Q2 2023 Xenia Hotels & Resorts Inc Earnings Call
Hello, and welcome to the Xenia hotels, <unk> Resorts, Inc. Q2, 2023 earnings conference call.
MS Elliott somehow recorded 19 or cold stacking.
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And over time under Brian Vice President of Finance the floor is yours. Please go ahead.
Thank you Elliot and welcome to Xenia hotels, <unk> resorts second quarter 2023 earnings call and webcast I'm here with more silver box, our chair and Chief Executive Officer, Barry Bloom, Our President and Chief operating Officer, and T. Shaw, Our executive Vice President and Chief Financial Officer Marcel will.
With the discussion of our performance Barry will follow with more details on operating trends and capital expenditure projects and that will conclude today's remarks on our balance sheet and outlook for 2023. We will then open the call for Q&A before we get started let me remind everyone that certain statements made on this call are not historical facts.
And are considered forward looking statements. These statements are subject to numerous risks and uncertainties as described in our annual report on Form 10-K, 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 our earnings release that we issued this.
Morning, along with the comments on this call are made only as of today August 2nd 2023, and we undertake no obligation to publicly update any of these forward looking statements as actual events unfold you can find reconciliations of non-GAAP financial measures to net income and definitions of certain items referred.
Two whenever remarks, and the earnings release, which is available on the Investor Relations section of our website the second quarter 2023 property level.
Information, we will be speaking about today is on a same property basis for all 32 hotels unless specified otherwise an archive of this call will be available on our website for 90 days I will now turn it over to Marcel to get started.
Thanks, Amanda and good afternoon to everyone joining our call today.
While overall results for the quarter was slightly below our expectations. The year is unfolding largely as we expected.
Our demand segmentation mix continues to return towards pre pandemic levels as leisure demand started to normalize a bit.
Transient and group demand has continued to recover.
And we are seeing good earnings contribution from our recently acquired hotels W. Nashville, and Hyatt Regency, Portland, Oregon Convention Center.
For the quarter, we reported net income of $13 $8 million.
Justice EBITDA of $74 $7 million and adjusted <unk> per share of <unk> 47.
With all of these measures reflecting declines against outsized results in the second quarter of 2022.
Okay.
Same property Revpar in the quarter was $182.49.
A modest decrease of 2% as compared to 2022 as.
As a result of softer demands in a select number of our leisure oriented properties.
Weather impacts at our California hotels and resorts and.
And the impact from our ongoing renovations.
Occupancy decreased 10 basis points as compared to the second quarter of 2022.
While average daily rates decreased one 8%.
Yeah.
Excluding renovation impacts in the quarter at Grand Bohemian Orlando Hotel, Monaco, Salt Lake City, and Hyatt Regency Scottsdale, we estimate that same property revpar would have been nearly flat compared to the second quarter of 2022.
Yeah.
As compared to the second quarter of 2019 Revpar for the 30 hotels, we currently own.
We're open at that time was down one 6% in the quarter.
E 30, hotels, which excludes hydrogen supporting CW Nashville occupancy.
Occupancy was roughly 11 points below 2019, while ADR was up 14, 7%.
Adjusted EBITDA of $74 $7 million reflected a decrease of $14 million or 15, 7% compared to the second quarter of 2022.
We attribute the vast majority of the $14 million decline in the quarter lapping strong second quarter of 2022 results.
Due to the post omicron bouncing demands and unsustainably low operating expenses during that quarter.
However, we estimate that renovation activity in the second quarter also contributed approximately $3 million of the $14 million.
Year over year decline in the quarter.
Okay.
Hotel EBITDA margin on a same property basis contracted 423 basis points compared to the second quarter of 2022, which was in line with our expectations.
That's compared to the second quarter of 2019 margins at the 30 hotels. We currently own that were open at that time decreased to 103 basis points.
Recall that our portfolio benefited from a combination of very strong rate driven revpar growth and expenses that were well below normalized levels in the second quarter of last year.
Which resulted in significant flow through to the bottom line.
Property expenses start normalizing in the third quarter of 2022.
As many of our properties successfully filled open positions and resume services.
Okay.
Now turning to our markets in the second quarter, our properties experienced a wide range of comparable Revpar result, with the weakest results in markets with significant renovation disruption.
Negative weather related impacts such as our California markets.
With difficult year over year comparisons due to outsized levels of leisure demand last year, such as key west and Napa.
The strongest growth was notably in markets, where we own properties that have historically been more dependent on corporate transient and group demand.
Five of these markets reported double digit revpar growth, including Houston, Portland, Philadelphia, Nashville, and Atlanta.
While Pittsburgh in San Francisco also experienced revpar growth in excess of 8%.
Yeah.
Despite the significant variances in Revpar results across all 22 markets and 32 properties.
And the factors I mentioned earlier.
<unk> results were nearly in line with our expectations.
Okay.
We remain very optimistic about our portfolio growth prospects and see meaningful opportunities for earnings growth in the years ahead through internal drivers such as continued recovery potential stabilization of our recent acquisitions and several significant recent and ongoing capital expenditure projects, which Barry will touch upon later.
As we've discussed in prior earnings calls, we have meaningful recovery potential in some of our larger group and business transient focused hotels.
Mainly Marriott San Francisco Airport Hyatt Regency, Santa Clara.
Our two Dallas hotels, and our three Houston hotels.
In the second quarter.
These seven hotels reported over 9% Revpar growth on average as compared to 2022.
However.
As far as the seven hotels was still approximately 15% below the second quarter of 2019.
While EBITDA was still approximately 24% lower than the same period.
Also our acquisitions have been accretive.
Our two most recent acquisitions either agency portal at the Oregon Convention Center and they'll be in Nashville continues to ramp up nicely in the second quarter.
Both properties grew revpar by double digit percentages over the second quarter of 2022 as group business gained momentum.
For 2023.
Group room revenue on the books at both properties is currently over 45% ahead of 2022 levels.
Driven by solid increases in both room nights and rate.
Okay.
Okay.
Jason to the Oregon Convention Center, the hydrogen support on continues to benefit from a combination of strong citywide and in house group business and are successfully taking share from other group focused hotels.
W. Nashville also benefited from strong group production in the quarter and are successfully building a solid base of group business to augment a rapidly growing base of business transient with local corporate accounts.
Working closely with Marriott the property is making good headway with respect to its overall revenue management strategy.
Okay.
The property is performing very well on the room side of the business in line with our underwriting.
With significant growth potential remaining on the food and beverage side.
Yeah.
The hotel is under the leadership of a new general manager with significant experience with the W brands and large complex, the food and beverage operations and.
And we remain optimistic about the future of this outstanding also.
Okay.
We continue to believe that hide regency, Portland, NW Nashville have the potential to contribute in excess of $20 million and combined annual EBITDA above 2022, EBITDA contribution once both property stabilized.
Okay.
Before I wrap up my comments I'd like to highlight that despite uncertainty in the economy. The third quarter is off to an encouraging start.
With preliminary July same property Revpar up one 5% as compared to July 2022.
Reflecting a modest improvement over our second quarter results.
Despite significant impact from our ongoing renovations.
Okay.
We estimate that July revpar for our portfolio, excluding hydrogen see Scottsdale Grand Bohemian Orlando and hotel Monaco Salt Lake City was up over 6% compared to last year.
Highlighting both the short term impact of these renovations and the strong performance of the remainder of the portfolio during the month.
Okay.
At current levels and give them meaningful long term growth potential we've used senior shares as attractively valued in today's market environment.
We have significantly improved the quality and diversification of the portfolio through over $3 billion in transaction activity since our listing in 2015.
And we are continuing to invest capital expenditures that we believe will generate attractive returns.
Yeah.
Meanwhile, we continue to balance this portfolio of investments with returns to shareholders.
Year to date, we have repurchased repurchased over 5 million shares of stock.
At an average price of $13 10 per share.
Yeah.
And our current stock price our implied value is approximately $265000 per key which.
Which is significantly below replacement cost given the quality of our portfolio.
Okay.
I will now turn the call over to Barry as he will provide more detailed portfolio performance information and an update on our capital expenditure projects.
Okay.
Thank you Marcel and good afternoon, everyone.
Marcel indicated in his remarks, the same property leaders in terms of Revpar growth in the quarter included many of the hotels and markets has lagged over the past two years supporting our view that the overall recovery is extended beyond leisure oriented properties in the sunbelt.
As expected results in the second quarter reflected very challenging year ago growth comparisons along with renovation impact.
The quarter began with occupancy of 76% in April with an ADR of $277 27.
Resulting in Revpar $195 72.
The one 5% decline compared to April 2022.
May occupancy was 68, 5% with an ADR of $265 67.
Resulting in Revpar of $181 90.
Virtually flat to 2022.
Weakest months of the quarter was June largely owing to the start of our comprehensive renovation and repositioning of Hyatt Regency Scottsdale with occupancy of 66, 8% and an ADR of $254 38.
Looking at Revpar of $169 84.
Three 3% declined to June 2022.
Absent the impact from renovations, we estimate same property revpar in the second quarter would have been nearly flat to 2022.
Similar to last quarter rate growth in our same property portfolio moderated in the second quarter declining one 8% as compared to the second quarter of 2022.
Wave reminder, breakthrough an astounding, 21% in the second quarter of 2022 compared to the second quarter of 2021 30 hotels in the same property portfolio.
On average rate declines at our leisure oriented sales in the second quarter exceeded that of our same property portfolio as compared to the second quarter of 2022.
However rates are these properties remained well above 2019 levels for instance rates in key west and Napa were 43% and 36% above second quarter of 2019 levels respectively.
You also note that our hotels in Charleston, and Savannah, we're not impacted to the same degree by the softening year over year and held up well with only very modest shrimp product lines.
On a sequential basis occupancy in the second quarter improved by two five points compared to the first quarter.
Reflecting our commentary regarding continued opportunity for recovery, particularly in the corporate segment.
Business on Mondays through Thursdays are still down nearly 14 points in occupancy from 2019 levels, while weekend Occupancies were down approximately 8%.
The most notable improvements in occupancy in the quarter, when our corporate and group focused markets with continued growth in business transient demand remaining solid.
Business from our largest corporate accounts across our portfolio continues to improve year to date remains about 20% down from 2019 levels.
We continue to benefit from healthy group production in all periods with pace being driven by increases in both room nights and rate.
Including our two most recent acquisitions I Regency, Portland, and W. Nashville Group room revenue on the books for 2023 is currently over 16% ahead of last year and about 6% of 2022 levels from the second half of 2023.
If we exclude hiring see Scottsdale for meeting spaces, mostly unavailable for the remainder of this year. Our group pace for 2023 is up approximately 20% over 2022 levels and about 13% ahead of 2022 levels from the second half of 2023.
We believe there is continued opportunity for further recovery in group business across our portfolio.
Our current group revenue on the books for 2023, it's about six 5% behind 2019 levels, excluding Hyatt Regency Scottsdale.
Now turning to expenses and profit.
Second quarter same property hotel EBITDA was $79 4 million.
A decrease of 14, 4% on a total revenue decrease of 2% compared to the second quarter of 2022.
Hosting and 423 basis points of margin erosion.
This decrease in hotel EBITDA margin for the quarter reflected the lapping of outsized second quarter 2022 results coming out of the pandemic, we had a very strong pent up demand coupled with many hotels, we're not operating at normalized staffing and service levels.
Both rooms, and food and beverage department margins decreased in the quarter as compared to the second quarter of 2022 as expenses increased on lower revenue.
One notable bright spot in the quarter was 25% reduction in overtime expenses compared to the second quarter of 2022, as our operators have been better able to higher and more efficiently staff the properties.
We were also pleased that AMG property operations and energy expenses were stable at 4% to 5% increases over the second quarter of 2022.
With respect to labor overall recall that our operator successfully staffed up in the second half of last year to meet the strong recovery in demand.
Over the last couple of quarters <unk> been successful matching overall levels of staffing to guest demand.
Looking ahead to the second half of the year, and we expect margin declines to moderate.
Okay.
Turning to Capex during the second quarter, we invested $22 4 million and portfolio improvements, bringing our year to date totaled $34 million.
In June we commenced a $110 million comprehensive renovation and up branding of the 491 room Hyatt Regency Scottsdale resort in spot any ranch with completion of all phases is expected by the end of 2024.
Working on the two acre pool complex is now underway with the meeting facilities and Guestroom renovations expected to start later this year.
Upon completion of the property with five additional keys for a total of 496 rooms will be rebranded as a grant resort.
Also in the quarter, we completed the comprehensive guestroom renovation at the Kimpton Canary Hotel, Santa Barbara to begin in the fourth quarter of 2022.
We also completed the renovation and reconfiguration of the premium suites, resulting in the addition of three.
Keys at the Ritz Carlton Denver.
We have several other projects that remain ongoing at the Grand Bohemian Hotel Orlando, we completed the comprehensive renovation and public spaces, including meeting space lobby restaurant bar, Starbucks and creation of a rooftop bar.
A comprehensive renovation of the Guestrooms began in the second quarter is expected to be completed in the third quarter.
At the Park Hyatt <unk> resort, we continue to work on a significant upgrade to the resort spa amongst amenities, which will be branded as a mirror ball life Imbalanced Spa is now expected to open in phases during the third quarter of this year.
And finally at Kimpton Hotel Monaco Salt Lake City, we began a comprehensive renovation of meeting space restaurant bar and Guestrooms in the second quarter, but is expected to be completed in the third quarter.
Our expectation for total capital expenditures. This year has been revised slightly lower to a range of $120 million to $140 million.
Of this amount approximately $45 million will be spent at Hyatt Regency, Scottsdale, which is consistent with our initial guidance provided in early March.
We are excited about the projects that we have underway and look forward to their completion.
With that I will turn the call over to Ashish.
Thanks Barry.
I will provide an update on our balance sheet and discuss our guidance.
First on our balance sheet, we fixed our remaining variable rate debt during the quarter.
Such all of our debt is currently fixed at a rate of approximately five 5% or.
Our next debt maturity is about two years from now.
We continue to have a fully undrawn line of credit that together with our unrestricted cash translates to approximately $700 million of liquidity.
During the quarter, we reduced our debt outstanding by about 2% primarily by buying back $30 million of our senior notes.
We repurchased our notes in the open market at a price that was approximately 1% below par.
In addition, we continue to buy back our stock during and after the second quarter.
We have approximately $97 million remaining on our repurchase authorization.
We paid a <unk> 10 per share dividend in the second quarter on an annualized basis that reflects a yield of approximately 3%.
It also reflects a payout ratio of about 40%.
Projected fad based on the midpoint of our <unk> guidance.
Second I will turn to our full year outlook.
Since we last provided guidance, we've lowered our expectations for revpar growth by 100 basis points to 5% at the midpoint.
This reflects both slightly lower revpar in the second quarter as well as slightly greater revenue displacement due to renovation disruption.
As to adjusted EBITA, sorry, we have lowered the midpoint by $3 million to $254 million. This.
This change is due to renovations being more impactful than previously estimated.
More specifically, we have fine tuned our estimates.
For renovation disruption now that we are farther along with some of the projects and have commenced work in Scottsdale.
We now expect the impact to revpar to be approximately 250 basis points, which is up from an expected 200 basis points a quarter ago.
We expect the impact to adjusted EBITDA to be about $18 million, which is up from our $15 million prior estimate.
Yeah.
Our adjusted <unk> guidance, which is $168 million at the midpoint is unchanged from prior guidance.
This is a result of the variance in adjusted EBITDA, sorry, being offset by lower interest expense and lower income tax expense.
Our expectation for interest expense is $2 million lower than our expectation for income tax expenses of $1 million lower.
Prior guidance.
Our G&A expense guidance is unchanged.
On a per share basis, we expect <unk> of one <unk>.
<unk> 51 at the midpoint, which is up about one and a half cents from prior guidance due to share repurchases over the last few months.
As to our expected seasonality of earnings our percentage weighting of full year. Adjusted EBITA sorry is as follows and this is by quarter, we expect the third quarter to be in the high teens percentage range in the fourth quarter to be in the mid 20% range.
As to hotel EBITDA margin, we expect second half EBITDA margin to decline approximately 140 basis points versus last year.
We estimate that second half hotel EBITDA margins would be up approximately 60 basis points versus last year, but for the impact of revenue disruption due to renovations.
I'd like to conclude by mentioning that the company continues to be favorably positioned with no near term debt maturities or interest rate risk a high quality portfolio and strong relationships with brands managers lenders and other industry participants we are executing and on track on several potential high value projects.
We expect to drive strong growth in the years ahead.
So with that we'll be happy to take your questions and we'll turn the call back over to Elliot to start our Q&A session.
Thank you.
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First question comes from Dori Kesten with Wells Fargo. Your line is open.
Thanks, Good morning.
You noted that our plan remains the F&B hollow Mcguffey Nashville, what what's your new GM.
The property to accelerate those changes.
I think the primary mission is really to re look at each of the outlets who they've served historically and really look at it and develop a specific marketing plan for each outlet that includes both looking at I mean, everything top to bottom from.
What the what the menu offerings aren't each outlet.
What the staffing is in those outlets and most importantly, what the marketing and social media plan is for each of those outlets I think.
Each outlet is unique and each outlet needs and deserves its own specific marketing plan for the audience that it really intended to target and that's what.
We've been working with with him on over the last four weeks or so that he's been in place.
Okay.
And for the five or so properties that either recently completed renovations or soon to be completing how.
How should we think of their ramp.
And stabilization.
I think it's.
Storage in the properties that have recently or are finishing.
In the next few months here.
Each of them has traditionally.
Renovated very quickly. These are not brand name repositioning. These are high quality renovations of existing product that we're generally leaders or near leaders in their market. So we would expect a pretty quick ramp meaning a couple of quarters at most to get them back.
On track, we've not missed did not lost they.
We have not lost business permanently and I think in each of the cases as we look at the product that we're delivering back to the market. The product was clearly better than where the properties were prior to renovation and should have a pretty easy time in terms of the ramp up.
The one that's a little unique because it's really additive is the mirror ball spa at Avianca, which we think introduces an entirely new market segment.
To that resort in terms of really positioning a portion of the property is being a true.
Destination Spa resort, so the growth of that and the ramp up of that may take a little bit longer than the more comprehensive top to bottom renovations at Canary.
And Santa Barbara Monica, Salt Lake City, and Grand Bohemian Orlando.
And there is obviously some specifics around each of these markets too.
There are market dynamics that are impacting what goes on in some of those markets as well as you can imagine.
A couple of dose.
Particularly when you think about Santa Barbara will have more of a leisure location, where clearly there has been a little bit of softening of the leisure demand overall like we've highlighted in our comments about doing those renovation the way we did it positions.
Positions us much better and stronger going forward to compete very effectively for that leisure demand in our markets.
Similarly, when you think about Salt Lake City.
There have been some changes in the market there with a with a large hyatt property opening up downtown that clearly impacts our assets around there.
So again, there it might take a little longer to get back to where we were not necessarily because of the renovation and how we position it but more about some of the overall market dynamics and again.
That is renovation to position ourselves much better and much more competitive going forward.
Okay. Thank you.
Now turning to David Katz with Jefferies. Your line is open.
Hi afternoon, everyone. Thanks for taking my questions I wanted to just go back to the W. Nashville because.
It's important.
Just I know you've done.
Done some strategic shifting and rearranging and so forth.
Have your aspirations for it.
No change.
Change in any way.
No other than maybe perhaps pushing them out just a little bit.
Any positive surprises I know you've talked about it a bit so far.
But I think it's worth going back to.
Yes, Thanks, David Good afternoon.
So to your point I think when we look at our overall expectations they really haven't changed.
I think.
And you said there is in your question.
May have delays that stabilization by a year or so when we think about how quickly we get to that number.
But I highlighted in my comments too that we're very pleased with what's going on on the room side and.
And in some ways. It has been a good positive surprise at how quickly we're getting to the Revpar numbers that we were hoping for on the room side.
We've talked kind.
Numerous signs really about some of the challenges that we've had on the food and beverage side, but we're really encouraged by.
The momentum that the property will have going forward and being able to address those so overall expectations really haven't changed there.
Understood and.
Look for the window that that we look through let's say the past three to four weeks the economic outlook has changed and now where we are landing softly. So it would seem.
From your perspective.
Any change in terms of opportunities for you to acquire or opportunities to divest.
What's going on through your per view really over it feels like just the past 30 days or so.
Yes.
It's interesting in the year.
Subscription is appropriate there it seems to have shifted very quickly the the mindset of doom and gloom to saying, okay. The soft landing as happens I think it's probably little too too early to declare total victory there on the soft landing I think we still have to see how things play out over the next few months and quarters.
But as we're seeing on the ground, we really haven't seen any drastic changes everything as it relates to the acquisitions environments are any of those kinds of things clearly there are still we still have the same expectation, which is we are in a much higher interest rates environment, and where we have previously been which is going to create some potential opportunities as it relates to that.
Acquisitions moving forward because certainly there are going to be people that are not going to be.
Willing or able to refinance out of some of their debt.
They currently have in place. So we do still believe thats going to create opportunities going forward and so our fundamental view on that Hasnt changed.
And as it relates to the business on the ground.
Obviously, you spoke about our results in July and I would certainly wouldn't describe those results to all of a sudden the economic climate has changed but we're certainly encouraged by what we're seeing kind of short term and at least where the results for July came in.
Understood.
Appreciate it thank you.
Our next question comes from Tyler Battery with Oppenheimer. Your line is open.
Good morning. Thank you can we stick on July for a second and just maybe talk about what caused that sequential improvement.
Excluding.
The renovation and renovation impact.
Yes.
Youll hear more from us on this going forward, where we really will give you some data, including and excluding the renovation because clearly.
The impact from Scottsdale renovation really started happening in June and that will continue throughout throughout the process of us.
Renovating and operating the property.
So when we looked at.
We looked at July .
As we mentioned we were in there is and these are estimates.
Estimates based on what we saw from our daily numbers, we think we're up about one 5% in Revpar for the month. When you include the three properties under renovation, which really were very significantly impacted and in July we were up about 6% throughout the rest of the portfolio and really what we're seeing there is a bit of a.
Continuation of the trends that we've been seeing continued strengthening on the group side continuing strengthening of some of those properties that we feel still have a lot of recovery potential.
And then.
On the leisure side of the business is.
A little bit more nuance, I guess, where we're seeing some impact where things really arent quite as frothy as they were last year and other properties that are still holding up fairly well.
So a little bit of a continuation of what we saw in the second quarter with a really wide range of outcomes for our various hotels.
And clearly with the three renovation properties on the bottom end of that spectrum.
Now the positive there as we look ahead is thats certainly the impacts from the Scottsdale renovation is going to continue in <unk>.
Can be fairly significant as we go through the rest of the year, but here by the end of the third quarter, we will be done with the <unk>.
Orlando renovation will be done with the Salt Lake City renovation. So the impact from those two renovations is going to be going away as we move forward.
Yeah.
Okay.
Follow up question is just more housekeeping related on the renovations.
I guess why more renovation disruption than you expected.
Raymond James.
More disruptive are taking longer to complete and not sure if anything what really changed there and then just remind us real quick on how you calculate it and how you think about <unk>.
Innovation disruption and providing that information.
Well, it's a couple of components.
Clearly <unk> pointed out in his comments, we started the renovation in.
At Scottsdale, So I had a little bit more real time info as we saw what happened in June and July .
So.
<unk> certainly looked at our forecasts were for Scottsdale, and adjusted that for the rest of the year. The renovation on Orlando for example has taken a little bit longer than we anticipated. Initially so wanted to ask a little bit to that as well I guess more just really a fine tune and kind of seeing what we are.
Currently seeing on the ground and adjusting that based on our forecast for us for the next couple of next couple of quarters.
Okay.
And our methodology is just I'll leave it there methodology to yes, sorry, yes, that's fine.
The methodology and it's just.
With renovation versus without it's not lapping the prior year.
Which of course isn't an exact science.
Best efforts on our on our part to say what do we think the market would've done.
These hotels have done if we hadn't done this renovation so.
So thats really to <unk> point, that's the way we look at the methodology.
Okay, great I appreciate that detail. Thank you.
We now turn to Bill Crow with Raymond James Your line is open.
Hey, great good afternoon guys.
Anything.
Well, let me start on the expense side.
Second quarter represent a good run rate have you baked in the entirety of the property insurance increased property taxes et cetera, we still have a few more quarters to go before we.
Fully recognize the increases that have happened.
Hey, Bill Thanks for the question.
We're up about 25% in property and casualty insurance. This year, we have a renewal that's late in the year. So the numbers that were in our initial guidance hold us through the large large portion of the year at that level.
Okay, and then on property taxes.
Property taxes.
High teens percentage range.
So year to date real estate taxes, and insurance were up 16%.
As we expected.
That to be up about 20% for the full year deadline.
No.
Yes.
Anything in July it was 6%.
The renovations is pretty strong.
And there that boosted the numbers of Taylor swift or anything like that.
As usual.
Well ill tell us whats concert, we havent two markets that was almost a 100 basis points.
So that was the only unusual thing that it was a lot of ins and outs as Marcelo just mentioned.
Yeah.
And then one final one from me.
J W. Myriad just opened in downtown Dallas are you seeing any impacts on reservations.
From net new competition, and I know, it's newer hotel, maybe a little bit different.
Just wondering what youre seeing there.
No no not yet it's a little different a little smaller and probably too early to comment on on whether we've actually seen any movement of gas out of either out of either all hotels.
To that hotel I mean, we feel pretty good a lot of our business in that market is very very low.
Corporate is very very geographic specific.
And so we the hotel intends to retain all of that business, it's really very very backyard business.
Okay.
That's it from me thanks.
Our next question comes from Ari Klein with BMO. Your line is open.
Thanks, and good afternoon.
Maybe just following up on the on the renovation.
Can you update us or let us know how youre thinking about manpack next year.
And how we should be thinking about the headwinds.
Under renovation.
Yes, we will give you the same I'll tell you what we've given you before which is we haven't given you an update on that yet.
So.
As you well know.
But I appreciate the question, obviously, we're getting deeper into the year.
Obviously, we are getting deeper into the year here and we are definitely turning our attention to analyzing that.
We as you know, especially the methodology that we're looking at as far as what do we think the hotel would have done.
With renovation not happening versus what is happening, we just want to be able to collect some more data and really see how we do here over the next few months, we'll have a much better sense for how we think how we think things are going to kind of stabilize and come back as we're completing these various components of the renovation that you know are kind of states over the next one.
18 months, so we absolutely will.
As we get deeper into the year here you put a finer point on that and clearly we are going to have to look at it in both ways, which is.
The disruption like we historically have looked at it and the way. We just described it which is what would the property have done that we then do the renovation, but also looking at.
Are we actually going to do better than we did this year were worst than this year.
At the beginning of the year, we had some very good business in Scottsdale, we have the Super Bowl at the beginning of the year, which really aided the performance. So clearly the first couple of quarters of next year are going to be a tough comparison.
We get deeper into the year.
And we are completing some of the components of this renovation I think we'll be much better positioned in the second half of next year than where we are in the second half of this year. So.
Again, we will.
We will certainly update you on that and expect to do so in the next quarter. When we have a better sense of where we think things are lining up for next year.
Got it and just a follow up there are you taking any group business for next year.
<unk>.
At the Grand Hyatt Scottsdale or are you pushing any of that also.
2025.
No. There are there are components of the meeting space that stay in place and an inventory.
Throughout the renovation is just much much smaller pieces of that inventory. So the opportunity to do a large scale group has really reduced for the balance of the renovation.
But obviously, we'll have benefit next year.
Okay.
Sorry.
The only thing I was going to add to that is.
Obviously, we'll have the benefit as we get into next year. There. After we complete the full renovation, which is obviously great.
Disruptive.
And removes an amenity that people are clearly looking for if we get that pool. Once we get the full renovation behind us once we get.
The space room renovation done.
The way we are currently envisioning it we're going to have a product to offer that's going to be much more appealing to the smaller groups that we'll be able to use some meeting space that we'll go after that.
Thanks, and then just maybe on the leisure side of things can.
Can you give us some more color on what youre seeing with the consumer.
Is there less flaring or upgrades that you're seeing and then in the markets that have may be seen in the most.
Pressure like Florida, where what do you think things level off or stabilize that from a revpar standpoint.
Yes.
When I think when we think about.
The in particular, the key west and Napa properties those are not really sweet dominant properties. They are very few sweet opportunities. So we're not missing out on we're seeing people not upgrading to the suites because they are quite frankly very few available it's really more of a of a market demand issue and where we and our hotel.
Our hotels and hotels, where kind of <unk>.
The set rate to drive the Occupancies that.
The hotel's one want to achieve so it's really more of a function of.
What the market is willing to bear across the entire market and it is about our specific hotels within the market and certainly the opportunity is there for the guests to pay a little less than they were paying before where it where it levels out I think we're still in the process of trying to understand that month by month.
Even in key West and Napa you have seasonality in the guest changes overtime certainly the biggest premiums were achieved in for us in those properties in.
In Q2, so I think we'll start to see that gap moderate as as we move through the year certainly we don't see.
We see stabilization above the 2019 levels for sure but is there could there be a little more softening in the near term certainly possible, but again every month is a little different every month. The hotels, we're doing more price discovery and trying to drive that right mix of occupancy and rate.
Thanks for the color.
Our next question comes from Michael Bellisario with Baird. Your line is open.
Thanks, Good afternoon, everyone.
Got it.
First I just have one follow up on the renovations that having more disruption tell you anything about how the underlying market is performing are perhaps underperforming.
<unk> property.
Yes, I don't know that that is a direct correlation in this case, but certainly.
There are some because if you think about the fact that if the market is extremely frothy theyre not going to have much of a choice but to stay at your hotel anyway, thats being renovated so I think thats.
Clearly in a property like Scottsdale for example, as you are well aware the summer months are not a high occupancy period right for a market like that so so there's a lot of options for people to stay at different hotels. So during those months were clearly running at very low occupancies because people aren't going to stay at a hotel that doesn't have a pool available.
Anne has all kind of hammering going on.
When there is when there is other opportunities to stay so certainly in those months that Thats certainly the case in your overall premise as is appropriate to say that clearly in a very tight market you wouldn't see as much disruption now I wouldn't necessarily.
Again, ascribe that particularly to the situations that we're talking about though.
Got it that's helpful. Just wanted some clarification there and then switching gears just one for <unk> on the repurchases that you guys did how do you think about the different return profiles on buying back stock versus the notes repurchased you did.
On the latter topic notes repurchases as maybe your repurchase there are.
Our read through on how you are thinking about or how we should think youre thinking about refinancing that is going to have to take place in two years there.
Yeah. So I think we've taken a sort of a balanced approach with regard to share repurchases in general I think when you look at.
The return profile for that versus on buying back obviously, there's a different risk uncertainty around each one of those so you know.
I think we look at those uses of capital just like we look at renovation spending acquisition spending or anything else.
So there is no.
Set formula I think.
Decision, we're making kind of real time base.
Based on what we're seeing in the business the other capital needs and uses potential uses of capital.
So it's a bit more nuanced.
With regard to the <unk>.
Feedback, we certainly are mindful of that maturity in a couple of years.
Chipping away at it and one way reduces that maturity.
But frankly, we also think it's just a good uses of capital.
The coupon on that debt.
Relative to the yields we can generate on the cash and the fact that there arent as many near term opportunities at least with regard to acquisitions.
That's how we're thinking about that piece.
Helpful. Thank you.
As a reminder, if you'd like to ask any questions. Please press star one on your touch we keep up now.
And that center in Washington, with Keybanc. Your line is open.
Great Thanks, and good afternoon.
Ignoring renovation disruption for a moment what is your back half revpar growth and margin guidance assume for just corporate and leisure demand trends, meaning.
Are you assuming similar trends you saw in <unk> and in July any acceleration or just.
Softer economic backdrop.
Well I think.
On the Revpar side, let's just talk about that first.
What we saw in July in terms of the Revpar.
Revpar growth in the portfolio ex disruption and then the impact of disruption.
Is more consistent with what we expect to see in the back half sort of mid single digits type Revpar growth.
And then with the impact of disruption closer to flattish maybe slightly positive. So that's that's kind of the <unk>.
Revpar view.
On the margin side for the full year, we had talked about the impact of.
Renovations being about 100 basis points on margin and we continue to think that's about the right range. So that's kind of a big picture and maybe I'll turn it over to Barry If you want to talk about leisure travel.
Absolutely I mean, we certainly see.
The decline in leisure are moderating as we move deeper in the year and again as we get away from kind of.
The second quarter peak leisure demand period in the portfolio, but we do see some continued softening in leisure, but that's more than offset.
By all of the other by the end of two components of the business, we've talked about the strengthening both the group and corporate transient I think we have some I think we have realistic, but certainly increasing expectations for corporate demand recovering through the fall as people get back to business, we certainly saw that in.
The early part of Q1 and into Q2 on the corporate side.
Real strength, a little bit of softening that over the summer, but expect that to return as we get into the the traditional fall travel season.
So we obviously talked about the group basis as it currently is we currently have it for the second half of the year and that gives us confidence to that's despite some of the softening in leisure and we are seeing this uptick in group sales that is absolutely materializing in the portfolio.
And some of the trends in corporate transit like Barry talked about.
That's helpful detail and then just going back to the prior question.
Do you view your debt or equity to be more xscribe today.
Well I think we view them, both both of them to be attractive to me in the sense that we.
<unk>.
Took advantage of repurchasing on both.
Got that and equity so.
I don't know that I could give you I mean, they're just very different so it's hard to compare them.
And say, which one is more attractive given they're just very different risk profiles around each one.
Okay.
Okay.
This concludes our Q&A I'll now hand back to Marcel for boss.
Chairman and CEO for closing remarks.
Thanks Elliot.
Thanks, everyone for joining today and thanks for your questions.
Enjoy the rest of your summer and we look forward to speaking next quarter. Thanks.
Ladies and gentlemen, today's call is now concluded. Thank you for your participation you may now disconnect your lines.
We look forward to speaking next quarter. Thanks.
Ladies and gentlemen, today's call is now concluded.