Xenia Hotels & Resorts Inc. Q1 2023 Earnings Call
Speaker 1: Good morning. Thank you for attending today's Zena Hotel Sir Resorts first quarter, 2023 Earnings Conference Call. My name is Megan and I'll be your moderator for today's call. All lines will be needed in the presentation portion of the call with an opportunity for questions and answers at the end.
Speaker 1: If you would like to ask a question, please press star 1 on your telephone keypad. I would not like to pass the conference over to Amanda Bryant, VP of Finance.
Speaker 1: Amanda, please go ahead.
Speaker 2: Thank you, Megan. Good morning. A welcome to Zemia Hotel's Resorts First Quarter 2023 earnings call and webcast. I'm here with Marcel Verbaus, our chair and chief executive officer. Barry Bloom, our president and chief operating officer.
Speaker 2: and Atish Shah, our Executive Vice President and Chief Financial Officer. Marcel will begin with a discussion on our performance. Barry will follow with more details on operating trends and capital expenditure projects. And Atish will conclude today's remarks on our balance sheet and outlook for 2023. We will then open the call for Q&A.
Speaker 2: from 10K and other SEC filings, which could cause our actual results to differ materially from those expressed in or implied by our comments. Forward-looking statements in the earnings release that we issued yesterday, along with the comments on this call, are made only as of today, May 3, 2023, and we undertake no obligation to publicly update the results.
Speaker 2: any of these forward-looking statements and actual events unfold. You can find recommendations of non-GAAP financial measures to net income and definitions of certain items referred to in our remarks in the earnings release, which is available on the Investor Relations section of our website.
Speaker 2: First quarter 2023 property level portfolio information we will be speaking about today is on the same property basis for all 32 hotels. An archive of this call will be available on our website for 90 days. I will now turn it over to Marcelle to get started.
Speaker 3: Thanks, Amanda, and good morning to everyone joining our call today.
Speaker 3: We are pleased with our first quarter results, which reflect a strong start to the year. As expected, our portfolio experienced significant red bar growth in the first quarter as compared to 2022, particularly in January and February , as we lacked a negative impact of the overcrowding variant in the beginning of last year.
Speaker 3: Overall demand in the quarter reflected the continued transition in our business to a more normalized mix of leisure, corporate transition and group demand.
Speaker 3: This trend particularly aided performance in our hotels and resorts that have traditionally been more dependent on corporate transients and group demand, and that in many cases were more significantly impacted by the Omicron variant during the early part of last year.
Speaker 3: For the quarter, we reported a net income of $6.3 million.
Speaker 3: adjusted EVD rate of $71.3 million, and adjusted FFO per share of 40 cents.
Speaker 3: With all of these measures, we're reflecting significant increases over the first order of last year.
Speaker 3: Same property required in the quarter was $179.55.
Speaker 3: An increase of 23.9% as compared to 2022.
Speaker 3: The majority of grant bar growth came from occupancy, which increased roughly 10 points as compared to the first quarter of 2022, while average daily rates increased 5.2%.
Speaker 3: As compared to the first quarter of 2019, Red Bar for the 30 hotels we currently own that were open at that time was down just 1.6% for the quarter.
Speaker 3: For these 30 hotels, which excludes high-frequency Fordlands and W. Nashville, occupancy was roughly 10 points below 2019, while ADR was up 13.5 percent.
Speaker 3: Adjustment of EVID RRE of $71.3 million reflected growth of 42.8% over the first quarter of 2022.
Speaker 3: Margins improved 167 basis points compared to the first quarter of 2022, despite continued inflationary pressures, particularly in labor and utilities.
Speaker 3: Importantly, the demand for recovery continues to broaden.
Speaker 3: In the first quarter, eight of our 10 largest markets, as measured by 2022 EBITDA contribution, reported double-digit REQ bar increases as compared to the first quarter of 2022.
Speaker 3: Breath bar for a Dallas hotel increased more than 50%.
Speaker 3: While RECBAR grew more than 30% in our Houston, Atlanta, and San Francisco, San Mateo hotels.
Speaker 3: experience, red-barring increases of more than 60% and 70% respectively.
Speaker 3: These are all markets with larger hotels with relatively higher dependence on business encuentra.
Speaker 3: These are all markets with larger hotels with a relatively higher dependence on business for engine and group demand, and they are still performing well below 2019 levels.
Speaker 3: Therefore, we continue to believe that these markets continue to present the greatest potential for recovery and earnings growth in these quarters ahead. Conversely, the two top 10 markets with bar declines in the quarter, Key West and Napa, are in the top 10.
Speaker 3: Lab particularly strong performance in the first quarter of 2022 as Oma Crown did not help meaningfully impact the man in these markets.
Speaker 3: Additionally, the unusually rainy weather had a substantial negative impact on demand in Napa for the quarter.
Speaker 3: with the bad weather conditions also impacting leisure demands in the remainder of California.
Speaker 3: with a bad weather conditions also impacting leader demands in the remainder of California. The site loss of uncertainty in the economy.
Speaker 3: We have not yet observed any signs of broad-based demand slowing.
Speaker 3: to April , same property, RAPR, is approximately $196.
Speaker 3: which would be down roughly 2% as compared to April 2022.
Speaker 3: preliminary April occupancy of 70.7% is nearly flat to 2022, and preliminary ADR is down approximately 2%.
Speaker 3: reflecting that the man makes shifts we are witnessing in the portfolio. For the 30 hotels that were open in 2019, for a preliminary report for April was approximately $197, which would be a 1.1% increase as compared to April of 2019.
Speaker 3: These preliminary results are encouraging given the historical seasonal strength of the month of April within our portfolio.
Speaker 3: including very strong leisure-driven performance in April last year.
Speaker 3: We remain cautiously optimistic for the balance of 2023 and beyond, based on the trends we continue to see in our business.
Speaker 3: top-line performance in April also matching our expectations. We are reiterating the midpoints of our full-year outlook for red bar growth and adjusted EBIT RE. At least we'll provide additional details on our updated guidance during these remarks. Let me highlight four key factors supporting our long-term optimism.
Speaker 3: revenue, group room revenue on the books for 2023 is only about 6% behind 2019 levels for the 30 hotels that were open at that time.
Speaker 3: Group room revenue on the books for 2023 is currently about 20% ahead of 2022 levels.
Speaker 3: Driven by increases in both room knives and wraith.
Speaker 3: We are also seeing continued momentum in corporate transient business.
Speaker 3: increasing by mid-team percentage points on both Tuesday and Wednesday nights as compared to the first quarter of 2022.
Speaker 3: Second, we have numerous growth drivers embedded in our existing portfolio that we believe will support growth this year and beyond.
Speaker 3: As mentioned previously, we have recovery potential in our larger urban, group and business transit focused hotels.
Speaker 3: Mainly Marial Center Cisco Airport, HydroEDNC Santa Clara, R2000 hotels, and R3 USEN hotels.
Speaker 3: These seven hotels reported more than 40 percent bread part growth on average in the first quarter as compared to 2022.
Speaker 3: However, even out of these seven hotels in the first quarter of 2022, we're still approximately 22 percent below the first quarter of 2019.
Speaker 3: Also, we own several recently renovated properties and properties undergoing renovations that are assumed to be completed.
Speaker 3: So we expect to be meaningful internal EBITDA growth drivers. These include high-dream-seek-grant cypress, carcaya and aviara.
Speaker 3: Waldorf Astoria Atlanta Buckhead, and Grand Bohemian Hotel Orlando amongst others.
Speaker 3: Looking further ahead, our upcoming transformation of the high-greedency Scottsdale Resort and Spa at Ganey Ranch to a luxury Grand Hyatt Resort is expected to be a meaningful contributor to our future growth.
Speaker 3: And I agree to report that the Oregon Convention Center and WNAS are continuing to ramp as the base of group business builds on both properties.
Speaker 3: years. Third, our flexible balance sheet, which was further strengthened as a result of our recent activities, supports continued investment in our portfolio, while also balancing returns to shareholders in the form of share repurchases and our 10 cents per share quarterly becomeible.
Speaker 4: F-4
Speaker 3: Genius Portfolio's high quality hotels and resorts will continue to benefit from diminishing levels of new competitive supply, as the environment for new hotel development remains challenging.
Speaker 3: Based on the most recent data from lodging ecom metrics, weighted room supply growth in our submarkets is expected to be just 1.2% in 2023 and 1% in 2024.
Speaker 3: This represents a meaningful reduction in growth from about 3% annually just a few years ago.
Speaker 3: As for the transaction environment, we believe we are very well positioned to remain opportunistic as it relates to potential future acquisitions. We continue to look at opportunities to meet our criteria, including top 25 markets and key leader definitions.
Speaker 4: However.
Speaker 3: We are willing to be patient as the overall environment continues to evolve, and as we evaluate all avenues to drive shareholder value.
Speaker 3: And with that, it will turn it all over the bar.
Speaker 3: Thank you Marcel and good morning everyone. As Marcel indicated in his prepared remarks, the same property leaders in terms of rev-bar growth in the quarter included many of the hotels that lagged over the past two years, suggesting that recovery is now more broad-based.
Speaker 3: Red Park grew in excess of 30% of our hotels in Dallas, Santa Clara, San Francisco, Houston, Philadelphia, Washington DC, Atlanta, and Portland.
Speaker 3: While it may seem surprisingly co-op strength in San Francisco, it's given much of the negative press. Marvichal, the 688-room Mariac of the San Francisco Airport, is recovering very well.
Speaker 3: This property is benefiting from improving group demand, recovering international air travel, and improving business transit demand, particularly from life science related corporate accounts.
Speaker 3: As expected, results in the first quarter varied across the month and the quarter, as we lap the impact of the onalcrone variant in early 2022. Same property ramp on January increased a very robust 49.25% and moderated to a ramp of 10.24% in March, as compared to 2022.
Speaker 3: despite impact from several renovations and severe weather that impacted several of our California profits. Break growth in the first quarter, our same property portfolio moderated a bit from the mid-teens percentage increases in the last several quarters to a 5.2% as compared to 2022.
Speaker 3: We're optimistic regarding corporate and group rates, particularly as we achieve higher midweek octopuses in a number of our larger hotels and urban markets.
Speaker 3: including Santa Clara, San Francisco, Houston, and Dallas, particularly on Tuesday and Wednesday nights, for these higher occupancies who are providing meaningful rate compression opportunities.
Speaker 3: Our managers anticipate further improvement in corporate trends and business fundamentals and continue to expect negotiated corporate rates to increase in the high single digit percentage range this year.
Speaker 3: Business from the largest corporate accounts across our portfolio continues to improve, with March representing the strongest recovery to 2019 since the beginning of the pandemic.
Speaker 3: On average, rate growth in our leisure-oriented hotels in the first quarter was below that of our same property portfolio, but still positive as compared to the first quarter of 2022, with rates well above 2019 levels.
Speaker 3: We saw rate declines in Key West and Napa off of historic highs through the pandemic, yet rates are nearly 40% above 2019 levels, and rates did increase in Key One at our other leisure-oriented properties in Orlando, Savannah, Charleston, and Arizona.
Speaker 3: Now, turning to expenses and profit.
Speaker 3: First quarter same property hotel EBITDA was $77.2 million, an increase of 33.6% on a total revenue increase of 25.9% compared to the first quarter of 2022, resulting in 167 basis points of margin improvement.
Speaker 3: This significant improvement in the hotel EBITDA market for the quarter reflects our operators' ability to manage expenses, while also benefiting from significantly better revenue in areas such as food and beverage, up more than 35 percent for 2022, with banquet and catering revenues up over 60 percent compared to 2022, as a result of high-quality group business.
Speaker 3: both of which contributed to significant levels of food and beverage profits.
Speaker 3: Good control of room expenses also contributed to EBITDA margin expansion as improved occupancy spread the fixed operating costs over a broader base.
Speaker 3: whose payroll expense was up roughly 20 percent compared to the first quarter of 2022. Good margins in the operating departments were somewhat offset by increases in areas such as utilities, which were up approximately 24 percent.
Speaker 3: With respect to labor overall, our operators successfully staffed up last year to meet the strong recovery and demand where necessary and have been able to better fill open positions. In general, our fully recovered hotels are operating at FTE staffing levels between 90 and 95 percent of pre-pandemic levels, while hotels where there is still substantial opportunity for recovery.
Speaker 3: are operating at FTE staffing levels of approximately 75% of pre-pandemic levels. Now turning to CapEx, during the first quarter we invested $11.6 million in portfolio improvements. At the Grand Bohemian Orlando, we completed the comprehensive renovation of public spaces including meeting space, lobby, restaurant, bar.
Speaker 3: Starbucks, and the addition of a new rooftop bar. A comprehensive renovation of the guest room will commence in the next several weeks.
Speaker 3: At Canary Hotel in Santa Barbara, we have just completed the comprehensive gas room renovation and are now looking forward to the benefits of a fully renovated hotel.
Speaker 3: At the Ritz-Carlton Denver, the recently completely needed renovation and reconfiguration of the premium suites resulted in three additional keys added as of April 1st.
Speaker 3: At Park I at Albiara, we continue to work on the significant upgrade of the resort spa and wellness amenities, which we branded as a Mirabal Life Imbalanced Spa on completion late in the second quarter.
Speaker 3: We also continue planning work at the Hotel Monica Salt Lake City on a comprehensive renovation meeting space, restaurant, bar, and guest rooms. It is also expected to commence in second quarter.
Speaker 3: And finally, the comprehensive $110 million renovation and upbranding of the 491-room High-regency Scottsdale Resort and Spa at Ganey Ranch is expected to begin in June with expected completion of all phases by the end of 2024. The project will formally kick off with a complete renovation of the two-acre pool complex in early June with an expected completion date by the end of this year.
Speaker 3: doubling the size of the largest existing ballroom to 24,000 square feet, and renovation of the existing meeting space would begin in early July and is expected to be completed, along with the renovation of all other meeting spaces by the end of 2024.
Speaker 3: Gas room renovations are expected to begin in the fourth quarter and is expected to be completed in the second quarter of 2024.
Speaker 3: Finally, the comprehensive renovation of all other public spaces, including the lobby and the transformation of all food and beverage venues, is expected to begin in the second quarter of 2024, to be completed by the end of 2024.
Speaker 3: We note that this renovation is nearly all guest space as the building systems have been very well maintained over the property's history.
Speaker 3: Upon completion, the property will have five additional keys for 496 rooms.
Speaker 3: Upon completion, the property will have five additional keys for 496 rooms and will be rebranded as a Grand Hyatt Resort.
Speaker 3: Concluding the aforementioned projects, in 2023 we expect to spend approximately $130 million on capital expenditure projects.
Speaker 3: Of this amount, approximately $45 million will be spent at High Beach City Scottsdale. This is consistent with our initial guidance provided in early March.
Speaker 3: We are excited about the work our in-house project management team has completed and are even more excited about the projects we have underway and in various stages of planning in 2023. With that, I will turn the call over to Atish. Okay, thanks Barry. I will provide an update on our balance sheet and discuss our guidance. As to our balance sheet, it continues to be a strength of the company.
Speaker 3: As we previously discussed, in January we completed a recast of our line of credit, entered into new bank term loans, and refinanced one property mortgage loan. These actions improved our balance sheet profile.
Speaker 3: interest rates. We continue to have a fully undrawn line of credit and a strong liquidity position. We continue to be active on the share by the front. In addition to the shares we repurchased last year, thus far in 2023, we have repurchased nearly 3% of our outstanding shares at an average price of about $13.50 per share.
Speaker 3: share repurchase authorization.
Speaker 3: As for our dividend, we paid a 10 cent first year dividend in the first quarter on an annualized basis that reflects a yield above 3 percent on our stock. It also reflects a payout ratio below 40 percent of projected SAD based on the midpoint of our FFO guidance. I'd like to end the program as just one of the way from the bottom so I can just take a quick vision so...
Speaker 3: Moving ahead to our outlook, group revenue pays continues to strengthen, with 2023 group revenue pays for the last three quarters of the year up about 7 percent to last year. This reflects room night pays for the second through fourth quarter up about 3 percent and room ratesuck in dollars on MAN helping to reduce the number of thumbsh elects that
Speaker 3: up about 3.5%. Overall, the year's evolving is expected with a very strong first quarter, followed by expectations for lower levels of growth in quarters two through four given tougher year-ago comparisons and the impact of renovations. The midpoint for a full year guidance.
Speaker 3: for adjusted EBITDA RE is unchanged from early March. The midpoint of our FFO per share guidance increased slightly due to share buybacks.
Speaker 3: and our guidance on interest expense, income tax expense, and G&A expenses.
Speaker 3: expense, income tax expense, and G&A expenses were unchanged.
Speaker 3: As to our expected seasonality of earnings, our estimated percentage weighting of full year adjusted EBITDA RE by quarter is as follows.
Speaker 3: For the second quarter, about 30 percent. For the third quarter, about 20 percent. And for the fourth quarter, in a low 20 percent range.
Speaker 3: I'd like to wrap up by reiterating that Xenia is well positioned with a curated collection of high quality properties managed by leading operators and located in desirable markets.
Speaker 3: With lower industry-wide new supply additions on the horizon, we expect to have a long runway for growth.
Speaker 3: Our portfolio has several embedded drivers that we expect to utilize and we expect to utilize our balance sheet to drive additional growth over the next few years. We have historically done well managing through the various ups and downs in this with business and expect our nimble profile and highly focused team to continue to deliver strong results.
Speaker 1: And with that, we will turn the call back over to Megan for our Q&A session. Thank you. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason you would like to remove that question, please press star followed by 2.
Speaker 1: Again, to ask a question press star 1. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered.
Speaker 1: Our first question comes from a line of David Katz with Jeffries.
Speaker 3: Your line is now open. Hi, morning everybody. Atish, can you just talk about leverage, leverage tolerance, where you'd like to be, how you're thinking about where you'd like to be, and just give us a little perspective there, please. Yeah, sure, David. So, ways in which we've used the web service
Speaker 3: As you may be familiar, we've been running the company pre-COVID with in the leverage range of low three times to low four times net debt to EBITDA. And we believe that to be the appropriate level of leverage for us overall. We're running just above that right now, a little closer to five times that...
Speaker 3: So that's what we view as sort of the appropriate level of leverage for our business. And I will also remind that, you know, we don't have any press or other senior capital. So that's simply, you know, our relatively straightforward balance sheet that I'm capturing there and describing our debt profile.
Speaker 3: Perfect. And as my follow-up, just looking at the M&A landscape, would you, and maybe this is more of a Marcel question, would you consider yourself more likely a seller or buyer?
Speaker 3: And any perspectives on either of those sides of the ledger would be helpful. Sure. I'll say that.
Speaker 5: From our perspective, we've obviously done a lot of fine-tuning of the portfolio. So we like the markets that we're in, we like the hotels that we own. We think, we've obviously talked quite a bit about where we think the embedded growth exists in the portfolio. So I don't envision us being...
Speaker 5: Extremely active on the disposition side at this point. We've really narrowed down our portfolio to what we believe is a really highly curated portfolio that has a good amount of upside in it at this point also because of some of the some of the activities we've undertaken as it relates to renovations and all those kind of things. It doesn't mean we won't sell anything. I mean, if the time comes where we think it's appropriate.
Speaker 5: from a market timing perspective and from a perspective of maybe a renovation is coming due that we don't think is going to give us the right type of returns, we might do some additional dispositions, but I don't expect us to do a lot of those.
Speaker 5: On the acquisition side, it's really a matter of balancing the potential levers that we can pull with the drive share with value as I look to my remarks. So clearly, we think that there's a lot of value in our existing portfolio, so that's why you've seen this be pretty active to share it by background.
Speaker 5: and clearly at these values that Tije outlined in his remarks, we think that there is a lot of value in our portfolio. And we'll keep an eye on the acquisition landscape. We don't think right now the timing is perfect to get aggressive on acquisitions. We do find that.
Speaker 5: as we get deeper into the year and where people might be dealing with refinancing issues and those type of things that we've talked about over the last couple quarters, that there might be some better and more plentiful opportunities out there.
Speaker 4: Perfect. Understood. Thank you. Thank you.
Speaker 1: The next question comes from the line of Brian Mayer with B. Riley.
Speaker 6: Your line is now open. Thanks, just a couple quick questions. On the food and beverage front, you know that spend was seemingly a bit higher than we were thinking. You know, what's driving that and how sustainable do you think that is Barry? It's really driven obviously directly
Speaker 5: by the group business that we enjoyed in Q1, the Duke of America, Q1 of 2022. We're not seeing, we're hearing anything about softening in terms of the robustness of banquet and catering spend from groups. They continue to spend at significant levels. I've noticed that.
Speaker 5: the food and beverage spend has continued to actually surprise our operators as well, where groups are often committing to relatively minimal food and beverage contributions as part of their contracts. But as they arrive on property and as they get closer to their programs, still seem to be...
Speaker 5: a bit celebratory in terms of what they want to spend on food beverage overall, and backwoods in particular from the groups.
Speaker 6: Okay, and then on the leisure, you know, kind of resource side of your business, you know, it seems like, you know, maybe not just with you, but with some of the other companies we cover, that those, you know, ADR increases are moderating a bit. How sensitive are you finding the consumer, leisure consumer, to be these days to, you know, pricing in that product category?
Speaker 3: I think it's much less about the consumer and what they're willing to spend than is about the demand characteristics in the particular submarket. So obviously we highlighted Key West and NAPA. NAPA is a little bit of an outlier because it's very hard to discern how much of our challenges there in Q1 were weather related but they were significantly weather related.
Speaker 5: Key West is more interesting example. We're not seeing guests not willing next time to pay the price if there's a lot more competition for the business within the market and that has led to the moderation in pricing more so than a consumer unwillingness to spend top dollar for a premium experience.
Speaker 6: Okay, and then just lastly, I think Marcel, you commented upon April trends, and I just want to clarify maybe what I thought I heard there. Maybe it's, is it the price insensitive revenge travel from 2022 kind of exiting the marketplace to a degree?
Speaker 6: and being replaced by more rational corporate and business transient. That's what's going on really, I think, as it's impacting ADR.
Speaker 5: That's only a little bit of it. When you look back at the last year as April , you were coming out of Omancroni. You had some really, really frothy leisure travel that was taking place in April of last year. And the fuel of a lot of our resort locations during that time. Whereas this year in April , you have a little bit of...
Speaker 5: more balanced demand segments between group, corporate transients, and leisure. So it's just a little bit of a natural transition that you're seeing in the portfolio. We're not overly concerned about race being held and those types of things. We've had a lot of discussions obviously with our operators on that and we feel very confident.
Speaker 5: that consumers are still willing to pay the rates. But we're clearly seeing a little bit of an occupancy shift between the different segments in our portfolio. And that's not a bad thing for us overall. We think it's a very positive thing. And we've talked about that as it relates to our hotels that are more focused on business financing group. And we're seeing some really good growth there.
Speaker 5: And so we're actually excited about that. And I also pointed out obviously that the April results were really in line with what our expectations were, with what we expected to see in April given the strength that we saw last year. And so we, again, feel good about what our current expectations are really for the second quarter and beyond. It gets a lot more curious.
Speaker 1: with Oppenheimer. Your line is now open.
Hey, thank you. Good morning. Just to follow up question in terms of trends in the portfolio specifically in April , interested what you're seeing in the West Coast or on the West Coast in particular. I mean, I know you called out the strong year over year performance there in Q1, but any increased cancellations in April .
Compared with March, just given some of the tech layoffs out there and some of the noise with the regional banking situation.
Hey, Tyler, good morning. Nothing of real note and I think obviously our property is most reliant on tech business and the tech sector in general is High Street Santa Clara and we've not seen any significant...
downward trends there in terms of demand, either on the group side or on the corporate transient side. Obviously, there are fewer employees in the market, but that is not translated – and obviously, we're keeping a close eye on it – but that's not translated to any softening in demand. That's not translated to any softening in demand.
And we continue to see some growth, actually year-over-year growth in, obviously year-over-year growth in the market, but the trend line there has not shown us anything that we would be concerned about in that market. Thank you.
Okay, great. I just want to circle back on the buyback a little bit if I could. Just talk a little bit more about how that fits in with how you're thinking about capital allocation just in light of where leverage is right now and give us some of the commentary on the potential deals that might be coming down.
I mean, is your thoughts on the buyback more depending on where the stock is trading or is that more just compared to some of the other options out there? I mean, is this like 12 to 14 level, ideally where you think you might be active in terms of repurchasing the stock?
Yeah, hi Tyler, I'm Tish. You know, I think we've always taken sort of a balanced approach to share by-backs. And you know, we have bought back shares over the years from time to time. We view it as one tool in the tool set of driving shareholder returns.
Obviously, a little bit shorter dated in terms of how you do that relative to some of the longer dated investments in our business. But that's how we continue to view it, really as a tool. And we've taken a balanced approach towards it. So it doesn't mean that we're not open to other projects and some groups.
work full of the evaluation on a per key basis. You can look at external estimates of NAF as well. You could look at it by cap rate. So across all those measures, and we do evaluate them, we continue to feel like the stock is a compelling value. And so therefore we're reacted on it.
And so, you know, we have the authorizations in the board, you know, that's got a significant room. Beyond that, I think really just I would continue to view it as a tool and that will take a balance of purchase.
Okay, great. That's all for me. Thank you.
Thank you. Our next question comes from the line of Michael Bilisario with Baird. Why is the line so open?
Thanks good morning everyone. First question, just on the renovation disruption at $15 million.
that you guys have for the full year. Maybe how much of that did you experience in the first quarter? And then what sort of the rough cadence of that impact from 2Q to 4Q for the remainder of the year?
Yeah, I mean, we didn't experience much of it in the first quarter, probably about a million dollars worth. And then it certainly takes up, you know, kind of third and fourth quarter. That's where we are going to experience more of the impact. And, you know, a lot of the ties to the, the renovation project that very described it.
into this kind of the second half of the second quarter here and we get started on the room renovation at Grand Bimini in Orlando and the room renovation at Monaco Salt Lake City. We start seeing a little bit of impact in the second quarter, but the bulk is really coming from the third and fourth quarter. By far the majority coming from...
kind of the second half of the second quarter year and we get started on the room for innovation at the Grand Beam in Orlando and the room for innovation at Monaco Salt Lake City, we're starting to see a little bit of impact in the second quarter. But the bulk is really coming from the third and fourth quarter by far the majority coming from Wisconsin.
Got it. That's helpful. And then just switching gears a little bit for Barry on the group side, what type of customer are you seeing the greatest pickup in committed room nights kind of broadly? And then secondarily, when you think about in the quarter for the quarter or in the month for the month bookings, who's booking on that very short-term window and what are they willing to trade off on? Is it price? Is it dates? Is it F&B? What's kind of the...
hard-deck sheet large programs. I'm not going to time one. What we are seeing is a lot of rigidity around dates, which for our hotels we think has been overall helpful. It's also an easy decision whether you can take it or not, but companies kind of have decided in their own mind when they're having a meeting and then they're shopping hotels.
And that's given the hotels in general a lot of opportunity to compress and press rate with those accounts because their dates are really locked in and they may not have a lot of available options in the market as opposed to if they were looking at a broader swath of dates. So that's one. Two, I think we're going to go to the next slide. What another slide we are going to share from our test cost-
The growth right now that we're seeing has shifted a little bit. Obviously the corporate demand was very pent up, but executed pretty quickly. So now we're starting to see in particular some of the longer term larger programs on the corporate side and association business start putting business on the books in particular for.
for future years, which had been a really slow process. They hadn't committed to how we were starting to see good commitments in a lot of the larger hotels on the association side for 24 and 25.
Got it, and then just one follow up there on the group side. I think there were a few comments by Atish just on the group rate for 23. Anything on volume for the remainder of the year on the group side? And then also what are you seeing on the books for 24? Thank you.
Yeah, sure. Yeah, I did just discuss the volume in my comments for the last three quarters. Sorry if it didn't come through clearly, but I said volume up about 3%, rates up about 3.5%. And again, both those stats are for the second through fourth quarter, so the remainder of the year taking out.
first quarter which obviously has a benefit due to the comparison to last year in Pomekron. The only thing I would also point out with the pace is it's inclusive of of Scottsdale and obviously you know we had you know a lot of business in Scottsdale last year given the significance of the group business at that hotel.
This year, the hotel is not filling up business given the upcoming renovation. So if you exclude that, the pace being up about 7%, that's revenue pace, is actually more like 12% in that range. So that's a pretty big drag on our numbers. So it's just something to keep in mind when we think about pace.
that the remainder of the portfolio is actually quite a bit better than that seven. And then as the 24, it's a little too early to talk about that. I know some of the peers have talked a little bit about 24, but just given the nature of our business, a lot of it looks a little bit closer to the year, and certainly we have a big chunk that books in the year for the year.
It's because our group is a little bit more corporate and leisure oriented than association oriented. So first of all, we've traditionally not talked about it this early. And second, well, even if we give you a number, it does move around quite a bit between now and kind of toward the end of the year when we do talk about it. So a little premature. But I will say that we do feel pretty good about group business for 24. The things that operate...
early number of 24, we do feel pretty good about 24 and how it's shaping up. And you know, W Nashville, Portland, I mean those hotels that are new to us continue to ramp and do well from a food perspective.
Thank you for that. Yeah.
Thank you for that. Yeah. Thank you.
Our next question comes from the line of Bill Crow with Raymond James. Your line is now open. Good morning. Thanks. Good morning. Thank you. Can you hear me? Okay.
Very interesting for you, which we've heard from a couple of your peers that are starting to really focus on expenses at property level, especially at some of the leisure or consumer or in properties. I'm curious whether you all have started to get into that kind of pre-recession mode of cutting costs. I'm sure you all have started to get into that kind of pre-recession mode of cutting costs.
Hey Bill, it's Barry. I'll take that one. I mean, as you know, we think we do a really good job of always looking at expenses and always working with the operators on identifying opportunities. We have asked all of our hotels for
a deeper look at where expenses have kind of recovered to and what the opportunities are moving forward, whether business slows or not. But that's very much a periodic exercise for us.
I will tell you that our sense is that it's been an easier exercise to conduct given all the learnings that we had during COVID. And we've talked about before, you know, how we kind of worked with the properties and asked them to build up operating models at every decile of occupancy. For those
So it's been a much, much quicker process to look at that. And the reality is that there are some cases where expenses have moved in response to, in part, providing great customer service, particularly where rates were, you know, significantly in excess of what they were. But I think, you know, we have a huge amount of confidence in our asset management team and the work they have always done and continue to do.
for me if my other questions were asked.
Thank you.
Our next question comes from the line of Ari Klein with BMO Capital Markets. Your lines are open.
Thanks and good morning. Can you talk a little bit about the cadence of red park growth expectations for the rest of the year? I think the guidance implies maybe around 1% growth post Q1 and renovation disruption will be more significant in the second half of the year, but April was down a bit from last year. So, some color on the rest of PQ and the year will be great.
Yeah, sure, Ari. So when we had given guidance back in March and things haven't changed really that much from then, we had talked about kind of the red part number on the first quarter. We've come in as we expected.
the second quarter being sort of slightly positive, and then the back half really being flat in terms of that part of 22. So I would say generally we continue to view things that way. I don't know if you have anything to add there. I'll just add that, like I said, the April numbers came in for expectations. So...
It's not necessarily a matter of extrapolating that through the rest of the second quarter because we actually expected April to come in a little below last year, expecting a little bit of growth in May and June that will get us to kind of the cadence that Atish points on. Got it. And then maybe looking at NASFL, it improved year over year. I'm just curious how you view the occupancy number at 50.
3%, did that perform relative, how did that perform relative to your expectations in Q1 and what's your view there just for the rest of the year? On the REF-BAR side it was close to our expectations. I would say that we still have a lot more with the trial particularly on the FMB side.
and there continues to be a lot of focus on that part of the operations. We've had very intense meetings with our operator there as it relates to things that we think can and should be improved. So our expectations haven't really changed as it relates to how we look at this year and going forward.
I still believe that there is a very tremendous amount of upside in this property. And we're really not quite there yet with where we're going to get to, particularly on the food and beverage side. I would say that the April performance was encouraging, particularly as it was added to the Graff bar side of the business.
So, so far year to date, more or less tracking where we want to be a little behind on F&B, then you know why we're big.
All right, thank you. Thank you.
There are currently no further questions registered, so I'll now pass the conference over to Marcel Verbas, Chair and CEO . Thank you, Megan. Thanks everyone for joining us today.
We look forward to seeing many of you over the next few months at the various industry events and look forward to updating you again next work. Second includes the Zina Hotels and Resorts First Quarter 2023 Earnings Conference call. Thank you for your participation. I hope you have a wonderful rest of your day.