Q4 2023 Apple Hospitality REIT Inc Earnings Call

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Operator: As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kelly Clarke, Vice President of Investor Relations for Apple Hospitality REIT. Thank you. Thank you, and good morning.

As a reminder, this conference is being recorded I would now like to turn the conference over to your host Kelly Clarke, Vice President Investor Relations for Apple Hospitality REIT. Thank you you may begin thank.

Thank you and good morning, welcome to Apple Hospitality, REIT fourth quarter and full year 2023 earnings call today's call will be based on the earnings release and Form 10-K, which we distributed and filed yesterday afternoon.

Kelly C. Clarke: Welcome to Apple Hospitality REIT's fourth quarter and full year 2023 earnings call. Today's call will be based on the earnings release and Form 10-K, which we distributed and filed yesterday afternoon. Before we begin, please note that today's call may include forward-looking statements as defined by federal securities laws. Such forward-looking statements are based on current views and assumptions and, as a result, are subject to numerous risks, uncertainties, and the outcome of future events that could cause actual results, performance, or achievements to materially differ from those expressed, projected, or implied. Any such forward-looking statements are qualified by the risk factors described in our filings with the SEC, including in our 2023 Annual Report on Form 10-K, and speak only as of today. The company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law.

Before we begin please note that today's call may include forward looking statements as defined by federal Securities laws.

These forward looking statements are based on current views and assumptions and as a result are subject to numerous risks uncertainties and the outcome of future events that could cause actual results performance or achievements to materially differ from those expressed projected or implied any such forward looking statements are qualified.

By the risk factors described in our filings with the SEC, including in our 2023 annual report on Form 10-K and speak only as of today.

The company undertakes no obligation to publicly update or revise any forward looking statements, except as required by law.

Kelly C. Clarke: In addition, non-GAAP measures of performance will be discussed during this call. Reconciliations of those measures to GAAP measures and definitions of certain items referred to in our remarks are included in yesterday's earnings release and other filings of the SEC. For a copy of the earnings release or additional information about the company, please visit applehospitalityreit.com.

In addition, non-GAAP measures of performance will be discussed during this call reconciliations of those measures to GAAP measures and definitions of certain items referred to in our remarks are included in yesterday's earnings release and other filings with the SEC.

For a copy of the earnings release or additional information about the company. Please visit Apple hospitality REIT dotcom.

Justin G. Knight: This morning, Justin Knight, our Chief Executive Officer, and Liz Perkins, our Chief Financial Officer, will provide an overview of our results for the fourth quarter and full year 2023 and an operational outlook for 2024. Following the presentation, we will open the call for Q&A. At this time, it is my pleasure to turn the call over to Justin.

This morning, Justin Knight, our Chief Executive Officer, and Liz Perkins, Our Chief Financial Officer will provide an overview of our results for the fourth quarter and full year 2023, and an operational outlook for 'twenty 'twenty four following the overview, we will open the call for Q&A at this time it is my pleasure to.

Turn the call over to Justin.

Justin G. Knight: Good morning, and thank you for joining us today. We're pleased to report another year of strong operating performance, portfolio growth, and total returns for our shareholders. During the year, Operating Fundamentals continued to strengthen, and we thoughtfully grew our portfolio with the acquisition of six hotels, enhanced the quality of our hotels through capital improvement projects, provided our shareholders with attractive distributions, and positioned our balance sheet for continued growth by raising net proceeds of $216 million through our ATM program. Our accomplishments in 2023 and our outperformance since the onset of the pandemic are a testament to the merits of our strategy of owning a diversified portfolio of rooms-focused hotels with broad consumer appeal, while maintaining financial flexibility with low leverage, and speak to the strength of the brands and management companies we work with, and the diligent efforts of our experienced team.

Good morning, and thank you for joining us today.

We're pleased to report another year of strong operating performance portfolio growth and total returns for our shareholders.

During the year operating fundamentals continue to strengthen and we thoughtfully grow our per player with the acquisition of six hotels enhance the quality of our hotels through capital improvement projects provided our shareholders with attractive distributions.

And positioned our balance sheet for continued growth by raising net proceeds of 216 million through our ATM program.

Our accomplishments in 2023, and our outperformance since the onset of the pandemic are a testament to the merits of our strategy of owning a diversified portfolio of rooms focused hotels with broad consumer appeal, while maintaining financial flexibility with low leverage and speak to the strength of the brands management companies, we work with and the diligent.

Of our experienced team.

With resilient leisure demand and steady improvements in business travel. We are pleased to report comparable hotels revpar growth of more than 2% for the fourth quarter and 7% for the full year 2023 as compared to the same period of 2022 primarily driven by increases in comparable hotels, ADR up nearly 3% and five.

Justin G. Knight: With resilient leisure demand and steady improvements in business travel, we are pleased to report Comparable Hotels' REBPAR growth of more than 2% for the fourth quarter and 7% for the full year 2023, as compared to the same periods of 2022, primarily driven by increases in Comparable Hotels' ADR of nearly 3% and 5%, respectively. Comparable Hotels' occupancy for the fourth quarter of 2023 was essentially flat to the fourth quarter of 2022.

[noise] percent respectively comparable.

Comparable hotels occupancy for the fourth quarter of 2023 but its essentially flat to the fourth quarter of FY 'twenty, two and for the year was up approximately 2% as compared to try and try to.

Justin G. Knight: And for the year, it was up approximately 2% as compared to 2022. Comparable Hotels Adjusted Hotel EBITDA was $104 million for the quarter and $500 million for the year, down 2% and up 5%, respectively, as compared to the same periods in 2022. Our portfolio continues to perform ahead of pre-pandemic levels, with comparable hotels RevPAR up approximately 8% relative to both the fourth quarter and full year 2019, despite continued opportunity to rebuild occupancy, especially midweek. Comparable hotels adjusted hotel EBITDA was up approximately 6% and 7% to the fourth quarter and full year 2019, respectively. Based on preliminary results, January comparable hotels occupancy increased just over 1% year-over-year, and ADR grew over 2% Overall, travel trends remained favorable, with operating results continuing to be bolstered by limited near-term supply growth.

Comparable hotels adjusted hotel EBITDA was $104 million for the quarter and $500 million for the year down, 2% and up 5%, respectively as compared to the same periods of trying to trying to.

Our portfolio continues to perform ahead of pre pandemic levels with comparable hotels revpar up approximately 8% relative to both the fourth quarter and full year 2019, despite continued opportunity to rebuild occupancy, especially midweek.

Comparable hotels adjusted hotel EBITDA was up approximately 6% and 7% for the fourth quarter and full year 2019, respectively.

Based on preliminary results January comparable hotels occupancy increased just over 1% year over year and ADR grew over 2%.

Overall travel trends remained favorable with operating results continued to be bolstered by limited near term supply crafts.

Justin G. Knight: We anticipate that we will be in a position to more meaningfully grow rates as we move through the first quarter and into seasonally higher occupancy months. Our revenue and asset management teams continue to leverage our scale ownership of rooms-focused hotels and our unparalleled access to performance data to benchmark and share best practices across our third-party management companies to drive strong margins, despite continued inflationary and wage pressures. We are fortunate to be partnered with some of the best operators in the industry who monitor real-time performance and focus on-site efforts to maximize profitability at our hotels without sacrificing service, cleanliness, maintenance, or overall guest satisfaction. Through disciplined cost controls, we achieved comparable hotels adjusted hotel EBITDA margin of 32.9% for the quarter, despite lower red part growth and 36.4% for the full year. Supported by our strong operating performance, we continue to provide investors with strong dividend yields. We paid a distribution totaling $0.24 per common share during the fourth quarter and $1.04 per common share during the year for a total of approximately $238 million.

We anticipate that we will be in a position to more meaningfully grow rate as we move through the first quarter and into seasonally stronger occupancy months.

Yeah.

Our revenue and asset management teams continue to leverage our scale ownership of rooms focused hotels, and our unparalleled access to performance data to benchmark and share best practices across our third party management companies to drive strong margins. Despite continued inflationary wage pressures.

We are fortunate to be partnered with some of the best operators in the industry to monitor real time performance and focus onsite efforts to maximize profitability to our hotels without sacrificing service cleanliness maintenance, our overall guest satisfaction.

Through disciplined cost controls, we achieved comparable hotels adjusted hotel EBITDA margin of 32, 9% for the quarter. Despite.

Despite lower revpar growth and 36, 4% for the full year.

Supported by our strong operating performance, we continue to provide investors with strong dividend yield.

We paid distributions totaling 24 cents per common share during the fourth quarter and a dollar and four cents per common share during the year for a total of approximately $238 million.

Justin G. Knight: Based on Wednesday's closing price, our annualized regular monthly cash distribution of $0.96 per share represents an annual yield of approximately 6%. Together with our board of directors, we will continue to monitor our distribution rate and timing relative to the performance of our hotels and other potential uses of capital. During the fourth quarter, we sold approximately 12.8 million shares under our ATM program at a weighted average market sales price of approximately $17.05 per common share and received net proceeds of approximately $260 million. The $17.05 per share represents a 12.6 times multiple on 2023 EBITDA, just under a turn and a half spread to the combined multiple for the five hotels we acquired in the fourth quarter. The proceeds were used to fund acquisitions and to reset our balance sheet, position us to be active in the market, and to continue to pursue creative opportunities. In 2023, we acquired a total of six hotels and an associated parking deck for a total of approximately $290 million. As previously announced, in June, we acquired the Courtyard Cleveland University Circle for $31 million.

Based on Wednesday's closing price our annualized regular monthly cash distribution of <unk> 96 per share represents an annual yield of approximately 6%.

Together with our board of Directors, we will continue to monitor our distribution rate and timing relative to the performance of our hotels and other potential uses of capital.

During the fourth quarter, we sold approximately $12 8 million shares under our ATM program at a weighted average market sales price for approximately $17.05 per common share and received net proceeds of approximately $260 million.

The $17.05 per share.

Represents a $12 six times multiple on 2023, EBITDA, just under a turn and a half spread to the combined multiple for the five hotels, we acquired in the fourth quarter.

The proceeds were used to fund acquisitions and to reset our balance sheet position us to be active in market.

And to continue to pursue accretive opportunities.

And 'twenty two 'twenty three we acquired a total of six hotels and then associated parking deck for a total of approximately $290 million as previously announced in June we acquired the courtyard Cleveland University circle for $31 million.

Justin G. Knight: In October, we acquired the Courtyard and Hyatt House, Salt Lake City Downtown, together with a corresponding parking garage for a combined total of $91.5 million. We also acquired a residence in Seattle, South Renton, in October for $55.5 million. In November, we purchased the Embassy Suites in South Jordan, Salt Lake City, for a total of approximately $37 million. And in December, we acquired Spring Hill Suites' Las Vegas Convention Center for $75 million.

In October we acquired the courtyard and Hyatt House Salt Lake City downtown together with a corresponding parking garage for a combined total of $91 $5 million.

We also acquired the residence Inn in Seattle, South Renton in October for 50 $525 million.

In November we purchased the embassy suites, South Jordan and Salt Lake City for a total of approximately $37 million.

And in December we acquired the Springhill suites, Las Vegas Convention center for $75 million.

We are pleased to expand and enhance our presence within these business friendly markets that have seen significant economic growth and positive demographic trends in recent years.

Justin G. Knight: We are pleased to expand and enhance our presence within these business-friendly markets that have seen significant economic growth and positive demographic trends in recent years. These markets are home to a wide variety of business, group, and leisure demand generators, from healthcare, universities, technology, and manufacturing to outdoor recreation, professional sporting events, and world-renowned entertainment. The hotels complement our existing portfolio and reflect our proven investment strategy. The combined purchase price for the recently acquired hotels represents a blended cap rate of just over 8% on 2023 year-end financials after an industry standard 4% FF&E reserve and an 11.3 times multiple on 2023 combined hotel EBITDA. We believe each of these assets is well positioned within its respective market and has embedded upside that will enable it to be a meaningful contributor to our overall portfolio performance. We continue to have two hotels under contract for purchase that are currently under development, an embassy suite in downtown Madison, Wisconsin, for approximately $79 million, and a motto in downtown Nashville for approximately $98 million. We anticipate acquiring the Madison Embassy in mid-2024 and the Nashville Model in late 2025, both following completion of construction.

These markets are home to a wide variety of business group and leisure demand generators from healthcare universities technology and manufacturing to outdoor recreation professional sporting events and world renowned entertainment.

The hotels complement our existing portfolio and reflect our proven investment strategy.

The combined purchase price for the recently acquired hotels represents a blended cap rate of just over 8% on 2023 year end financials. After an industry standard 4% F F F a knee reserve.

And then 11 three times multiple on 2023 combined hotel EBITDA.

We believe each of these assets is well positioned within its respective market and has embedded upside that will enable it to be a meaningful contributor to our overall portfolio performance.

We continue to have two hotels under contract for purchase that are currently under development and embassy suites in downtown Madison, Wisconsin for approximately $79 million and our motto in downtown Nashville for approximately $98 million, we anticipate acquiring the Madison Embassy in mid 'twenty 'twenty four and the Nashville motto in late 'twenty.

25, both following completion of construction.

Our patients over the past several years has positioned us to be active in the market with limited competition, where we can secure high quality assets at pricing that meets our internal underwriting criteria consistent with the strategy. We articulated on past calls we were able to fund a portion of our recent activity utilizing our ATM with equity issued at a spread just specific.

Targeted acquisition.

Justin G. Knight: Our patience over the past several years has positioned us to be active in a market with limited competition, where we can secure high-quality assets at prices that meet our internal underwriting criteria. Consistent with the strategy we articulated on past calls, we were able to fund a portion of our recent activity, utilizing our ATM with equity issued at a spread to specific targeted acquisitions, positioning us to generate incremental value for our existing shareholders. Having reset our balance sheet, we are exceptionally well-positioned to pursue additional accretive opportunities, and we continue to actively underwrite a number of potential acquisitions that could further enhance our unique and scalable platform and contribute to long-term shareholder returns. As has been the case historically, our acquisition focus continues to be on high-quality, branded, rooms-focused hotels in urban, high-density suburban, and developing markets, supported by a broad variety of business and leisure demand drivers.

<unk> us to generate incremental value for our existing shareholders.

Having reset our balance sheet, we are exceptionally well positioned to pursue additional accretive opportunities and we continue to actively underwrite a number of potential acquisitions that can further enhance our unique and scalable platform and contribute to long term shareholder returns.

Yes.

As has been the case historically our acquisition focus continues to be on high quality branded rooms focused hotels in urban high density suburban and developing markets.

Supported by a broad variety of business and leisure demand drivers.

Through our scale ownership at these hotels broadly diversified across markets and demand generators, we have unparalleled access to performance market and brand data, which we believe enhances the underlying strength of our due diligence efforts combined with our tremendous transaction experience our available balance sheet capacity.

And our deep industry relationships, we believe we continue to be well positioned relative to competitors in the current market environment and are optimistic that we will continue to be net acquirers in the coming months.

Justin G. Knight: Through our scale ownership of these hotels, broadly diversified across markets and demand generators, we have unparalleled access to performance, market, and brand data, which we believe enhances the underlying strength of our due diligence efforts. Combined with our tremendous transaction experience, our available balance sheet capacity, and our deep industry relationships, we believe we continue to be well positioned relative to competitors in the current market environment and are optimistic that we will continue to be net acquirers in the coming months. We also actively seek opportunities to refine our portfolio and optimize our capital reinvestment program by disposing of older assets in lower growth markets. Earlier this month, we sold a Hampton Inn and a Homewood Suites located in Rogers, Arkansas, for a combined total of $33.5 million.

We also actively seek opportunities to refine our portfolio and optimize our capital reinvestment program by disposing of older assets and lower growth markets.

Earlier this month, we sold our Hampton Inn <unk> suites, located in Rogers, Arkansas for a combined total of $33 $5 million we.

We anticipate a portion of the proceeds from the sale of these two hotels will be used to complete a 10 31 exchange, which will result in the deferral of taxable gains of approximately $15 million.

The sales price represents an all in eight 6% cap rate on 2023 year end financials, assuming $5 $4 million or approximately 22000 per key and Pip related capital improvements.

Yes.

Since the onset of the pandemic, we have strategically transacted in ways that have refined and grown our portfolio.

We have completed approximately $287 million in hotel sales and have invested approximately $848 million in new acquisitions, while maintaining the strength of our balance sheet. These transactions have lowered the average age of our portfolio increase revenue per available room and margins helped to manage near term capex.

Justin G. Knight: We anticipate a portion of the proceeds from the sale of these two hotels will be used to complete a 1031 exchange, which will result in the deferral of taxable gains of approximately $15 million. The sales price represents an all-in 8.6% cap rate on 2023 year-end financials, assuming $5.4 million, or approximately $22,000 per key, in PIP-related capital improvements. Since the onset of the pandemic, we have strategically transacted in ways that have refined and grown our portfolio. We have completed approximately $287 million in hotel sales and have invested approximately $848 million in new acquisitions, while maintaining the strength of our balance sheet. These transactions have lowered the average age of our portfolio, increased revenue per available room and margins, helped to manage near-term CapEx needs, and positioned us to continue to benefit from near-term economic and demographic trends. We also continue to reinvest in our existing portfolio to ensure our hotels remain competitive in their respective markets and are positioned to demand premium rates. Over the past year, we invested approximately $77 million in capital expenditures.

<unk> needs and positioned us to continue to benefit from near term economic and demographic trends.

We also continue to reinvest in our existing portfolio to ensure our hotels remain competitive in their respective markets and are positioned to command premium rates over.

Over the past year, we invested approximately $77 million in capital expenditures and then 2024, we expect to spend between 75 and $85 million with major renovations at approximately 20 of our hotels.

As we look ahead the fundamentals of our business remain favorable with continued strength in demand and limited new supply.

As of year end over half of our hotels did not have any new upper upscale and upscale or upper mid scale product under construction within a five mile radius, providing us with the ability to meaningfully benefit from incremental demand and positively impacting the overall risk profile of our portfolio by both reducing potential downside.

And enhancing the upside impact from variability and margin demand over.

Over the past several years, we have demonstrated the value of a scaled investment and a broadly diversified portfolio of rooms focused hotels with low leverage we are confident that this same strategy will continue to enable us to drive strong performance for shareholders in the coming year and overtime.

Justin G. Knight: And in 2024, we expect to spend between $75 and $85 million on major renovations at approximately 20 of our hotels. As we look ahead, the fundamentals of our business remain strong, with continued strength in demand and limited new supply. As of year-end, over half of our hotels did not have any new upper, upscale, upscale, or upper mid-scale product under construction within a five-mile radius, providing us with the ability to meaningfully benefit from incremental demand and positively impacting the overall risk profile of our portfolio by both reducing potential downside and enhancing the upside impact from variability in lodging demand. Over the past several years, we have demonstrated the value of a scaled investment in We are confident that this same strategy will continue to enable us to drive strong performance for shareholders in the coming year and over time. Our hotels are franchised with industry-leading brands, managed by some of the best management companies in the industry, and provide a strong value proposition with broad consumer appeal.

Our hotels are franchise with industry, leading brands managed by some of the best management companies in the industry and provide a strong value proposition with broad consumer appeal.

Underlying the strength of our portfolio is a consistent reimbursement and effective portfolio management strategy and a dedicated corporate team with extensive industry experience.

As we move further into 2024, we are optimistic about the trajectory of our industry and our pro players specifically.

It is now my pleasure to turn the call over to Liz for additional detail on our balance sheet financial performance during the quarter and annual guidance.

Thank you Justin and good morning, we are pleased to report another strong quarter for our portfolio of hotel comparable hotels total revenue was $315 million for the quarter and $1 $4 billion for the year up 3% and 7% as compared to the same periods of 2022, respectively.

Continued strength in leisure demand and recovery in business travel during the quarter enabled us to achieve comparable hotels revpar of $105 and $116 up 2% and 7% as compared to the same periods of 2022 with ADR of $151 and $157.

Up three 5%.

With occupancy of 70% and 74% essentially flat and up 2% to fourth quarter and full year 2022, respectively.

Liz Perkins: Underlying the strength of our portfolio is a consistent reinvestment and effective portfolio management strategy and a dedicated corporate team with extensive industry experience. As we move further into 2024, we are optimistic about the trajectory of our industry and our portfolio specifically. It is now my pleasure to turn the call over to Liz for additional detail on our balance sheet, financial performance during the quarter, and annual guidance. Thank you, Justin, and good morning.

Looking day over day leisure travel was resilient during the quarter with weekend occupancy is stable compared to the fourth quarter of 2022 with continued improvement in business travel, we anticipate leisure demand will remain stable through 2024 and that most of our growth in occupancy will come from continued improvement in weekday demand.

<unk>, which while elevated relative to the prior year remains meaningfully below pre pandemic levels.

Liz Perkins: We are pleased to report another strong quarter for our portfolio of hotels. Comparable hotels' total revenue was $315 million for the quarter and $1.4 billion for the year, up 3% and 7% as compared to the same periods of 2022, respectively. Continued strength in leisure demand and recovery in business travel during the quarter enabled us to achieve comparable hotels REVPAR of $105 and $116, up 2% and 7%, as compared to the same periods of 2022, with ADR of $151 and $157, up 3% and 5%, with occupancy of 70% and 74%, essentially flat and up 2% to fourth quarter and full year 2022, respectively. Looking day over day, leisure travel was resilient during the quarter, with weekend occupancy stable compared to the fourth quarter of 2022, with continued improvement in business travel.

AME store room night channel mix remained relatively stable in the quarter with brand Dot com bookings at 40% OTA bookings at 13% property direct at 25% and GDS bookings at 16%.

Our channel mix continues to highlight the power of our brand and the strength of our property direct sales effort that arm properties maintained in the field.

Fourth quarter same store segmentation was largely consistent with the third quarter <unk> remained strong at 33% other discounts remained seasonally elevated at 30%.

Group continued to make up 14% of our mix almost 200 basis points higher than the same period in 2019 and the negotiated segment was 17% of our mix in line with the same period in 2022, but still lower than 2019, which we believe represents opportunity for continued upside.

Turning to expenses total payroll per occupied room for our same store hotels was under $41 for the quarter up slightly to the third quarter 2023, and up 7% to the fourth quarter 2022.

Contract Labor remained stable at roughly 10% of wages during the quarter, a 13% improvement compared to the fourth quarter of 2022.

Liz Perkins: We anticipate leisure demand will remain stable through 2024 and that most of our growth in occupancy will come from continued improvement in weekday demand, which while elevated relative to the prior year, remains meaningfully below pre-pandemic levels. Same-store room-night channel mix remains relatively stable in the quarter with Brand.com bookings at 40%, OTA bookings at 13%, Property Direct at 25%, and GDS bookings at 16%. Our channel mix continues to highlight the power of our brands and the strength of our Property Direct sales efforts that our properties maintain in the field. Fourth quarter same-store segmentation was largely consistent with the third quarter.

While we expect year over year growth in total payroll to moderate in 2024, given more stabilized operations in 2023, we anticipate that higher wages for full and part time employees and higher utilization of contract Labor will continue to result in elevated cost per occupied room relative to pre pandemic level.

We achieved comparable hotels adjusted hotel EBITDA of approximately $104 million during the quarter and $500 million for the full year down, 2% and up 5% to the same periods of 2022, respectively comparable hotels adjusted hotel EBITDA margin was $32 nine per.

<unk> for the quarter and 36, 4% for the year down 160 basis points and 90 basis points to the same periods of 2022, respectively.

Liz Perkins: BAR remained strong at 33%, and other discounts remained seasonally elevated at 30%. Group continued to make up 14% of our mix, almost 200 basis points higher than the same period in 2019. And the negotiated segment was 17% of our mix, in line with the same period in 2022 but still lower than 2019, which we believe represents an opportunity for continued upside. Turning to expenses, total payroll per occupied room for our same store hotels was under $41 for the quarter, up slightly to the third quarter 2023 and up 7% to the fourth quarter 2022. Contract labor remains stable at roughly 10% of wages during the quarter, a 13% improvement compared to the fourth quarter of 2022.

As we have stated on past call our ability to maintain and potentially grow margin will be largely conditioned on our ability to grow rate.

So with more manageable inflation numbers and hotels appropriately staffed we expect near term growth and operating expenses to moderate relative to the significant increases we saw over the past year.

Adjusted EBITDA for the fourth quarter was $91 million and for the year was $437 million up 1% and 6% to the same periods of 2022, respectively.

<unk> for the quarter was $72 million and for the year was $367 million down, 3% and up 4% as compared to the same periods of 2022, respectively.

Looking at our balance sheet as of December 31, 2023, we had approximately $1 $4 billion and total outstanding debt net of cash approximately three one times, our trailing 12 months EBITDA with a weighted average interest rate of four 3%.

Liz Perkins: While we expect year-over-year growth in total payroll to moderate in 2024 given more stabilized operations in 2023, we anticipate that higher wages for full and part-time employees and higher utilization of contract labor will continue to result in elevated costs per occupied room relative to pre-pandemic levels. We achieved comparable hotels adjusted hotel EBITDA of approximately $104 during the quarter and $500 million for the full year, down 2% and up 5% compared to the same periods of 2022, respectively. Comparable hotels' adjusted hotel EBITDA margin was 32.9% for the quarter and 36.4% for the year, down 160 basis points and 90 basis points to the same periods of 2022, respectively.

Total outstanding debt, excluding unamortized debt issuance cost and fair value adjustment was comprised of approximately $283 million in property level debt secured by 15 hotel and approximately $1 $1 billion outstanding on our unsecured credit facility.

At year end, our weighted average debt maturities were just under four years, we had cash on hand of approximately $10 million and availability under our revolving credit facility of approximately $650 million and approximately 89% of our total debt outstanding was fixed or hedged.

As of December 31, we had approximately $105 million of debt maturing in the next 12 months, consisting of $185 million term loan and a mortgage loan of approximately $20 million.

We plan to pay for these upcoming debt maturities using funds from operations borrowings under our revolving credit facility and our new financing Act.

Liz Perkins: As we have stated on past calls, our ability to maintain and potentially grow margin will be largely conditioned on our ability to grow rates. Though, with more manageable inflation numbers and hotels appropriately staffed, we expect near-term growth in operating expenses to moderate relative to the significant increases we saw over the past year. Adjusted EBITRE for the fourth quarter was $91 million and for the year was $437 million, up 1% and 6% compared to the same periods of 2022, respectively. MSFO for the quarter was $72 million and for the year was $367 million, down 3% and up 4% as compared to the same periods of 2022, respectively. Looking at our balance sheet, as of December 31, 2023, we had approximately $1.4 billion in total outstanding debt net of cash, approximately 3.1 times our trailing 12-month EBITDA, with a weighted average interest rate of 4.3%. Total outstanding debt, excluding unamortized debt issuance costs and fair value adjustments, was comprised of approximately $283 million in property-level debt secured by 15 hotels and approximately $1.1 billion outstanding on our unsecured At year end, our weighted average debt maturities were just under four years.

Acquisitions completed during the fourth quarter were funded using cash on hand availability under our revolving credit facility and net proceeds from the sale of shares under our ATM program.

As Justin highlighted in his remarks during the quarter, we sold approximately $12 8 million shares under our ATM program at a weighted average sales price of approximately $17 and <unk> <unk> per share and received aggregate gross proceeds of approximately $219 million and proceeds net of operating cost of them.

Proximally $216 million.

As of year end, we had approximately $5 million remaining under our ATM program and are in process with our board and agents to reauthorize and extend our ATM program, we anticipate public filings related to the program to be filed later today.

With the successful capital raise during the quarter, we were able to grow our portfolio with the acquisition of five attractive high quality hotel, while maintaining full availability on our revolving credit facility to pursue additional accretive opportunity.

Turning to our outlook for 2024 provided in yesterday's press release for the full year, we expect net income to be between $191 million and $217 million.

Comparable hotels, revpar change to be between 2% and 4%.

Comparable hotels adjusted hotel EBITDA margin to be between 34, 6% and 35, 6% and adjusted EBITDA to be between $452 million and $474 million.

Liz Perkins: We had cash on hand of approximately $10 million and availability under our revolving credit facility of approximately $650 million, and approximately 89% of our total debt outstanding was fixed or hedged. As of December 31st, we had approximately $105 million of debt maturing in the next 12 months, consisting of one $85 million term loan and a mortgage loan of approximately $20 million. We plan to pay for these upcoming debt maturities using funds from operations, borrowing under our revolving credit facility, or new financing. Acquisitions completed during the fourth quarter were funded using cash on hand, availability under a revolving credit facility, and net proceeds from the sale of shares under our ATM program. As Justin highlighted in his remarks, during the quarter, we sold approximately 12.8 million shares under our ATM program at a weighted average sales price of approximately $17.05 per share and received aggregate gross proceeds of approximately $219 million and proceeds net of offering costs of approximately $216 million. As of year-end, we had approximately $5 million remaining under our ATM program and are in the process with our board and agents to reauthorize and extend our ATM program.

While our asset management and hotel teams are working diligently to mitigate cost pressures, we have assumed for purposes of guidance that hotel operating costs will increase by approximately 5% at the midpoint.

This outlook is based on our current view and does not take into account any unanticipated developments in our business or changes in the operating environment, nor does it take into account any unannounced hotel acquisitions or dispositions.

The high end of our full year range reflects relatively steady macroeconomic conditions through 2024 with continued strength in leisure demand and improvement in business transient.

The low end of our range reflects more modest lodging demand growth with a slight pullback in leisure demand offset by continued improvement in business transient and group.

It should be noted that because of calendar shifts with the Easter holiday and more challenging year over year comparisons driven by the 2023 Super Bowl in Phoenix, where we have meaningful meaningful portfolio concentration, we anticipate first quarter performance for our portfolio to be below the low end of our range with performance improving as we move.

Into higher occupancy months in the second and third quarters.

As we begin 2024, we are pleased with our performance and confident we are well positioned for the year. Our recent acquisition activity has enabled us to drive incremental value for shareholders. Despite challenges in the operating environment, which continued to put pressure on margin.

Implied modified funds from operations are up on a per share basis year over year at the midpoint and higher of our guidance range. Our differentiated strategy has proven resilient through economic cycle. Our balance sheet is strong with ample liquidity, which we will continue to use opportunistically to pursue accretive transaction.

Liz Perkins: We anticipate public filings related to the program to be filed later today. With this successful capital raise during the quarter, we were able to grow our portfolio with the acquisition of five attractive, high-quality hotels while maintaining full availability on our revolving credit facility to pursue additional accretive opportunities. Turning to our outlook for 2024, provided in yesterday's press release, for the full year, we expect net income to be between $191 million and $217 million, and Comparable Hotels REVPAR change to be between 2% and 4%. Comparable Hotels The Adjusted Hotel EBITDA margin is expected to be between 34.6% and 35.6%.

Our assets are in good condition with consistent capital investments, ensuring that we maintain a competitive advantage over other product in our market and we believe the fundamental fundamentals of our business are sound with favorable supply dynamics, allowing us to benefit from incremental demand. Our team will continue to work to maximize the performance of our existing <unk>.

Assets and pursue external growth, where we can achieve favorable pricing.

That concludes our prepared remarks, Justin and I will now be happy to answer any questions that you have for us This morning.

Thank you if you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.

Liz Perkins: And Adjusted EBITDA RE to be between $452 million and $474 million. While our asset management and hotel teams are working diligently to mitigate cost pressures, we have assumed for purposes of guidance that hotel operating costs will increase by approximately 5% at the midpoint. This outlook is based on our current view and does not take into account any unanticipated developments in our business or changes in the operating environment, nor does it take into account any unannounced hotel acquisitions or dispositions.

You May press star two if you'd like to remove your question from Mchugh for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Our first question comes from the line of Michael Bellisario with Baird. Please proceed with your question.

Thanks, Good morning, everyone.

Good morning, good morning.

Two questions for you, but first on capital allocation.

I know you mentioned it briefly in your prepared remarks, but can maybe big picture remind us of your math on kind of how and when you think about equity issuance and then also your targeted returns when underwriting acquisitions, and then sort of separately on the same topic just regarding the dispositions should we view those as one off sales or do you have more.

Liz Perkins: The high end of our full-year range reflects relatively steady macroeconomic conditions through 2024, with continued strength in leisure demand and improvement in business transient. The low end of our range reflects more modest lodging demand growth with a slight pullback in leisure demand offset by continued improvement in business transient and group. It should be noted that because of calendar shifts with the Easter holiday and more challenging year-over-year comparisons driven by the 2023 Super Bowl in Phoenix, where we have meaningful portfolio concentration, we anticipate first quarter performance for our portfolio to be below the low end of our range with performance improving as we move into higher occupancy months in the second and third quarters. As we begin 2024, we are pleased with our performance and confident we are well-positioned for the year. Our recent acquisition activity has enabled us to drive incremental value for shareholders despite challenges in the operating environment, which continue to put pressure on margins. Implied modified funds from operations are up on a per share basis year over year at the midpoint and higher of our guidance range.

More older and need of Capex hotels in the portfolio that you might look to sell at least over the near term. Thanks.

Okay.

So to answer your first question.

When looking to issue equity.

For to fund acquisitions.

We're mindful of the spread.

And look to issue equity only when we.

I have confidence that we can drive incremental value for our existing shareholders I highlighted in my prepared remarks.

The spread investment.

Specific to all of the assets that we have.

Acquired.

In the fourth quarter, but we have also released specifics to the Vegas asset.

Which if you remember.

<unk> was acquired at a 10 seven multiple on trailing EBITDA through November of last year.

That hotel is continuing to do exceptionally well and as is the case with the majority of the assets that we acquired our expectation is that they will continue to produce growth rates in excess of our portfolio average.

Operator: Our differentiated strategy has proven resilient through economic cycles. Our balance sheet is strong, with ample liquidity, which we will continue to use opportunistically to pursue creative transactions. Our assets are in good condition, with consistent capital investments ensuring that we maintain a competitive advantage over other products in our market. And we believe the fundamentals of our business are sound, with favorable supply dynamics allowing us to benefit from incremental demand. Our team will continue to work to maximize the performance of our existing assets and pursue external growth where we can achieve favorable pricing. That concludes our prepared remarks. Justin and I will now be happy to answer any questions that you have for us this morning. Thank you. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue... You may press star 2 if you'd like to remove your question from the queue.

Importantly.

The acquisitions, when we look at acquisitions from the beginning of the pandemic.

We've been looking to continue to position the poor player for outperformance and making adjustments on the margin and this will feed into a response for your second question.

But on average looking at all of our acquisitions activity from the beginning of the pandemic.

On average the hotels that we've acquired we're 10 years younger.

Produced $21 higher Revpar and drove 5% higher margin. So when you look at the evolution of our portfolio over time, we're continuing to keep it fresh through acquisitions.

That's supplemented through dispositions activity the two hotels that we sold.

We're on average just over 20 years old.

And both in need of significant and the franchise renovations, which is what drove the higher per key renovation dollars that I quoted in my prepared remarks.

In terms of quantity of assets that fit that category within our portfolio.

We think there is a manageable amount and it's our expectation that we'll continue to be opportunistic we're continually exploring market conditions.

Michael Bellisario: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Michael Bellisario with Baird. Please proceed with your question. Thanks. Good morning, everyone.

Conditions are such today that.

There is a reasonable amount of competition that we can generate around some of the smaller lower priced assets within our portfolio.

Justin G. Knight: Good morning, regarding underwriting acquisitions. And then, sort of separately on the same topic, just regarding dispositions, should we view those as one-off sales, or do you have more older, in need of CapEx hotels in the portfolio that you might look to sell, at least over the near term? So to answer your first question, when looking to issue equity to fund acquisitions, we're mindful of the spread and look to issue equity only when we have confidence that we can drive incremental value for our existing shareholders, as I highlighted in my prepared remarks.

And we will continue to transact where that makes sense.

Yeah on the two assets we drove.

Meaningful gains over our whole period, the hotels have done incredibly well, but when we looked at the market and our positioning relative to significant new supply that was coming online.

Felt we would.

Yeah.

Best served by taking our chips off the table and reinvesting elsewhere, and we will continue to do that proactively where we see opportunities within our portfolio.

Got it that's very helpful. And then just one quick follow up just on the guidance thinking about the high end of Revpar, 4%, maybe what what needs to happen what do you need to see in terms of pickup is it really just midweek business travel trying to understand what needs to happen to achieve that high end. Thank you.

Justin G. Knight: The spread investment was specific to all of the assets that we acquired in the fourth quarter, but we've also released specifics on the Vegas asset, which, if you remember, was acquired at a 10-7 multiple on trailing EBITDA through November of last year. That hotel has continued to do exceptionally well, and as is the case with the majority of the assets that we acquired, our expectation is that they will continue to produce growth rates in excess of our portfolio average. Importantly, the acquisitions, when we look at acquisitions from the beginning of the pandemic, we've been looking to continue to position the portfolio for outperformance and making adjustments on the margin. And this will feed into a response to your second question.

To achieve the high end, we'll need to see and really throughout the guidance range. We're assuming continued.

Recovery MBT.

Okay.

I guess more strength and continued opportunity may be on the leisure side I think in general our assumption is.

<unk> will grow and leisure will remain stable on the high end I think you you would not have as much potential pullback in leisure.

Making up.

Continued strength, there and some <unk> recovery.

Thank you. Our next question comes from the line of Austin, where Schmidt with Keybanc capital markets. Please proceed with your question.

Justin G. Knight: But on average, looking at all of our acquisition activity from the beginning of the pandemic, on average, the hotels that we've acquired were 10 years younger, produced $21 higher rent par, and drove 5% higher margin. So when you look at the evolution of our portfolio over time, we're continuing to keep it fresh through acquisitions. And then that's supplemented through dispositions activity. The two hotels that we sold were, on average, just over 20 years old and both in need of significant end of franchise renovations, which is what drove the higher per key renovation dollar that I quoted in my prepared remarks.

Thanks, and good morning, everybody.

And you highlighted an ability to push rate more meaningfully into kind of the seasonally stronger months and I'm just curious how much pricing power do you think you have today.

What segment is going to be the primary driver of it sounds like mid week, maybe BT, but if you could confirm that that'd be helpful. And then how does occupancy.

Play into managing kind of the rate versus occupancy.

Justin G. Knight: In terms of the quantity of assets that fit that category within our portfolio, we think there's a manageable amount, and it's our expectation that we'll continue to be opportunistic. We're continually exploring market conditions. Conditions are such today that there is a reasonable amount of competition that we can generate around some of the smaller, lower priced assets within our portfolio, and we'll continue to transact where that makes sense. On the two assets, we drove meaningful gains over our whole period. The hotels did incredibly well.

As you see things strengthen.

The middle early to middle part of the year.

So starting with the last part of your question.

C race tied very closely to occupancy so as we compressed the hotel as we fill the hotel.

Able to more aggressively price incremental rooms, and our teams strategically work to fill hotels with base business such that they can they can meaningfully drive rate.

As we continue to feel by hotels in terms of where we think the opportunity.

Justin G. Knight: But when we looked at the market and our positioning relative to significant new supply that was coming online, we felt we would be best served by taking our chips off the table and reinvesting elsewhere. And we'll continue to do that proactively where we see opportunities within our portfolio.

They exist.

I guess to the greatest extent.

Suddenly you highlighted the opportunity we have mid week and when we look at where were running relative to pre pandemic levels from an occupancy standpoint.

We're pleased with the progress we've made over the past year, but certainly believe we have continued opportunity both from an occupancy standpoint and rate standpoint.

Liz Perkins: And then just one quick follow-up just on the guidance, thinking about the high end of REVPAR 4%. Maybe what needs to happen? What do you need to see in terms of pickup?

With business transient.

Hi group and.

Okay.

Midweek.

Other midweek segments like government I think we're pleased.

Liz Perkins: Is it really just midweek business travel? I'm trying to understand what needs to happen to achieve that high end. To achieve the high end, we'll need to see, and really, throughout the guidance range, we're assuming continued recovery in BT, but I guess more strength and continued opportunity on the leisure side. I think, in general, our assumption is BT will grow and leisure will remain stable on the high end. I think you would not have as much potential pullback in leisure, making up for continued strength there and some BT recovery.

With how we progressed through the fourth quarter, which is one of our weaker occupancy.

Quarters, and yet we were still able to to move freight and <unk>.

<unk>.

Into January I think we highlighted which is also one of our weaker occupancy months, we were able to move rate in January.

As we move into February will have more challenging comps just given our concentration in Phoenix and the Super Bowl haven't been in Phoenix last year, certainly we're happy with the performance of Vegas.

Austin Wurschmidt: Thank you. Our next question comes from the line of Austin Wurschmidt with KeyBank Capital Markets. Thanks, and good morning everybody.

But we only have one asset in that market and so there will be some trade offs as we look at February but as we move.

Justin G. Knight: Justin, you highlighted an ability to push REIT more meaningfully into kind of the seasonally stronger months, and I'm just curious, you know, how much pricing power do you think you have today? You know, what segment's going to be the primary driver? Sounds like midweek, maybe BT, but if you could confirm that, that'd be helpful.

Into March excluding.

The calendar shift related to the Easter holiday and then move specifically into that.

Second and.

And third quarter, we're optimistic based on how business is shaping up.

<unk> rates have moved and I think as we continue to build the occupancy will be able to yield out some of our lower rated negotiated accounts.

Justin G. Knight: And then how does Occupy..., you know, play into, you know, managing kind of the rate versus occupancy, you know, as you see things strengthen into the middle, you know, early to middle part of the year. So starting with the last part of your question, we see rate tied very closely to occupancy. So as we compress the hotel, as we fill the hotel, we're able to more aggressively price incremental rooms and our teams to fill hotels with base business, such that they can meaningfully drive rates as we continue to fill hotels.

And then we're pleased with the with movement that we've seen in government per Dms and.

Within our group segment as well.

And believe that that as we progress through the year, we'll be able to maximize performance in those segments to drive raise more meaningfully.

So is it fair to say that guidance assumes a 50 50 split between ADR growth and occupancy.

Justin G. Knight: In terms of where we think the opportunity exists, I guess to the greatest extent, certainly you highlighted the opportunity we have midweek and when we look at where we're running relative to pre-pandemic levels from an occupancy standpoint. We're pleased with the progress we've made over the past year but certainly believe we have continued opportunity both from an occupancy standpoint and rate standpoint with business transient groups and, you know, other midweek segments like government. I think we're pleased with how we progressed to the fourth quarter, which was one of our weaker occupancy quarters, and yet we were still able to move rates, and even into January, I think we highlighted, which was also one of our weaker occupancy months.

At the midpoint, probably weighted more heavily to ADR, but some occupancy growth.

It's really as Justin mentioned is that incremental occupancy and compression mid week that should help us drive rate.

Understood and then just maybe lives on expenses, what's really holding back from driving agency utilization and lower it seems like job growth has been pretty strong on the note.

This is an overall industry phenomenon, but what do you think you need to see to really see that next leg down in an agency utilization.

Well, that's a really good question.

I think the teams are working really really hard to continue to leverage.

Justin G. Knight: We were able to move rate in January. As we move into February, we'll have more challenging comps. Just given our concentration in Phoenix and the Super Bowl having been in Phoenix last year, I'm certainly we're happy with the performance of Vegas, but we only have one asset in that market, and so there will be some trade-off as we look at February. But as we move into March, excluding the calendar shift related to the Easter holiday, and then move specifically into the second and third quarters.

House, Labor, where where markets allow for it I think that while.

Yeah.

There has been some improvement sort of nationally I think its really market dependent and there are some markets, where we have higher occupancies.

That said have always relied on contract labor and in today's environment. Unfortunately have to rely on an even more so I think.

No.

The efforts that the teams have made to bring labor more labor in house and to really put themselves in a position where.

Liz Perkins: We're optimistic based on how business is shaping up. Negotiated rates have moved. And I think as we continue to build occupancy, we'll be able to yield out some of our lower rated negotiated accounts. And then we're pleased with the movement that we've seen in government per diems and within our group segment as well. And believe that as we progress through the year, we'll be able to maximize performance in those segments to drive rates more meaningful. So is it fair to say that guidance assumes a 50-50 split between ADR growth and occupancy? A little, you know, at the midpoint, probably weighted more heavily to ADR, but some occupancy growth. Because really, as Justin mentioned, it's setting criminal occupancy and compression mid-week that should help us drive rates.

We have flexibility and we're maximizing the use of contract labor, where if occupancies are seasonally lower we can use less contract labor and we're not having to.

<unk> restrict in house labor hours, I think we're benefiting from it from that standpoint on the culture side, but.

It's going to be slow and steady I mean.

We'd like to see.

More immigration reform I don't know if we'll see that in the near term, but that would certainly be more helpful and I do think that anecdotally.

Although it's been slower than we like we continue to hear that availability is easier and easier, but it's just.

At a slower slower pace to normalcy, then than we might like.

Okay. That's all for me thanks for the time.

Liz Perkins: And then just, maybe Liz, on expenses, what's really holding back from driving agency utilization down? It seems like job growth has been pretty strong. I mean, I know this is an overall industry phenomenon, but what do you think you need to see to really see that next leg down in agency utilization? That's a really good question.

Absolutely.

Thank you. Our next question comes from the line of Dori Kesten with Wells Fargo. Please proceed with your question.

Hi, Thanks, good morning.

Or the assets.

That you acquired in.

23, what Linda difference between in the trailing 12, EBITDA multiple and what you under wrote for the following 12.

Liz Perkins: We're, you know, I think the teams are working really, really hard to continue to leverage in-house labor where, where markets allow for it. I think that while there has been some improvement sort of nationally, it's really market dependent. And there are some markets where we have higher occupancies that have always relied on contract labor. And in today's environment, you unfortunately have to rely on even more.

We have we havent provided that yet.

Have provided guidance for the entire portfolio and on average our expectations or.

The newly acquired assets.

At the high end or exceeded the high end of the range that we've provided.

As I highlighted in response to one of the earlier questions.

Were intentional and targeting hotels that we think will lift the portfolio from a growth standpoint.

Liz Perkins: So I think the efforts that the teams have made to bring more labor in-house and to really put themselves in a position where we have flexibility and we're maximizing the use of contract labor where, you know, if occupancies are seasonally lower, we can use less contract labor, and we don't have to flex or restrict in-house labor hours. I think we're benefiting from it from that standpoint on the culture side. But, you know, I think it's going to be slow and steady. I mean, we'd like to see, you know, more immigration reform.

And.

We have been on average leaning them to markets.

That have benefited from recent economic and demographic shifts.

I think if you look at our activity over the past year.

Pleased with how the hotels have done subsequent to our acquisition and certainly optimistic about how that performed near term and over the long term for us.

Okay.

And then you noted a one and a half turn spread.

Where you issued equity versus where you acquired in Q4 based on the assets you noted you're underwriting today.

Liz Perkins: I don't know if we'll see that in the near term, but that would certainly be more helpful. And, you know, I do think that anecdotally, although it's been slower than we like, we continue to hear that availability is easier and easier, but it's just, you know, at a slower pace to normalcy than we might like. That's all for me. Thanks for the time.

And where you are trading today is that is that one five turn around the same or has it.

Ann.

So based on where we're trading today.

Certainly.

Impacts the multiple for the company overall.

Dori Kesten: Thank you. Our next question comes from the line of Dori Kesten with Wells Fargo. Thanks. Good morning.

The assets have.

Justin G. Knight: For the assets that you acquired in 23, what was the difference between the trailing 12, even a multiple, and what you underwrote for the full 12? We haven't provided that yet. We have provided guidance for the entire portfolio, and on average, our expectations for the newly acquired assets are at the high end or exceeding the high end of the range that we've provided. As I highlighted in response to one of the earlier questions, we're intentional in targeting hotels that we think will lift the portfolio from a growth standpoint and have been, on average, leaning into markets that have benefited from recent economic and demographic shifts. I think if you look at our activity over the past year, we're pleased with how the hotels have done subsequent to our acquisition and certainly optimistic about how they'll perform near term and over the long term for us. Okay, and then you noted a one-and-a-half turn spread to where you issued equity versus where you acquired in Q4. Based on the assets you noted you're underwriting today and where you're trading today, is that one-and-a-half turn around the same, or has it changed? Come in.

On average performed better than they did on a trailing basis.

Do you have kind of.

Some some shifts.

What would impact that the math on that.

But again, when we look at where we issued.

We're able to lock in pricing at that higher multiple which puts us in a position.

To drive incremental value.

Through the acquisitions and the fact that they continued to perform incredibly well.

We think that's advantageous to us.

No sorry, I meant the athlete's foot you're underwriting today.

Pricing the pricing today, Oh, sorry.

So when.

When we look at what we've acquired recently.

We were able in the fourth quarter to take advantage, especially on larger assets of the lack of availability of financing, which put us in a position to have a meaningful.

Meaningfully competitive advantage.

For assets that required.

Larger levels of financing.

We think that that continues to exist and so we're optimistic about our ability to continue to acquire assets.

In and around that that price range.

Justin G. Knight: So, based on where we're trading today, I mean, certainly that impacts the multiple for the company overall, and the assets have, on average, performed better than they did on a trailing basis, so you have kind of some shifts that would impact the math on that. But again, when we look at where we issued, we were able to lock in pricing at that higher multiple, which puts us in a position to drive incremental value through acquisitions. And the fact that they continue to perform incredibly well.

Certainly pricing varies by asset and were not at a point in the cycle, where there are sufficient transactions to drive kind of at a constant market clearing price.

Assets are being priced individually.

And I think we will continue to transact, where we see the greatest ability to drive value. I think you can expect on a go forward basis, but from a quality standpoint, we will be pursuing assets of similar quality.

The extent financing continues to be a challenge for our competitors.

Justin G. Knight: We think it's advantageous to us. No, sorry, I meant the assets that you're underwriting today if there's... Oh, pricing today. Oh, sorry. A mix.

You can expect us to pursue those assets.

Which you know are most.

Justin G. Knight: So, you know, when we look at what we've acquired recently, we were able in the fourth quarter to take advantage, especially on larger assets, of the lack of availability of financing, which put us in a position to have a meaningful competitive advantage for assets that required larger levels of financing. We think that that trend continues to exist, and so we're optimistic about our ability to continue to acquire assets in and around that price range. Certainly, pricing varies by asset, and we're not at a point in the cycle where there are sufficient transactions to drive kind of a constant market clearing price.

Challenging for our competitors to acquire.

And then to pivot as as the market.

It becomes more fluid as we move into the year I think generally speaking the expectations are that we will see more transactions and 24 than we did in 2003 and certainly when we look at refinancings that are coming due and incremental pressure from the brands around capital improvements that there.

There are adequate catalysts to drive more motivated sellers to market and certainly continues to be significant interest on the buy side.

Okay and then one last one there is there is a pretty large difference between consents.

Justin G. Knight: Assets are being priced individually, and, you know, I think we'll continue to transact where we see the greatest ability to drive value. I think you can expect on a go-forward basis that, from a quality standpoint, we would be pursuing assets of similar quality. To the extent financing continues to be a challenge for our competitors, you can expect us to pursue those assets which are, you know, the most challenging for our competitors to acquire, and then to pivot as the market becomes, you know, more fluid as we move into the year. I think, generally speaking, expectations are that we will see more transactions in 2024 than we did in 2023.

Consensus G&A and what you're guiding for the year.

Liz can you give us a little teach in on.

How G&A.

At the beginning of the year and then I guess, just how like relative share price performance versus guidance changes can shift that as the year goes on.

Absolutely so at the beginning of the year the way that we've historically approached it.

No because I keep getting this question, we definitely reevaluate each time that guidance, but we typically set guidance at the target.

You know target compensation, so at the midpoint of of compensation and that aligns with the midpoint of guidance now because so much of <unk>.

Both the executive team and the internal team hears the compensation is tied to how our stock performs on a relative and total return basis.

Liz Perkins: And certainly, when we look at refinancings that are coming due and incremental pressure from the brands around capital improvements, there are adequate catalysts to drive more motivated sellers to market, and there certainly continues to be significant interest on the buy side. Okay, and then one last one: there's a pretty large difference between consensus G&A and what you're guiding for the year. Liz, can you give us a little teach-in on how G&A is set at the beginning of the year and then, I guess, just how relative share price performance versus guidance changes can shift that as the year goes on?

Can fluctuate throughout the year.

So.

Depending on how we perform we will began accruing based on how we're performing.

From a total relative shareholder return perspective.

As we rounded out last year.

And even updated guidance for with.

With the Q3 release, we had a run up at the end of the year, which impacted actual for 2023 and resetting it for this year, we're at the midpoint and it could increase if we perform well.

Liz Perkins: Absolutely not. So at the beginning of the year, the way that we've historically approached it, you know. Though, because I keep getting this question, we definitely reevaluate each time we set guidance, but we typically set guidance at the target, you know, target compensation, so at the midpoint of compensation, and that aligns with the midpoint of guidance. Now, because so much of both the executive team and the internal team here's compensation is tied to how our staff performs on a relative and total return basis, that can fluctuate throughout the year, and so, you know, depending on how we perform, we will begin accruing based on how we're performing from a total and relative shareholder return perspective. And, you know, as we rounded out last year and even updated guidance for with the Q3 release And it could increase if we perform well, and it should align, generally speaking, with how we're performing operationally as well. Okay, thank you.

It should align.

Generally speaking with with how we're performing operationally as well.

Okay. Thank you.

Mhm.

Thank you. Our next question comes from the line of Anthony Powell with Barclays. Please proceed with your question.

Hi, good morning.

Good morning, <unk> morning.

Wanted to track I guess, the Midscale properties under construction in our markets I'm asking because there's a lot of energy around a lot of the midscale.

Brands that should be for larger brands are introduced and so I'm curious if you believe those properties may eventually creep almond prices start to compete with your properties.

We have so.

Our internal modeling allows us to add or subtract different segments and to look at.

The potential impact of supply in a number of different ways.

While there has been a significant amount of talk about the potential for mid scale development.

When we add mid scale and look at the potential impact on our portfolio.

It moves to needle.

Very slightly on the margin, but keeps us right at around 50% exposure.

So slightly higher but still.

Not meaningfully higher than than the larger.

The way, we've historically looked at it.

We'll continue to monitor that.

And in May.

Anthony F. Powell: Mm-hmm. Thank you. Our next question comes from the line of Anthony Powell with Barclays. Hi, good morning.

And make adjustments to the extent, we begin to see more meaningful impact from.

From mid scale development, but to date, there's been a lot of talk.

Justin G. Knight: I guess in terms of supply growth, morning, have you started to track, I guess, the mid-scale properties under construction in the markets? I'm asking because there's a lot of energy around a lot of the mid-scale brands that the larger brands have introduced. And so, I'm curious if you believe those properties may eventually creep up in price and start. We have. So, our internal modeling allows us to add or subtract different segments and to look at the potential impact of supply in a number of different ways. While there has been a significant amount of talk about the potential for mid-scale development, when we add mid-scale and look at the potential impact on our portfolio, it moves the needle very slightly on the margin but keeps us right at and around 50% exposure. So, slightly higher, but still not meaningfully higher than the larger, you know, the way we've historically looked at it.

But.

Very few projects have.

Began construction at least in the markets, where we have ownership.

Got it okay, and maybe on acquisitions in terms of where do you want to buy I mean, you bought in a lot of the western states with high population growth business friendly areas. Matt you also did some deals in markets like Portland, Oregon that were a bit more.

Florida recover looking.

Forward.

Do more of those more urban.

Property deals that mark is that a bit more challenged with pricing or.

I will focus mainly on kind of the high growth sunbelt kind of western states that you've been doing so well in recently.

Thank you can expect us to to look at all markets and to invest where we think pricing is appropriate to the potential upsides.

Importantly, the Portland, Oregon asset was acquired as part of our portfolio with to Fort worth assets.

And on a combined basis, we got comfortable with the growth profile.

Done.

Credibly well on that portfolio transaction overall, certainly Portland, Oregon has been slower to rebound.

Justin G. Knight: We will continue to monitor that and make adjustments to the extent we begin to see more meaningful impact from mid-scale development. But, to date, there's been a lot of talk, but very few projects have begun construction, at least in the markets where we have ownership. Okay, and maybe in acquisitions, in terms of where you want to buy, I mean, you bought in a lot of western states with high population growth, business-friendly areas, and you also did some deals in markets like Portland, Oregon, that were a bit more, For more information, visit www.fema.gov. Would you do more of those more urban property deals in markets that were a bit more challenged to get pricing? Or are you going to focus mainly on kind of the high-growth, sunbelt, kind of western style? They are doing so well.

And returns that we've gotten to date on that asset.

Slightly lower than what we've gotten on average.

But combined with the two fort worth assets, which are performed.

At or near the high end of returns that we've gotten for.

All of our acquisitions together.

We feel really good about that transaction and adopt our price of entry into that market.

As we begin to see more of the urban markets that have been slower to recovery begin to turn a corner I think we will look opportunistically to invest where pricing is appropriate.

And I think part of the beauty of our model is it's our.

Design and intention to be broadly diversified and so we are taking a broad view.

Justin G. Knight: You know, I think you can expect us to look at all markets and to invest where we think pricing is appropriate to the potential upside. Importantly, the Portland, Oregon, asset was acquired as part of a portfolio with two Fort Worth assets. And on a combined basis, we got comfortable with the growth profile and have done incredibly well on that portfolio transaction overall. Certainly, Portland, Oregon, has been slower to rebound.

Underwriting assets in all markets.

And looking for opportunities where pricing, we're able to achieve matches the upside potential for the assets within those markets.

Okay. Thank you.

Thank you Anthony.

Thank you. Our next question comes from the line of Floris Van <unk> with Compass point. Please proceed with your question.

Hey, guys. Thanks for taking my question.

Justin G. Knight: And returns that we've gotten to date on that asset are slightly lower than what we've gotten on average. But combined with the two Fort Worth assets, which have performed at or near the high end of returns that we've gotten for, you know, all of our acquisitions together, we feel really good about that transaction and about our price of entry into that market. You know, as we begin to see more of the urban markets that have been slower to recover begin to turn a corner, I think we will look opportunistically to invest where pricing is appropriate. And I think part of the beauty of our model is that it's our design and intention to be broadly diversified. And so we are taking a broad view, underwriting assets in all markets, and you know, looking for opportunities where the pricing we're able to achieve matches the upside potential for the assets within those markets. Okay, thank you.

Justin maybe can you talk a little bit about.

The amount of CBS maturities in the select service.

Segment, this year, and and what kind of opportunity set that could.

Provide to key to your company.

I certainly we watch that closely we subscribe to a number of list that they provide us with asset level detail.

Maturing loans.

Okay.

I think it's important to note before I fully answer.

This is a trend that has happened in the past and I think it's.

The industry has a tendency to over anticipate the total number of transactions that are driven by it.

That said the dynamics are slightly different this time with interest rates being meaningfully higher than where most of these assets were originally financed.

Floris van Dijkum: Thank you. Thank you. Our next question comes from the line of Floris Van Dijkum with Compass Point.

Justin G. Knight: Hey guys, thanks for taking my questions. Um, Justin, maybe you could talk a little bit about the amount of CMBS maturities in the select service segment this year and what kind of opportunities that that could provide for your company? Certainly, we watch that closely. We subscribe to a number of lists that provide us with asset-level detail on maturing loans.

And we already have experience.

With maturing loan.

Forcing assets to market.

In ways that have enabled us to transact at very attractive purchase prices for us.

So I think as.

As I have highlighted for some time now.

For the foreseeable future we believe.

Justin G. Knight: I think it's important to note before I fully answer that this is a trend that has happened in the past, and I think the industry has a tendency to over-anticipate the total number of transactions that are driven by it. That said, the dynamics are slightly different this time, with interest rates being meaningfully higher than where most of these assets were originally financed. We already have experience with maturing loans forcing assets to the market in ways that have enabled us to transact at very attractive purchase prices for us.

Debt refinancings.

And really that the capital investment required as part of those refinancings with loan coverage and higher interest rates being primary drivers.

And then continued pressure from the brands around capital improvements due to be meaningful drivers or motivators for potential sellers to bring assets to market and.

And when we think about the need to bridge a bid ask spread that's existed in.

Justin G. Knight: I think, as I've highlighted for some time now, for the foreseeable future, we believe that refinancings and really the capital investment required as part of those refinancings, with loan coverage and higher interest rates being primary drivers, and then continued pressure from the brands around capital improvements to be meaningful drivers or motivators for potential sellers to bring assets to market. When we think about the need to bridge a bid-ask spread that exists and suppressed total transaction volume, we think that those two things will increasingly be catalysts pushing increased transaction volume. Certainly, we're optimistic that those two factors will create meaningfully greater opportunities for us as well. And then maybe my thought, so by the way, in your view of the, what's the total volume of the maturities in 24 and what percentage do you think would be appropriate for you guys? I guess that's what I was trying to get at.

Suppressed total transaction volume.

We think that those two things will increasingly be catalysts.

Pushing it.

<unk> transaction volume and certainly we're optimistic creating that those two factors will create.

Meaningfully greater opportunities for us as well.

And then maybe my my fault.

By the way in your view of what's the total volume of the.

The maturities in 'twenty, four and what percentage do you think would be appropriate for you guys. I guess, that's what I was trying to get at.

Historically, we haven't given specific targets because assets coming to market.

Can vary in quality and attractiveness to us based on price.

I think when we look at total transaction volume over the past couple of years.

And correlate that with maturing financing.

We're coming to a point where.

Justin G. Knight: Historically, we haven't given specific targets because assets coming to market can vary in quality and attractiveness to us based on price. I think when we look at total transaction volume over the past couple of years and correlate that with maturing financing, we're coming to a point where we should see significant increases in both. They are somewhat correlated, and we see that as a meaningful driver for transactions going forward. And maybe my follow-up is on Vegas. I like that transaction.

We should see significant increases in both.

They are somewhat correlated.

And.

We see that being a meaningful driver for transactions going forward.

Right.

And maybe my follow up is on on Vegas.

Yes.

Alright.

That transaction, maybe if you can talk about the rationale.

Forgetting into Vegas, there's not many.

Justin G. Knight: Maybe if you could talk about the rationale for getting into Vegas. There are not many hotel REITs, anyway, that are active in that market. There are a lot, obviously, casino REITs. But if you could talk a little bit about why you think this is good for Apple and also talk about the opportunity set and how you can expand in that market. Absolutely.

Hotel REIT anyway that.

Active in that market, so a lot of obviously.

Casino rights.

But if you could talk a little bit about.

Why do you think this is.

Good for Apple and also talk about the opportunity set and how you can expand in that market.

Absolutely. So Vegas is a market that we've we've liked for some time now.

Justin G. Knight: So Vegas is a market that we've liked for some time now. Given that the majority of rooms in Vegas are associated with casinos, there are limited opportunities to invest in rooms-focused hotels that fit our overall investment thesis and are a good fit for the profile of our portfolio. We have historically owned assets in Vegas. We owned a full-service Marriott Hotel and a Residence Inn Hotel that we sold before the great financial crisis.

Given that the majority of firms in Vegas are associated with casinos that there are limited opportunities to invest.

In rooms focused hotels that fit our overall investment thesis.

<unk> are a good fit for the profile of our portfolio.

We have historically owned assets in Vegas.

We owned.

Our full service Marriott Hotel and a residence Inn hotel that we sold before the great financial crisis and so.

Justin G. Knight: And so we have a significant amount of experience in the market. And Vegas is unique in that it generates its own demand. And that demand takes, you know, many different forms. For example, we've found that there is significant demand for hotel rooms that are not associated with casinos. And especially given the proximity of this hotel, which is very similar to the hotels that we owned earlier relative to the Convention Center, we found we can do incredibly well in the market. You know, we're incredibly excited about the Spring Hill Suite specifically, but we highlighted in our press release, and haven't had an opportunity necessarily to discuss it, that the hotel came with land that enables us to potentially develop up to 500 additional rooms. And we are in the process of currently exploring an opportunity to develop on that site. The purchase price for the site is included in the purchase price that we quoted. And so it's not incremental.

We have a significant amount of experience in market.

And Vegas is unique in that.

It generates.

It generates its own demand and that demand takes.

Many different forms we've found that there is significant demand for.

Our hotel rooms that are not associated with casinos.

And especially given the proximity of this hotel, which is very similar to the hotels that were under earlier.

Relative to the Convention center.

We found we can do incredibly well in market.

We're incredibly excited about.

The Springhill suites, specifically, but we highlighted in our press release and haven't had an opportunity.

To discuss it.

The hotel came with land.

That enables us to potentially develop up to 500 additional rooms and.

And we are in the process of currently exploring.

An opportunity to develop on that site.

The purchase price for the site is included in the purchase price that we quoted.

And so it's not incremental and certainly given the scarcity of land and available opportunities for development.

Justin G. Knight: And certainly, given the scarcity of land and available opportunities for development in the heart of Vegas, with close proximity to the Convention Center, we think we have something very special there. You know, I think It's reasonable to expect that in the near future, we'll have more to say on that, but certainly excited to be there and incredibly pleased with how the hotel has performed for us to date. And if you look at projections for the Vegas market, they're incredibly favorable. And I think, interestingly, as we look at leisure specifically and how leisure trends have transitioned, Vegas is on the winning side of those transitions right now and certainly benefited early in the year from the Super Bowl. But even outside of the Super Bowl week, it has continued to produce incredibly strong numbers for us year over year, and I think we feel it will be meaningfully additive to the performance of our portfolio overall. Thanks, Jeff.

In the heart of Vegas with close proximity to.

To the Convention Center, we think we have something very special there.

I think.

It's reasonable to expect in the first in the near future.

That will have some data.

We will have more to say on that.

But certainly excited to be there incredibly.

Incredibly pleased with how the hotel has performed for US to date and if you look at projections for the Vegas market. They are incredibly favorable.

I think interestingly.

As we look at leisure specifically and how.

These are trends have transitions.

<unk> is on the winning side of those transitions right now.

And certainly benefited early in the air from the Super Bowl, but even outside of the Super Bowl week.

Continue to produce incredibly strong numbers for us year over year.

And I think what we feel will be meaningfully additive to the performance of our portfolio overall.

Yes.

Thanks Joseph.

Bryan Maher: Our next question comes from the line of Bryan Maher with B. Riley Securities. Well, thank you and good morning. Just two for me. Most of them might have been asked and answered.

Thank you.

Thank you. Our next question comes from the line of Bryan Maher with B I'm, Sorry Zero Securities. Please proceed with your question.

Thank you and good morning, just two for me most of mine have been asked and answered but.

Justin G. Knight: When you're looking at trading out of properties, and I know you've discussed trading out of older properties and creating kind of a newer, younger portfolio, but what considerations do you take with respect to business-unfriendly states where taxes or laws might make it increasingly difficult to do business there? Is that working into your consideration as well? It's certainly a factor we consider. You know, and interestingly, when we look at our portfolio, by and large, we're indexed towards business-friendly states. You know, I'd say, certainly, we're continually looking at our Chicago presence, which is mostly outside of the city. And submarkets have performed differently from each other. But overall, that's been an area of the country that's been slower to rebound.

When youre looking at trading out of properties and I know you've discussed trading out of older properties in creating kind of a newer younger portfolio, but what considerations do you take with respect to kind of business unfriendly states.

Where taxes are laws might make it increasingly difficult to do business. There is that working into your consideration as well.

It's certainly a factor we consider.

Interestingly.

When we look at.

At our portfolio by and large for indexed towards business friendly states.

I'd say.

Certainly we're continually looking at our Chicago presence, which is mostly outside of the city.

And Submarkets.

<unk> had performed differently from each other but overall that's been an area of the country that's been slower to rebound.

Liz Perkins: You know, outside of that, we're generally happy with our concentration and the performance of our assets overall. And really, you know, we're looking at a lot of different areas. What we're looking to optimize around is the ability to drive rates relative to potential cost increases. And, you know, I think when we underwrite markets, we underwrite them very differently, depending on the dynamics there, both as we're looking to acquire new hotels and as we're assessing our existing portfolio for potential dispositions. And I think it's reasonable to expect that we will continue to, you know, explore opportunities and pursue opportunities to shift the mix such that we're moving the needle from an overall performance standpoint. You know, Liz and I both highlighted challenges with margins in our prepared remarks.

Outside of that.

We're generally happy with our <unk>.

Concentration and the performance of our assets overall and really.

What we're looking to optimize around.

His ability to drive rate relative to potential cost increases.

I think when we underwrite markets.

We underwrite them very differently, depending on the dynamics there.

As we're looking to acquire new hotels, and as we're assessing our existing portfolio for potential dispositions and I think it's reasonable to expect that we will continue to.

Explore opportunities and pursue opportunities.

Two shifts the mix such that we're.

Moving the needle from an overall performance standpoint.

Liz and I, both in our prepared remarks highlighted challenges with margins.

Liz Perkins: And, you know, one of the ways, in addition to the efforts of our management companies and our asset management team to address those concerns, one of the ways that we can, you know, more holistically address those concerns is to adjust the mix of our portfolio. And I highlighted in response to one of the earlier questions that we've been purposeful in pursuing assets in markets where we can drive higher margins, which leads to greater profitability for our investors. Thanks. That kind of segues well into my second question, which is, you know, you talk a lot about it with the expense pressures and inflation and wages in particular, but can you maybe, or maybe better for Liz, kind of address, you know, the impact of property tax increases, maybe insurance increases, which we hear about repeatedly, and how much of a pressure is that? And do you think that that will mitigate the problem? It's a good question.

And one of the ways.

In addition to the efforts of our management.

Companies and our asset management team to address those concerns.

One of the ways that we can.

More holistically address those consensus is to adjust the mix of our portfolio, Ed and I highlighted in response to one of the earlier.

Questions, we've been purposeful and pursuing.

Assets in markets, where we can drive higher margins, which lead to greater profitability for our investors.

Thanks for that kind of segways well into my second question, which is you talked a lot about with des.

Expense pressures in inflationary in wages in particular, but can you maybe maybe better for Liz kind.

Kind of address the impact of property tax increases maybe insurance increases, which we hear about repeatedly in and how much pressure is that and do you think that that will mitigate.

It's a good question so in in our guidance for 2024, we have assumed a higher growth rate around property taxes insurance and other so more of your fixed costs then your variable cost.

Liz Perkins: So, you know, in our guidance for 2024, we have assumed a higher growth rate for property taxes, insurance, and other, so more of your fixed costs than your variable costs. And, you know, we hope that, you know, we're conservative there, but, you know, we've had a decent run with property taxes, and, you know, I think it is prudent to assume that we could have some increases there. In property insurance, the market's still tough, you know, hopefully not as tough as last year.

And we.

We hope that.

We're conservative there, but we've had we've had a decent run with property taxes, and I think prudent to assume that we could have some increases there and then property insurance.

Market is still tough hopefully not as tough as last year, where we're hearing more positive things I think the market isn't quite quite as challenging as last year, but but still still a harder market than we'd like and so we've we've anticipated.

Liz Perkins: We're hearing more positive things. I think the market isn't quite as challenging as last year, but still a harder market than we'd like. And so we've anticipated, you know, strong double-digit increases in fixed cost expenses in the guidance range across the scenarios. We are, from a variable cost standpoint, lapping ourselves. 2023, when you look backwards, should be a more stable comp year for 2024.

Strong double digit.

Increases on fixed cost expenses and in the guidance range.

Cross across the scenarios.

We are from a variable cost standpoint, lapping ourselves 2023, when you look backwards should be a more stable comp year for 2024 that said.

Tyler Batory: That said, really being able to overcome your continued expense increases, even more moderate ones, will require rep park growth. Okay, thank you. Thank you. Thank you. As a reminder, if you'd like to join the question queue, please press star 1 on your telephone. Our next question comes from the line of Tyler Batory with Oppenheimer and Company. Good morning. This is Jonathan. I'm for Tyler.

Really being able to overcome.

Continued expense increases even more moderate.

We'll require revpar growth.

Okay. Thank you.

Thank you.

Thank you as a reminder, if you'd like to join the question queue. Please press star one on your telephone keypad. Our next question comes from the line of Tyler <unk> with Oppenheimer and company. Please proceed with your question.

Hi, Good morning. This is Jonathan on for Tyler Thanks for taking our questions.

Liz Perkins: Thanks for taking our questions and thanks for coming through so far. The first one for me is just a clarification question on the guidance probably for Liz, helpful commentary on the high end of the range, but maybe conversely on the low end. Is that assuming flat BT and stable leisure, or does that low range still assume some level of recovery?

So far.

First one for me just to clarify clarification question on the guidance probably for lids.

Helpful commentary on the island.

Of the range, but maybe Conversely on the low end is that assuming flat <unk> and stable leisure or does that low range still assume some level of recovery in beauty.

Liz Perkins: I still assume some continued improvement in BT, and that's what we're seeing. I mean, really, you know, even as we crossed over into January, you know, we've seen, and we gave you an indication of where January ended up, which was an improvement from a REVPAR increased perspective compared to December. You know, where that really came from was, you know, leisure hanging in there, but recovery in midweek occupancies, which we believe are related to business travel recovery. And so, I think, throughout the range, we anticipate continued improvement midweek related to Business Transient. Okay, great.

I still assume some continued improvement in BT and that's what we're seeing I mean really.

Even as we crossed over into January we have seen.

And we gave you an indication of where January ended up which was an improvement from from a revpar increase perspective to December where that really came from was leisure hanging in there, but recovery in midweek Occupancies, which we believe are related to business travel recovery.

And so I think throughout the range.

We anticipate continued improvement midweek.

<unk> to business transient.

Okay, great. Thank you for the detail there and then switching gears.

Justin G. Knight: Thank you for the detail there. And then, switching gears, I appreciate all the commentary on acquisitions, Justin, so far. In light of that outlook for this year on picking up acquisition activity, any additional color on how you're thinking about new development acquisitions? And I guess with the anticipated acquisition dates of those two developments that are under contract, do more of these deals kind of make sense for you going forward? Certainly, we continue to underwrite, and I highlighted in response to one of the earlier questions that we are currently exploring an opportunity to build on the land adjacent to the Vegas asset that we recently acquired. You know, the same challenges that are keeping supply growth low for the industry overall impact our underwriting. It's expensive to build hotels, and while we feel we have partnered with developers who have a competitive advantage in that arena and are able to deliver assets at attractive prices for us, there are very few markets where the underwriting makes sense.

Appreciate all the commentary on acquisitions just in so far.

Of that outlook for this year picking up acquisition activity any additional color on how you're thinking about new development acquisition.

And I guess with the anticipated acquisition dates.

Those two developments that are under contract due to.

More of these deals kind of makes sense for you going forward.

Certainly we continue to underwrite and I highlighted in response to.

Sure.

One of the earlier questions. We are currently exploiting an opportunity to build.

On the land adjacent to the Vegas asset that we recently acquired.

The same challenges that are keeping supply growth low for the industry overall.

<unk>, our underwriting it's expensive to build hotels.

And while we feel we have partnered with developers who have.

Our competitive advantage in that arena and are able to to deliver assets at attractive pricing for us there are very few markets, where the underwriting makes sense.

Justin G. Knight: We're incredibly optimistic about the two projects that we have currently under contract. They're super well located in markets that we think will be very strong for us long term. And I think it's reasonable to expect that, in the near term, we could add one or two more to that group. But, you know, it's challenging.

Incredibly optimistic about the two projects that we have.

Currently under contract, they're Super well located.

In markets that we think will be very strong for us long term.

And.

I think it's reasonable to expect that.

In the near term.

Could add one or two more to that group.

But it's challenging and I.

Justin G. Knight: And I think in the near term, while we will be active in underwriting both new development deals and existing assets, it's more likely, or it's likely that the majority of the transactions we complete over the next year or so will be around existing assets. Okay, very helpful. Thank you for all the color.

I think.

In the near term.

While we will be active in underwriting both new development deals and existing assets.

It's more likely or it's likely that the majority of the transactions, we complete over the next year or so will be.

Around existing assets.

Okay very helpful. Thank you for all the color that's all for me.

Jonathan: That's all. Thank you. Thank you. Our next question comes from the line of Michael Herring with Green Street. Please proceed with your, Hey, thanks. Good morning.

Thank you.

Thank you. Our next question comes from the line of Michael Huang with Green Street. Please proceed with your question.

Hi, Thanks, good morning.

Justin G. Knight: Just a quick one on the Las Vegas acquisition again. Can you just talk about whether or not the union labor agreements in the market are impacting that hotel and how that's impacting your underwriting there in the market? Absolutely. So, in any market where there's significant union activity, that impacts prices for labor within the market. And so, you know, I think relative to other markets, labor is more expensive in that market for us.

Just a quick one on the Las Vegas acquisition again can.

Can you just talk about whether or not the union labor agreements in the market are impacting that hotel and how that's impacting your underwriting there.

<unk>.

Absolutely so.

In a market, where there are significant union activity.

That impacts pricing for labor within the market.

And so.

Relative to other markets.

Labor is more expensive and that market for us.

Justin G. Knight: That said, it's a market that is also positioned to drive higher rates. And so, when we look at the margin profile, we feel very comfortable with that. You know, we, we, um, What we look at are the costs of labor in markets, and union activity in the market is only one factor that impacts those costs.

That said it.

It's a market that also is positioned to drive higher rates and so when we look at the margin profile, we feel very comfortable with that.

We.

But we look at cost of labor in markets.

Union is only union activity in the market is only one factor that impacts those costs the bigger factor in most markets is availability.

Justin G. Knight: The bigger factor in most markets is availability. You know, I think we have effectively underwritten assets, looking at all of the assets we've acquired recently in a way that we feel very comfortable with their long-term profitability. And just one other thing, I know you just updated us a little bit on the purchase contracts, but I'm just curious if the supply dynamics in those markets have changed at all, or if, Yeah, if that's changed at all in the last six months or so, or if you're still feeling pretty good about that, in our markets overall or in the markets where we recently acquired. In the case of the ones that are under contract in Madison and Nashville, if the spike dynamics there have changed. No, they've remained relatively constant.

And.

I think.

We have effectively underwritten.

Assets.

Looking at all of the assets, we have acquired recently in a way that we feel very comfortable with the long term profitability.

Thanks, and just one other on I know you just stop giving us a little bit on the purchase contracts I'm just curious.

Dynamics in those markets have changed at all or.

Yes, if that's changed at all in the last six months or so.

Still feeling pretty good about that.

In our markets overall are in the markets for our recently acquired assets.

Sorry for the ones that are under contract to Madison in Nashville.

It's their home channel.

No.

They've remained relatively constant.

Justin G. Knight: You know, I think Nashville is a market that's seen significant supply growth. We knew that going in. And I think our selection of a site within within Nashville reflects our view of potential exposure. That said, supply has been coming down in most markets. And we've spent a lot of time talking about Vegas on this call. Vegas is actually a market that has very little supply coming online in the near term. And across the board, we feel very good about supply. When we look at the overall trend for our portfolio, again, looking at a five-mile radius from the assets that we own, the supply picture has become increasingly favorable over time, not less so. And that's even taken into consideration the new acquisitions, which in some cases have been in markets that have performed incredibly well, and that, as a result, have been more attractive for new developers.

I think Nashville is a market that's seen significant supply growth, we knew that going in and I think our selection of a site within within national.

Reflective.

Yeah.

Our view of potential exposure.

<unk>.

Supply has been coming down in most markets.

And we've spent a lot of time talking about Vegas on this call on Vegas is actually a market that has very little supply coming online.

Near term.

And.

Across the board.

And we feel very good about supply when we look at the overall trend for our portfolio again looking at a five mile radius.

The assets that we own.

The supply picture has become increasingly favorable over time.

So and that's even taking into consideration the new acquisitions, which in some cases have been in markets that have performed incredibly well and that as a result.

More attractive for new development.

Justin G. Knight: That's helpful. Thank you. Thank you. Thank you. That concludes our question and answer session. I'll turn the floor back to Mr. Knight for any final questions.

Got it that's helpful. Thank you.

Thank you.

Thank you that concludes our question and answer session I will turn the floor back to Mr. Knight for any final comments.

Thank you and thanks for spending time with US. This morning, we appreciate your questions and your continued interest in our company as always as you have the opportunity to travel we hope you'll take the opportunity to stay with us in one of our hotels and we look forward to meeting with many of you here in the near future.

Justin G. Knight: And thanks for spending time with us this morning. We appreciate your questions and your continued interest in our company. As always, when you have the opportunity to travel, we hope you'll take the opportunity to stay with us in one of our hotels. And we look forward to meeting with many of you here in the near future at conferences or in individual meetings. Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

At conferences or in individual meetings.

Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.