Q4 2023 Host Hotels & Resorts Inc Earnings Call
Good morning, and welcome to the host hotels <unk> resorts fourth quarter 2023 earnings conference call.
Today's conference is being recorded.
At this time I'd like to turn the call over to Jamie markets Senior Vice President of Investor Relations.
Thank you and good morning, everyone. Before we begin please note that many of the comments made today are considered to be forward looking statements under federal Securities laws.
As described in our filings with the SEC. These statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed and we are not obligated to publicly update or revise these forward looking statements.
In addition on today's call, we will discuss certain non-GAAP financial information such as our CFO adjusted EBITDA, Ari and comparable hotel level results.
You can find this information together with reconciliations to the most directly comparable GAAP information in Yesterdays earnings press release.
Our 8-K filed with the SEC.
And in the supplemental financial information on our website at host hotels Dot com.
With me on today's call are Jim <unk>, President and Chief Executive Officer.
<unk> Executive Vice President and Chief Financial Officer.
With that I would like to turn the call over to Jim.
Thank you, Jamie and thanks to everyone for joining us this morning.
1023 was a terrific year for host on several fronts.
First we delivered strong operational improvements driven largely by occupancy increases a continued rate growth.
Second we completed the work on the three strategic objectives, we established in 2021.
We will continue to realize the benefits of our ongoing efforts well into the future.
Third.
We returned significant capital to stockholders in the form of dividends and share repurchases.
To successfully allocate capital through reinvestment in our portfolio and announced an agreement with Hyatt to complete transformational renovations at six properties in our portfolio.
Lastly, we maintained an investment grade balance sheet and continue to position host.
To capitalize on the significant growth opportunities, we see in the lodging space, including potential acquisition opportunities.
Turning to our results.
We finished 2023 above the midpoint of our full year guidance range, we delivered adjusted EBITDA, our E $1.629 billion and adjusted <unk> per share of $1.92.
Comparable hotel total Revpar grew eight 3% and comparable hotel Revpar grew eight 1% compared to 2022.
Notably comparable hotel EBITDA margin was 60 basis points ahead of 2019 due in large part to our efforts to redefine the hotel operating model with our managers.
During the fourth quarter, we delivered adjusted EBITDA, our E $378 million and adjusted <unk> per share up 44 cents, which includes $26 million of business interruption proceeds from hurricane Ian.
Yeah.
Comparable hotel Revpar improved 1.5% compared to the fourth quarter of 2022.
Our revpar performance for the quarter was driven by an increase in both occupancy and rate.
Despite an estimated 30 basis point impact from the wildfires in Maui, our fourth quarter comparable hotel EBITDA margin of 28, 1% was flat to 2019.
This marks the seventh consecutive quarter since the onset of the pandemic that we have achieved total revpar revpar comparable hotel EBITDA and margins at or above 2019 levels.
I will say that one more time.
We have delivered operating metrics at or above 2019 levels for nearly two years.
As a reminder.
The operational results discussed today refer to our comparable hotel portfolio in 2023.
Which excludes Hyatt coconut point and Ritz Carlton Naples.
In 2024, our comparable hotel portfolio only excludes Ritz Carlton Naples.
During the fourth quarter, our portfolio results were once again impacted by the evolving nature of demand at our three resorts on Maui.
We estimate that the Maui wildfires impacted fourth quarter comparable hotel Revpar by 130 basis points comparable hotel total revpar by 150 basis points comparable hotel EBITDA by $9 million in comparable hotel EBITDA margin by 30 basis points.
For the full year, we estimate that Maui impacted our comparable hotel revpar by 50 basis points.
Comparable hotel total revpar by 70 basis points comparable hotel EBITDA by $13 million and comparable hotel EBITDA margin by 10 basis points.
<unk>, our joint venture timeshare, we estimate the Maui impacted adjusted EBITDA R E by $15 million in the fourth quarter and $22 million for the full year.
Our risk management team is continuing to engage with our insurers about potential business interruption coverage in Mali, and the timing and amount of any potential proceeds are not yet no.
Shifting to another market there remains top of mind.
San Francisco results showed meaningful year over year improvement in the fourth quarter.
Revpar was up 10% driven by both rate and occupancy and F&B revenue was up 15%.
<unk> business is driving the strong results with group room revenue up 36% for the fourth quarter compared to last year as our properties have shifted their focus to in house groups until the citywide calendar improves in 2025.
We have seen positive trends from 2023, continuing in the first quarter of 2024.
It was convention driving weekday demand and.
In fact January was the best month in the history of the San Francisco Marriott, Marquis with total revenue and EBITDA setting all time records.
Briefly looking at out of room spend in the fourth quarter comparable hotel food and beverage and other revenues were down slightly due to impacts from Maui, we estimate the Maui impacted fourth quarter F N b and other revenues by 60 basis points and 540 basis points respectively.
Encouragingly the out of room revenue trends, we have seen post pandemic remain elevated for the rest of our portfolio.
In addition to driving strong revpar growth and operating improvements across the business. We continue to be recognized as a global leader in corporate responsibility over the course of 2023.
We introduced new 2030, environmental and social targets, which are aligned with our vision of becoming a net positive company by 2015.
Incorporate the progress made toward our prior goals and are more reflective of our current portfolio by updating our baseline to 2019.
These environmental and social targets will enable our team to focus on and measure our progress over the long term.
Our 2030 environmental targets are in their third generation and put hosts on a linear path to net zero operations by 2040, leaving 10 years to get to net positive by 2050.
We now have 14 properties with lead certification and projects in the pipeline at 19 properties. In addition, we are the only lodging REIT to have green building certifications linked to our sustainable financings.
And this year's corporate responsibility report, we highlighted our asset level climate risk assessment across three near term climate perils, including flood wind in wildfire and three long term perils, including heat cold and water stress based.
Based on the results, we have identified assets with elevated climate risk and their corresponding EBITDA contributions, which allows us to prioritize capital investments and resilience and better underwrite potential acquisitions.
Our 2030, social targets are in their second generation and now include two responsible supply chain targets around supplier diversity and responsible sourcing and one new community impact target.
As an employer of choice, we aim to lead our industry by integrating diversity equity and inclusion and belonging best practices into all aspects of our culture.
Turning to capital allocation, we repurchased one 9 million shares at an average price of $16 50 per share in the fourth quarter.
For the full year, we repurchased 11 4 million shares at an average price of $15 93 per share for a total of $181 million.
We have approximately $792 million of remaining capacity under the repurchase program.
In the fourth quarter, we declared a quarterly cash dividend of <unk> 20 per share and an 11% increase over the prior quarter.
We also announced a special dividend of 25 cents per share, bringing the total dividends declared for the year to 90 per share.
In total we returned over $700 million of capital to shareholders in 2023.
Additionally, in the fourth quarter, the buyer of the Sheraton, New York repaid the $250 million seller financing, though we provided to effectuate the disposition.
Our size scale and balance sheet have allowed us to provide seller financing on three recent dispositions at a time when debt capital was scarce further demonstrating that our fortress balance sheet and unparalleled access to capital creates unique opportunities and substantial value for shareholders.
Turning back to fourth quarter operations.
Our overall business mix results were skewed by Molly as leisure transient demand decreased in group demand increased driven by recovery and relief groups outside.
Outside of this temporary demand shift business mixed results were as expected.
Group led the growth with nearly 1 million group room nights sold in the fourth quarter.
Bringing our total group nights sold for 2023 to a $4 1 million or 112% our comparable 2022 actual group room nights.
Business transient continued its gradual improvement with 7% revenue growth for the quarter and leisure remaining strong with transient rates at our resorts up 58% to 2019, including our three Maui resorts.
As we look at the current backdrop for our business. We are optimistic about 2024 for several reasons.
First macroeconomic sentiment is incrementally more positive with consensus expectations of a soft landing.
Supply levels and anticipated growth in supply is at historically low levels in our markets and chain scales.
Third we expect tailwind from increased airline capacity.
Continued improvement in the international inbound demand imbalance and lastly, the transactions market is expected to pick up.
As improved macroeconomic sentiment allows for more visibility on operating performance and the market is expecting that we will see rate cuts later this year.
As we consider these factors we believe host is best positioned to capitalize on acquisition opportunities with $2.9 billion of total available liquidity and net leverage at 1.9 times.
In addition, we have completed 24 transformational renovations and four development ROI projects, which we believe provide meaningful tailwind for our portfolio.
Looking at results to date of the 10 hotels that have stabilized post renovation operations. The average Revpar index share gain is eight two points, which is well in excess of our targeted gain of three to five points.
We are also continuing to reinvest in our portfolio with additional comprehensive renovations and resiliency investments underway and we do not expect meaningful disruption this year.
And most importantly, we believe the diverse demand drivers in our portfolio leave us well positioned for top line growth.
Turning to portfolio reinvestment in 2023, we invested nearly $650 million and capital expenditures at our properties completing renovations to approximately 3500, Guestrooms 111000 square feet of meeting space and approximately 110.
In 2020 for our capital expenditure guidance range is $500 million to $605 million.
Which reflects approximately $225 million to $280 million I've been investment for redevelopment repositioning and ROI projects.
Within the Hyatt transformational capital program, we have already started renovations at the Grand Hyatt Atlanta, and the Grand Hyatt, Washington, which we expect to complete in the first half of 2025.
We will also start transformational renovations at the Hyatt Regency Reston in the fourth quarter of this year.
Other major ROI projects include the completion of renovations at the Hilton singer Island resort.
And the construction of the Venetian Canyon suites Villa expansion.
In addition to our capital expenditure investments, we expect to spend $50 million to $70 million on our luxury condominium development at four seasons resort Orlando at Walt Disney World Resort this year.
We expect to benefit from approximately $9 million of operating profit guarantees related to the Hyatt transformational capital program, which will offset the expected revenue disruption at those properties for 2024.
We are extremely proud of our operational and financial performance in 2023, and the iconic portfolio and balance sheet, we have built and maintained.
Our people our platform and our portfolio have allowed us to create meaningful shareholder value and we are confident in the significant opportunities ahead for continued growth and value creation in 2024.
With that I will now turn the call over to Suraj.
Thank you Jim and good morning, everyone building on Jim's comments I will go into detail on our fourth quarter operations full year 2020 for guidance and our balance sheet.
Starting with business mix overall transient revenue was down 5% compared to the fourth quarter of 2022, driven by the evolving nature of demand in Melbourne.
We estimate that Maui had a 590 basis point impact of transient revenue, which was evenly split between demand and rate.
We were encouraged that transient rate at our resorts grew 2% above last year's tough comparisons despite the demand impact of Maui and renovation disruption.
Looking ahead to spring break transient revenue pace is up for our portfolio compared to the same time last year, driven by occupancy and rate growth at our resorts.
Outside of Maui resort transient revenue pace for spring break is up 20%.
Business transient revenue was up over 7% to the fourth quarter of 2022, driven by both rate and demand growth at our downtown properties.
Business transient demand continued its slow and steady recovery.
Room nights at our downtown properties were down 15% in the fourth quarter compared to 2019, which is the smallest gap to the 2019 post pandemic.
For the full year business transient demand grew 12% over 2022.
In 2024, we expect further demand growth driven by large corporates alongside rate growth in the mid single digits.
Turning to group 2023 was the year of group and Convention Hotel recovery.
For the full year group room revenues increased 21% over last year and room night volume recovered to 95% of 2019 levels.
It is worth noting that our group results were positively skewed by disaster and recovery bookings in Maui.
Excluding Maui group room night volume recovered to 94% of 2019 levels.
Group room revenue exceeded 2022 by 13% in the fourth quarter, driven by an increase in both rate and room nights and we estimate roughly half of that growth can be attributed to recovery and relief groups on mountain.
Outside of Maui hotels in San Francisco, Boston D C and Seattle contributed to the group room night increase.
Notably November the APAC conference in San Francisco drove results with an estimated 41000 citywide group room nights.
Looking ahead to 2024, we have $3 1 million definite group room nights on the books, representing a 16% increase since the third quarter, putting US ahead of where we were this time last year.
Total group revenue pace is up 10% over the same time last year, driven by rate room nights and banquets.
We continue to be encouraged by the ongoing strength of group business as evidenced by strong pace lengthening booking windows and double digit citywide room night pace in key markets, such as New Orleans, San Diego, Seattle and D C.
Shifting gears to margins as expected margin declines year over year were driven by increases in wages and benefits fixed expenses as well as moderating attrition and cancellation revenues and impacts from metal. Despite these headwinds full year 2023 comparable hotel EBITDA margin was 30.
1%, representing a 60 basis point increase over 2019.
Our ability to achieve this margin expansion is a result of our efforts to redefine the operating model and is indicative of our strong execution, particularly when considering the total comparable hotel expenses have only grown 7% in the last four years and occupancy is still eight points below 2019.
Turning to our outlook for 2024, the midpoint of our guidance contemplates a stable operating environment with continued improvement in group business. A continued gradual recovery in business transient steady leisure transient demand and the continued evolution of demand on Maui as the island recovers from the recent wildfires.
At the low end, we haven't assumed slower group pickup in softer leisure transient and at the high end, we have assumed a faster recovery at our Maui resort and increased group pickup.
For full year 2024, we anticipate comparable hotel revpar growth of between two 5% and five 5% over 2023.
We expect comparable hotel EBITDA margins to be down 120 basis points year over year at the low end of our guidance to down 40 basis points at the high end.
Notably, we expect margins to be down only 20 basis points at the midpoint versus 2019, Despite a 50 basis point margin impact for milk.
In terms of Revpar growth cadence for the year, we expect comparable hotel revpar growth to be in the low single digits in the first half of the year due to tough comparisons to 2023, which saw a surge in recovery of downtown markets driven by improving route business and elevated leisure demand.
We expect mid single digit comparable hotel revpar growth in the second half of the year as a result of strong group booking pace less renovation disruption compared to the second half of 2023, and the diminishing impact of the Maui wildfires.
For January we expect comparable hotel revpar to be approximately $187, a one 4% improvement over 2023.
At the midpoint of our guidance range, we anticipate comparable hotel revpar growth of 4% compared to 2023, and our comparable hotel EBITDA margin of 29, 3%, which is 80 basis points below 2023.
As we think about bridging our 2023 results to 2024, we estimate that Maui is impacting comparable hotel revpar by 100 basis points and comparable hotel EBITDA margin by 50 basis points.
We also expect a 15 basis point impact to margins from moderating attrition and cancellation revenues and a 45 basis point impact from property taxes and insurance.
In 2024, we expect wage rates to increase approximately 5% for context in 2023 wages and benefits comprised approximately 50% of our total comparable hotel expenses and attrition and cancellation revenues were $75 million, which is approximately 50% higher.
And then 2019.
Our 2020 for full year adjusted EBITDA midpoint is $1.635 billion.
This includes an expected additional $10 million from business interruption proceeds related to hurricane Ian and an estimated $60 million contribution from operations at the Ritz Carlton Naples, which is excluded from our comparable hotel set in 2024.
It is important to note that we have not included any assumption for business interruption proceeds from the Maui wildfires in our 2020 for guidance.
Turning to our balance sheet and liquidity position our weighted average maturity is four two years at a weighted average interest rate of four 5%.
We have a balanced maturity schedule with our next maturity of $400 million coming due in April 2024.
We are closely monitoring the debt capital markets and we believe our balance sheet provides us with optionality and flexibility.
As Jim noted, we have $2 9 billion and total available liquidity, which includes $217 million of Epiphany reserves and full availability of our $1 5 billion credit facility.
We ended 2023 at one nine times net leverage and since our last call Fitch upgraded the company's issuer rating from Triple B minus to Triple B with a stable outlook returning close to its pre pandemic rating level.
Wrapping up in January we paid a quarterly cash dividend of <unk> 20 per share and a special dividend of 25 says returning to our pre pandemic quarterly payout level.
The board of directors authorized a quarterly cash dividend of <unk> 20 on our common stock to be paid on April 15th 2024 to stockholders of record on March 28, 2024, as always future dividends are subject to approval by the company's board of directors.
To conclude we are proud of our achievements in 2023, and we believe our best in class portfolio and balance sheet leave us uniquely positioned to capitalize on opportunities for growth in the future.
With that we would be happy to take your questions to ensure we have time to address as many questions as possible. Please limit yourself to one question.
Certainly everyone at this time well be conducting a question and answer session. If you have any questions or comments. Please press star one on your phone at this time.
We do ask that what posing your question. Please pickup your handset if you're listening on speaker phone to provide optimum sound quality we.
We do ask that all participants please ask one question.
Once again, if you have any questions or comments. Please press star one on your phone.
Your first question is coming from Shaun Kelley from Bank of America. Your line is live.
Shaun Kelley: Hi, Good morning, everyone. Thanks for taking my question.
Jim or Suraj, maybe we could just start off with a little color on the M&A environment, you alluded to it in your prepared remarks, a little bit and obviously, we know the strength of the balance sheet, but you know coming out of the Alice comp range, how are conversations going and maybe you can just lead us a little bit on how you can really tap in using your balance sheet strength to.
Lots of opportunities that others may not out in front of them at this point in the market.
Sure Shaun this is Jim ill happy to take that question.
I think our fortress balance sheet really differentiates host in the space.
In here today at one nine times leverage with $2.9 billion of liquidity is a testament to the fact that we can do it all as we have shown and that's how we intend to approach.
2024.
We wanted to be net acquirers, we want to continue to elevate the EBITDA growth profile of the portfolio in 2024.
Shaun Kelley: Through acquisitions, but also through continued reinvestment in the portfolio as we've done over the past few years.
May recall that.
Shaun Kelley: We acquired $1 $6 billion of assets at the beginning of the recovery in 2021, and another $315 million in 2022.
And over that timeframe, we've invested from 'twenty through 'twenty, three we've invested over $2 1 billion and our assets. So.
You know our 16 properties under the Mtc T. As we noted in our prepared remarks are significantly outperforming our underwriting expectations of three to five points in yield index. The properties that have stabilized post operations.
<unk> are up two eight points or up to 10 points I'm, sorry, eight to 10 points.
And we continue to do the same.
With the H CCP program and 2024.
As historic now with respect to the acquisition market.
Frankly, there just arent a lot of properties that are currently listed for sale are certainly not assets that would interest post.
That's really not slowing us down at all.
We are.
Talking to our.
Ken.
Competitors in the industry, our friends in the industry and others to try to kick deals loose that our host type assets.
We are leaning on our relationships, we're leaning on our reputation and our ability to close deals all cash.
And that really gives us a very meaningful competitive advantage and we believe this is the year or two to get the balance sheet to work. So we're working very hard to.
Shaun Kelley: Two to find the right sorts of assets to add to the portfolio.
You know the assets that we like are those that have diverse demand drivers with a combination of group business transient and leisure.
And we want to continue the same but they at the end of the day. It really is everything that we do is to elevate EBITDA growth profile of the portfolio now I'd say that there aren't a lot of assets on the market today, but.
But I believe and we believe as a team here in house that.
Under the assumption that the fed is going to start loosening interest rates in the second half of this year that that will.
Spark sellers to bring properties to market and it's going to also.
Bart competition for those assets. So our point of view is we have the balance sheet. We can do it all we want to get out there we want to get ahead of the pack and I hope over the course of the next several months that we're gonna be able to tell you that we've been an acquirer early in 2024.
Thank you very much.
Thank you. Your next question is coming from Smedes Rose from Citi. Your line is live.
Hi, Thank you I was wondering if you could just talk a little bit more about on the group booking side. It sounds like part of your improvements you're seeing are driven by you know kind of large citywide.
Citywide conventions and the return of maybe sort of association business, but could you talk about maybe just what you're seeing just more on the corporate side.
Larger leading smaller meetings more frequently and just any kind of detail around that would be interesting.
Speaker Change: Sure Smedes.
We're doing really well on the corporate group business and that remains strong so while it's still decent it's certainly coming back.
There's quite a few market, particularly with the citywide coming back for 2024 in a meaningful way.
The 'twenty 'twenty four citywide room night pace is around 90% of 2019 actuals and quite a few things are pacing ahead, but corporate group continues to be strong and what's also important to note is there spend on banquet and catering continues to be strong so it'd be a catering contribution at our hotels.
It has not declined year over year, and we are keeping pace, both from a demand perspective, but as well as from a rate perspective right now.
Our pace of them.
Our standpoint is around 4% and we are pacing ahead to last year by three 4% in terms of the room nights and on a total revenue basis. It's 10% that we are pacing ahead year over year, so pretty meaningful out of the market, which will drive I think that's where our portfolio specifically the $3 1 million.
Room nights that we have on the books for 2024.
Speaker Change: They include San Diego, Orlando D C, San Francisco and San Antonio those markets make up just over 50% of the $3 1 million that's already on the books in terms of citywide case, what's pacing well is also San Diego D C. But also Seattle.
Orlando and Miami.
Thank you I appreciate that.
Thank you. Your next question is coming from Robin Farley from UBS. Your line is lives.
Great. Thanks, just circling back to your comments on potential acquisition I guess I'm I'm surprised just given there are the maturity Sandy S maturity. Some of which are you know were pushed back in 2023 into 'twenty 'twenty four.
Maybe there's not more kind of for sale in the first half of 'twenty four so I guess, what I'm. What is your sense of kind of what's happening with those maturities and then also just curious what your current thoughts are on that type of asset location.
If there's been any change in terms of what.
It's what else would be looking for thanks.
Speaker Change: Sure Robyn we track all the MBS majority see MBS loans outstanding and the majorities.
This year, there was about $26 billion of foodservice.
Our loans are that will be maturing and.
I know that earlier in the pandemic there was a lot of talk of distress frankly, we haven't seen it materialize.
Certainly not on assets or markets that would interest us.
We'll continue to track it.
There may be pressure as we get later into the year.
Speaker Change: Because one of the things that are that other hotel owners are going to have to deal with sooner or later is reinvesting in their portfolio and as you know as I mentioned earlier in my response, we have invested significant capital in our portfolio. So we're in a really great place to can you continue to gain.
<unk> yield index and continue to outperform going forward. So I think it's still TBD on distress.
But we're certainly not counting on that where we're making it happen on their own right.
Trying to capitalize on our relationships our reputation and our balance sheet.
To be net acquirers this year.
Types of assets and the types of markets.
It's really it's.
There is nothing thats per scripted per se, it's off the list.
But we are always going to be thoughtful about maintaining geographic diversification, which has served us well I think you know notwithstanding the tragedy in Maui.
The geographic diversification of our portfolio still allowed us to achieve eight 1% revpar growth in 2023, notwithstanding a 50 basis point.
Impact from the Maui wildfires so.
We'll continue to look at assets, where we can add value through our strong asset management and enterprise analytics capabilities assets, where we see ROI opportunities that haven't been completed by the AR, but the current owner.
Speaker Change: And our new markets.
We'll continue to look for resorts will also continue to start looking at our urban markets today, because I you know we've seen some good solid performance out of the urban market. So I think recovery is on the way we feel good about the macro picture.
There is visibility.
From an underwriting perspective, and you know that's.
That's all keep our fingers crossed that the soft landing there seems to be the consensus there's a does come through.
Great very helpful. Thank you.
Thank you. Your next question is coming from Bill Crow from Raymond James Your line is live.
Thanks, Good morning, maybe a first suraj.
Sure about the kind of the tale of two halves of the year and Revpar growth in the low single digits in the first half and then accelerating up to I guess, what 567% in the second half of the year to hit your numbers can you kind of compartmentalize, how much tailwind you get from Maui.
How much do you get from renovation disruption.
Perhaps coconut point is is providing a lift to give them the.
The challenges in that market last year, what can you tell us to give us the confidence of that outsized growth in the second half of the year.
Sure. So the first piece and I'll talk about the first half. The reason that is low single digits is because of the tough comps that we have particularly given.
The Q1 performance in 2023, and remember 2022 Q1 was impacted by omicron. So he had a meaningful amount of growth in the first quarter of 'twenty three in the first half leisure did extremely well as you might recall, so just tougher comps in the first half that's where the low single digits on the second half what's real.
Really giving us confidence are two things one specifically is the group booking pace for the second half, particularly for Q3 as well as Q4 and when you look at overall second half.
This is really strong and we have confidence in that pace number and the second piece is really the tailwind from our four hotels that had meaningful impact Alaska you're from renovation in the second half second half of 2023, those four hotels really being the one hotel.
Speaker Change: South Beach, its a fair amount Killarney, the Biscayne Bay Marriott and the Hilton singer Island, which is a complete redevelopment projects. So that's really what's going to help drive that tailwind into the second half it's been booking pace and the tailwind from those four renovation property is there other factors as well, but those are.
Probably the two largest up.
Most impactful factors driving the mid single digits in the second half.
Great. Thanks for the color.
Thank you. Your next question is coming from Michael Bellisario from Baird. Your line is live.
Thanks, Good morning, everyone.
And you want to stick to your outlook do you have an industry revpar forecast that youre thinking about and then specific to your outlook. What are you assuming for the mix of rate and occupancy in 2024, and how does that affect your expense outlook and how you're thinking about cost per occupied room.
<unk>.
Sure. So the way, we think of the industry forecast that.
And if you look at F. T R. It's effectively around 4%, but remember our midpoint number is getting impacted 100 basis points as a result of impact from Maui than all the other word that that would be 100 basis points more if it wasn't for Maui.
Speaker Change: That's also keep in mind the weighting of our portfolio is different when you look at.
The different market that we have waiting inputs.
Two apples to apples comparison, when you are looking at all comparable revpar growth versus what the other third parties put out there. So that's one thing to keep in mind as well. So overall really pleased particularly given the capital investments that we've made with Jim talked about and the lift that we're getting from the M. D C P projects as well.
The eight other projects that we invested in them and the Revpar index gain translating into EBITDA growth as well.
Speaker Change: In terms of total expense growth for this year at the midpoint, we're effectively at five 8% total expense growth on that midpoint of 4% for the total portfolio.
Yes.
And Oh, sorry. The other question you had was just split between often our rates on a per cent and that's.
Pretty evenly split.
Between the two.
Thank you.
Okay.
Thank you. Your next question is coming from Duane sending worth from Evercore ISI. Your line is live.
Hey, Thanks, So on the group pace I think you said up.
Eight up 13%.
Duane: How are you thinking about close in group bookings in the quarter for the quarter over the balance of the year.
Assume closing group would moderate as the booking curve continues to normalize.
And then Relatedly are you leaning on group any differently than.
And then you did pre pandemic given changes in underlying seasonality. So for example.
Duane: Given changes in business transient is there more of an effort to lean on group to fill in off peak periods.
Speaker Change: I'll start with the second part of your question first.
It's really an asset by asset revenue management decision in terms of what is available and where we can maximize yield and were looking always at the total revenue piece of it it's not just the room night piece, because obviously the banqueting hearing.
That groups provide makes a meaningful difference I wouldn't necessarily say there is a different.
Way that we are or the managers are approaching revenue management. Obviously the goal is to fill the hotels with the highest not only rated business, but the highest that's sort of provide you the.
The the highest total revenue and ultimately total EBITDA for the hotel.
Do you think about the cadence of group of for the balance of the year, we already have $3 1 million group room nights.
Speaker Change: On the books, we expect.
For the year based on the midpoint to be above in terms of total group room nights for the year relative to 2023.
Three and we did not just given how well we've been paying thing obviously in the Europe.
For the year pickup is going to be lower than in the month for the mother and the quarter for the quarter is going to be lower than what we had seen previously just because of the lead times have expanded not only for just in the year for the year, but also into future years.
But we feel very confident with the ongoing sort of the short term pick up to make that gap up, particularly given sort of the new dates that have been filled for the year. Both in the first half as well as the second half.
Speaker Change: Okay I appreciate the thoughts.
Speaker Change: Thank you. Your next question is coming from Chris will Ranke from Deutsche Bank. Your line is live.
Hey, good morning, guys I appreciate all the detail so far just had a question as to how youre thinking about.
Cadence of transient through the year, especially as we get into summer Q3 remember last year we.
A little.
Surprise were.
More international outbound and we didn't get the corresponding numbers inbound how are you kind of internally modeling.
Summer transient this year thanks.
Sure. So the way, we're thinking of transient, but I mean, we obviously expect it to be moderating for the summer we've ever had an extremely strong summer last year and to your point I mean U S. Outbound for the year was a 117% above 90.
Teen level and inbound was effectively at 90% of 19.
For what it's worth right now U S travelers projecting that inbound number is going to be more at 98% for 2024 relative to 219 O which is that we.
Do it.
Speaker Change: We expect an impact on a year over year basis. Therefore, the low single digit guidance for the first half of the year, but what I will say as you know our fourth quarter ended with our transient.
Hum ADR for our resorts still up 58% to 2019 and.
Speaker Change: What we are seeing in terms of spring break and I think that's like both the visibility we have because you want me to get into summer visibility until you get to the end of Q1 spring break is pacing.
Up 20% in revenue and about right is pacing above 7% and that's specifically for our resort excluding Maui. So we feel very good which effectively is saying that none of these are particularly the transient resort ADR is still going to be up about 50% of 'twenty.
Speaker Change: The level, so that's really encouraging a lot of visibility into the summer yet, but spring break is very encouraging.
Okay. Thanks, guys.
Yeah.
Thank you. Your next question is coming from Stephen Grambling from Morgan Stanley. Your line is live.
I, obviously, we can kind of look at the the total dollar amounts, but theres been some changes in construction costs and otherwise I'm just curious.
How youre thinking about the ROI on those projects and if you can give any other color comparing and contrasting the two thanks.
Hey, David It's Jim.
The first part of your question, we Didnt hear it cut out so would you mind repeating it.
Jim: I just ask you to compare and contrast, the higher transformation versus the Marriott transformation programs.
Yeah.
Sure it brought him from what perspective.
How you're thinking about the return on an investment.
How would you how the hotels might compare and contrast or is the reason why we should be assuming that there should be kind of the same uplift or could there be a difference when we think about looking at the two.
No I think it is as Youre looking to get the H T. C. P program, it's modeled after.
The Marriott program, we have received enhanced 100 priorities on all of our dollars that we're investing.
Which is meaningful because in many of the.
Many of the hotels, we didn't have owner's priority for one reason or another either at bit burned off over time or just didn't exist. So.
That's a that's a.
Big plus Ah Hi, It is also providing $40 million and operating profit guarantees to cover off the anticipated disruption and as we noted in our comments, we expect to collect $9 million and operating profit guarantees this year that will cover the <unk>.
It's a pay to disruption associated with the Hyatt renovations and I think the cadence is a you know the assumptions are the same.
The assumptions are the same let's hope the results are the same because the results out of the M. D C P.
Lou away our assumptions, but you know we're looking at.
So low to low teens cash on cash returns you know say low double digit to low teens cash on cash returns, which is the same way we underwrote. The M. T C. P program and frankly, the other eight are assets that are have.
Received transformational renovations.
And just one follow up on that was that primarily through Revpar index premium or was there also a component of any way to break that down with F&B uplift or other revenue.
Jim: Revenue uplift.
It's it's it's both and I think we can pilots I'm going to let Rob talk a little bit about the F&B uplift because we have seen a meaningful uplift.
And F N b.
Revenues throughout the portfolio.
I think we have a little audio problem here.
Hang on.
Yeah.
Thank you. Your next question is coming from Ari Klein from BMO or your.
Your line is live.
Thanks, and good morning.
I guess within the 4% Revpar growth outlook, what are your expectations for leisure performance.
And are you seeing any kind of noticeable difference in the consumer behavior at the ultra high end resorts versus leisure I'd, rather property and then maybe if you could just talk to what you're seeing in Maui for future bookings perspective. Thanks.
Driver you're back on audio.
Jim: No.
He's not throbbing.
There you go Okay I'm back on.
And if I start doing it here.
I'll start out.
Jim: Ari with respect to what are we seeing from the leisure consumer.
Jim:
Jim:
Our leisure transient traveler is.
Generally.
Jim: The affluent consumer in the country.
Jim: We are seeing no slowdown in spend.
We're really not seeing a backing off in a meaningful way and in a D. R and out of room spend and banquet you know and in outlets is is so strong.
This goes back to Steven's question, you know the the investment that we made and in a lot of our properties and the transformational properties has resulted in a significant pickup in outlet and spend throughout.
Throughout the portfolio so.
Leisure is from our perspective, it's stope is still trending very strong and I think that goes back to.
Jim: The commentary around spring break you know, where our revenue pace is up 20% year over year for spring break and we're very pleased with that.
Speaker Change: Thanks, and then just on Maui, what Youre seeing from a booking standpoint that gives you kind of confidence in the recovery in the second half of the year.
Speaker Change: Ah well I am not certain that we said that there was going to be a recovery in the second half of the year.
So we hope that there's a recovery in the second half of the year, but there are a number of things that have to happen on Maui, particularly.
Particularly on the West side, which is where the wildfires were and are at the gating issue really is.
You know finding a finding shelter for the displaced residents and March 1st is a pivotal date in our mind the governor of the state of Hawaii has stated that if.
Speaker Change: The owners of short term rentals on Maui.
Speaker Change: Don't come to terms with allowing their units to be utilized by the displaced residents then.
He is considering a ban on short term rentals, because I I think on the island of Maui in total there's about 30000 short term rentals. So it's quite significant and we're tracking it very closely.
Additionally.
Yeah clean up and.
Cleanup.
Cleanup and.
And the plans to rebuild the high end of town.
Speaker Change: We are still in process so.
Speaker Change: The west side, I think it's going to take some time to come back in the interim.
We have been working with a relief agencies in particular now are the Red Cross and we have contracted with the Red Cross for 350 rooms at the Hyatt Regency Maui.
Through the end of May.
And we're hopeful that that will be extended Oh wow, the the recovery a.
Moves forward.
Speaker Change: Dorian why lay out where we own the andaz wailea and the Fairmont Kea Lani is different those properties had been.
Speaker Change: In the case of the Fairmont Kea Lani <unk>.
Just completed a transformational renovation so the asset is in incredible shape.
As is the Andaz wailea, where we completed a soft goods rooms, redo as well as the significant bathroom work. So both of those assets are in great shape, and we're confident that over time.
The consumer.
Begins to understand the differentiation between why lay out which is a completely different sub market than the west side and kind of Polly a that will be.
See the cadence of business.
Pick up.
And I would just say that.
As we think about the midpoint of our guidance this year we've.
Speaker Change: We've we've assumed pretty much you know 100 basis point impact on Maui.
And that will result in about the same.
Diminishing in EBITDA as we.
Speaker Change: They experienced last year.
But if maui is better than our anticipation and it's too soon to really know that then we think there are some upside and that takes us to the higher end of the EBITDA guide.
Yeah, I just want a cogs. It makes you I explain the the EBITDA piece for Maui and to be clear I'm. Obviously, when you look at sort of the first half it's going to be impacted by the wildfires, that's about it $25 million to $30 million incremental impact for 2024. So when you think about the total impact.
Speaker Change: For the year, I mean, it's close to $50 million that that.
The wildfire impact, it's actually having as a result.
Speaker Change: Of Maui.
Keep that in mind, its 25 million of incremental impact year over year.
Speaker Change: 25 to 30.
Thank you.
Thank you. Your next question is coming from David Katz from Jefferies. Your line is live.
Good morning, everybody. Thanks for working me in I appreciate it.
<unk> covered a lot of ground already.
I really wanted to just maybe triple click on how we think about the boundaries for deals.
More are fixer uppers in or out of bounds versus you know things that that just need a little more strategic direction.
And any thoughts on sort of size would be helpful. There as well and that's it for me.
Yeah.
Well, David you know, let me take the second part of your question first because that's an easy one bigger is better for us.
Speaker Change: And as you know.
We don't turn any attractive opportunity away, but obviously, given our scale and our ability to deploy capital.
Speaker Change: We.
Focus on larger transactions, we focus on comps.
Complicated transactions complicated boxes with them you know.
Diverse demand generators being group business transient and leisure.
As well as you.
Hotels that have multiple outlets.
Speaker Change: And look for opportunities to not only improve the top line, but to improve the the middle part of that P&L through our asset management and enterprise analytic analytics capabilities.
Speaker Change: We are perfectly open minded to.
And asset that needs to be repositioned from a capex perspective.
It doesn't it.
Speaker Change: It doesn't concern us at all we certainly have the ability with our design and construction group in house to do that.
But what we really look at is how does this asset going to perform.
After a it is a renovated and repositioned and how is it going to perform relative to the.
The existing portfolio because our bottom line goal is to.
Speaker Change: Put money to work, whether it's within our existing assets or new acquisitions.
To elevate the EBITDA growth profile of the company. So it is it's across the board.
Thank you very much.
Thank you. Your next question is coming from Dori Kesten from Wells Fargo. Your line is live.
Thanks, Good morning, how is that spread between your group and transient ADR shifted from 2019 full today and how.
How much do your transient rates drive or any ear plenty air group booking pricing.
Sorry can you repeat the question for me.
The spread between your group rate and your transient rate and wondering how that's changed from CASM 19 pulp Hawaii and then the second piece of it was how much do your transient rate.
Inform your N E F 'twenty year group pricing.
Yeah. So it typically so I hope I answered the second half, whereas I'll have to get back to you on the specific delta to 19 on on group and transient don't have that in front of me, but in terms of the way we think about the yielding it really is group come squares, so youre developing that group base and.
Speaker Change: You're saying with a group rate is and then you're yielding the transient business and depending on where group is coming in and it's not just a rate piece you have to remember its also we get a meaningful amount of ancillary business with food and beverage and golf and Spa and all of that is that makes up a pretty meaningful amount for our portfolio. It is.
Looking at total revenue and what that contribution to total EBITDA. So once the group base is built then we figure out the properties are looking at okay. What makes more sense to layer in transient and at what rate So youre going to yield out the lower rated business and obviously moved towards the higher rated business.
So it's more of the group pace that drives it where it says just where transient is coming in I mean, so youre looking at transient pick up certainly in the short term and filling that up but at all the pricing is all determined where groups that for majority of our portfolio.
Yeah.
Speaker Change: Certainly there are no further questions in the queue I'll now hand, the conference back to Jim for closing remarks. Please go ahead.
Thank you and thank you all for joining US today, we appreciate the opportunity to discuss our quarterly results and our guidance for 2024, and we look forward to seeing many of you at conferences in the coming months have a great day.
Thank you everyone. This concludes today's event you may disconnect at this time and have a wonderful day. Thank you for your participation.