Q4 2023 Xenia Hotels & Resorts Inc Earnings Call

February 27, 2024

Emily: www.ukuleleroadtrips.com www.thevenusproject.com For more UN videos, visit www.un.org, www.thevenusproject.com www.TheBusinessProfessor.com www.thevenusproject.com Hello everyone, and welcome to the Xenia Hotels & Resorts Q4 2023 Earnings Conference Call. My name is Emily, and I'll be facilitating your call today. After the presentation, there will be an opportunity for any questions, which you can ask by pressing start followed by the number 1 on your telephone keypad. I will now turn the call over to our host, Amanda Bryant, Vice President of Finance. Please go ahead, Amanda.

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Hello, everyone and welcome to the Xenia hotels <unk> Resorts Q4, 2023 earnings Conference call. My name is Emily and I'll be facilitating your cold stacked.

After the presentation, there will be the opportunity for any questions, which you can ask by pressing star followed by the number one on your telephone keypad I will now turn the call over to our host Amanda Bryant Vice President of Finance. Please go ahead Amanda.

Amanda Bryant: Thank you, Emily, and welcome to Xenia Hotels & Resorts' fourth quarter 2023 earnings call and webcast. I'm here with Marcel Verbachs, our Chairman and Chief Executive Officer, Barry Bloom, our President and Chief Operating Officer, and Atee Shaw, our Executive Vice President and Chief Financial Officer. Marcelle will begin with a discussion on our performance, Barry will follow with more details on our operating trends and capital expenditure projects, and Ateesh will conclude today's remarks on our balance sheet and outlook. We will then open the call for Q&A.

Thank you Emily and welcome to Xenia hotels, <unk> resorts fourth quarter 2023 earnings call and webcast I'm here with Marcel Burbach, Our chair and Chief Executive Officer, Barry Bloom, Our President and Chief operating Officer, and a teashop executive Vice President and Chief Financial Officer, Marcel will begin with a discussion.

Our performance Jerry will follow with more detail on our operating trends and capital expenditure projects and that will conclude today's remarks on our balance sheet and outlook. We will then open the call for Q&A before we get started let me remind everyone that certain statements made on this call are not historical facts are considered forward looking state.

Amanda Bryant: Before we get started, let me remind everyone that certain statements made on this call are not historical facts nor considered forward-looking statements. These statements are subject to numerous risks and uncertainties, as described in our annual report on Form 10-K and other SEC filings, which could cause our actual results to differ materially from those expressed in or implied by our comments. Forward-looking statements in the earnings release that we issued this morning, along with the comments on this call, are made only as of today, February 27, 2024, and we undertake no obligation to publicly update any of these forward-looking statements as actual events unfold. You can find a reconciliation of non-GAAP financial measures to net income and definitions of certain items referred to in our remarks in this morning's earnings release and earnings supplemental, which is available on the Investor The property-level information we'll be speaking about today is on a same-property basis for all 32 hotels, unless specified otherwise. An archive of this call will be available on our website for 90 days. I will now turn it over to Marcel to get started. Thanks, Amanda, and good afternoon, everyone.

These statements are subject to numerous risks and uncertainties as described in our annual report on Form 10-K, and other SEC filings, which could cause our actual results to differ materially from those expressed in or implied by our comments.

I was looking statements in the earnings release that we issued this morning, along with the comments on this call are made only as of today February 27th 2024, and we undertake no obligation to publicly update any of these forward looking statements as actual events unfold you can find a reconciliation of non-GAAP financial measures to net income of definite.

As of certain items referred to in our remarks in this morning's earnings release and earnings supplemental which is available on the Investor Relations section of our website. The property level information will be speaking about today is on a same property basis about 32 hotel unless specified otherwise an archive of this call will be available on our website for 90 days.

I will now turn it over to Marcel to get started.

Thanks, Amanda and good afternoon, everyone.

Marcel Verbachs: We are pleased to report on our results and achievements in 2023 as we have successfully executed against our long-term strategy by further investing in our high-quality, diversified portfolio while remaining focused on working with our operating partners to drive top-line growth and control expenses in a challenging operating environment. During the course of 2023, we invested over $120 million in capital expenditures across the portfolio. All of which was supported by our in-house project management.

We are pleased to report on our results and achievements in 2023, as we successfully executed against our long term strategy by further investing in our high quality diversified portfolio.

While remaining focused on working with our operating partners to drive topline growth and control expenses and a challenging operating environment.

Okay.

During the quarters of 2023, we invested over $120 million and capital expenditures across the portfolio.

All of which was supported by our in House project management fees.

We believe that our recent capital projects will enable us to capture significant revenue and income growth in the years to come.

Marcel Verbachs: We believe that our recent capital projects will enable us to achieve significant revenue and income growth in the years to come. Our 2023 portfolio performance was broadly in line with our expectations. Despite a challenging economic backdrop, and our fourth quarter financial results allowed us to finish the year near the upper end of our full year guidance ranges for net income, adjusted EBITDA rate, and adjusted FFO per share that we provided when we reported our third quarter results. The same property portfolio REFBAR for full year 2023 increased 3.9% compared to 2022. Just shy of the low end of our most recent guidance, as November and December RAF barometers were a bit softer than expected.

Our 2023 portfolio performance was broadly in line with our expectations.

Despite a challenging economic backdrop.

In our fourth quarter financial results allowed us to finish the year near the upper end of our full year guidance ranges for net income adjusted EBITDA and.

And adjusted <unk> per share that we provided when we reported our third quarter results.

Okay.

Same property portfolio Revpar for full year 2023 increased three 9% compared to 2022.

Just shy of the low end of our most recent guidance.

November and December Revpar were a bit softer than expected.

Our 2023, Revpar increase was driven by a healthy 250 basis points of occupancy gain as average daily rate was essentially flat.

Marcel Verbachs: Our 2023 REFBAR increase was driven by a healthy 250 basis point occupancy gain, as average daily rate was essentially flat. If we exclude Hyatt Regency Scottsdale Resort & Spa at Ganey Ranch, where the transformational renovation is well underway. Same property REF bar for the remainder of the portfolio increased a solid 6.4% as compared to 2022. In 2023, 23 out of the 32 hotels in our same property portfolio achieved REFBAR growth as compared to 2022, and graphs increased by double-digit percentages in seven of our 22 markets, including Portland, Houston, Dallas, San Francisco, San Jose, Nashville, and Atlanta. We expect most of these markets to continue to experience strong growth in 2024 as well. On a same property basis, 2023 Hotel Ibida's $271.5 million was 1.5% below 2022 levels, and margins were 153 basis points lower as compared to 2022. Excluding Hyde Reedy Scottsville in both years, same property hotel Ibiza increased 3.5%, and margins decreased just 92 basis points in 2023 as compared to 2022.

Okay.

If we exclude Hyatt Regency, Scottsdale resort and Spa Daney ranch transformational renovation is well underway.

Same property Revpar for the remainder of the portfolio increased a solid six 4% as compared to 2022.

Okay.

In 2023 23 of the out of the 32 hotels in our same property portfolio achieved revpar growth as compared to 2022.

Revpar increased by double digit percentages in seven of our 22 markets, including Portland Houston.

San Francisco, San Jose Nashville, and Atlanta.

We expect most of these markets to continue to experience strong growth in 2024 as well.

On a same property basis, 2023 hotel EBITDA of $271 5 million.

Well, it's one 5% below 2022 levels and.

And margins were 153 basis points lower as compared to 2022.

Excluding Hyatt Regency Scottsdale in both years same property hotel EBITDA increased three 5% and margins decreased just 92 basis points in 2023 as compared to 2022.

Okay.

Marcel Verbachs: We are pleased with this result, given the inflationary pressures on the overall economy, and our industry, particularly, during the year. Now, turning specifically to our fourth-quarter results, this morning we reported net income of $7.6 million, adjusted EBITDA RE of $59.4 million, and adjusted FFO per share of 41 cents. Despite significant disruption from the high-efficiency Scottsdale renovation throughout the quarter, as well as disruption from our Grand Bohemian Orlando renovation early in the quarter, our fourth quarter adjusted FFO per share of 41 cents was flat compared to the same period in the prior year. This was partially due to a lower share count resulting from our substantial share repurchase activity during the quarter and the year.

We are pleased with this result, given the inflationary pressures on the overall economy.

And our industry, particularly during the year.

Okay.

Now turning specifically to our fourth quarter results. This morning, we reported net income of $7 $6 million adjusted EBITDA ratio of $59 $4 million.

Adjusted <unk> per share of <unk> 41.

Despite significant disruption from the Hyatt Regency Scottsdale renovation throughout the quarter.

As well as disruption from our Grand Bohemian Orlando renovation early in the quarter or.

Our fourth quarter adjusted <unk> per share of <unk> 41.

Flat compared to the same period in the prior year.

This was partially due to a lower share count, resulting from our substantial share repurchase activity during the quarter and the year.

Yeah.

Marcel Verbachs: Our same property, Rappaport, for the fourth quarter decreased 3.4% as compared to 2022. However, excluding Hyde Regency Scottsdale, REF Bar 414 increased 1.2%. On a same-property basis, fourth-quarter hotel EBITDA of $63.7 million was 8.4% below 2022 levels, and Hotel Iguodal Margin decreased to 162 bases, excluding Hyatt Regency Scottsdale. 4th Quarter St. Property Hotel In-N-Out increased 2.5%, and Hotel Ibiza Margin decreased just 10 days. The trends across our portfolio continue to indicate that our demand segmentation mix is reverting towards pre-pandemic levels, as Group and Business Transient Demand recover and Leisure Demand Normalization in the fourth quarter and the full year.

Our same property revpar for the fourth quarter decreased three 4% as compared to 2022.

However, excluding hybrid I'd regency, Scottsdale revpar for the quarter increased one 2%.

On a same property basis fourth quarter hotel EBITDA of $63 7 million was eight 4% below 2022 levels and hotel EBITDA margin decreased 162 basis points.

Excluding Hyatt Regency, Scottsdale fourth quarter same property hotel EBITDA increased two 5%.

And hotel EBITDA margin decreased just 10 basis points.

Okay.

The trends across our portfolio continue to indicate that our demand segmentation mix is reverting towards pre pandemic levels as.

His group and business transient demand recover and leisure demand normalizes.

In the fourth quarter and the full year.

Marcel Verbachs: Same property group room revenues, excluding Hyde Regency Scottsdale, increased 4% and 16%, respectively, as compared to 2022. We also saw continuous Franklin business transient demand over the year as evidenced by a healthy recovery in mid-week occupancy. And finally, leisure demand continues to normalize, which was not a big surprise given the incredible strength in domestic leisure demand coming out of the pandemic. This retracement was evident in the lagging performance of some of our more leisure-dependent assets and markets in the fourth quarter.

Same property group room revenues, excluding Hyatt Regency, Scottsdale increased 4% and 16% respectively as compared to 2022.

We also saw continued strength in business transient demand over the year.

As evidenced by a healthy recovery in midweek occupancy.

And finally leisure demand continued to normalize.

This was not a big surprise, given the incredible strength and domestic leisure demand coming out of the pandemic.

This retracement was evident in the lagging performance of some of our more leisure dependent assets and markets in the fourth quarter.

Okay.

Marcel Verbachs: As for our capital allocation strategy, included in our $120 million in capital expenditures in our portfolio in 2023 were major renovations at Kimpton Canary Hotel Santa Barbara, Kimpton Hotel Monaco Salt Lake City, and Grand Bohemian Orlando. In addition to other projects, such as the creation of a Miraval Life & Balance Spa at Park Hyatt Abriaro. As you are all well aware, we also commenced the transformative renovation and upbranding of Hyde-Wheaton C. Scottsville in June of last year.

As for our capital allocation strategy included in our $120 million in capital expenditures in our portfolio in 2023 were major renovations at Kimpton Canary Hotel in Santa Barbara Tim.

Kimpton Hotel Monaco Salt Lake City.

Grand Bohemian Orlando.

In addition to water projects such as the creation of a miracle life Imbalanced Spa at Park Hyatt <unk>.

Okay.

As you are all well aware, we also commenced the transformative renovation that not brand engelhard, we can see Scottsdale in June of last year.

Okay.

Marcel Verbachs: We are excited that this project is progressing on time and on budget today. We continue to believe strongly that the property will be able to compete even more effectively in the Phoenix-Scottsdale Luxury Resort Market after its relaunch at the Luxury Grand Hyatt Resort Scottsdale by the end of the year. Barry will provide a detailed update on our progress on this important project and his remarks.

We are excited that this project is progressing on time and on budget today.

We continue to believe strongly that the property will be able to compete even more effectively in the Phoenix Scottsdale luxury resort markets.

<unk> relaunched as the luxury Grand Hyatt resorts Scottsdale by the end of the year.

Barry will provide a detailed update on our progress on this important project in his remarks.

Yeah.

Marcel Verbachs: Importantly, we balance these investments in our portfolio with meaningful returns to our shareholders. In 2023, we returned approximately $177 million to shareholders through nearly $133 million in share buybacks and roughly $44 million in common dividends. Looking ahead, we are cautiously optimistic as we start 2024. We believe that our recent and ongoing ROI investments will yield meaningful results in 2024 and in the years to come. We expect to invest another $120 to $130 million in capital projects this year, with the Hyatt Regency Scottsdale renovation expected to account for $65 to $70 million of this total amount. These are important projects that will start to drive benefits later this year, as the guest rooms and various other components are completed. Also, in 2024, we expect to generate earnings growth from our recently renovated properties, some of which have already started to see notable share gains in the months coming out of renovation.

Importantly, we balance these investments in our portfolio with meaningful returns for our shareholders.

In 2023, we returned approximately $177 million to shareholders through nearly a $133 million in share buybacks and roughly $44 million in common dividends.

Okay.

Looking ahead, we are cautiously optimistic as we start 2024.

We believe that our recent and ongoing ROI investments will yield meaningful results in 2024 and in the years to come.

We expect to invest another $120 million to $130 million in capital projects. This year.

With the Hyatt Regency, Scottsdale renovation expected to account for $65 million to $70 million of this total amount.

Okay.

It is important projects will start to drive benefits later this year as the Guestrooms and various other components are completed.

Yeah.

Also in 2024, we expect to generate earnings growth from our recently renovated properties.

Some of which have already started to see notable share gains in the months coming out of renovation.

Okay.

Marcel Verbachs: While Barry will provide more detail on our capital projects, I would like to note that we expect overall renovation disruption in the portfolio to be a bit less than in 2023, despite continued significant renovation disruption at High Regency Scottsdale. The majority of the capital expenditures we will make in 2024, outside of the Scottsdale project, are expected to be significantly less impactful on the guest experience than the major renovations we completed in 2023. Our initial 2024 outlook is based on a range of 2% to 5% same-property reservoir growth, or 3.5% at the midpoint. Excluding Hyatt Regency, Scottsville; we expect the portfolio to produce two and a half percent to five and a half percent ref bar growth. And better than this outlook are opportunities for further occupancy.

While Barry will provide more detail on our capital projects I would like to note that we expect overall renovation disruption in the portfolio to be a bit less than in 2023.

Despite continued significant renovation disruption at Hyatt Regency Scottsdale.

The majority of the capital expenditures, we will make in 2024 outside of the Scottsdale project.

Are expected to be significantly less impactful to the guest experience than the major renovations we completed in 2023.

Okay.

Our initial 2024 outlook is based on a range of 2% to 5% same property revpar growth of three 5% at the midpoint.

Excluding Hyatt Regency Scottsdale, we expect the portfolio to produce two 5% to five 5% Revpar growth.

Yeah.

Embedded in this outlook are opportunities for further occupancy gains.

Marcel Verbachs: In 2023, our same property portfolio, excluding Scottsdale, occupancy was still approximately 10 points beyond 2019 levels, despite a two-and-a-half point increase in occupancy during the year, in addition to growth from recently renovated properties. Our greatest opportunities for growth in 2024 include continued strong performance at our hotels that cater to group and business transient customers. This includes our two most recent acquisitions, W Nashville and Hyatt Regency Portland at the Oregon Convention Center, both of which should generate above-average levels of RFR growth as compared to our overall portfolio.

In 2023, our same property portfolio excluding Scottsdale.

Occupancy was still approximately 10 points behind 2019 levels.

Aspire to two five point increase in occupancy during the year.

Okay.

In addition to growth from recently renovated properties.

Our greatest opportunities for growth in 2024 include continued strong performance at our hotels that cater to group and business transient customers.

This includes our two most recent acquisitions that we can Nashville, and Hyatt Regency, Portland at the Oregon Convention Center.

Both of which should generate above average levels of revpar growth as compared to our overall portfolio.

Additionally, in 2024, we expect strong revpar growth at our properties in Orlando, Atlanta, and are recovering Northern California markets, San Francisco and San Jose.

Marcel Verbachs: Additionally, in 2024, we expect strong REFRA growth at our properties in Orlando, Atlanta, and our recovering Northern California markets, San Francisco and San Jose. Excluding Scottsdale, we crossed into 2024 with approximately 8% greater group room revenue on the books than we did for 2023 at the end of 2022. We also anticipate continued recovery in business transient demand, which should drive further mid-week occupancy gains. We expect leisure transient demand to remain relatively stable this year after some retracement last year. Ateej will provide additional details around our 2024 outlook, including our expectations for seasonality and impact from our ongoing renovation activity, and his prepared remarks. We are off to a solid start in 2024. According to date, through February 22, 2024, we estimate that excluding Scottsdale, the same property of Ref Bar increased 4.9% as compared to the same period in 2023, when including Hyde Regency, Scottsville, which delivered extremely strong results in early 2023 due to the Super Bowl and strong overall demand in the markets. Court of the day draft bar through February 22nd is down half a percent.

Okay.

Excluding Scottsdale, we cross into 2024 with approximately 8% Greater group rooms revenue on the books than we did for 2023 at the end of 2022.

We also anticipate continued recovery in business transient demand, which should drive further midweek occupancy gains.

We expect leisure transient demand to remain relatively stable this year after some retracement last year.

<unk> will provide additional details around our 2024 outlook, including our expectations for seasonality and impacts from our ongoing renovation activity in his prepared remarks.

Yeah.

Okay.

We are off to a solid start in 2024.

Quarter to date through February 22024, we estimate that excluding Scottsdale same property Revpar increased four 9% as compared to the same period in 2023.

Okay.

When including hybrid see Scottsdale, which delivered extremely strong results in early 2023 due to the Super Bowl and strong overall demand in the market quarter to date Revpar through February 22nd is down half a percent.

Given its very strong performance through may of last year and the renovation disruption. This year <unk> Scottsdale will be a drag on revpar growth through the first half of the year.

Marcel Verbachs: Given its very strong performance through May of last year and the renovation disruption this year, I dream Chief Scottsville will be a drag on rest bar growth through the first half of the year, after which the comparisons will become significantly more favorable. To wrap up, I am very proud of all the great work our team accomplished in 2023. We not only delivered results broadly in line with the expectations we set at the start of the year, but we also invested meaningfully in our portfolio in ways that we believe will enhance our growth profile in the year ahead. All this was accomplished during a time when we also returned substantial levels of capital to shareholders through a combination of share repurchases and dividends. And as we announced this morning... We are continuing this into 2024, as our Board of Directors authorized a 20% increase in our quarterly cash dividends to $0.12 per share for the first quarter. I will now turn the call over to Barry to provide more details on our operating results and our capital projects. Thanks, Marcel, and good afternoon, everyone.

After which the comparisons will become significantly more favorable.

To wrap up I'm very proud of all the great work our team accomplished in 2023.

We not only delivered results broadly in line with the expectations. We set at the start of the year, but we also invested meaningfully in our portfolio and ways that we believe will enhance our growth profile in the years ahead.

All this was accomplished during a time when we also returned substantial levels of capital to shareholders through a combination of share repurchases and dividends.

Okay.

And as we announced this morning.

We are continuing this into 2024 as our board of directors authorized a 20% increase in our quarterly cash dividend to <unk> 12 per share for the first quarter.

Okay.

I will now turn the call over to Barry to provide more details on our operating results and our capital projects.

Thanks, Marcel and good afternoon, everyone.

Barry A. N. Bloom: For the full year of 2023, our 32 same-property portfolio rev bar was $169.46, based on occupancy of 65.1%, at an average daily rate of $260.40. The same property portfolio rep part increased 3.9% as compared to 2022. This increase reflected a 2.5 point gain in occupancy and a flat average daily rate as compared to full year 2020. Excluding High Regency Scottsdale, full year rent was $170.57, an increase of 6.4% as compared to full year 2020.

For the full year of 2023 or 32 same property portfolio Revpar was $169 46.

Just on occupancy of 65, 1%.

And average daily rate of $260 40.

Same property portfolio Revpar increased three 9% as compared to 2022.

This increase reflected a two five point gain in occupancy and flat average daily rate as compared to full year 2022.

Excluding Hyatt Regency Scottsdale full year Revpar was $170 57.

An increase of six 4% as compared to 2022.

Barry A. N. Bloom: This increase reflected over 3.5 points of occupancy gain and a nearly flat average daily rate as compared to full year 2022. Our properties achieving the strongest REVPAR growth as compared to full year 2022 included the High Regency Portland, with REVPAR up 30.8%, our three Houston properties with REVPAR up 19.9%, and our two Dallas properties with REVPAR up 17.9%, all of which benefited from recovering business transient and strong group In addition, our properties in San Francisco, Santa Clara, and Nashville all achieved double-digit revenue growth for the year.

This increase reflected over three five points of occupancy gain and nearly flat average daily rate as compared to full year 2022.

Our properties, achieving our strongest revpar growth as compared to full year 2022 included the high Regency, Portland, with Revpar up 38% or three Houston properties with Revpar up 19, 9% and our two Dallas properties with Revpar up 17, 9% all of which benefited from recovering business transient and strong group demand.

In addition, our properties in San Francisco, Santa Clara and Nashville, all achieved double digit revpar growth for the year.

Barry A. N. Bloom: Conversely, the greatest revenue declines compared to 2022 were experienced at High Regency Scottsdale, Kimpton Monaco Salt Lake City, Grand Bohemian Orlando, and Kimpton Canary Santa Barbara, all of which were undergoing comprehensive renovations, which will position each of these hotels extremely well for the years ahead. The REVPAR declines at Andaz Napa and Hyatt Center Key West reflected weaker leisure demand against an extremely tough prior year comparison, although both properties' REVPAR was above 2019 levels. At W Nashville, Red Park grew by over 10% for the full year, with 33% growth in group revenue, as our business strategy for this hotel continues to become more refined. EBITDA margin improved by over 170 basis points in 2023 as compared to 2022. We continue to focus the hotel's efforts on improving food and beverage performance, including the repositioning and relaunch of the hotel's three-meal restaurant.

Conversely, the greatest Revpar declines compared to 2022 were experienced at Hyatt Regency, Scottsdale, Kimpton, Monica Salt Lake City, and Bohemian Orlando, and Kimpton, Canary, Santa Barbara, which were undergoing comprehensive renovations, which will position each of these hotels extremely well for the years ahead.

The revpar declines at Andaz, Napa, and Hyatt centric key west reflected weaker leisure demand against an extremely tough prior year comparison, although both properties revpar was above 2019 levels.

At W. Nashville, Revpar grew by over 10% for the full year with 33% growth in group revenue as our business strategy for this hotel continues to become more refined.

EBITDA margin improved by over 170 basis points in 2023 as compared to 2022.

We continue to focus the hotel's efforts on improving food and beverage performance, including the repositioning and relaunch of the hotels three meal restaurant.

Barry A. N. Bloom: As we look ahead to 2024, group revenue paces up nearly 20% as of the end of January. In January, Revpar was up over 6% compared to the prior year, despite inclement weather, giving us further confidence that the hotel's penetration within each segment will continue to improve as the market recognizes the outstanding attributes of this property. Although RevPAR declined in the fourth quarter, this was expected as the overall market was impacted by the absorption of three new luxury hotels year-over-year during this traditionally softer period. For the fourth quarter, our $32 Same Property Portfolio REB PAR was $157.69 based on occupancy of 61.9% at an average daily rate of $254.56. Same property portfolio REVPAR decreased 3.4% in the quarter as compared to the same period in 2022. Excluding High Regency Scottsdale, fourth quarter REBPAR was $162.51, an increase of 1.2% as compared to 2022.

As we look ahead to 2020 for group revenue pace is up nearly 20% as of the end of January.

In January Revpar was up over 6% compared to the prior year. Despite inclement weather. It means further confidence that the hotel's penetration within each segment will continue to improve as the market recognizes the outstanding attributes of this property.

Although revpar decline in the fourth quarter. This was expected as the overall market was impacted by the absorption of three new luxury hotels year over year. During this traditionally softer period.

For the fourth quarter or 32 same property portfolio Revpar was $157 69.

Based on occupancy of 61, 9% and an average daily rate of $254 56.

Same property portfolio Revpar decreased three 4% in the quarter as compared to the same period in 2022.

Excluding Hyatt Regency, Scottsdale fourth quarter Revpar was $162 51.

An increase of one 2% as compared to 2022.

Barry A. N. Bloom: This increase reflected about one and a half points of occupancy gain and a slight decline in average daily rate as compared to full year 2022. In the quarter, same property REVPAR in October and November declined 2.2% and 3.7%, respectively, as compared to 2022, while December REVPAR decreased 4.9% compared to 2022. Excluding High Regency Scottsdale, REVPAR was up 2.4% and 1.4% in October and November and declined 0.8% in December as compared to 2022.

This increase reflected about one five points of occupancy gain and a slight decline in average daily rate as compared to full year 2022.

In the quarter same property Revpar in October November declined two 2% and three 7%, respectively as compared to 2022 or December Revpar decreased four 9% compared to 2022.

Excluding Hyatt Regency, Scottsdale, Revpar was up two 4% and one 4% in October and November and declined <unk>, 8% in December as compared to 2022.

As Marshall mentioned in his prepared remarks overall business reflects the continued transition in our business and that was primarily a leisure demand driven recovery in 2022 to a more traditional mix of leisure business transient and group demand.

Barry A. N. Bloom: As Marcel mentioned in his prepared remarks, overall business reflects the continued transition in our business from what was primarily a leisure-demand-driven recovery in 2022 to a more traditional mix of leisure, business transient, and group. As it relates to business transient, midweek occupancies continue to improve in the fourth quarter, with Monday, Tuesday, and Wednesday occupancies all up relative to the fourth quarter of 2022. Conversely, occupancy on Saturday nights declined relative to the fourth quarter of 2022, reflecting softening leisure demand across the portfolio from the extreme peaks we experienced in 2020. Business from the largest corporate accounts improved throughout the year, but we estimate that room-night demand from this important sub-segment is still down about 20% from 2019 levels. On the leisure side, several of our more leisure-oriented properties reported REBPAR declines in the fourth quarter and full year 2023 as compared to 2022, including our properties in Key West, Napa, Savannah, and Santa Barbara. Among our leisure markets, Charleston was a relative bright spot in our portfolio, with positive revenue growth in the fourth quarter and full year. Not surprisingly, the slight decline in our total portfolio's average daily rate in the fourth quarter was largely attributable to lower rates at most of our leisure-oriented hotels. Now turning to the group.

As it relates to business transient midweek occupancy has continued to improve in the fourth quarter with Monday, Tuesday, and Wednesday, Occupancies, all up relative to the fourth quarter of 2022.

Conversely occupancy on Saturday nights declined relative to the fourth quarter of 2022, reflecting softening leisure demand across the portfolio and the extreme peaks we experienced in 2022.

Business from the largest corporate accounts improves throughout the year, but we estimate that room night demand for this important sub segment is still down about 20% from 2019 levels.

On the leisure side several of our more leisure oriented properties reported revpar declines in the fourth quarter and full year 2023, as compared to 2022, including our properties in key West Napa savanna in Santa Barbara.

Among our leisure markets Charleston was a relative bright spot in our portfolio with revpar growth in the fourth quarter and full year.

Not surprisingly the slight decline in our total portfolio average daily rate in the fourth quarter was largely attributable to lower rates at most of our leisure oriented hotels.

Now turning to group in the quarter, our same property group's revenue exceeded fourth quarter of 2022 levels by nearly 5% excluding hybrid Scottsdale.

Barry A. N. Bloom: In the quarter, our same property group's revenue exceeded fourth quarter of 2022 levels by nearly 5%, excluding High Regency Scottsdale. Our performance reflected very strong group results in October, particularly for our properties in Houston, Atlanta, and Orlando, and generally higher group rates across the portfolio. A full year, same property, 2023 group revenue ended about 16% higher than 2022 and about 2% lower than 2019, again, excluding High Regency Scottsdale in all. The vast majority of the recovering group to date has come from average daily rate increases, as group room nights in 2023 were still about 12% lower than in 2019. This gives us confidence that we will see further opportunities for growth over the coming year, particularly at our important group-oriented hotels in Orlando, Portland, Atlanta, and Dallas, as we see booking windows lengthen and normalize.

Our performance reflected very strong group results in October, particularly at our properties in Houston, Atlanta, and Orlando and generally higher group rates across the portfolio.

Our full year same property 2023 groups revenue ended about 16% higher than 2022, and about 2% lower than 2019 again, excluding hydrogen Scottsdale in all periods.

The vast majority of the recovery in group to date has come from average daily rate increases as group room nights in 2023, we're still about 12% lower than in 2019.

This gives us confidence we will see further opportunities for growth over the coming year, particularly at our important group oriented hotels in Orlando, Portland, Atlanta, and Dallas, as we see booking windows lengthen and normalized.

Now turning to expenses and profit.

Barry A. N. Bloom: Now, turning to Expenses & Processes. Fourth quarter, Same Property Hotel Ipita was $63.7 million, a decrease of 8.4% compared to the fourth quarter of 2022, resulting in 162 basis points of margin erosion. Excluding High Regency Scottsdale, fourth quarter Same Property Hotel Ypadal was $63.4 million, an increase of 2.5% as compared to the fourth quarter of 2022, and reflected a 10 On a full-year basis, Same Property Hotel Ibidal was $271.5 million, and margins decreased 153 basis points per month. Excluding Hiram C. Scottsdale, same property, hotel EBITDA margins decreased 92 basis points, as compared to full year 2022.

Fourth quarter same property hotel EBITDA was $63 7 million.

A decrease of eight 4% compared to the fourth quarter of 2022, resulting in 162 basis points of margin erosion.

Excluding hydrogen Scottsdale fourth quarter same property hotel EBITDA was $63 4 million, an increase of two 5% as compared to the fourth quarter of 2022 and reflected a 10 basis point decline in margin.

On a full year basis same property hotel EBITDA was $271 $5 million and margins decreased 153 basis points.

Excluding <unk> Scottsdale same property hotel EBITDA margins decreased 92 basis points as compared to full year 2022.

Okay.

Our fourth quarter and full year 2023 margins reflected generally good expense control over the year in light of significant increases in wages and benefits as well as utility costs.

We continue to see significant reductions in overtime labor staffing levels and recruiting by our managers normalize in line with business levels.

Barry A. N. Bloom: Our fourth quarter and full year 2023 margins reflected generally good expense control over the year in light of significant increases in wages and benefits, as well as utility costs. We continue to see significant reductions in overtime labor as staffing levels and recruiting by our managers normalize in line with business levels. Administrative and general expenses declined by nearly 3% year-over-year in Q4, and repairs and maintenance expenses were stable year-over-year in Q4.

Administrative and general expenses declined by nearly 3% year over year in Q4, and repairs and maintenance expenses were stable year over year in Q4.

Now turning to Capex during the fourth quarter and over the full year, we invested $51 4 million and $129 million and portfolio improvements perspective.

In 2023, some of the significant renovation projects in our portfolio included.

At Grand Bohemian Hotel Orlando, we completed a comprehensive renovation of all guest rooms, and public spaces, including meeting space lobby restaurant bar, Starbucks and the creation of a new rooftop bar.

Barry A. N. Bloom: Now turning to CapEx. During the fourth quarter and over the full year, we invested $51.4 million and $120.9 million in portfolio improvements, respectively. In 2023, some of the significant renovation projects in our portfolio included: At Grand Bohemian Hotel Orlando, we completed a comprehensive renovation of all guest rooms and public spaces, including meeting space, lobby, restaurant, bar, Starbucks, and the creation of a new rooftop bar. The phased renovation was complete in the fourth quarter.

The phased renovation was completed in the fourth quarter.

This transformative renovation has completely changed the look and feel of the property will afford the hotel with the ability to maintain its market leading position within the downtown Orlando market.

At the Kimpton Hotel, Monaco, Salt Lake City, and Kimpton scenario, Santa Barbara We completed comprehensive renovations of each hotels meeting space restaurant bar and Guestroom.

These significant renovations will ensure these hotels positioning as the premier boutique hotels within their respective markets.

In the second quarter, we commenced the initial phases of the approximate $110 million transformative renovation and up branding of the 491 room Hyatt Regency Scottsdale resort in spot Gainey Ranch, thus far the project is on time and on budget.

Barry A. N. Bloom: This transformative renovation has completely changed the look and feel of the property, and it will afford the hotel with the ability to maintain its market-leading position within the downtown Orlando market. At the Kempton Hotel Monaco Salt Lake City and Kempton Canary Santa Barbara, we completed comprehensive renovations of each hotel's meeting space, restaurant, bar, and guest room.

The two acre pool complex.

The two acre pool complex is expected to be fully completed and operational by the end of the first quarter.

The guestrooms are being renovated in phases. The first 150, which have now been completed with approximately 50 more to be completed in the next two weeks and the remainder are expected to be completed and continual phases until final completion at the end of the third quarter.

Barry A. N. Bloom: These significant renovations will ensure these hotels' positioning as the premier boutique hotels within their respective markets. In the second quarter, we commence the initial phases of the approximate $110 million transformative renovation and upbranding of the 491-room High Regency Scottsdale Resort & Spa, Ganey Ranch. Thus far, the project is on time and on budget. The two-acre pool complex is expected to be fully completed and operational by the end of the first quarter.

All of the other elements, including public spaces, and new and existing meeting space is expected to be completed by the end of 2024.

We anticipate this property will be a meaningful driver of earnings in 2025 and beyond as we complete the rebranding of the resort two Grand Hyatt later this year.

The initial response from both leisure and group guests is only affirms our confidence and our expected outcome from the substantial investment we're seeing future group business being booked at meaningfully higher rates in the hotel has achieved historically.

Barry A. N. Bloom: The guest rooms are being renovated in phases, the first 150 of which have now been completed, with approximately 50 more to be completed in the next two weeks, and the remainder expected to be completed in continual phases until final completion at the end of the third quarter. All of the other elements, including public spaces and new and existing meeting spaces, are expected to be completed by the end of 2024. We anticipate this property will be a meaningful driver of earnings in 2025 and beyond as we complete the rebranding of the resort through Grant Hyatt later this year. The initial response from both leisure and group guests has only affirmed our confidence in our expected outcome from this substantial investment. We are seeing future group business being booked at meaningfully higher rates than the hotel has achieved historically.

Much of this is the direct result of the expansion of the Arizona Ballroom, which will allow the hotel to retain existing group customers as we'll attract new group customers, who otherwise could not be accommodated at the resort and the spectacular physical facilities being created throughout the resort.

At the adult pool, which was completed in mid January the new bar now known as <unk> Oasis is meeting with significant positive feedback in part due to revised menu overseen by the announced celebrity chef Richard Blaze with whom we have developed an excellent working relationship to Farhan Avera, I Regency Grand Cypress and Hyatt centric key west.

Chef plays the first winter Bravos top chef all stars in our current Costar and Fox is next level chef will be involved in all aspects of food and beverage programming and menu design throughout the resort.

Barry A. N. Bloom: Much of this is the direct result of the expansion of the Arizona Ballroom, which will allow the hotel to retain existing group customers, as well as attract new group customers who otherwise could not be accommodated at the resort, and the spectacular physical facilities being created throughout the resort. At the Adult Pool, which was completed in mid-January, the new bar, now known as H2Oasis, is meeting with significant positive feedback, in part due to a revised menu overseen by the renowned celebrity chef Richard Blaise, with whom we have developed an excellent working relationship at Parkhead Aviara, High Regency Grand Cypress, and Hyatt Center Key West. Chef Blaise, the first winner of Bravo's Top Chef All-Stars and a current co-star on Fox's Next Level Chef, will be involved in all aspects of food and beverage programming and menu design throughout the resort.

Major new venues include an upscale modern Italian steak and seafood concept, along with speakeasy style bar and the resorts former Regency club space and a global small plate concepts, including our sushi bar and the location of the long dormant also restaurants and.

In addition, the hotels three meal restaurant be completely re imagined along with an expanded lobby bar.

Additionally, fountain court the dramatic space just outside the lobby, we redeveloped into a space that we'll be able to be utilized for outdoor functions and live music.

Finally, the previously mentioned <unk> pool bar and newly concept at pool bar and restaurant at the family pool will complete a significantly elevated food and beverage offerings as the resort all of which will create a much more compelling offering for in house and local Scottsdale business.

Other capital projects planned for 2024 include renovations of restaurants and bars, a Bohemian hotel Savannah, the Ritz Carlton Denver Marriott woodlands waterway.

Barry A. N. Bloom: Major new venues include an upscale modern Italian steak and seafood concept, along with a speakeasy-style bar in the resort's former Regency Club space, and a global small-plate concept, including a sushi bar, at the location of the long-dormant Alto Restaurant. In addition, the hotel's three-meal restaurant will be completely reimagined, along with an expanded lobby bar. Additionally, Fountainport, the dramatic space just outside the lobby, will be redeveloped into a space that will be able to be utilized for outdoor functions and live music.

Renovation of the lobbies at the Westin Oaks in Galleria Houston.

Location of the fitness facility. In addition to the concierge lounge at the Westin Oaks, Houston, and approximately $20 million of infrastructure and sustainability projects.

We are very excited about the projects, we have underway and look forward to their completion with that I will turn the call over to Ashish.

Thanks, Barry I will provide an update on three items.

Barry A. N. Bloom: Finally, the previously mentioned H2Oasis Pool Bar, a newly concepted pool bar and restaurant by the family pool, will complete the significantly elevated food and beverage offerings at the resort, all of which will create a much more compelling offering for in-house and local Scottsdale businesses. Other capital projects planned for 2024 include renovations of restaurants and bars at Bohemian Hotel Savannah, The Rich Carleton Denver, and Marriott Woodlands Waterway. Renovation of the lobbies at the Westin Oaks & Galleria, Houston Relocation of the fitness facility and addition of a concierge lounge at the Westin Oaks, Houston, and approximately $20 million in infrastructure and sustainability projects. We are very excited about the projects we have underway and look forward to their completion. With that, I will turn the call over to Atisha. Thanks, Barry.

Our balance sheet for return of capital in 2020 for full year guidance.

As to our balance sheet, we are well positioned to take advantage of opportunities given our liquidity and balance sheet profile with.

With no debt maturities until August of 2025.

All of our debt at fixed interest rates at present.

Preferred equity and 29 of our 32 hotels unencumbered of property level debt our balance sheet continues to be strong.

At year end, our leverage ratio was about five times trailing 12 months net debt to EBITDA.

We expect our leverage ratio to decline as earnings increase in the years ahead.

Now I want to turn to our return of capital I have two specific items here are as follows.

First we repurchased about $3 9 million shares in the fourth quarter, bringing our full year 2023 buyback total to approximately $10 4 million shares.

Atee Shaw: I will provide an update on three items: our balance sheet, return of capital, and 2024 full-year guidance. As to our balance sheet, we are well positioned to take advantage of opportunities given our liquidity and balance sheet profile, with no debt maturities until August of 2025, all of our debt at fixed interest rates at present, no preferred equity, and 29 of our 32 hotels unencumbered with property level debt. Our balance sheet continues to be strong. At year-end, our leverage ratio was about five times trailing 12 months net debt to EBITDA.

In total during 2000 22023, we repurchased about 9% of our outstanding shares at about $12 75, a share together.

Together with shares repurchased in the prior year and the smaller amount purchased thus far in 2024, we believe our repurchase activity at these price levels will prove to be a driver of long term value creation.

Second our board of directors increased our first quarter dividend to <unk> 12 per share based on the closing price of our shares yesterday this level of dividend equates to an annualized yield of approximately three 7%.

Atee Shaw: We expect our leverage ratio to decline as earnings increase in the years ahead. Now I want to turn to our return on capital. I have two specific items here, as follows.

As to our payout ratio at this level of dividend reflects approximately 40% of fad based on 2023 <unk>.

Atee Shaw: First, we repurchased about 3.9 million shares in the fourth quarter, bringing our full-year 2023 buyback total to approximately 10.4 million shares. In total, during 2020-2023, we repurchased about 9% of our outstanding shares at about $12.75 a share. Together with shares repurchased in the prior year and the small amount purchased thus far in 2024, we believe our repurchase activity at these price levels will prove to be a driver of long-term value creation. Second, our Board of Directors increased our first quarter dividend to $0.12 per share.

Over time, we expect the dividend to grow to prior levels are to roughly double and that our payout ratio will return to pre pandemic levels in the mid 60% range.

The third item I wish to discuss is our 2020 for guidance.

At the midpoint of the full year guidance that we issued this morning, we expect revpar and adjusted EBITDA to each grow in the low single digit percentage range.

<unk> <unk> per share to grow in the high single digit percentage range.

Getting into the components a bit more I will begin with revpar.

We expect same property revpar to increase three 5% at the midpoint of the range.

These expectations for revpar growth or four items.

First group room revenue booking pace, excluding Scottsdale is up about 5% as of the end of January.

Atee Shaw: Based on the closing price of our shares yesterday, this level of dividend equates to an annualized yield of approximately 3.7%. As to our payout ratio, this level of dividend reflects approximately 40% of FAD based on 2023 FFO. Over time, we expect the dividend to grow to prior levels or to roughly double, and that our payout ratio will return to pre-pandemic levels in the mid-60% range. The third item I wish to discuss is our 2024 guidance. At the midpoint of the full year guidance that we issued this morning, we expect RevPAR and adjusted EVA.RE to each grow in the low single-digit percentage range, and FFO per share to grow in the high single-digit percentage range. Going into the components a bit more, I will begin with RevPAR.

This was driven roughly equally by growth in room nights and rate.

And just over 60% of expected 2024 group rooms revenue is already definite.

The second item continued pickup in business transient demand is driving higher occupancy.

On this on business transient demand the corporate negotiated rates rates piece of the business, we expect rates to increase in the low to mid single digit percentage range versus last year.

Third leisure comparisons will become easier starting in May. We also expect some high end leisure travelers will stay in the U S. This summer instead of traveling internationally as they did last year.

Fourth and last strong growth from three of our smaller properties, which were under renovation in 2023.

Atee Shaw: We expect same property REVPAR to increase 3.5% at the midpoint of the range. Supporting these expectations for Rev. Park growth are four items.

These three properties together drive approximately one third of the three 5% expected revpar growth.

Atee Shaw: First, group room revenue booking pace, excluding Scottsdale, is up about 5% as of the end of January. This is driven roughly equally by growth in room nights and rates, and just over 60% of expected 2024 group room revenue is already definite. The second item, continued pickup in business transient demand, is driving higher occupancy. On this, the corporate negotiated rates piece of the business, we expect rates to increase in the low to mid single-digit percentage range versus last. Third, leisure comparisons will become easier starting in May. We also expect some high-end leisure travelers will stay in the U.S. this summer instead of traveling internationally as they did last year.

One final point on our Revpar guidance is that we also provided revpar outlook, excluding Hyatt Regency Scottsdale, we.

We expect full year same property revpar to grow approximately 4% at the midpoint excluding Scottsdale.

The level of variance will change significantly as we move through the year with the first half seeing a much larger variance because of both the renovation timing as well as the comparison to a very strong first five months of 2023 and Scottsdale.

As to hotel EBITDA margins for the year, we expect margins to decline about 100 basis points as compared to 2023.

Atee Shaw: Fourth and last, strong growth from three of our smaller properties, which were under renovation in 2023. These three properties together drive approximately one-third of the three and a half percent expected rev park growth. One final point on our REBPAR guidance is that we also provided a REBPAR Outlook excluding Hyatt Regency Scottsdale. We expect full-year same-property REBPAR to grow approximately 4% at the midpoint, excluding Scottsdale. The level of variance will change significantly as we move through the year, with the first half seeing a much larger variance because of both the renovation timing as well as the comparison to a very strong first five months of 2023 in Scottsdale. As to Hotel Ibiza margins, for the year, we expect margins to decline about 100 basis points as compared to 2023.

First half margins are expected to decline about 250 basis points and second half margins are expected to increase about 100 basis points.

Excluding the impact of Scottsdale, we expect we expect full year margins to decrease about 40 basis points, which reflects a first half decline of about 100 basis points and flat margins in the second half.

Moving ahead to adjusted EBITDA, we are guiding to a midpoint of $254 million for 2024.

By quarter. The weighting is just above 20% for the first quarter.

Nearly 30% for the second quarter.

Around 20% for the third quarter and back up to nearly 30% for the fourth quarter.

Atee Shaw: First half margins are expected to decline about 250 basis points, and second half margins are expected to increase about 100 basis points. Excluding the impact of Scottsdale, we expect full-year margins to decrease about 40 basis points, which reflects a first half decline of about 100 basis points and flat margins in the second half. Moving ahead to AdjustedEBIT.RE, we are guiding to a midpoint of $254 million for 2024. By quarter, the weighting is just above 20% for the first quarter, nearly 30% for the second quarter, around 20% for the third quarter, and back up to nearly 30% for the fourth quarter.

This weighting varies from the cadence of earnings in prior years due to tougher comps in some markets in the first couple of quarters, including Scottsdale as well as renovation disruption, which is much greater in this year's first half than last year's first half.

As we get into the second half of 2024, the comps become easier and our renovation activity turns into a tailwind relevant relative to last year's second half.

Okay.

And finally, our <unk> per share guidance of $1 $68.05 at the midpoint reflects the increase in adjusted EBITDA versus last year lower expected interest expense as well as a lower share count.

Atee Shaw: This weighting varies from the cadence of earnings in prior years due to tougher comps in some markets in the first couple quarters, including Scottsdale, as well as renovation disruption, which was much greater in this year's first half than last year's first half. As we get into the second half of 2024, the comps become easier, and our renovation activity turns into a tailwind relative to last year. And finally, our FFO per share guidance of $1.68.5 at the midpoint reflects the increase in adjusted EBITDA RE versus last year, lower expected interest expense, as well as a lower share count. Year-over-year, our guidance reflects about 9% growth in FFO per share at the mid- As we look ahead, we believe the investments we are making this year and have made over the last few years, continued growth in Nashville and Portland, significant recovery potential in Northern California, and low, rooms-weighted supply growth should lead to higher levels of REVPAR growth in the years ahead.

Year over year, our guidance reflects about 9% growth in <unk> per share at the midpoint.

As we look ahead, we believe the investments we're making this year and have made over the last few years continued ramp in Nashville in Portland significant recovery potential in northern California.

And low rooms weighted supply growth should lead to higher levels of revpar growth in the years ahead.

We also believe the annual expense growth relative to revenue growth.

We will continue to moderate over the quarters and years and that should lead to renewed margin growth.

And with that we will turn the call back over to Emily to begin our Q&A session.

Thank you.

A reminder, if you'd like to ask a question today. Please do so now by pressing star followed by the number one on your telephone keypad. If you change your mind or you feel like your question has already been answered you can remove yourself from the queue by pressing star and maintain.

Atee Shaw: We also believe the annual expense growth relative to revenue growth will continue to moderate over the quarters and years, and that should lead to renewed margin growth. And with that, we will turn the call back over to Emily to begin our Q&A session. As a reminder, if you would like to ask a question today, please do so now by pressing star, followed by the number 1 on your telephone keypad. If you change your mind, or you feel like your question has already been answered, you can remove yourself from the queue by pressing star and then star again. First question today, David, please go ahead, you're live.

Our first question today comes from David Katz with Jefferies. David. Please go ahead. Your line is open.

Hi afternoon I appreciate it.

And congrats on your quarter.

I wanted to.

Just touch base on the W. Nashville in particular touch.

Large hotel large presence.

Obviously seems to be getting some traction there.

Can you kind of and I did hear the prepared remarks just color.

Marcel Verbachs: Hi, this is an afternoon meeting. I appreciate it. And congrats on your quarter; touch base on the W Nashville, in particular. It's such a, you know, it was a large hotel, and large obviously seems to be getting some traction, www. XeniaHotelsInc.com www.thevenusproject.com, Yeah, David, as we've talked about the last couple of quarters, we do think there is a significant amount of upside there over the next few years. We saw some of that upside coming last year, but clearly, we're still kind of in the first half of that ballgame, let's put it that way, of really optimizing both the business mix and truly continuing to optimize the food and beverage offering.

A little bit more about.

How high the ceiling for that property now that it seems like you have it fishing in the right direction.

Maybe how many years of what inning, we're in in terms of getting that.

Normalized please.

Yes, David as we've talked about the last couple of good afternoon by the waiters Marcello.

As we've talked about the last couple of quarters, we do think there's a significant amount of upside there over the next few years. We we saw some of that upside coming last year, but clearly we're still kind of in the.

The first half of the ballgame, let's put it that way.

Really optimizing both the business mix and truly continuing with to optimize the.

Food and beverage offerings. So very spoke about a few of the things that we're doing there I think we're seeing some really good results here on the group side.

Marcel Verbachs: So, Barry spoke about a few of the things that we're doing there. I think we're seeing some really good results there on the group side, and we are certainly hard at work and looking to optimize these food and beverage spaces, including, you know, kind of the first step that we took there as far as reconcepting the three-course restaurant that we're really working through that progress process right now.

And we are certainly.

The hard work and looking to optimize these food and beverage spaces, including.

The first step that we took there as far as.

Re concept thing.

The three new restaurant that we're really working through that progress process right now so.

Marcel Verbachs: So, you know, at this point, I think we're still, like I said, kind of in the first half of that ballgame; we have a lot of work to kind of, you know, cut out for us, and, you know, it's not going to be a straight line, frankly, and you saw some of that in the fourth quarter where REF bar declined a bit as a result of the absorption of some of those new And as we've talked about, again, over the last few quarters, we're really trending overall on the room side in the direction that we wanted to go, and we still have some work left on the food and beverage side, particularly, but I think our strategy is starting to pay off, and we expect that to continue over the next couple of years.

At this point I think we're still.

Like I said kind of in the first half of the ballgame, we have a lot of work to kind of.

Cutoff for Hudson.

It's not going to be a straight line frankly, and then you saw some of that in the fourth quarter were.

Revpar declines declined a bit as a result of the absorption of some of those newer luxury hotels that came online, but that was not unexpected and as we've talked about.

Again over the last few quarters.

We are really trending overall with on the room side and the direction that we wanted to go and we still have some work left on the on the food and beverage side, particularly.

Our strategy is starting to pay off and we expect that to continue over the next couple of years.

Understood.

Marcel Verbachs: Understood. Look, I also wanted to just, Ateesh, touch on leverage for a few minutes because, you know, we've had obviously a dozen different interest rate expectations over the last few years. Where do you want to put your leverage now, based on what the current interest rate environment is, and, you know, I suppose, why do you want to put it there? Yeah, great question, David.

Okay I also wanted to just.

Touch on leverage for few minutes, because we've had obviously.

Dozen different interest rate expectations over the last.

90 days, where do you want to put your leverage now based on what the current interest rate environment is.

And I suppose why do you want to put it there.

Yes, great question, David Thanks.

Atee Shaw: Thanks. You know, our long-term view on the target for leverage is really getting back to the range that we were in pre-COVID. So that's low three times, net debt to EBITDA to low four times. So kind of that one point range between low three times and low four times.

Our long term view on the target for leverage is.

Is really getting back to the range that we were in pre COVID-19. So that's <unk>.

<unk> three times net debt to EBITDA.

Low four times, so kind of that that one point range between low three times and low four times. So we're still a bit away from that and our view is at this point in the cycle we will.

Atee Shaw: So we're still a bit away from that, and our view is that at this point in the cycle, as earnings continue to ramp from here, we should get back into that target range, low three times to low four times over the next couple of years, particularly as we get past, you know, the renovation at Ganey Ranch and we see the lift at Nashville and Portland. So, you know, and the reason really has less to do with, you know, the current interest rates and more just about how we want to run the company based on our asset base and the level of activity that, you know, we usually undertake in terms of acquisitions and dispositions, so making sure we have significant levels of flexibility. With regard to, you know, near-term interest rates, I will also just add, as I mentioned in my comments, that we are currently 100% fixed. So we don't have that interest rate exposure that maybe some others do.

As earnings continue to ramp from here.

Should get back into that target range low three times below four times over the next couple of years, particularly as we get past the.

The renovation Gainey ranch, and we see the lifted and Nashville, and Portland So.

And the reason really has less to do with.

Kind of the current interest rates and more just about how we want to run the company for our asset base and the level of activity that we usually undertake in terms of acquisitions and dispositions, so making sure we have significant levels of flexibility.

With regard to near term interest rates I will also just add as I mentioned in my comments that we are currently 100% fixed. So we don't have that interest rate exposure than maybe some others do we're actually in a really good position balance sheet wise and also having no maturities till really a year and a half from now also <unk>.

Atee Shaw: We're actually in a really good position balance sheet wise, and also having no maturities till really a year and a half from now positions us pretty well. Noted. Thank you. Thank you. The next question comes from Michael Bellisario with BEV. Please go ahead, Michael. Your line is now open. Thanks. Good afternoon, everyone.

<unk> is pretty well.

Noted thank you.

Thank you.

The next question comes from Michael Bellisario with Baird.

Please go ahead, Michael your line is now open.

Okay.

Thanks, Good afternoon, everyone.

Just wanted to.

Marcel Verbachs: I just want to stick on that same topic, sir. Please see the complete disclaimer at https://sites.google.com or at https://sites.google.com. Yeah, so I'll answer that really on both sides of the transaction equation, so both on acquisitions and dispositions. It really depends on what the opportunity set is on the acquisition side, and as you know, we haven't seen a kind of wide, kind of broad range of good acquisition opportunities over the last couple years.

I'll stick on that same topic served just capital allocation you didn't touch on dispositions in the prepared remarks.

I believe that that's a possibility this year as the transaction market and what's your thinking on asset sales. How are you thinking about which market switch assets. Among many what will you do with any sale proceeds from a follow up on David's question there.

Yes, so on the I'll answer that really on both sides of the transaction equation. So both on acquisitions and dispositions and it really depends on what the opportunity set is on the acquisition side and as you know we haven't seen.

Kind of a wide kind of a broad range of good acquisition opportunities over the last couple of years and we're hopeful that we're starting to see some signs there of improvement as it relates to potential acquisitions that could be appealing to us. So as you know go in going into COVID-19, and even a little bit out coming out of <unk>.

Marcel Verbachs: And we're hopeful that we're starting to see some signs of improvement as it relates to potential acquisitions that could be appealing to us. So, as you know, going into COVID and even a little bit coming out of COVID, the transaction side has been an important pillar for how we want to create shareholder value over time. So I would say that we will continue to look at both dispositions and acquisitions to drive future value. And as it relates to the dispositions, a lot of our prior dispositions have really been in light of potential additional capital expenditures, whether that's an appropriate, or we see an appropriate ROI on those kinds of potential projects. And I would look at that the same way as we've done historically.

With.

The transaction side has been in importance.

<unk>.

Pillar for how we want to create shareholder value over time, So I would say that we will continue to look at both dispositions and acquisitions to drive future value.

And as it relates to the dispositions.

A lot of our prior dispositions have really been in light of potential additional capital expenditures, whether thats what.

Would you see an appropriate ROI in those kind of.

Those kind of potential projects and.

I would.

I would look at at the same way as what we've done historically I think what our track record has been there is kind of what you could expect going forward that we will look at every.

Marcel Verbachs: I think what our track record has been there is kind of what you could expect going forward, that we will look at every hotel, you know, very carefully and do a very deep analysis, particularly when there are some additional CapEx needs, and to the extent that we don't feel the return will be there, that it might be the right time to sell some of those assets. I wouldn't expect any wholesale changes as it relates to dispositions. And certainly, we're going to remain very disciplined as it relates to potential acquisitions. And as you saw last year, we clearly felt that there was very significant value in our own portfolio, in our own stock, which made that a bigger priority for us on the capital allocation front than potential acquisitions that really were too expensive and not really out there enough for us to get excited about. That's helpful. And then just for Barry on Scottsdale, you mentioned Page has picked up. Please help us bring that up.

Hotel very carefully and do a very deep analysis, particularly when there are some additional capex needs.

To the extent that we don't feel the return will be iterative it might be dry time to sell some of those assets I wouldn't expect any wholesale changes as it relates to.

The dispositions and and certainly we're going to remain very disciplined as it relates to potential acquisitions.

And as you saw last year, we clearly felt that there was a very significant value in our own portfolio and in our own stock, which.

Which made that a bigger priority priority for us on the capital allocation front and potential acquisitions that really were too expensive and not really out there enough for us to get excited about.

Yeah.

Understood. That's helpful. And then just for Barry on Scottsdale, You mentioned the group booking pace has picked up.

Help us frame that up I don't know if thats.

Comparison of 2019, or maybe there is a different year, but how many group rooms or maybe booked in 2019, what do you think the upside <unk> upon stabilization.

Barry A. N. Bloom: I don't... How many group rooms? The website is upon stabilization. How should we think about the curve? https://www.patreon.com, Yeah.

How should we think about the curve.

Group bookings over the course of the renovation on completion.

Barry A. N. Bloom: Thanks, Mike. It's a really good question. I think it's a little early to really become that focused on it. What we're seeing is we're clearly seeing activity, a lot of activity for 25, and rates that are absolutely incredible, both in Q1 of 25, for Q1 of 25, and kind of throughout the rest of the year. But one of the things that we've seen in all the renovations we've done of this type is that it takes a lot of show and tell for a lot of the groups to really make the commitment and to really get rooms on the books. Right now, it's not a pretty property to tour, quite frankly. And as we move through the year and it becomes much more clear to the planners what the product is like, we expect the group base to ramp significantly over the course of the year.

How much higher are those ADR.

Excuse me on the group.

So far thanks.

Yes.

So really good question I think is a little early to really become that focused on it. What we're seeing is we're clearly seeing activity a lot of activity for 25 and rates that are.

Absolutely incredible.

In both in Q1.

<unk> of $4 25 for Q1 of 25 and kind of throughout the rest of the year, but one of the things that we've seen in all of the renovations. We've done of this type is that it takes a lot of of show and tell for larger groups truly make the commitment and to really get get rooms on the books right now, it's not a pretty property detour quite frankly and <unk>.

As we move through the year and it becomes much more clear to the planners what the practices like we expect group pace to ramp significantly over the course of the year, particularly $4 25.

We do have some pretty good business on the books for Q4 of 24 in this space that is not.

Being added to so the non Arizona ballroom the other smaller meeting spaces. We've continued to do through the renovation by maintaining about 300 rooms in inventory across the entire year, we've been able to capture a large number of small groups smaller groups through the hotel that has really helped us maintain at.

Kopinski as best we can and to help drive EBITDA and reduce the displacement during this year.

Okay.

Understood. Thank you.

Our next question comes from Austin, <unk> with Keybanc capital markets. Please go ahead Austin.

Yes. Thanks, good afternoon, just going back to the W. Nashville for a minute and really I guess in the context of <unk>.

Overall portfolio upside potential.

Do you guys think that the prior hotel EBITDA stabilization level that you underwrote is still achievable.

At the outset of the acquisition and I guess are there.

There any real headwinds you see that could see that.

Pushing that out I guess over over a long time longer time period like the supply that you identified here more recently.

Thanks, Austin and I think as we look at the property.

As I've said earlier wed obviously like to see that.

Kathryn a stabilization level, a little bit earlier than what we're seeing so far as we are thinking about the market longer term and as we're thinking about the ore at the levers that can be pool at the property and awareness hotel is positioned on can be positioned gulfport.

We still believe we can get to that range.

It's certainly going to take a little bit longer than we were hoping for that we were expecting to achieve when we underwrote the property.

It won't come as a big surprise to you, but clearly we still believe that the asset can get there and.

And it takes some time to kind of.

Change the strategy as it relates to Bulgaria explained as far as where we are on the group side and how we're really optimizing the room side and how that kind of plays into driving further food and beverage revenues. So.

As we sit here today like I said I think it's a lengthening of getting to the stabilized number book, we don't see a specific reason why it can't get to the range.

Okay. That's helpful and then Barry you've kind of highlighted in the past I think the.

Group bookings for the overall portfolio.

We're trending a little bit better in the first half of the year and you've continued to see sort of good short term bookings, but that's lengthening.

How does sort of the group setup.

For the year from a cadence perspective first half versus second half and what is sort of embedded in the guidance from a.

In the year for the year versus maybe what you had to do last year.

Yes, it's interesting we're definitely seeing the booking cycle lengthened.

Which which means were which would actually we think very positive because we're seeing a lot more business going on the books for the second.

The second year or the first next year. So we're seeing.

Real trend and some really good positive momentum in 2025 that quite frankly, we were sitting in the same place in 'twenty three we werent seeing for 2020 for the group is pretty balanced throughout the year, Although we view a little more upside in the latter half of the year than the first half of the year, but some of that is.

Based on.

Is some of the just some of the particulars in the portfolio in which properties are performing well we've got some issues. This year between Q3 and Q4 on the group side as it relates to the Jewish holidays.

But it's pretty steady.

Through the year in terms of front half versus back half.

Just just to refine that a little bit I mean is there any more significant kind of go get her in the year for the year assume this year relative to last year embedded in guidance or is it sort of a similar or even less amount and what you ended up achieving in 2023.

Okay. Thanks.

It's pretty comparable in for 24 versus 23.

Our next question comes from Ari Klein with BMO capital markets.

Please go ahead.

Thanks, and good afternoon, just going back to the high highest Scottsdale I think for the year, it's around the 50 basis point headwind.

Year to date I think it's been around 500 basis point headwind can you talk about the tailwind in the second half of the year.

Significant are they in.

I guess to the extent you can talk about.

Bridging the gap between where things are today in <unk> versus stabilized David.

That cadence look over the next few years, how long does it take to get there.

Yes, sure a great question.

So it is a pretty significant drag as you just pointed out in the first quarter in particular.

Probably on the order of magnitude of 500 basis points that moderates a bit in the second quarter, where it should be about a couple of hundred basis point drag and then in the back half. It's about a 300 basis point tailwind. So as I was mentioning in my upfront comments, you see a lot of variability in performance and that has to do.

Do with a couple of things I mean, one is.

The market was really strong last year in the first half.

In our prior to starting the renovation, we had the Super Bowl and really strong leisure and group demand.

We're coming off of that.

And then on top of that we've got the timing of the renovation where really the second half of last year was heavily impacted as as the first half of this year and when we get into the second half of this year, we really have a tailwind from a comparison perspective, so you've got a few moving parts there with regard to that that property and so.

Now hopefully the color on giving you helps a little bit in terms of how you think about kind of the cadence this year as it relates to revpar.

In terms of getting to low $40 million in terms of hotel EBITDA, which is our underwriting we think thats a couple of years post.

Commenced sort of wrapping up the renovation so we'll wrap up the renovation kind of the end very end of this year.

And it should take a couple of years given the group mix at the hotel to to get into that low $40 million range and we continue to be really confident about that based on kind of what we're seeing in the market. Some of the color Barry provided around what our key customers are telling us.

As well as how the renovation is starting to come together and how it is starting to look so I think those are the things that continue to give us confidence in the long term underwriting on that asset.

Thanks, and then maybe just capex outside of the high it's around $60 million.

For the year, how should we think about the level of spend.

Beyond this year once that project completed and maybe to the extent you can talk about.

Some some future projects.

Our significant that may be you cannot you might start to look at the Hyatt.

I mean I'll start on that one we had been spending on average about 70% to $75 million a year pre COVID-19 between kind of the usual MEP staff.

Typical stuff that we do as well as some ROI type projects now varied quite a bit based on acquisition. So sometimes we acquired assets that required capex like Avi RSC saw more elevated spending, particularly in P&L associated with that project, So I would say longer.

Term.

The portfolio, we should get back to that that range.

But again, there's going to be some lumpiness associated.

On transactions, what you are buying and selling and how that impacts capex and as well as.

Our ROI projects, which.

Really kind of fall in the cycle that an asset has as opposed to necessarily.

The overall cycle for the company so.

Okay.

Thanks.

Yes.

Okay.

Our next question comes from Dori Kesten with Wells Fargo. Please go ahead Gerry.

Thanks, Good afternoon.

As you think through the renovation in the portfolio that you've completed over the last several years, how much EBITDA upside will you estimate.

Interbank stabilized.

Yes, that's a great question Tori.

No.

We estimate about $25 million of upside from the renovations we've done over the last few years. This is excluding scottsdale that have yet to ramp for us.

And then Scottsdale, roughly another $25 million, so there's $50 million of upside.

From the Capex that we have done in the last few years and are currently doing this year.

And we expect that $50 million will take a few years again getting back to the earlier question on stabilization for Scottsdale, but.

The other projects as well, including the few projects that we had last year that they will take a little bit of time to stabilize so.

That's the overall target on stabilization from Capex spend.

This year than in the past few years.

So that 25 X Gainey ranch.

Okay.

25, <unk> 25 for all of the other Capex and then 25 for Gainey Ranch. So total of 50.

Got it Okay and then.

Net.

Is there an incremental EBITDA headwind this year for Gainey Ranch I wasn't sure Kevin will incremental conservatism Herceptin group bookings are.

EMEA opining about when the renovation complete.

No. Its about 14, it was about $14 million headwind last year, and it's about $14 million. This year in terms of EBITDA.

Loss due to disruption so.

It's the same level of disruption for the project now last year in 2023, we had some other projects rates of that so our aggregate level of disruption was $18 million. So.

It's $18 million disruption last year compared to primarily Gainey ranch this year at $14 million. So that's the $4 million benefit, but if youre just looking at Gainey ranch its 14% to 14 now again, the timing varies by quarter because of the timing of the.

<unk> and last year was much more second half disruption. This year is much more first half disruption but.

The number overall is the same.

And as these pointed out in your comments.

That's not that's not to say that that's the.

The number off of a kind of they're stabilized number because clearly.

We had a lot of really good business in the first five months of last year, So Danny range overall.

Would be down kind of absent the renovation as well so the $14 million is really the renovation disruption we're speaking of.

But as you know, it's kind of an asset.

We talked about earlier, and how we kind of get sort of upside going forward.

In the years that the market extremely well and in some ways was overly frothy, particularly in.

In 'twenty, two and also really in 'twenty three if we hadn't done the renovation the property would have been somewhere in the high 20 millions awareness going into COVID-19, it wasn't a low 20 millions and given kind of the condition of the asset over time.

Yes that was a more reasonable expectation of where in a normal year to property would produce done clearly the way. We're looking at is renovation as it is going to give us very significant upside over both what we kind of view it as a true kind of stabilized number and even some of the frothy years that we've seen over the last couple of years in the market.

Right no I appreciate that.

Sorry, what I was referring to is I thought last quarter. The expectation for 24 was that there would be a $12 million headwind and then it was 14 that was just that.

Spreads I was asking about.

Yes.

That's a good question I mean, two we just speak about the $12 million last quarter and we did talk at that point about the fact that we would have some additional disruption coming from some of the other the other capex that we're spending.

So our expectation at the time was that we would probably end up around somewhere around $14 million of total renovation disruption for the full year with.

With 12 of that coming from from Gainey Ranch as we sit here today, we think that thats, probably a little bit higher for Gainey Ranch then.

And less coming from any other projects. So the total of $14 million disruption is kind of similar to what we thought last quarter with a little bit more disruption from gainey ranch than we.

Then we projected last quarter.

Got it okay. Thank you.

Our next question comes from George <unk> with Oppenheimer.

Please go ahead.

Thank you. Good afternoon. This is Jonathan on for Tyler Thanks for taking our question.

Just one from me today, it's a multipart question on the common dividends any additional details you can share in terms of what factors are contributing to that decision to raise it why do you think this level is appropriate.

In the current environment and I'm also interested in your perspective on the bridge to returning to that prior payout ratio that Marcelo mentioned and kind of what you would need to see to get there.

Yes sure Great question, so on the dividend I think.

Why the increase.

I think that was the first part of your question.

One is.

Just looking at the.

Demand that we're seeing in the business as well as the company's earnings profile.

We have.

I have confidence in that and so it seemed at an appropriate time to recommend to the board to increase the dividend, which they agreed to do.

I think.

As we think about kind of the payout ratio.

The point in that comment was just to indicate that our expectation is that the bill.

We will continue to recover.

And we'll get back to that pre COVID-19 payout ratio level. There is no specific timeline, we want to articulate at this point, but just to indicate that that is the long term goal is to get back to that prior payout level.

Which was in the as I mentioned, the mid 60% range.

Okay.

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

Our next question comes from David Katz with Jefferies. Please go ahead David.

Alright, Thanks for letting me circle back I just want to.

Make sure we have this bridge properly.

If we were to sort of take your 24 guidance right, which includes $14 million of impact.

Right.

I'll take the remaining 11 of that notional 25 from Scottsdale.

And then the other 25% is totally on top of the 24 guidance or is there any of that 25 thats sort of in 'twenty four already.

Well some of it is in 'twenty four I think we didn't break it out with that level of detail, but certainly you are seeing some.

That 20 that 25 was off of last year.

Sounds good point I should have clarified that so that 25 was off of last year and certainly the three renovation projects. We did last year youre seeing lift this year in the numbers.

Not have kind of the breakout by year on that.

But it's something we can look to provide in the future.

But that certainly if there is a piece of that 25 this year.

Alright.

Theres some of that 25%.

And your 24 guidance already and we can venture owned gas Okay got it.

Yes.

Okay.

We have no further questions I'll hand back to Ms. Marcel robust for closing comments.

Thanks Emily.

Thanks, everyone for joining us today.

Yes.

Youre getting sort of tail end of our long earnings season. So we appreciate everyone's interest and questions today and look forward to.

To updating you over the next couple of quarters as we progress through some important projects, particularly Scottsdale.

And as you can tell we're very excited about the progress that we're making there. So we look forward to updating you on that next quarter.

Thank you everyone for joining us today. This concludes our call and you may now disconnect your lines.

Yeah.

Yes.

Okay.

Q4 2023 Xenia Hotels & Resorts Inc Earnings Call

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