% of our total operating costs and so labor is a big driver of our of our margins. What we said at the beginning of the year or are our full year expectations were for margins to grow year over year, which with which they did in the first quarter by over 280 basis points and our expectations are for that to come.
<unk> you know for the for the full year.
And Mike I would just sort of bookend on to Sean's comments that our guidance reflects ramp back to what we think is a normalized FTE level.
Yeah.
Got it.
It sounds like the improvement in <unk> was maybe there a little bit more temporary or the the improvement that you might see a little bit more of a 'twenty three impacts because the long run whether that's 'twenty four 'twenty five as is unchanged.
Fair takeaway there.
Yeah, I would say that you know we have a very aggressive on the asset management side.
And so we spend a lot of time, making sure that our management companies do not lack costs get ahead of the top line coming into the year clearly everybody had a perspective around possible macro headwinds and so we were pretty cautious on the FTE side. So I think what you're seeing is that we didnt fill some of those spots and so its a temporary.
Transitory.
Pick up on the first quarter on Ftes, and what I'm, saying, though is it does demonstrate our model and ability to flex on the FTE side. It goes back to the lean operating model from a standpoint of our ability to cluster our ability to have efficiencies because of the size of our box and the average length of stay and so what I think it should do Mike is.
To give you confidence that we can flex them when we need to given the type of model that we have.
Yeah.
Got it that's helpful. And then just one more for Shawn, whereas net leverage stand today and sort of what's the comfort level or the comfortable range that you want to operate at for the remainder of the year based on your outlook.
Sure today, we're in a we're in the high fours on a trailing a trailing four quarter basis on leverage we would expect that to go down this.
This year roughly half a turn as as as our EBITDA continues to grow over over 2022 and for for pretty overall cycle. We continue to believe that that below four times net debt to EBITDA is the appropriate level as a reminder.
We entered a COVID-19 with with leveraging the in the low twos I think we were three two or three three.
And and we would expect it to get back below four times sometime you know in that either first or second quarter next year, depending on that on the on the trajectory based on our internal models.
Thank you that's all for me.
Our next question comes from the line of Krish Darling with Green Street. Please proceed with your question.
Thanks, Good morning.
Mostly you discussed the desire to maintain some level of leverage neutrality in terms of share repurchases. So I wonder how youre thinking about selective dispositions in that context, I'm I understand you know, it's not a great environment to maximize value, but in theory that provides incremental capital.
To take advantage of that.
That option, so any thoughts on any of those competing ideas.
Well. Thanks for the question I would say in general E. Given the backdrop that we face today on the on the in the debt capital markets that is not an optimal market to be selling assets into and given the fact that you know we do have significant liquidity on our on our balance sheet. You know we can project forward in terms of what we think.
Our free cash flow will be and Oh said that you know with utilizing cassaday and then putting them back when we have free cash flow generated so I would think about it from a timing issue as opposed to have needing to sell assets in order to stay leverage neutral.
Okay Fair enough that's helpful and maybe one more it might be for Tom, but if I look at your recent presentation you lay out the pipeline as you know future conversion opportunities along with I think about five to seven of what you're calling special situations.
Just hoping you could speak to those special situations the types of ROI projects that you're envisioning over time there.
Sure. This is less limit jump in on this question I think that what those unique opportunities are is where you have an asset and the size of the of the lot size allows you to look at not only hospitality asset, but maybe also doing a a okay. You site. So these are situations where.
There you can look at our developing multifamily alongside a hotel so it's not necessarily something that we would execute on our own but it's an opportunity where we think there's incremental value for for all James embedded in that asset given where it's located.
Yeah.
Got it I appreciate the time thank you.
Our next question comes from the line of Anthony Powell with Barclays. Please proceed with your question.
Hi, good morning.
On the balance sheet I know you extend it.
Mortgage loans in that term loan into next year I mean, as you think about.
No.
Most of your peers seem to be paying off mortgages is that something that you.
Consider or what do you think on the mortgage.
Currently.
Yeah. Thanks, Thanks have a you know mortgage debt today, we have where we have mortgage debt on on on for 15 of our of our 96 hotels. It represents less than 10% of our total asset value. We're very comfortable just from a standpoint of having diverse debt sources.
As having you know anywhere from you know up to maybe 15% of our of our total debt as a secured and so we think that that's appropriate I think for the loans that we have secured today you know they are loans that are you know anywhere on and I'm going to just 23 numbers here.
Kind of a mid teens debt yield and north of two times coverage on each one of those loans and so theyre relatively low LTV loans.
And so which is why they're priced attractively and so we think that's a strategy, but when you think about our secured debt that that yeah.
We refinance we would we would probably continue to maintain sort of not pushing individual leverage on those on those individual loans, but we're trying to make sure it's attractive from a from a from a pricing perspective.
You know the market today, you know continues to be you know like like all lending choppy on unsecured debt you know as we talk to secured lenders. We're obviously in a very good position because of our balance sheet and because of our because of our relationships and.
And so we would expect to be able to put secured debt on in an efficient way, but it would be more expensive than the expiring debt the market's moving all over the place and so I'm not I don't have a number of you today on what the all in rate would be out of it than it would be you know it spreads you know higher than than than maturing.
But we would be able to compensate for that.
From lower Ltvs.
Yeah.
Alright, thank you.
Yeah.
Our next question comes from the line of Floris Van <unk> with Compass point. Please proceed with your questions.
Hey, good morning, I, just a follow up question I think Leslie you mentioned something about BT and I'm somewhat encouraged by Btu.
To use 85% of 19 levels I think you said.
April it's actually even higher Hum.
Where will will be T get too.
Or can it get to 100% of 19 levels. This year in your view.
What does it take obviously, we've got some economic uncertainty still weighing over us et cetera, but maybe if you can give a little comments and and and and how does that view your perspective.
Perspective on on on the company and I know in the market as well.
So look I would generally say that BT is grinding for we don't necessarily see it getting back to 2019 levels by the end of this year. We do think it is a possibility that the 'twenty 'twenty four story now obviously, we all know the million dollar question is just to get back to a 100% or not but what I would say is is that we.
We have confidence that the puts and takes between all of the segments and given the elevated rate growth that we're seeing across the portfolio across the segments, it's going to allow us to achieve our 2019 revenues you know across the portfolio and so what I would what I would say to you is is that you know we all as an industry are evolving.
To be able to capture the new breakdown of segmentation and we think that our portfolio is built for that and when you think about our urban centric portfolio, our urban lifestyle assets, which are sitting you know in the heart of seven day, a week demand nature and types of assays that we have whether it's the mix between BT and leisure you know evolves we can capture.
That and so I think that were net net positive on how BT is evolving but as a new normal continues to shake out our portfolio is uniquely positioned to be able to capture the evolving mix is what I would say yeah, and then just a bolt on to that I call out with respect to our guidance relative to two.
The first quarter as well as fourth quarter. So our revpar was improved relative to the 19 100 basis points fourth quarter to first quarter and our guidance implies that midpoint, we're at 99% up 19 levels of Revpar. So another four.
400 basis points of recovery quarter over quarter, and so I think that is as much of an indication of how we believe that the recovery is going to continue to unfold and because of our urban centric portfolio and P. T being a driver of that in this moment of time.
That is if it is overall, giving us the confidence to give the guidance that we gave.
Yeah.
Thanks, that's it for me.
Our next question comes from the line of Gregory Lewis Chief will see short question.
Good morning.
I want to also talk about a question about business transient could you provide an update on negotiated corporate ADR trends now.
Now that we're past the winter months.
So where is negotiated ADR today compared to the mid single digit growth that had been previously articulated thanks.
Good morning, Greg, It's Tom and Yeah, where we're actually pleased with how it shook out.
When we went into the negotiation process, which starts in the August September timeframe, and it was pretty lengthy going into fourth quarter as well as first quarter, we had a pretty significant ask on the table. Knowing that we had you know a walk away price. It at the same time and where we ended up you know globally was somewhere between 5%.
On the minimum and high single digits on the top end and you know, there's obviously accounts that you know when you think about volume and to lessees point about the grind forward, we're seeing significant volume year over year, which was an easy comp. If you think about 'twenty 'twenty to Q1 versus 2023 but more importantly, we're.
Seeing movement from what Sean was just talking about from Q4 to Q1, where our mix is increasing and the type of accounts that are increasing are the large corporations. As you. All know Smes have been you know kind of holding up if you will and now we're starting to see growth from you know the tech companies, even though they went through a correction and re.
The hiring process, we're actually seeing volume start to gain traction from aerospace and automotive consulting, where we see Deloitte accenture, and Pwc and Ernst and young coming back and staying at our hotels and a leading indicator of that is when you look at source of business you can see that global distribution systems.
You know, which was in the low you know I'm a high single digits percentage wise now as a double digits right. So youre looking at the demand is coming through the amex travels in the organizations that typically book those type of BT events. So we're encourage out how it ended up and we're seeing the growth in rate and then the volume is starting to also.
You know track back to 19, but certainly over 2022.
Great. Thanks, so much for that.
The other question that I had for you yeah I'll leave it there isn't H H.
And progress on the front desk.
And I found that interesting.
Greg that's a start breaking up and you break it up so we didn't hear part of your question I'm sorry.
As it sits here.
Try again.
Okay.
Okay believes that there is an H L. A survey and progress on the front desk.
And I found that pretty interesting.
Not to front run the survey, but I'm curious how front desk staffing and labor costs are trending for the portfolio today.
It's the position harder to fill for hourly rules.
Yeah, and I would say when we think about our desk and what's happening there versus housekeeping and food and beverage we've been able to maintain levels. Because you have to obviously have a certain amount of folks on the shifts so as occupancy starts to increase it typically has not been the hardest area to <unk>.
Find jobs compared to let's say housekeeping and food and beverage because of what happened you know when you think about the restaurant industry and and the the move where group took a little while to come back, but the desk because its always been something that we've been maintaining and to lessen his earlier point, we always can cover shifts if we need to you know when it comes down to having.
Managers do that as well, even if we had a little bit of a you.
You know and the slow track back, but we've typically haven't seen that be the topic, where we've been able to have retention in fact, what we've done which I think is interesting Greg you have an up selling program and with that you know the whole goal is to try to drive average rate and put people in views configuration.
And so it's actually been attractive for the desk folks to be able to be hired and have that opportunity to have a little incentive in place, which they get a piece of the pie if they're able to upsell and we've found that program to be highly attractive to be able to get more people on the desk to be able to work at our assets.
Yeah.
Okay terrific. Thanks, so much.
All the information.
Yes.
And we have reached the end of the question and answer session and I'll now turn the call back which is less D&O for closing remarks.
Thank you all for joining us today I would just like to reiterate that the positive momentum that we've seen in our portfolio our urban concentration position us for continued growth and that we talked about a number of catalysts that are unique to our old J and that provides us confidence that we can continue to outperform look I look forward to seeing many of you I'm at NAREIT I hope all of you have.
Great Summer plans and I wish you all well for the summer. Thank you everybody.
Okay.
And this concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.
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