Q4 2023 Sunstone Hotel Investors Inc Earnings Call
Operator: Good morning, ladies and gentlemen, thanks for standing by. Welcome to the Sunstone Hotel Investors fourth quarter 2023 earnings call. At this time, all participants are in a listen-only mode.
Good morning, ladies and gentlemen.
Thank you for standing by.
Looking to the Sunstone hotel investors fourth quarter 2023 earnings call.
At this time all participants are in a listen only mode.
Operator: Later, we will conduct a question and answer session, and instructions will be given at that time. I would like to remind everyone that this conference is being recorded today, Feb. 23, 2024, at 1 p.m. ET.
Later, we will conduct a question and answer session.
And instructions will be given at that time.
I would like to remind everyone that this conference is being recorded today February 'twenty or 'twenty 'twenty four at one P M Eastern time.
Operator: I will now turn the presentation over to Mr. Aaron Reyes, Chief Financial Officer. Please go ahead, sir. Thank you, operator. Before we begin, I would like to remind everyone that this call contains forward-looking statements that are subject to risks and uncertainties, including those described in our filings with the SEC, which could cause actual results to differ materially from those projected. We caution you to consider these factors in evaluating our forward-looking state. We also note that the commentary on this call will contain non-GAAP financial information. www.adjustedeva.org Adjusted FFO and Property Level Adjusted EBITDA are We are providing this information as a supplement to information prepared in accordance with generally accepted accounting principles. Additional details on our quarterly results have been provided in our earnings release and supplementary materials, which are available in the investor relations section of our website.
I will now turn the presentation to Mr. Aron Ray as Chief Financial Officer. Please go ahead Sir.
Aaron Reyes: Thank you operator.
Aaron Reyes: Before we begin I would like to remind everyone that this call contains forward looking statements that are subject to risks and uncertainties, including those described in our filings with the SEC, which could cause actual results to differ materially from those projected.
Aaron Reyes: We caution you to consider these factors in evaluating our forward looking statements.
Aaron Reyes: We also note that the commentary on this call will contain non-GAAP financial information, including adjusted EBITDA or adjusted.
Adjusted SFO and property level adjusted EBITDA R E.
Aaron Reyes: We are providing this information as a supplement to information prepared in accordance with generally accepted accounting principles.
Aaron Reyes: Additional details on our quarterly results have been provided in our earnings release and supplemental which are available in the Investor Relations section of our website.
Operator: With us on the call today are Bryan Giglia, Chief Executive Officer; Robert Springer, President and Chief Investment Officer; and Chris Ostapovich, Chief Operating Officer. Bryan will start us off with some highlights from last year, followed by commentary on our fourth quarter operations and recent trends. Afterward, Robert will discuss our capital investment. And finally, I will provide a summary of our fourth-quarter earnings results, review our current liquidity position, and provide the details of our outlook for 2024. After our remarks, the team will be available to answer your questions. With that, I would like to turn the call over to Bryan. Please go ahead.
Aaron Reyes: With us on the call today are Bryan Giglia, Chief Executive Officer, Robert Springer, President and Chief Investment Officer, and Chris <unk>, Chief operating officer.
Brian will start us off with some highlights from last year, followed by commentary on our fourth quarter operations and recent trends.
Robert Springer: Afterwards, Robert will discuss our capital investment activity.
Chris: And finally, I will provide a summary of our fourth quarter earnings results.
Chris: Review, our current liquidity position and provide the details of our outlook for 2024.
Speaker Change: After our remarks, the team will be available to answer your question.
Speaker Change: With that I would like to turn the call over to Brian. Please go ahead.
Bryan Albert Giglia: Thank you, Aaron, and good morning, everyone. We were encouraged by our execution in the fourth quarter, as better-than-expected top-line performance and strong cost controls allowed us to deliver earnings above the high end of our guidance range. The fourth quarter caps off a productive year at Sunstone, in which we made further progress on our three strategic objectives, which include capital recycling, investing in our portfolio, and returning capital to our shareholders. On the recycling front, we completed the sale of Boston Park Plaza in the fourth quarter with solid execution.
Brian: Thank you Erin and good morning, everyone.
Brian: We were encouraged by our execution in the fourth quarter as better than expected top line performance and strong cost controls allowed us to deliver earnings above the high end of our guidance range.
Brian: The fourth quarter caps off a productive year at sunstone, and which we made further progress on our three strategic objectives, which include capital recycling investing in our portfolio and returning capital to our shareholders.
Brian: On the recycling front, we completed the sale of Boston Park Plaza, and the fourth quarter and a solid execution.
Bryan Albert Giglia: While the hotel performed very well for us, it had reached its maximum return potential and needed significant additional investment, much of which would be defensive and would result in meaningful earnings disruption. So, consistent with our investment lifecycle approach, we sold the hotel at an attractive valuation in an all-cash deal and are actively pursuing opportunities to redeploy the proceeds into assets that have a more compelling future return profile. As we have previously discussed, given the composition of our portfolio, we are targeting a group-centric hotel that has an attractive going-in yield with limited near-term capital needs but with longer-term value-add opportunities. While this sounds like an ambitious wish, we are confident that we can execute in the near term.
Brian: While the hotel performed very well for US It had reached its maximum return potential and needed significant additional investments much of which would be defensive and would result in meaningful earnings disruption.
Brian: So consistent with our investment lifecycle approach we.
We sold the hotel at an attractive valuation and all cash deal and are actively pursuing opportunities to redeploy the proceeds into assets that have a more compelling future return profile.
Brian: As we have previously discussed given the composition of our portfolio. We are targeting a group centric hotel that has an attractive going in yield with limited near term capital needs, but with longer term value add opportunities.
Brian: While this sounds like an ambitious wishlist.
Brian: We are confident that we can execute in the near term.
Bryan Albert Giglia: We look forward to further updating you on our progress soon. During 2023, we also executed on our second strategic objective, which is investing in our portfolio, and we are already seeing the benefits of some of those projects. In October, we launched the Westin Washington, D.C.
Brian: We look forward to further updating you on our progress soon.
Brian: During 2023, we also executed on our second strategic objective, which is investing in our portfolio and we are already seeing the benefits of some of those projects.
October we launched the Westin, Washington D C.
Bryan Albert Giglia: The fully renovated flagship property has been very well received, with 2024 group pace up almost 20% as compared to 2023. While the hotel has always been a productive group house, the conversion to the Western brand is already driving incremental transient demand at higher rates. Looking forward, work is now also underway on another value-add conversion of our soon-to-be Marriott Long Beach downtown, which should contribute to earnings growth starting in the second quarter of the year. In late 2023, we completed the demolition of the backyard of the Confidant Miami Beach, and the room renovation is now underway.
Brian: The fully renovated flagship property has been very well received with 2020 for group pace up almost 20% as compared to 2023.
While the hotel has always been a productive group house the conversion to the Western brand is already driving incremental transient demand at higher rates.
Brian: Looking forward work is now also underway on another value add conversion of our soon to be Marriott long beach downtown which should contribute to earnings growth starting in the second quarter of the year.
Brian: In late 2023, we completed the demolition of the backyard of the confidante Miami Beach and the room renovation is now underway.
Bryan Albert Giglia: In the near future, Robert will share some additional details on these exciting projects that will drive growth in 2024 and beyond. The last element of our strategy is the return of capital to our shareholders. In 2023, we will return nearly $120 million to shareholders through an increased quarterly base dividend and through share repurchases at a meaningful discount to NAV. While our share repurchase activity will remain opportunistic, our common dividend will continue to provide a more consistent return of capital. That said, in 2023, we repurchased 56 million of our common stock at $9.43 per share. Additionally, over the last two years, we have repurchased $165 million of common stock at $10.15 per share.
Brian: Shortly Robert will share some additional details on these exciting projects that will drive growth in 2024 and beyond.
Brian: The last element of our strategy is to return of capital to our shareholders.
Brian: In 2023, we returned nearly $120 million to shareholders through an increased quarterly base dividend and through share repurchases at a meaningful discount to NAV.
Brian: While our share repurchase activity, we will remain opportunistic our common dividend, we will continue to provide a more consistent return of capital.
That said in 2023, we repurchased $56 million of our common stock at $9 43 per share.
Brian: Additionally over the last two years, we have repurchased $165 million of common stock at $10 15 per share.
Bryan Albert Giglia: Our strong balance sheet and liquidity position gives us the ability to further enhance our capital return into 2024. Now, shifting to our quarterly results, as I noted at the top of the call, we were pleased with how the portfolio performed in the fourth quarter relative to our expectations. Similar to what we saw earlier in the year, group business performed well, corporate travel continued to move higher, and leisure demand further moderated, although still generating comparable profitability well ahead of the pre-pandemic level.
Brian: Our strong balance sheet and liquidity position gives us the ability to further enhance our capital return into 2024.
Speaker Change: Now shifting to our quarterly results as I noted at the top of the call. We were pleased with how the portfolio performed in the fourth quarter relative to our expectations.
Speaker Change: Similar to what we saw earlier in the year group business performed well corporate travel continued to move higher and leisure demand further moderated although still generating comparable profitability well ahead of pre pandemic levels.
Bryan Albert Giglia: Our convention hotels led the portfolio with nearly 8% REBPAR growth in the quarter, driven by our newly converted Weston, Washington, D.C., which grew REBPAR more than 50% in the quarter and should continue to generate outsized growth into 2024 as it benefits from our recent investment. Elsewhere across the portfolio, we also saw strength in our urban markets, including San Francisco and Portland, which were our slowest to recover but showed meaningful improvement as the year progressed. The Marriott Boston Long Wharf also continues to provide solid growth, with red power up 8.4% during the quarter. As has been widely discussed, leisure travel continues to moderate and has been impacted by the imbalance of the increased number of Americans going abroad while inbound international visitation remains below historical averages. This trend is evident in wine country as market-wide softness has continued to hamper results.
Speaker Change: Our convention hotels led the portfolio with nearly 8% revpar growth in the quarter driven by our newly converted Westin, Washington D C, which grew revpar more than 50% in the quarter and should continue to generate outsized growth into 2024 as it benefits from our recent invest.
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Speaker Change: Elsewhere across the portfolio. We also saw strength in our urban markets, including San Francisco, and Portland, which has been our slowest to recover but showed meaningful improvement as the year progressed.
Speaker Change: The Marriott Boston Long Wharf also continues to provide solid growth with revpar up eight 4% during the quarter.
Speaker Change: To moderate and it has been impacted by the imbalance of the increased number of Americans going abroad, while inbound international visitation remains below historical averages.
Speaker Change: This trend is evident and wine country as market wide softness has continued to hamper our results.
Bryan Albert Giglia: We are focused on driving group business and generating ancillary revenues at these resorts, which partially mitigated the depressed leisure volumes in 2023. While we cannot control when leisure demand will accelerate, we can continue to work with the resorts to build a base of group business and control costs all while maintaining a world-class guest experience. On the cost side, we remain focused on working with our managers to find ways to offset inflationary pressure.
Speaker Change: We are focused on driving group business and generating ancillary revenues at these resorts, which partially mitigated the depressed leisure volumes in 2023, while we cannot control when leisure demand will accelerate we can continue to work with the resorts to build a base of group business.
<unk> and control costs, all while maintaining a world class guest experience.
On the cost side, we remain focused on working with our managers to find ways to offset inflationary pressures.
Bryan Albert Giglia: While labor availability has improved, wage growth continues to hover near the high end of historical averages in most markets. We were able to mitigate labor cost increases through enhanced productivity, better staff management, and driving efficiencies where possible. Food and beverage profitability improved in the quarter, driven by further menu optimization and a better mix of business.
Speaker Change: While labor availability has improved wage growth continues to hover near the high end of historical averages in most markets.
Speaker Change: We were able to mitigate labor cost increases through enhanced productivity, better staff management, and driving efficiencies where possible food.
Speaker Change: Food and beverage profitability improved in the quarter driven by further menu optimization and a better mix of business.
Bryan Albert Giglia: Our margin performance during the quarter was impacted by the renovation activity at the Confidant Miami Beach and the Renaissance Long Beach. However, excluding these two hotels, our margin was down only 100 basis points, even with minimal top-line growth and the impact of higher property insurance costs, which speaks to the efforts of our operators to be disciplined in their cost management. As we look ahead into 2024, we are encouraged about the outlook for the year, which benefits from our recent investments and begins to pave the way for the next layer of growth in the portfolio. Group pay for the comparable portfolio is up approximately 6%, with DC sustaining the portfolio in the near term, while the second half of the year benefits from broad-based strength, including outsized growth in Long Beach, San Diego, and Boston.
Speaker Change: Our margin performance during the quarter was impacted by the renovation activity at the confidante, Miami Beach, and the Renaissance long Beach.
Speaker Change: Excluding these two hotels, our margin was down only 100 basis points, even with minimal topline growth and the impact of higher property insurance costs, which speaks to the efforts of our operators to be disciplined and their cost management.
Speaker Change: As we look ahead into 2024, we are encouraged about the outlook for the year, which benefits from our recent investments and begins to pave the way for the next layer of growth in the portfolio.
Speaker Change: Group pace for the comparable portfolio is up approximately 6% with DC sustaining the portfolio in the near term while the second half of the year benefits from broad based strength, including outsized growth in long Beach, San Diego and Boston.
Bryan Albert Giglia: In a testament to the market's desirability, Wyalaya has bounced back very well from the tragic fires last summer as our well-located resort has attracted additional group and leisure business and looks to generate year-over-year growth in ADR and earnings. We appreciate the hard work and dedication of the Resorts Associates who continue to do an outstanding job welcoming guests, providing unparalleled service, and making the Waialea Beach Resort the premier destination that it is.
Speaker Change: And a testament to the market's desirability wildfire has bounced back very well from the tragic fires last summer as our well located resort has attracted additional group and leisure business and looks to generate year over year growth in ADR and earnings.
Speaker Change: We appreciate the hard work and dedication of the resorts associates that continue to do an outstanding job welcoming guests, providing unparalleled service and making the <unk> Beach resort the premier destination that it is.
Bryan Albert Giglia: We continue to evaluate opportunities for the proceeds from the sale of Boston Park Plaza, and while a portion of the proceeds were utilized for additional share repurchase activity last quarter. We maintain significant investment capacity that we are looking to accretively redeploy into a superior growth opportunity than what would have been achieved through the continued ownership of Boston Park Plaza. As I noted earlier, our investment parameters include a compelling yield, limited near-term capital needs, and opportunities where we can add value either through asset management initiatives or through capital investment later in the course of our ownership.
Speaker Change: We continue to evaluate opportunities for the proceeds from the sale of Boston Park Plaza.
Speaker Change: While a portion of the proceeds were utilized for additional share repurchase activity last quarter.
Speaker Change: We maintain significant investment capacity that we are looking to accretively redeploy into a superior growth opportunity than what would have been achieved through the continued ownership of Boston Park Plaza.
Speaker Change: As I noted earlier, our investment parameters include a compelling going in yield limited near term capital needs and opportunities, where we can add value either through asset management initiatives or through capital investment later in the course of our ownership.
Bryan Albert Giglia: Considering the significant embedded growth we already have in our portfolio from our in-process transformation of Onda's Miami Beach and the booming resorts in wine country, a well-priced, cash-flowing investment will bring more balance to our earnings, sustain our strong credit metrics, and still provide us with the opportunity to create value. We expect to balance this with incremental share repurchases when our stock price warrants. We look forward to sharing additional updates on our progress redeploying these funds in the near term. We have executed on all three of our strategic objectives in 2023, but we know that we have more work to do in the current year.
Speaker Change: Considering the significant embedded growth we already have in our portfolio from our in process transformation of <unk>, Miami Beach, and the ramping resorts and wine country, a well priced cash flowing investment now, we'll bring more balance to our earnings sustain our.
Speaker Change: Our strong credit metrics and still provide us with the opportunity to create value.
Speaker Change: We expect to balance this with incremental share repurchases when our stock price warrants it.
Speaker Change: We look forward to sharing additional updates on our progress redeploying these funds in the near term.
Speaker Change: To sum things up.
Speaker Change: We executed on all three of our strategic objectives in 2023.
Speaker Change: But we know that we have more work to do in the current year.
Robert Springer: We are focused on delivering profitability growth from our operations and realizing the benefits of our investment projects. We will further advance our capital recycling strategy through the redeployment of our excess cash and further utilizing balance sheet capacity to thoughtfully grow the portfolio. These actions should further support our capital return objectives in the coming year. The entire Sunstone team remains committed to delivering strong returns and creating value for our shareholders. And with that, I'll turn the call over to Robert to give some additional thoughts on our renovation progress and upcoming capital investments. Thanks, Bryan.
Speaker Change: We are focused on delivering profitability growth from our operations and realizing the benefits of our investment projects.
We will further advance our capital recycling strategy through the redeployment of our excess cash and further utilizing balance sheet capacity to thoughtfully grow the portfolio.
Speaker Change: These actions should further support our capital return objectives in the coming year.
Speaker Change: The entire sunstone team remains committed to delivering strong returns and creating value for our shareholders.
Speaker Change: And with that I'll turn the call over to Robert to give some additional thoughts on our renovation progress and upcoming capital investments.
Robert Springer: Thanks, Brian.
Robert Springer: <unk> 2023, we invested over $110 million into our portfolio as we completed and relaunched the Westin Washington D. C. Downtown began the renovation and conversion of the Renaissance long beach to a Marriott and commenced the transformation of the confidante to the Andaz Miami Beach.
Robert Springer: During 2023, we invested over $110 million into our portfolio as we completed and relaunched the Westin Washington, D.C. downtown, began the renovation and conversion of the Renaissance Long Beach to a Marriott, and commenced the transformation of the Confidant to the Ondas Miami Beach. In 2024, we expect to invest between $135 and $155 million into our portfolio. The majority of the investment will be in Miami as work is now underway on both the exterior and interior areas of the hotel. In order to most efficiently complete the renovation, we will be suspending operations at the hotel starting in late March through the fall.
Robert Springer: In 2024, we expect to invest between 135 and $155 million into our portfolio.
Robert Springer: The majority of the investment will be in Miami as work is now underway on both the exterior and interior areas of the hotel in order to most efficiently complete the renovation we will be suspending operations at the hotel starting in late March through the fall, we expect to debut the fully renovated hotel in the fourth quarter and remained.
Robert Springer: Confident in our business plan and our underwriting approach.
Robert Springer: We look forward to updating our progress on our next call as we get that much closer to the completion of this transformational project.
Robert Springer: And long Beach, we expect to finish and launch our converted Marriott long beach downtown in the spring.
Robert Springer: It should contribute to earnings growth for the balance of the year.
Elsewhere across the portfolio work is underway to renovate the meeting space at our <unk> Marriott, New Orleans and to convert an underutilized area of the hotel into new meeting space, which should allow us to better compete in the market.
Robert Springer: We expect to debut the fully renovated hotel in the fourth quarter and remain confident in our business plan and our underwriting approach. We look forward to updating our progress on our next call as we get that much closer to the completion of this transformational project. In Long Beach, we expect to finish and launch our converted Marriott Long Beach downtown in the spring, which should contribute to earnings growth for the balance of the year. Elsewhere across the portfolio, work is underway to renovate the meeting space at our JW Marriott New Orleans and to convert an underutilized area of the hotel into new meeting space, which should allow us to better compete in the market. In addition, we are also adding a market concept in the lobby of the Renaissance Orlando, which has the combined benefit of delivering a better guest experience while also contributing to higher food and beverage profitability.
Robert Springer: In addition, we are also adding a market concept in the lobby of the Renaissance Orlando, which is combined benefit of delivering a better guest experience, while also contributing to higher food and beverage profitability.
Robert Springer: In DC, we are delivering the last piece of our comprehensive renovation of the property with the addition of 4000 square feet of new meeting space that has abundant natural light and an exterior patio and makes better use of an underutilized former restaurant space later in the year, we will be completing a soft goods renovation and.
Robert Springer: Why layer to keep the room product fresh and able to compete with its nearby luxury peers.
Robert Springer: While we will have several projects underway during the year on balance we expect that the renovation activity. We have planned for 2024 will be marginally less disruptive to earnings than what we experienced in the prior year.
Robert Springer: In D.C., we are delivering the last piece of our comprehensive renovation of the property with the addition of 4,000 square feet of new meeting space that has abundant natural light and an exterior patio and makes better use of an underutilized former restaurant space. Later in the year, we will be completing a soft goods renovation in Wyliah to keep the room product fresh and able to compete with its nearby luxury peers.
Robert Springer: As we have shared with you before capital recycling as a primary component of our strategy and we are encouraged by the incremental activity. We are seeing in the transaction market we.
Robert Springer: We have considerable investment capacity and are actively looking for ways to redeploy these proceeds into new growth opportunities.
Aaron Reyes: While we will have several projects underway during the year, on balance, we expect that the renovation activity we have planned for 2024 will be marginally less disruptive to earnings than what we had experienced in the prior year. As we have shared with you before, capital recycling is a primary component of our strategy, and we are encouraged by the incremental activity we are seeing in the transaction market. We have considerable investment capacity and are actively looking for ways to redeploy these funds into new growth opportunities. We look forward to sharing additional information on our progress in the near term. With that, I'll turn it over to Aaron. Please go ahead.
Robert Springer: We look forward to sharing additional information on our progress in the near term with that I'll turn it over to Aaron. Please go ahead.
Aaron Reyes: Thanks Robert.
Aaron Reyes: We are pleased with our financial results for the fourth quarter as Revpar growth EBITDA and <unk> were all above the high end of our guidance ranges.
Aaron Reyes: Adjusted EBITDA for the fourth quarter was $55 million.
Or 8% above the midpoint of our outlook.
Driven by better top line performance stronger expense management across the portfolio.
Aaron Reyes: Lower corporate level costs at.
Aaron Reyes: Adjusted <unk> for the fourth quarter was <unk> 19 per diluted share nearly 20% above the midpoint of our outlook and two cents above the high end at a range at a lower than expected financing costs combined with the benefits of stronger operating performance.
Aaron Reyes: While forward visibility remains challenging we are seeing more stability in booking behaviors and travel patterns.
Aaron Reyes: As a result, we are providing our full year outlook for 2024.
Aaron Reyes: Thanks, Robert. We are pleased with our financial results for the fourth quarter. As RevPAR Growth, EBITDA, and FFO were all above the high end of our guidance range. Adjusted EBIT.RE for the fourth quarter was $55 million, 8% above the midpoint of our guidance, driven by better top-line performance. Stronger expense management across the portfolio and lower corporate-level costs. Adjusted FFO for the fourth quarter was $0.19 per diluted share, nearly 20% above the midpoint of our outlook and $0.02 above the high end of the range, as lower than expected financing costs combined with the benefit of stronger operating performance.
Aaron Reyes: Based on what we see today, we expect that our total portfolio of Revpar growth will range from two 5% to five 5% as compared to 2023.
Aaron Reyes: This range includes all hotels in our portfolio.
Aaron Reyes: If we exclude the confident Miami Beach, which will be under construction for most of the year.
Aaron Reyes: Our full year Revpar growth is projected to range from 5% to 8%, we estimate that full year adjusted EBITDA will range from $230 million to $255 million.
Aaron Reyes: And our adjusted <unk> per diluted share will range from <unk> 78 to 90.
Aaron Reyes: Given how travel patterns evolved over the course of 2023 and the expected timing of citywide events and other major demand drivers in 2024.
Aaron Reyes: While forward visibility remains challenging, we are seeing more stability in booking behaviors and travel patterns. As a result, we are providing a full year outlook for 2020. Based on what we see today, we expect that our total portfolio REVPAR growth will range from 2.5% to 5.5% as compared to 2023. This range includes all hotels in the portfolio. If we exclude the confident Miami, which will be under construction for most of the year, our full-year REV part growth is projected to range from 5% to 8%.
Aaron Reyes: We expect that overall industry growth for this year will be more heavily concentrated in the second half of the year.
Aaron Reyes: Same will be true of our portfolio, which will also have the added impact of renovation activity in Miami and long Beach.
Aaron Reyes: And which will likely lead to modest revpar growth, excluding the impact of our renovation activity.
Aaron Reyes: And lower year over year portfolio earnings in the first quarter.
Before resuming a positive trajectory for the balance of the year.
Aaron Reyes: And the 2024 outlook section of our press release, we have included the key assumptions that support our full year guidance numbers.
Speaker Change: I'll share a couple of the key points here as well.
Speaker Change: Our outlook for 2024 does not assume the reinvestment of the proceeds received from the sale of Boston Park Plaza.
Speaker Change: As we have noted we are actively evaluating opportunities to replace those proceeds and would expect to update our guidance ranges as appropriate as those funds are put back to work this year.
Aaron Reyes: We estimate that full-year adjusted EBITDA RE will range from $230 million to $255 million, and our adjusted FFO per diluted share will range from 78 cents to 90. Given how travel patterns evolved over the course of 2023 and the expected timing of citywide events and other major demand drivers in 2024, we expect that overall industry growth for this year will be more heavily concentrated in the second half of the year. The same will be true of our portfolio, which will also have the added impact of the renovation activity in Miami and Long Beach and which will likely lead to modest REV PAR growth, excluding the impact of our Renovation Act, and lower year-over-year portfolio earnings in the first quarter before resuming a positive trajectory for the balance of the economy. In the 2024 Outlook section of our press release, we have included the key assumptions that support our full-year guidance number But I'll share a couple of the key points here as well. Our outlook for 2024 does not assume the reinvestment of the proceeds received from the sale of Boston Park Plaza.
Speaker Change: As Robert noted earlier, we will be suspending operations at the confident Miami Beach in late March to allow for the renovation work to be performed more quickly.
Speaker Change: A portion of the costs incurred at the hotel. During this time will be capitalized in accordance with generally accepted accounting principles or adjusted for in our reconciliations of adjusted EBITDA.
Speaker Change: And adjusted <unk> consistent with industry practice.
Speaker Change: We expect the resort to open in Q4 as Andaz Miami Beach.
Speaker Change: And for the full year, we estimate that the resort will generate an EBITDA loss of 3 million to $5 million with the majority of the loss spread across the second quarter through the early part of the fourth quarter, while the hotel is offline.
As we noted in our press release this morning, our capital investment activity in 2023 was $110 million.
Speaker Change: And with $30 million lower than the midpoint of our estimate at the start of the prior year as a portion of that spend will now be incurred in the current year.
Speaker Change: Inclusive of this carryover balance we estimate that we will invest between $135 million to $155 million into our portfolio. This year.
Speaker Change: Just on the renovation timeline, we expect to incur a total of 11 million to $13 million of earnings disruption in 2024, which is approximately $1 million less relative to the prior year.
Aaron Reyes: As we have noted, we are actively evaluating an opportunity to re-employ those processes, and we would expect to update our guidance ranges as appropriate as those funds are put back to work this year. As Robert noted earlier, we will be suspending operations at Confident Miami Beach in late March to allow for the renovation work to be performed more quickly. A portion of the costs incurred at the hotel during this time will be capitalized in accordance with generally accepted accounting principles or Adjusted for in our reconciliations of Adjusted EBIT.RE and Adjusted FFO consistent with industry practice. We expect the resort to open in Q4, as does Miami. And for the full year, we estimate that the resort will generate an EBITDA loss of $3 million to $5 million, with the majority of the loss spread across the second quarter through the early part of the fourth quarter while the hotel is offline.
Speaker Change: Our balance sheet remains strong and as of the end of the year, we had nearly $500 million of total cash and cash equivalents, including restricted cash.
Speaker Change: We retain full capacity on our credit facility, which together with cash on hand equates to nearly $1 billion of total liquidity.
Speaker Change: As at the end of the year, our net debt and preferred equity to EBITDA stood at two nine times.
Speaker Change: Our net debt to EBITDA was only one seven times.
Adjusting for the redeployment of a portion of the Boston Park Plaza sale proceeds we would expect our pro forma leverage metrics to increase by approximately one turn.
Speaker Change: To remain in the low end of our longer term target range.
Speaker Change: Have one piece of debt coming due at the end of the year and we expect that the modest principal balance of the maturing loan combined with our low overall leverage strong liquidity position and an improving financing market will give us sufficient optionality to address the refinancing before year end.
Speaker Change: Now shifting to our return of capital.
Speaker Change: Our board of Directors has declared a <unk> <unk> per share quarterly common dividend and is also declared that routine distributions for our series <unk> preferred securities.
Aaron Reyes: As we noted in our press release this morning, our capital investment activity in 2023 was $110 million, and was $30 million lower than the midpoint of our estimate at the start of the prior year, as a portion of that spend will now be incurred in a current. Inclusive of this carryover balance, we estimate that we will invest between $135 million and $155 million into our portfolio this year. Based on the renovation timeline, we expect to incur a total of $11 million to $13 million of earnings disruption in 2024, which is approximately $1 million less relative to the prior year. Our balance sheet remains strong, and as of the end of the year, we had nearly $500 million in total cash and cash equivalents, including our restricted cash. We retain full capacity on our credit facility, which, together with cash on hand, equates to nearly $1 billion of total liquidity.
Speaker Change: While we retain ample capacity for additional capital return that full year outlook that was discussed earlier does not assume the impact of any additional share repurchase activity.
Speaker Change: And with that we can now open the call to questions.
Speaker Change: So that we were able to speak with as many participants as possible. We ask that you. Please limit yourself to one question.
Speaker Change: Operator, Please go ahead.
The floor is now open for your questions to ask a question at this time simply press star followed by the number one on your.
Speaker Change: Telephone keypad.
Speaker Change: We ask that you please limit yourself to one question.
Speaker Change: We will now take a moment to compile a roster.
Speaker Change: Our first question comes from the line of Chris Sterling with Green Street. Please go ahead.
Chris Woronka: Thanks, Good morning good.
Alright, good morning, Chris.
Chris Woronka: Brian You mentioned in your prepared remarks, a handful of properties that you would expect to grow in excess of the 5% to 8% Revpar growth range that you provided at least when you exclude the confidante can you talk through which properties might fall below that range and then similarly, what is the midpoint of your guidance range implies for <unk>.
Aaron Reyes: As of the end of the year, our net debt and preferred equity to EBITDA is at 2.9 times, and our net debt to EBITDA was only $1.7, although accounting for the redeployment of a portion of the Boston Park Plaza sale process. We would expect our pro forma leverage metrics to increase by approximately one turn but to remain in the low end of our longer-term target range. We have one piece of debt coming due at the end of the year, and we expect that the modest principal balance of the maturing loan, combined with our low overall leverage, strong liquidity position, and an improving financing market will give us sufficient optionality to address the refinancing before year-end. Now, shifting to our return of Kappa.
Chris Woronka: These are neither transient revpar growth this year. Thank you.
Brian: Okay. Let me good morning, Chris I'll start with the first part so when we look at 'twenty four.
Brian: The above market or above portfolio growth.
Chris: Obviously western DC.
Chris: Long wharf long beach coming out of the renovation.
Chris: San Diego and Portland are our larger growth.
Assets when you look at the ones that are.
Chris: We'll be below that or below the midpoint.
The New Orleans market Wow.
Chris: Decent pace. This year, it's back end loaded so the city Wides and the demand is coming in the second and third quarter pardon me, sorry, the third and the fourth quarter, which doesn't have the transient compression.
Operator: Our Board of Directors has declared a $0.07 per share quarterly common dividend and has also declared the routine distributions for a Series H&I preferred security. While we retain ample capacity for additional capital return, the full year outlook that was discussed earlier does not assume the impact of any additional share repurchase activity. And with that, we can now open the call to questions. So that we are able to speak with as many participants as possible, we ask that you please limit yourself to one question. Operator, please go ahead. The floor is now open for your questions. To ask a question at this time, simply press star followed by the number one on your telephone keypad.
Chris: <unk>.
Chris: That's the first and second do so new Orleans will be slightly below.
Chris: San Francisco is a market, where we had great growth in 'twenty three.
Looking into 'twenty for their components of growth that are.
Chris: Our really good business transient demand continues to be strong the hotels group business or group business that it really focuses on is the is the smaller call. It.
50 to a 100 room night business.
Chris: That's about 40% of the business that's been pretty robust.
Chris: The hotel is continuing to book and booking short term thats kind of 90 days out.
Chris: That so that that remains strong the one concern in San Francisco or the city Wides are weak this year and so that could result in.
Chris: In some ADR pressure coming from the the other submarkets that maybe are not as strong as the financial Embarcadero, where we are with.
Chris: Good business demand.
Chris Woronka: We ask that you please limit yourself to one question. We'll now take a moment to compile our list. Our first question comes from the line of Chris Darling on Green Street. Please go ahead. Thanks. Good morning. Morning, Chris.
Chris: Some of the Wildcards in that market to or what happens with with AI, we have seen some increase.
Chris: <unk>.
Chris: Office getting filled up around us with with some of that business and we expect that to grow and then the international inbound is supposed to grow this year.
Chris: So if that does it will obviously help that market.
Bryan Albert Giglia: Bryan, you mentioned in your prepared remarks a handful of properties that you'd expect to grow in excess of the 5 to 8 percent REVPAR growth range that you provided, at least when you exclude the confidant. Can you talk through which properties might fall below that range? And then, similarly, what does the midpoint of your guidance range imply for leisure transient REVPAR growth this year? Okay, let me, good morning Chris. I'll start with the first part. So when we look at 24, Above Market or Above Portfolio Growth. Obviously, West.................. Long Wharf, Long Beach coming out of the Renaissance. San Diego and Portland are our larger growth assets.
Chris: Sure.
Chris: I think.
Chris: Looking Els Orlando.
Chris:
Chris: It had a big first half or first quarter of last year.
Chris: It has.
From a leisure standpoint the market.
Chris: Park.
Universal Park is opening next year and so we expect.
Chris: Some transient softness in that market also for the second half of the year.
Chris: Okay.
Chris: Yes.
Chris: Okay.
Chris: Our next question comes from the line of Duane spending were with Evercore ISI. Please go ahead.
Duane: Hey, Thanks, just wanted to ask a follow up there on the five to eight.
Duane: Next Miami can you talk about what that growth rate was ex Miami in the fourth quarter.
Duane: And maybe how you would how we should be thinking about that in the first half of the year, one Q to Q.
Duane: As far as I'm, sorry, Duane as far as the Cajun <unk>.
Duane: Yes, the five to eight outlook that you're providing X Miami.
Bryan Albert Giglia: When you look at the ones that will be below that or below the midpoint, the New Orleans market, while back-end loaded, so the citywide coming, third quarter, I'm sorry, the third and the fourth quarter, which doesn't have the transient compression that the first and second do, so New Orleans will be slightly below.
Duane: Miami Revpar looked like in the fourth quarter and maybe you already indicated it's probably going to be more second half weighted but I wonder if you could put a final point.
Duane: On the first half of the year.
Speaker Change: Sure. So doing just that to hit your first question on what had revpar growth looked like ex Miami and those are the statistics that we have on page two of the earnings release, we show both the <unk> portfolio and then out without Miami So for the quarter as you saw in our guidance range. We were down two two for the full portfolio and then if you exclude Miami.
Bryan Albert Giglia: San Francisco is a market where we had great growth; looking into 24, there are components of growth that are really good. The business transient demand, The Bulletproof Executive 2013, group business, or the group business that it really focuses on is the smaller, you know, college. That's about 40 percent of the business. That's been pretty robust, booking and booking short term that's kind of 90 days out. That, so that remains strong. The one concern in San Francisco is the city-wide czar, and so that could result..., https://www.sunstonehote.com, The other sub-markets that are maybe not as strong. Financial Embarcadero, where we are. You know, some of the wild cards in that market, too, are what happened... Office space filled up around us with some of that, and the International Inbound is supposed to grow this year. So if that happens, it will obviously help that market. Orlando had a big first quarter of last year, and has, www.
Speaker Change: It was down 40 basis points and both of those metrics were on the better side of our guidance range.
Speaker Change: And then so to add on to that when you look at the cadence for the year Q1 is we will obviously be the as aarons had the weakest quarter. When you look back to 'twenty three you had you hedged.
Speaker Change: Most of our group hotels had.
Speaker Change: Really.
Speaker Change: Some of the best quarters that they've ever had wildly.
Speaker Change: San Diego. So there was there was very strong.
Speaker Change: Part of that was the impact of the year over year with one micron and so Q1 was very strong this year will be Q1 will be our toughest comp.
Speaker Change: When you look at the back half of the year.
Speaker Change: Probably.
Speaker Change: 60, or so percent of the.
Speaker Change: Of our gain is coming in the back half Q2 ramps up a little bit more but our larger group hotels the majority of their.
Speaker Change: Of their demand and the pace is coming in the back half of the year Q3, and Q4, that's stronger for the New Orleans market, the San Diego market.
Speaker Change: Yes.
Speaker Change: Where we'll see the most growth the only one that's that's more uniform across the year will be DC.
Bryan Albert Giglia: SunstoneHotels.com, Park. The new Universal Park is opening next year, and so we expect Transient Softness in that market also. Thank you.
And in our our Revpar guidance DC.
Speaker Change: Is a big piece of it.
Speaker Change: 200 basis points of our Revpar growth is coming from that hotel ramping up long beach will start to see some of that.
Speaker Change: Happen in the start in Q2, but mainly in the second half of the year.
Okay. Thank you.
Duane Pfennigwerth: Our next question comes from the line of Duane Pfennigwerth with Evercore ISI. Please go ahead. Hey, thanks. Just wanted to ask a follow-up there. On the 5-8... Ex-Miami, can you talk about, you know, what that growth rate was ex-Miami in the fourth quarter and, and maybe you know how you would how we should be thinking about that in the first half of the year, you know 1Q2Q. As far as, I'm sorry, Duane, as far as the Cadence... So, yeah, the 5-8 outlook that you're providing for ex-Miami. What did ex-Miami RevPAR look like in the fourth quarter?
Speaker Change: Our next question comes from the line of Smedes Rose with Citi. Please go ahead.
Smedes Rose: Alright, Thanks, Brian I wanted to as you know to Maui definitely held up better in the fourth quarter and I. Just wanted to understand is that just the normal business mix, there or did it benefit from any.
Smedes Rose: The fire related fallout in terms of housing and how are you thinking about that property in 2000.
Smedes Rose: <unk> four and then just along with that if you could just talk a little bit about what youre seeing of it too.
Smedes Rose: Yes.
Smedes Rose: Pills, which seem to still be struggling to find there.
Smedes Rose: That's very reasonable run rate or at least a predictable one.
Aaron Reyes: And maybe, you know, you already indicated it's probably going to be more second-half weighted, but I wonder if you could put a finer point on the first half of the year. Sure, so Duane, just to hit the first question on what Rep Park Growth looked like ex-Miami, those are the statistics that we have on page 2 of the earnings release. We show both the full portfolio and then without Miami. So for the quarter, as you saw in our guidance range, we were down 2.2 percent for the full portfolio.
Okay. Good morning suite Smedes.
Speaker Change: So in Maui.
Speaker Change: The majority of the business.
Speaker Change: In the fourth quarter reverted back to the typical business that we would see in that market there was some.
Speaker Change: Early in the fourth quarter.
October.
Speaker Change: A little bit of some of the relief business still in there, but the hotels at a really good job of.
Speaker Change: Of pivoting early.
Speaker Change: Getting that relief business in the third quarter, and then reverting back to its more typical business mix as we got later into the year alright in the fourth quarter.
Aaron Reyes: And both of those metrics were on the better side of our guidance. And then, so to add on to that, when you look at the cadence for the year, Q1 is, well, obviously, there and said the weakest quarter. When you look back to 23, most of our group hotels had some of the best quarters that they've ever had, Guadalajara, San Diego. So there was very strong, part of that was the impact of the year-over-year with Omicron. And so Q1 was very strong. This year, Q1 will be our toughest.
Speaker Change: They are still in others.
Speaker Change: We have mentioned on calls Theres still some lingering impact.
Speaker Change: And we expect Maui <unk> recovery market into into 2024 and beyond.
We have we have good group based in there to leisure demand has been strong the wildly our market is is recovered much more than the kind of poly market, which still has the majority of the of the relief.
Aaron Reyes: When you look at the back half of the year... probably 60 or so percent of our gain is coming in the back half. Q2 ramps up a little bit more. But our larger group hotels, the majority of their..., of their demand and the pace is coming in that back half. The New Orleans market, the San Diego market, That's. The only one that's more uniform across the year will be D.C. And in our REVPAR guidance, D.C. is a big piece of it; our Red Park growth is coming from that hotel ramping up. Long Beach will start to see some of that happen, starting in Q2, but mainly in the second. Okay, thank you. Our next question comes from the line of Smedes Rose with Spiti. Please go ahead.
Speaker Change: Room nights in their market right now.
Speaker Change: But we have seen.
Just as a as a reference point the festive period.
Speaker Change: In December was stronger than.
Speaker Change: Then what we saw in 2022 and so that that.
Speaker Change: Higher end leisure customer definitely came back to the market Q1 is a little bit weaker on a year over year basis on the group side, that's mainly because theres a theres a large group piece of business that rotates out of Maui.
Smedes Rose: Hi Bryan, I wanted to, as you noted, Maui definitely held up better in the fourth quarter. And I just wanted to understand, is that just the normal business mix there? Or did it benefit from any fire-related fallout in terms of housing?
Speaker Change: Every year every third year and then comes back so there'll be back next year. So from that standpoint, we're very happy with.
Speaker Change: How the hotel has responded how our market has responded.
Speaker Change: Ken.
Speaker Change: It will our expectation is we will get growth out of it this year and probably.
Speaker Change: Get back to a more normalized level into 'twenty five.
Bryan Albert Giglia: And how are you thinking about that property in 2024? And just along with that, if you could just talk a little bit about what you're seeing of the two, Napa Hotels, which seem to still sort of be struggling to find their sort of reasonable run rate, or at least a predictable one. So, in Maui, the majority of the business... in the fourth quarter, reverted back to pivoting early and getting that relief business in the third quarter and then reverting back to more typical business mix as we got later in the fourth quarter. There's still, and others have mentioned on calls, there's still some lingering impact.
Speaker Change: When we look at it.
Speaker Change: That the wine country assets.
Speaker Change: Look at the leisure demand continues to be.
Speaker Change: Disappointing market wide.
Speaker Change: But right now we're focusing on what we can focus on to control in those hotels <unk> resorts and that means focusing both on group. If you look at the supplemental youll see that montage had a better quarter than than four seasons for seasons had two buyouts that didn't repeat this year. So.
Speaker Change: There is always going to be that lumpiness in their numbers.
Speaker Change: Montage has a bigger hotel.
Speaker Change: And does more more group business.
Speaker Change: So it had a.
Speaker Change: We were able to offset the transient weakness better with group and the seasons was able to and montage as we've talked about before is farther along in our.
Bryan Albert Giglia: And we expect Maui to be a recovery market into 2024 and beyond. You know, we have a good group base there. The leisure demand has been strong. The Hualea market has recovered much more than the Kanapali market, which still has the majority of the relief, you know, room nights in their market right now. But we have seen, you know, just as a reference point, the festive period in December was stronger than what we saw in 2020. So that higher-end leisure customer definitely came back to the market. Q1 is a little bit weaker on a year-over-year basis on the group side.
Speaker Change: <unk>.
Speaker Change: In some of the costs.
Speaker Change: Restructurings that we've done and so they're a little bit farther along four seasons thats being implemented now and montage also going into 'twenty for the residential units are now available and starting to be sold so we expect both to continue to gradually.
Speaker Change: Kris.
Speaker Change: On the top line, but we're not going to see that next leg really until we start to see some some transient demand accelerate now we've seen.
Speaker Change: And 'twenty two we saw.
Speaker Change: When they open and we saw some of that.
Bryan Albert Giglia: That's mainly because there's a large group of business that rotates out of Maui every third year and then comes back. So they'll be. So from that standpoint, we're very happy with how the hotel has responded, how our market has responded. Our expectation is we'll get growth out of it this year and probably get back to a more normalized level in 25. When we look at the wine country assets, you know, look, the leisure demand continues to be disappointing market-wide, but right now, we're focusing on what we can focus on to control in those hotels, to resource, and that. Focusing both on group. If you look at the supplementary, you'll see that Montage had a better quarter than Four Seasons.
Speaker Change: We're starting to see some pickup in transient demand.
Speaker Change: Now but.
Speaker Change: It will be it will come quickly.
Speaker Change: When it does come and when what we've done in the meantime is set the cost model and the segmentation of the hotels up right to be able to really push that cash flow. The good news is throughout the rest of the portfolio and what we've taken a lot of time.
Speaker Change: To do is make sure that we have.
Speaker Change: The right the right portfolio mix and built a foundation of of growth going forward to be able to handle.
Speaker Change: Markets that might not be performing the way we want them to we have DC growing this year, we've layered that with long beach, while we're talking about displacement at <unk> right now as we get later into the year, we'll start talking about next year and and the ramp up there and remember in the condition that that hotel was.
Bryan Albert Giglia: Four Seasons had two buyouts this year, so there's always going to be that lumpiness in their numbers, bigger hotels do more group business, so it had a, it was able to offset Transient Weakness better with groups than the Four Seasons was able to.
Speaker Change: And as the confidante it was doing $12 million of EBITDA.
Bryan Albert Giglia: And Montage, as we've talked about before, is farther along in our, you know, in some of the cost restructurings that we've done. And so they're a little bit farther along. Four Seasons, that's being implemented now.
Speaker Change: We've built and layer growth in investment in our portfolio will start to see that gives US then Portland is continuing to rebound we're getting great growth at long wharf, which is which is building more of a group base.
Bryan Albert Giglia: And Montage also going into 24, the residential units are now available, and starting. So we expect both to continue to gradually increase on the top line, but we're not going to see that next leg really until we start to see some some transient demand accelerate now. We saw some of that right when they opened. We're starting to see some pickup in transient now, but you know it will be it will come quickly when it does come and when we've done, What we're doing at this time is setting the cost model and the segmentations of the hotels up right to be able to really push that cash flow. The good news is throughout the rest of the portfolio, and what we've taken a lot of time to do is make sure that we have the right portfolio We have D.C. growing this year. We've layered that with long... You know, while we're talking about displacement at Andaz right now, as we get later into the year, we'll start talking about next year and the ramp up there. And remember, in the condition that that hotel was in, as the confidant, it was doing $12 million a year.
Speaker Change: Hotels done phenomenally, but theres still a lot room, there are a lot more room to go there and we haven't even talked about then what we can do with the proceeds from Boston Park Plaza, and providing better growth and more growth from that whether it be through share repurchase or additional acquisitions.
Speaker Change: No.
Speaker Change: While we took some lumps to build this foundation, we're set up pretty well for 24 and going into 'twenty five and beyond.
Speaker Change: Yes.
Speaker Change: Thank you I appreciate it.
Speaker Change: Our next question comes from the line of Chris where Ranke with Deutsche Bank. Please go ahead.
Chris Woronka: Hey, good morning, guys. Thanks for taking all the questions so far.
Chris Woronka: I know you just spent a lot of time, Brian you're talking about the.
The wine country assets, but I wanted to ask a slightly different question, which is.
Chris Woronka: Is there going to be at some point is there more of like a step function.
Speaker Change: Profitability lets call it hotel EBITDA, when you get to a certain level of core.
Speaker Change: Transpire or something like that you are obviously holding the rates just fine you don't have enough of Ark is there is there more of a step function I'm really trying to think about margin cadence as you eventually get more build Ark.
Bryan Albert Giglia: So, build and layer growth in investing in our portfolio, we'll start to see, you know, that gives us then, you know, Portland is continuing to rebound. We're getting great growth at Long Wharf, which is building more of a group base. The Hotel's done phenomenally, but there's still a lot more room to go there. And we haven't even talked about then what we can do with the proceeds from Boston Park Plaza and providing better growth and more growth from that, whether it be through share repurchase or additional acquisition. So, while we took some lumps to build this foundation, we're set up pretty well for 24 and going into 25. Thank you; I appreciate it.
Speaker Change: Yes.
Speaker Change: Good afternoon, Chris.
Speaker Change: It's the right question and it's the right question for wine country, and San Francisco, it's going to be a step function as we saw in San Francisco, we saw good growth.
Speaker Change: Last year and.
Speaker Change: There.
Speaker Change: There may be.
Speaker Change: A time period, where things go sideways, a little bit and then we get some more acceleration. These hotels. These resorts are exactly the same as that we've built.
Speaker Change: The foundation right for them, we have the right where we're working on the cost models. The right way right, we're holding rate, but at the same time, we're also making sure that we're.
Speaker Change: We're being rational with rate and thinking of total revpar.
Speaker Change: And that contribution because.
Chris Woronka: Our next question comes from the line of Chris Woronka with Deutsche Bank. Please go ahead. Hey, good morning, guys. Thanks for taking all the questions so far. I know you just spent a lot of time, Bryan, talking about the wine country assets, but I wanted to ask a slightly different question, which is, Is there going to be at some point, is there more like a step function on profitability, let's call it Hotel Ibiza, when you get to a certain level of Ock, or Trev Parr or something like that. You're obviously holding the rates just fine. But you don't have enough OCK.
Speaker Change: The rate will come down at both of these resorts to be able to bring in the right amount of group and when the group is.
Speaker Change: $700, a night or so at montage $800 in iron montage of ancillary spend and over 1004 seasons.
Speaker Change: Important that we that we make sure that the resorts look at that Holistically and so all of that has been done and yes, youre absolutely right there will be acceleration once.
Speaker Change: Additional transient occupancy and transient demand comes back into that market and it will be.
Speaker Change: Youre not going to see margins that you would see in a full service or convention.
Speaker Change: Upper upscale hotel, but you will see.
Speaker Change: You will see margin expand.
Speaker Change: Significantly from where they are and.
Bryan Albert Giglia: Is there more of a step function? I'm really trying to think about margin cadence as you eventually get more build OCK. Yeah, I, you know, it's good. It's the right question, and it's the right question for Wine Country. The Bulletproof Executive 2013, You know, we saw in San Francisco, we saw good growth last year and, of course, there may be, www.SunstoneHotelInc.com. The same is that we've built Foundation Right, www.sunstonehotels.com, where we're being rational with rate and thinking of total rev parts, you know, and that, because, you know, the rate will come down at both of these resort And when the group is... $700 a night or so at montage, $800 a night at montage in ancillary spend and over a thousand at four seasons, it's important that we make sure that the resorts look at that holistically. So all of that has been done, and yes, you're absolutely right that there will be acceleration.
Speaker Change: At that point as we've talked about before isn't as the point in time, where we would look to.
To potentially monetize one or both of these assets and recycle it into something.
Speaker Change: Some other growth opportunity, but we still think that theres quite a bit room to go it's not going to be linear though.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: Thanks, Brian.
Speaker Change: Our next question comes from the line of Floris Van did come with Compass point. Please go ahead.
Floris van Dijkum: Thanks, Good morning, guys.
Floris van Dijkum: Thanks for taking my question.
Hey, Brian.
Floris van Dijkum: <unk>.
Floris van Dijkum: As you keep shrinking your portfolio.
Floris van Dijkum: If I if I do my math correct. Your top three assets account for 58% of your EBITDA.
Floris van Dijkum: Obviously.
Floris van Dijkum: Very pleasantly surprised that widely of beaches bounce back as quickly as it has its great kudos to you guys and San Diego Bayfront continues to move along as well.
Floris van Dijkum: My question was on the third of your top three or the Orlando Seaworld Renaissance.
Floris van Dijkum: You guys have rebranded some of your other Renaissance hotels can you tell us maybe a little bit more on your longer term.
Bryan Albert Giglia: Transient Occupancy and Transient Demand come back into that market, and it will be, you know, you'll, look, you're not going to see margins that the upper-upscale hotels do, but you will see margins expand significantly from where they are. And At that point, as we've talked about before, is the point in time where we would look to, to Potentially Monetize Wonderland, and ReCycle. You know, some other growth opportunities. But we still think that there's quite a bit of room to go. It's not going to happen.
Floris van Dijkum: Our view on on the flag at this particular asset.
Floris van Dijkum: What you could potentially do to create some value going forward.
Speaker Change: Sure afternoon for us.
Speaker Change: And then.
Speaker Change: While Orlando is number three right now I think that too.
Speaker Change: DC might be passing it very soon.
Speaker Change: And but to your point of one concentration is something that we focus on quite a bit and so as we look to acquire.
Speaker Change: An additional asset or more.
Bryan Albert Giglia: Okay, thanks, Bryan. Our next question comes from a line from Floris Van Dijkum with Compass Point. Please go ahead. Thanks. Morning, guys.
That concentration and making sure that we're spreading that out.
Speaker Change: And.
Speaker Change: Replacing what we had in Boston.
Floris van Dijkum: Thanks for taking my questions. Hey, Bryan, question, you know, as you keep shrinking your portfolio, if I do my math right, your top three assets account for 58% of your EBITDA. Obviously, you know, very pleasantly surprised that YLEA Beach has bounced back as quickly as it has. It's great.
Speaker Change: That's something we look at it and we think a lot about so.
Speaker Change: While we would like that.
Speaker Change: The majority of EBITDA coming from a few more hotels. We also like the ones that we have that are producing it and they are they are world class assets.
Orlando I.
I think we've talked about this before on other calls is that.
We have rebranded a few of the of our Renaissance hotels, and Renaissance hotels, do very well on the group side.
Bryan Albert Giglia: Kudos to you guys. And San Diego Bayfront continues to move along as well. My question was on the third, you know, of your top three or, you know, the Orlando SeaWorld Renaissance. You guys have rebranded some of your other Renaissance hotels. Can you tell us a little, maybe a little bit more on your longer-term view on the flag at this particular asset and what you could potentially do to create some value going forward? Sure, after you, Floris. The... Well... Well, Orlando is number three right now; you might be passing it very easily. But to your point of one concentration is something that I've focused on quite a bit.
Speaker Change: We've been happy with the performance in Orlando. It has it has done done very well and done very well as Renaissance and we've been very happy with that and so our view is is that.
Speaker Change: While we always look for opportunities to to up brand or or or add value through through.
Speaker Change: The Orlando is a is a pretty mature lodging market with a lot of.
Speaker Change: Brands everywhere.
And so.
Speaker Change: What we are going to do and our focus is really to maximize this asset we think we can maximize it as a renaissance.
Speaker Change: And we.
Speaker Change: We have we have a lot of surface parking lots we have a.
Bryan Albert Giglia: And so as www.SunstoneHotels.com www.sunstonehotels.com placing what we had in Boston. That's something we look at and we think a lot about. The majority of EBITDA coming from a few more hotels. We also like the ones that we have that are... They are world-class houses.
Speaker Change: A leisure component, that's good but could maybe be better and so we will look to.
To maximize our real estate, which could <unk>.
Speaker Change: Include future development redevelopment.
Speaker Change: We've added a meeting space there are a few years ago, which has been able to drive.
Speaker Change: Additional room nights.
Speaker Change: But the good news is is we have a lot of we have a lot to work with there and and that the the.
Bryan Albert Giglia: Orlando, you know, I think we've talked about this before on other calls, is that we have rebranded a few of our Renaissance hotels, and they do very well on the group side. And we've been happy.
Speaker Change: The brand has always been.
Speaker Change: <unk>, especially at this location.
Speaker Change: And maybe just just to clarify on the on the surface parking lot and I think if I am.
Speaker Change: Not mistaken I mean, you can.
Bryan Albert Giglia: It has done it has done very well and done very well as a renaissance, and we've been very happy. And so our view is that while we always look for opportunities to... upbrand or add value through that. Orlando is a pretty mature lodging market with a lot of brands everywhere.
Speaker Change: Almost doubled.
Speaker Change: Floor plate potentially.
Speaker Change: If you have structured parking if I'm not if I'm not mistaken would you consider adding additional hotel rooms or what.
What kind of.
Bryan Albert Giglia: And so, what we are going to do in our focus is really maximize this asset. We think we can maximize it as a rent, and we have a lot of service parking lots. We have a leisure component that's good, but could maybe be better. And so we will look to maximize our real estate, which could Include future development and redevelopment. We added a meeting space there a few years ago which has been able to drive additional room nights. But the good news is we have a lot to work with there. The brand has always added to the special. And maybe just to clarify, on the surface parking lot, I think, if I'm not mistaken, I mean, you can almost double the floor plate, potentially, if you have structured parking, if I'm not mistaken.
Speaker Change: What kind of improvements do you reckon you would look to bring today to the property.
Yes.
Speaker Change: <unk>.
Structured parking is it comes with an expense, which would have to be evaluated but with some of the space we have there.
Speaker Change: We could add rooms, we could add additional meeting space I don't know if we need that because the hotels has really ample meeting space for its size.
Speaker Change: We could add more leisure components pool, waterpark that sort of thing.
Speaker Change: We have we have a lot of optionality there.
Speaker Change: We're.
Speaker Change: Currently evaluating.
Speaker Change: It will be most additive to the hotel.
Speaker Change: Thanks.
Speaker Change: This concludes today's question and answer session.
Speaker Change: I would now like to turn the call over to Brian Julia for closing remarks.
Floris van Dijkum: Would you consider adding additional hotel rooms? What kind of improvements do you reckon you would look to bring to the property? I mean, we have structured parking, which comes with it.
Bryan Maher: Thank you everyone for your interest and time today, we look forward to meeting with many of you at upcoming conferences and we look forward to.
Bryan Maher: For those that we have toward of the Andaz and those that are touring at coming up with.
Bryan Albert Giglia: .., evaluated, but with some of the space we have there, we could add rooms, we could add additional meeting space, I don't know if we need that for its size. We could add more leisure components, a pool, a water park, that sort of thing. So we have a lot of optionality there.
Bryan Maher: It will be a great opportunity for you to to witness R. R.
Bryan Maher: The next round of.
Bryan Maher: The growth that we have embedded in this portfolio. Thank you.
Bryan Albert Giglia: And we're currently evaluating it. Thanks. This concludes today's question and answer session. I would now like to turn the call over to Bryan Giglia for closing remarks. Thank you, everyone, for your interest and time today. We look forward to meeting with many of you at upcoming conferences. And we look forward to it. For those that we have toured with the Ondas and those that are touring with it coming up, we think it will be a great opportunity for you to witness our next round of growth that we have embedded in this portfolio.
Speaker Change: This concludes today's call you may now disconnect.
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Bryan Albert Giglia: Thank you. This concludes today's call. You may now disconnect. ?? ?? ?? ?? ?? ?? ?? ?? ?? ??