Q1 2024 RLJ Lodging Trust Earnings Call

Operator: Welcome to the RLJ Lodging Trust first quarter 2024 earnings call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. I would now like to turn the call over to Nikhil Bhalla, RLJ Senior Vice President of Finance and Treasurer. Please go ahead.

Welcome to the R. L. J lodging Trust's first quarter 'twenty 'twenty four earnings call. As a reminder, all participants are in listen only mode and the conference is being recorded after the presentation. There will be an opportunity to ask questions. If anyone should require operator assistance during the conference. Please.

Darn zero on your telephone keypad I would now like to turn the call over to Nikhil Bhalla <unk> Senior Vice President Finance and Treasurer. Please go ahead. Thank.

Nikhil Bhalla: Thank you, Operator. Good morning, and welcome to RLJ Lodging Trust's 2024 First Quarter Earnings Call. On today's call, Leslie Hale, our President and Chief Executive Officer, will discuss key highlights for the quarter. Sean Mahoney, our Executive Vice President and Chief Financial Officer, will discuss the company's financial results. Tom Bardenett, our Chief Operating Officer, will be available for Q&A. Forward-looking statements made on this call are subject to numerous risks and uncertainties that may lead the company's actual results to differ materially from what has been communicated.

Nikhil Bhalla: Thank you operator.

Nikhil Bhalla: Good morning, and welcome to <unk> lodging Trust's 2024 first quarter earnings call.

Nikhil Bhalla: On today's call.

Nikhil Bhalla: Hale, our president and Chief Executive Officer.

Nikhil Bhalla: To discuss key highlights for the quarter.

Nikhil Bhalla: Sean Mahoney, our executive Vice President and Chief Financial Officer will discuss the company's financial results.

Nikhil Bhalla: Net chief operating officer will be available for Q&A.

Nikhil Bhalla: Looking statements made on this call.

Nikhil Bhalla: Subject to numerous risks and uncertainties that may lead the company's actual results to differ materially from what had been communicated.

Sean M. Mahoney: Factors that may impact the results of the company can be found in the company's 10-Q.

Sean M. Mahoney: Our reports filed with SEC.

Sean M. Mahoney: <unk> undertakes no obligation to update forward looking statements.

Nikhil Bhalla: Also as we discuss certain non-GAAP measures. It may be helpful to review the reconciliations to GAAP.

Nikhil Bhalla: Okay.

Nikhil Bhalla: I.

Nikhil Bhalla: Factors that may impact the results of the company can be found in the company's 10Q and other reports filed with the SEC. The company undertakes no obligation to update forward-looking statements. Also, as we discuss certain non-GAAP measures, it may be helpful to review the Reconciliations to GAAP located in our press release. I will now turn the call over to Leslie.

Nikhil Bhalla: I will now turn the call over to Leslie.

Leslie D. Hale: Thanks, Nikhil. Good morning everyone, and thank you for joining us today. We are pleased that our momentum from last year has continued, with our first quarter results once again exceeding the industry. These results were in line with our expectations, which anticipated the impact of the holiday shift in March. Against this backdrop, we were encouraged to see urban markets once again lead the way for the overall industry. During the first quarter, in addition to delivering REVPAR growth and growing our REVPAR index, we executed on a number of fronts, including making progress on our next wave of conversions, expanding our pipeline of conversions with the acquisition of the Wyndham-Boston Beacon Hill, executing multiple high-return ROI projects, and taking steps to further ladder our debt maturities.

Leslie: Thanks to kill.

Leslie: Everyone and thank you for joining us today.

Leslie: We are pleased that our momentum from last year has continued with our first quarter results once again exceeding the industry piece.

Leslie: These results were in line with our expectations, which anticipated the impact of the holiday shift in March.

Leslie: Against this backdrop, we were encouraged to see urban markets. Once again lead the way for the overall industry.

Leslie: During the first quarter in addition to delivering revpar growth and growing our Revpar index, we executed on a number of fronts, including making progress on our next wave of conversions expanding our pipeline of conversions with the acquisition of the Wyndham Boston Beacon Hill.

Leslie: Executing multiple high return ROI projects and taking steps to further ladder our debt maturities.

Leslie D. Hale: Overall, our relative outperformance during the first quarter continues to demonstrate our multiple channels of growth. With respect to our operating performance, our first quarter REP part increased by 1% over last year, primarily driven by an increase in occupancy. As we expected, our growth was constrained by the shift of Easter into March, which muted citywide and other group activity during the most significant month of the quarter. Additionally, cold and rainy weather in California and South Florida negatively impacted these markets during the quarter.

Leslie: Overall, our relative outperformance during the first quarter continues to demonstrate our multiple channels of growth.

Leslie: With respect to our operating performance, our first quarter Revpar increased by 1% over last year.

Leslie: Really driven by increase in occupancy as we expected our growth was constrained by the shift of Easter into March, which muted citywide and other group activity during the most significant month of the quarter.

Leslie: Additionally, cold and rainy weather in California, and South, Florida negatively impacted these markets during the quarter.

Leslie D. Hale: In light of this, we were pleased by our portfolio's REF PAR growth, which outperformed the industry by 80 basis points, and we also gained 110 basis points of market share, underscoring the growth profile of our portfolio. The growth in our portfolio was broad-based, with a number of our urban markets achieving mid- to high-single-digit REPR growth. Urban markets are continuing to benefit from robust group activity, improving inbound international demand, and, most notably, a steady improvement in corporate travel.

Leslie: In light of this we were pleased by our portfolio's revpar growth, which outperformed the industry by 80 basis points and we also gained 110 basis points of market share underscoring the growth profile of our portfolio.

Leslie: The growth in our portfolio was broad base with a number of our urban markets achieving mid to high single digit revpar growth.

Leslie: Urban markets are continuing to benefit from robust group activity, improving inbound international demand and most notably the steady improvement in corporate travel.

Leslie D. Hale: From a segmentation perspective, our business transient revenues outpace our other segments during the quarter, with BT achieving revenue growth of 13%, driven by a balanced contribution between occupancy and ADR. The recovery of business transient is benefiting from continued strength and travel from SMEs in addition to the broadening of corporate travel across industries such as consulting, technology, and financial services, which is being aided by the return to work office mandate. This improving corporate demand enabled our mid-week REF bar to grow by 2.4% during the quarter.

Leslie: From a segmentation perspective, our business transient revenues outpaced our other segments during the quarter.

Leslie: With BT, achieving revenue growth of 13% driven by our balanced contribution between occupancy and ADR.

Leslie: The recovery in business transient is benefiting from continued strength in travel from Smes edition to the broadening of corporate travel across industries, such as consulting technology and financial services, which is being aided by the return to work office mandates.

Leslie: It's improving corporate demand enabled our midweek revpar to grow by two 4% during the quarter.

Leslie D. Hale: Relative to group demand, the strong booking momentum from last year continued during January and February, which achieved robust revenue increases of 10% and 9%, respectively. The strength of demand led our Group ADR to increase by approximately 3% during the first quarter, despite a soft march.

Leslie: Relative to group demand.

Leslie: <unk> bookings momentum from last year continued during January and February which achieved robust revenue increases of 10% and 9% respectively.

Leslie: Strength of demand led our group ADR to increase by approximately 3% during the first quarter. Despite a soft March.

Leslie D. Hale: We expect group demand to remain strong for the remainder of the year, as evidenced by our full-year pace at 106%, with the third and fourth quarters being the strongest of this year. Leisure demand remains healthy, as demonstrated by our leisure revenues increasing by 2% during the first quarter, driven primarily by the strength of our urban leisure business, which increased by 3%. Urban leisure continues to be bolstered by a robust volume of social events, such as concerts and sporting events.

Leslie: We expect group demand remained strong for the remainder of the year as evidenced by our full year pace at 106%.

Leslie: The third and fourth quarters being the strongest of this year.

Leslie: Leisure demand remains healthy as demonstrated by our leisure revenues, increasing by 2% during the first quarter driven primarily by the strength of our urban leisure, which increased by 3%.

Leslie: Urban leisure continues to be bolstered by our robust volume.

Leslie: Shall events, such as concerts and sporting events.

Leslie D. Hale: Additionally, over spring break, R Leisure also benefited from our Sweet Mix, which represents 50% of our portfolio. Our top-line growth was amplified by 7.7% growth in our out-of-room spend, which was driven by the continuing success of our ROI initiatives, leading to total revenue growth of 3.1%. We are also encouraged by the improving operating expense landscape, with the growth of costs per occupied room continuing to decelerate. Our top-line growth translated to hotel EBITDA margins of 27.4%.

Leslie: Additionally over spring break our leisure also benefited from our sweet mix, which represents 50% of our portfolio.

Leslie: Our topline growth was amplified by our seven 7% growth in our auto room spend which was driven by the continuing success of our ROI initiatives, leading to total revenue growth of three 1%.

Leslie: We are also encouraged by the improving operating expense landscape with a growth of cost per occupied room continuing to decelerate.

Leslie: Our top line growth translated to hotel EBITDA margins of 27, 4%.

Leslie D. Hale: From a capital allocation perspective, we are seeing strong returns from our investment. During the first quarter, our conversions in Charleston, Mandalay Beach, and Santa Monica achieved 26.5% REV part growth. The strong ramp that these properties are achieving further bolsters our confidence and our ability to unlock significant value in our next wave of conversions. We remain on track to complete the conversion of the Doubletree Houston Medical Center. Hotel Tonell in New Orleans and Bankers Alley in Nashville this year.

Leslie: From a capital allocation perspective, we are seeing strong returns from our investments.

Leslie: During the first quarter, our conversions in Charleston, Mandalay Beach in Santa Monica achieved 26, 5% Revpar growth.

Leslie: The strong ramp that these properties are achieving further bolsters, our confidence and our ability to unlock significant value in our next wave of conversion.

Leslie: We remain on track to complete the conversion of the Doubletree Houston Medical Center.

Leslie: Hotel tow now in New Orleans, and the bankers Alley in Nashville This year.

Leslie D. Hale: Additionally, we are advancing on the planning of our conversion of the Wyndham-Pittsburgh University Center to a courtyard and the Renaissance Pittsburgh to Marriott's Autograph Collection, both of which will be delivered in 2025. Additionally, during the first quarter, we expanded our pipeline of conversion opportunities by acquiring the fee-simple interest in the Wyndham-Boston Beacon Hill. We have made great progress with our plans to unlock the embedded value at this hotel, which sits in an irreplaceable A-plus location surrounded by Mass General Hospital, which is undergoing a $1.8 billion expansion.

Leslie: Additionally, we are advancing on the planning of our conversion of the Wyndham Pittsburgh University Center to a courtyard and the Renaissance Pittsburgh to Marriott's autograph collection, both of which will be delivered in 2025.

Leslie: During the first quarter, we expanded our pipeline of conversion opportunities by acquiring the fee simple interest in the Wyndham Boston Beacon Hill.

Leslie: We have made great progress with our plans to unlock the embedded value at this hotel, which sits in an irreplaceable a plus location surrounded by mass General hospital and is undergoing a $1 8 billion dollar expansion.

Leslie D. Hale: We remain confident that we can unlock over 40% of EBITDA upside following the repositioning of this property. We expect this property to be included in our next phase of conversions and will give more color later this year.

Leslie: We remain confident that we can unlock over 40% of EBITDA upside following the repositioning of this property.

Leslie: We expect this property to be included in our next phase of conversions and we'll give more color later this year.

Leslie D. Hale: In addition to our large-scale conversions, we are unlocking additional embedded value across our portfolio by also prioritizing our investments in markets poised to outperform. Since the beginning of the year, we have been executing on a number of high-return ROI projects to increase out-of-room spending by reimagining and optimizing non-revenue-generating space. For example, at the Residence Inn in Bethesda, we took advantage of our rooftop with city views to create a new bar and entertainment space.

Leslie: In addition to our large scale conversions, we are unlocking additional embedded value across our portfolio. We're also prioritizing our investments in market is poised to outperform.

Leslie: Since the beginning of the year, we have been executing on a number of high return ROI projects to increase out of room spending by re imagining and optimizing non revenue generating space.

Leslie: For example at the <unk>.

Leslie: Rents in Bethesda, we took advantage of our rooftop with city views to create a new bar and entertainment space.

Leslie D. Hale: At the Embassy Suites LAX, we transformed the lobby, creating multifunctional social and small group meeting space. At the Doubletree Austin, located adjacent to the state capitol, we added new guest rooms and elevated the lobby bar. At the Double T Suites Orlando at Disney, we reimagined the lobby to incorporate a new, very profitable market. And, at the Embassy Suites Deerfield Beach Resort, we created a new indoor-outdoor oceanfront bar and added a new profit center in the form of a snack market.

Leslie: The embassy suites, OA X, we transformed a lobby, creating multi functional social and small group meeting space.

Leslie: At the Doubletree Austin located adjacent to the state capital, we added new Guestrooms and elevated a lobby bar.

Leslie D. Hale: The Doubletree suites Orlando at Disney we've re imagined the lobby to incorporate a new very profitable market.

Leslie: And at the Embassy suites, Deerfield Beach resort, we created a new indoor outdoor Ocean front bar and added a new profit center in the form of a sundries market.

Leslie D. Hale: Our group mix and banquet and catering revenues are already seeing the benefit of these space reconfiguration projects. We expect these ROI projects to continue to ramp through the remainder of this year and contribute to our total revenues, achieving growth ahead of REVPAR. In addition to our internal investments, our pipeline of external growth opportunities has continued to build. Our competitive advantage as an all-cash buyer is enabling us to build an actionable pipeline. That said, we will continue to maintain our discipline as we have demonstrated. As we look ahead, we are cognizant of the macroeconomic uncertainty that exists.

Leslie: Our group mix in banquet and catering revenues are already seeing the benefit of these space reconfiguration projects. We expect these ROI projects to continue to ramp through the remainder of this year and contribute to our total revenues achieving growth ahead of Revpar.

Leslie: In addition to our internal investments our pipeline of external growth opportunities has continued to build on.

Leslie D. Hale: Our competitive advantage is an all cash buyer is enabling us to build an actionable pipeline.

Leslie: That said, we will continue to maintain our discipline as we have demonstrated.

Leslie: As we look ahead, we are cognizant of the macroeconomic uncertainty that exist. However, we remain constructive on the outlook for lodging fundamentals for the rest of the year.

Leslie D. Hale: However, we remain constructive on the outlook for lodging fundamentals for the rest of the year. Our outlook is supported by the continued momentum and the recovery of business transient, the outsized growth trends in urban markets, especially those with healthy city-wise, leisure attractions, and special events, and exposure to inbound international travel. We believe that the momentum in these segments should allow urban markets to continue to outperform the industry. For the second quarter, we expect Red Park Road to sequentially improve from the first quarter.

Leslie D. Hale: Our outlook is supported by the continued momentum in the recovery in business transient the outsize growth trends in urban markets, especially those with healthy citywide leisure attractions special events and exposure to inbound international travel.

Leslie D. Hale: We believe that the momentum in these segments should allow urban markets to continue to outperform the industry.

Leslie D. Hale: For the second quarter, we expect revpar growth to sequentially improve from the first quarter.

Leslie D. Hale: May is forecast to be the strongest month of the quarter, given robust citywide activity in a number of our markets, such as Boston, Washington, D.C., Southern California, as well as our Louisville market, which will benefit from the 150th anniversary of the Kentucky Derby.

Leslie: May is forecast to be the strongest month of the quarter given robust citywide activity in a number of our markets such as Boston, Washington, D C Southern California, as well as our Louisville market, which will benefit from the 150th anniversary of the Kentucky Derby.

Leslie D. Hale: As we move into the second half of the year, we expect Red Park growth to strengthen further due to citywide calendars and the location of many large-scale events. This will be favorable to our portfolio given our footprint in markets such as Boston, which should continue to benefit from city-wise in addition to robust business and international travel, supported by the growth in financial services, biotech, and education. Southern California should benefit from a healthy citywide calendar, growth from our conversions in Santa Monica and Mandalay Beach, and improving business transient demand from aerospace and a backlog of demand from Hollywood-related industries, as well as increased inbound international travel, especially from Asia, and Washington, D.C., will benefit from a strong citywide calendar in the second half of the year.

Leslie: As we move into the second half of the year, we expect revpar growth to strengthen further due.

Leslie: See the citywide calendars and the location of many large scale events.

Leslie D. Hale: This will be favorable to our portfolio given our footprint in markets, such as Boston, which should continue to benefit from city Wise. In addition to robust business in international travel supported by the growth in financial services biotech and education.

Southern California should benefit from a healthy citywide calendar growth from our conversions in Santa Monica, and Mandalay Beach, and improving business transient demand from aerospace and a backlog of demand from Hollywood related industries as well as increased inbound international travel, especially from Asia.

Leslie D. Hale: And Washington D C will benefit from a strong citywide calendar in the second half of the year collectively this should allow us to continue to exceed industry growth.

Leslie D. Hale: Collectively, this should allow us to continue to exceed industry growth. Longer term, we remain optimistic about the trajectory of lodging fundamentals, which should benefit from growth in all segments of demand, given the ongoing consumer preference for experiences, especially against the backdrop of an elongated period of limited new supply. Relative to these dynamics, our urban-centric portfolio is well positioned. Sean.

Leslie D. Hale: Longer term, we remain optimistic about the trajectory of lodging fundamentals, which should benefit from growth in all segments of demand given the ongoing consumer preferences towards experiences, especially against the backdrop of an elongated period of limited new supply.

Leslie D. Hale: Relative to these dynamics, our urban centric portfolio is well positioned.

Leslie D. Hale: I'll now turn the call over to Sean Sean.

Sean M. Mahoney: Thanks Leslie. To start, our comparable numbers include our 96 hotels owned throughout the first quarter. Our reported corporate adjusted EVDA and FFO include operating results from all sold and acquired hotels during RLJ's ownership period. As Leslie said, we were pleased to report solid first quarter operating results, which were in line with our expectations and demonstrated the strength of our high-quality, urban-centric portfolio. Our first quarter REPFAR growth of 1% was driven by a 1.2% increase in occupancy, which was slightly offset by a 0.1% decline in AVR. First quarter occupancy was 69.3%.

Sean: Thanks, largely to start our comparable numbers include our 96 hotels throughout the first quarter.

Sean M. Mahoney: Our reported corporate adjusted EBITDA and <unk> include operating results from all sold and acquired hotels during <unk> ownership period.

Sean M. Mahoney: As Leslie said, we were pleased to report solid first quarter operating results, which were in line with our expectation and demonstrated the strength of our high quality urban centric portfolio.

Sean M. Mahoney: Our first quarter Revpar growth of 1% was driven by a one 2% increase in occupancy, which was slightly offset by a 0.1% decline in ADR.

Sean M. Mahoney: First quarter occupancy was 69, 3%.

Sean M. Mahoney: The average daily rate was $199, and REVPAR was $138. As noted, our business transient and midweek outperformed; first quarter business transient REV PAR grew 11.6% above 2023, including ADR growth of 5% and occupancy growth of 7%. The strength of business transient was demonstrated by our weekday REPFAR growth of 2.4% above 2023, which was primarily driven by occupancy gains. Rampart growth remained healthy in many of our urban markets, including Boston at 12%. Houston CBD at 9%, Indianapolis at 17%, San Francisco at 5%, San Diego at 8%, and New York at 5%.

Sean M. Mahoney: Average daily rate was $199 and Revpar was $138.

Sean M. Mahoney: As was noted our business transient and midweek outperformed <unk>.

Sean M. Mahoney: First quarter business transient Revpar grew 11, 6% above 2023 <unk>.

Sean M. Mahoney: Including ADR growth of 5% and occupancy growth of 7%.

Sean M. Mahoney: The strength in business transient was demonstrated by a weekday revpar growth of two 4% above 2023, which was primarily driven by occupancy gains.

Sean M. Mahoney: Revpar growth remained healthy in many of our urban markets, including Boston at 12%.

Sean M. Mahoney: Houston CBD at 9%.

Sean M. Mahoney: Indianapolis at 17%.

Sean M. Mahoney: San Francisco at 5%.

Sean M. Mahoney: San Diego at 8%.

Sean M. Mahoney: In New York at 5%.

Sean M. Mahoney: Monthly red part growth during the first quarter was 5.8% in January, 0.5% in February, and declined 1.9% in March, primarily due to Easter timing. Total first quarter revenue growth benefited from continued out-of-room spend and increased 3.1% for the first quarter, including 6.2% in January, 6.1% in February, which benefited from an extra leap year day, and declined 1.3% in March. Turning to the current operating cost environment, inflationary pressures continued to normalize during the first quarter.

Sean M. Mahoney: Monthly Revpar growth during the first quarter was five 8% in January.

Sean M. Mahoney: <unk>, 5% in February and declined one 9% in March.

Sean M. Mahoney: Merrily due to Easter timing.

Sean M. Mahoney: Total first quarter revenue growth benefited from continued out of room spend and increased three 1% for the first quarter.

Sean M. Mahoney: Including six 2% in January six 1% in February which benefited from an extra leap year day and declined one 3% in March.

Sean M. Mahoney: Turning to the current operating cost environment inflationary pressures continue to normalize during the first quarter.

Sean M. Mahoney: On a per occupied room basis, total hotel operating cost growth was limited to 2.9%, which was 50 basis points lower than the fourth quarter, underscoring the benefits of our portfolio construct and our initiatives to redefine our operating cost model. Drilling down further into hotel operating expenses, fixed costs, such as insurance and property taxes, were the most significant driver of the year-over-year increases in hotel operating expenses, increasing 15% during the first quarter. The increases in fixed costs are impacting most industries and are not specific to the lodging industry.

Sean M. Mahoney: On a per occupied room basis.

Sean M. Mahoney: Total hotel operating cost growth was limited to two 9%.

Sean M. Mahoney: Which was 50 basis points lower than fourth quarter.

Sean M. Mahoney: Underscoring the benefits of our portfolio construct and our initiatives to redefine our operating cost model.

Sean M. Mahoney: Drilling down further into hotel operating expenses fixed cost such as insurance and property taxes were the most significant driver of the year over year increases in hotel operating expenses.

Sean M. Mahoney: Increasing 15% during the first quarter.

Sean M. Mahoney: The increases in fixed costs are impacting most industries and are not specific to the logic industry.

Sean M. Mahoney: We are encouraged by the improving trends in our more controllable variable hotel operating costs, which grew 4% above 2023.

Sean M. Mahoney: We are encouraged by the improving trends in our more controllable, bearable hotel operating costs, which grew 4% above 2023 or only 1.6% on a per-occupied room basis and represented sequential improvement of 210 basis points and 70 basis points, respectively, from the fourth quarter. There are many factors that influence these positive results, with the most significant contributors being the successful restructuring of many of our third-party operating agreements and our lean operating model.

Sean M. Mahoney: Or only one 6% on a per occupied room basis.

Sean M. Mahoney: And represented sequential improvement of 210 basis points, and 70 basis points, respectively from the fourth quarter.

Sean M. Mahoney: There are many factors that influence these positive results.

Sean M. Mahoney: With the most significant contributors being the successful restructuring of many of our third party operating agreements and our lean operating model.

Sean M. Mahoney: During the first quarter, our portfolio achieved hotel EBITDA of $88.9 million and hotel EBITDA margins of 27.4%. We were pleased with our operating margin performance, which was only 152 basis points lower than the comparable quarter of 2023, despite continued cost pressures. Turning to the bottom line, our first quarter adjusted EBITDA was $79.6 million, and adjusted FFO per diluted share was $0.33. We continue actively managing our balance sheet to create additional flexibility and further lower our cost of capital.

Sean M. Mahoney: During the first quarter, our portfolio achieved hotel EBITDA of $88 $9 million and hotel EBITDA margins of 27, 4%.

Sean M. Mahoney: We were pleased with our operating margin performance, which was only 152 basis points lower than the comparable quarter of 2023, Despite continued cost pressures.

Sean M. Mahoney: Turning to the bottom line, our first quarter adjusted EBITDA was $79 $6 million and adjusted <unk> per diluted share was 33.

Sean M. Mahoney: We continue actively managing our balance sheet to create additional flexibility and further lower our cost of capital.

Sean M. Mahoney: Early in the second quarter, we addressed our 2024 maturities. Today, our balance sheet is well positioned, with $400 million available under our corporate revolver. Our current weighted average maturity is approximately 3.4 years, and 88 of our 96 hotels are unencumbered by debt. We ended the first quarter with an attractive weighted average interest rate of 4.29%, and 82% of debt was either fixed or hedged. As it relates to our liquidity, we ended the quarter with approximately $350 million of unrestricted cash, $600 million of availability on our corporate revolver, and $2.2 billion of debt.

Sean M. Mahoney: Early in the second quarter, we addressed our 2024 maturities.

Sean M. Mahoney: Today, our balance sheet is well positioned so it's $400 million available under our corporate revolver.

Sean M. Mahoney: Our current weighted average maturity is approximately three four years and 88 of our 96 hotels are unencumbered by debt.

Sean M. Mahoney: We ended the first quarter with an attractive weighted average interest rate of 429% and.

Sean M. Mahoney: And 82% of debt either fixed or hedged.

Sean M. Mahoney: As it relates to our liquidity, we ended the quarter with approximately $350 million of unrestricted cash $600 million of availability on our corporate revolver.

Sean M. Mahoney: $2 $2 billion of debt.

Sean M. Mahoney: Yeah.

Sean M. Mahoney: With respect to capital allocation, we remain committed to returning capital to shareholders through dividends while investing in ROI projects, opportunistically buying back shares, and selectively pursuing acquisitions. Our current quarterly common dividend is $0.10 per share, which is well covered and supported by our free cash flow.

Sean M. Mahoney: With respect to capital allocation, we remain committed to returning capital to shareholders through dividends.

Sean M. Mahoney: Investing in ROI projects, Opportunistically buying back shares and selectively pursuing acquisitions.

Sean M. Mahoney: Our current quarterly common dividend is <unk> <unk> per share, which is well covered and supported by our free cash flow.

Sean M. Mahoney: We will continue making prudent capital allocation decisions to position our portfolio to drive results during the entire lodging cycle while monitoring the financing markets to identify additional opportunities to improve the laddering of our maturities, reduce our weighted average cost of debt, and increase our overall balance sheet flexibility. Turning to our outlook, Based on our current view, we are reaffirming our full year 2024 guidance. It assumes the continuation of the current operating and macroeconomic environment for the full year 2024.

Sean M. Mahoney: We will continue making prudent capital allocation decisions to position our portfolio to drive results during the entire lodging cycle, while monitoring the financing markets to identify additional opportunities to improve to ladder our maturities.

Sean M. Mahoney: Reduce our weighted average cost of debt and increase our overall balance sheet flexibility.

Sean M. Mahoney: Turning to our outlook based on our current view, we are reaffirming our full year 2020 for guidance. It assumes the continuation of the current operating and macroeconomic environment.

Sean M. Mahoney: For the full year 2024, we still expect comparable revpar growth between two 5% and five 5%.

Sean M. Mahoney: We still expect comparable REP bar growth between two and a half percent and five and a half percent, and comparable Hotel Ibiza growth between $395 million and $425 million. Corporate adjusted EBITDA between $360 million and $390 million, and adjusted FFO per diluted share between $1.55 and $1.75. Our outlook assumes no additional acquisitions, dispositions, refinancing, or share purchases. We still estimate 2024 RLJ capital expenditures will be in the range of $100 million to $120 million, net issuance expense will be in the range of $91 million to $93 million, and cash corporate G&A will be in the range of $35 million to $36 million.

Sean M. Mahoney: Comparable hotel EBITDA between $395 million and $425 million.

Sean M. Mahoney: Corporate adjusted EBITDA between $360 million and $390 million and adjusted <unk> per diluted share between $1 55, and $1 75.

Sean M. Mahoney: Our outlook assumes no additional acquisitions dispositions refinancings or share repurchases.

Sean M. Mahoney: We still estimate 2024 R O J capital expenditures will be in the range of $100 million to $120 million.

Sean M. Mahoney: Net interest expense will be in the range of $91 million and $93 million in cash corporate G&A will be in the range of $35 million to $36 million with.

Sean M. Mahoney: With respect to the second quarter, we expect our RETPAR growth to be below the midpoint of the full year outlook range due to softness in April RETPAR given the negative impact of Passover on group demand during the second half of the month. Finally, please refer to the supplemental information, which includes comparable 2023 quarterly and annual operating results for our 96 hotel portfolio. Thank you, and this concludes our prepared remarks. We will now open the line for Q&A. Operator.

Sean M. Mahoney: With respect to the second quarter, we expect our revpar growth to be below the midpoint of the full year outlook range due to softness in April revpar, given the negative impact of Passover on group demand during the second half of the month.

Sean M. Mahoney: Finally, please refer to the supplemental information, which includes comparable 2023 quarterly and annual operating results for our 96 hotel portfolio.

Sean M. Mahoney: Thank you and this concludes our prepared remarks, we will now open the line for Q&A operator.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Your first question comes from Michael Bellisario with Baird. Please go ahead.

Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment, it may be necessary to pick up.

Operator: Your handset before pressing the star Kiss. Your first question comes from Michael Bellisario with Baird. Please go ahead.

Michael Joseph Bellisario: Good morning everyone. Good morning Mike. First question is for Sean, just on the debt market, maybe why use the line of credit versus something more permanent to repay the CMBS loan that was maturing? Maybe just, you know, at a high level, what was your philosophy there and the economic benefit of doing so?

Michael Joseph Bellisario: Good morning, Good morning, Mike.

Sean M. Mahoney: In short, the answer is that the line draw was the most efficient source of capital that we had. We ran a process and obtained quotes from multiple debt sources during the first quarter, and we concluded, while the other markets are open and actually efficient, from an overall cost of debt and a cost of borrowing perspective, the line, which still has three years remaining on its initial tenor and was recast last year, was the most efficient use of capital.

Michael Joseph Bellisario: Last question for Sean just on the debt market.

Sean M. Mahoney: Why use the line of credit versus something more permanent to repay will see MBS bond that was maturing maybe just high.

Sean M. Mahoney: A high level what was the philosophy there.

Sean M. Mahoney: Another benefit of doing so.

Speaker Change: Sure. Thanks, Mike.

Sean M. Mahoney: In short the answer is is that deadline draws the most efficient source of capital that we had we ran a process.

Sean M. Mahoney: And obtain quotes from multiple debt sources.

Sean M. Mahoney: You know at the door.

Sean M. Mahoney: During the first quarter and we concluded a while the other markets are open and actually efficient from an overall cost of debt and our cost of borrowing perspective, the line, which still has three years remaining of initial tenor.

Sean M. Mahoney: And was recast last year was the most efficient use of capital and it would save us on an annual basis, you know several million dollars of interest rate savings by by by doing that I think as we look forward, we acknowledge that the line.

Sean M. Mahoney: It would save us, on an annual basis, several million dollars in interest rate savings by doing that. I think, as we look forward, we should acknowledge that the line was a vehicle in light of the current financing markets. We will look to peg out that financing sometime later this year or early next year is how we're thinking about it, but it's going to be based on how the credit markets evolve. We have preserved our optionality to do that.

Sean M. Mahoney: Is is what was the vehicle in light of the current financing markets, we will look.

Sean M. Mahoney: Paramount that financing you know sometime later this year early next year is how we're thinking about it but it can be based on how that on how the credit markets evolve, but we preserved our optionality to do that.

Speaker Change: Understood. That's helpful. And then just switching gears, maybe a bigger picture question on Capex.

Michael Joseph Bellisario: And then just switching gears, maybe a bigger picture question on CapEx. First, on the recurring front for properties, maybe where are costs today, how much have they moved versus either 2019 levels or compared to a year ago, for example, how are you thinking about when and where to renovate? And then, similarly, for your conversions, are renovation costs being higher impacting your underwriting or return expectations at all?

Thomas J. Bardenett: Thanks.

Thomas J. Bardenett: First on the recurring fronts for properties anywhere our costs today, how much of that goes versus either 2019 levels are compared to a year ago for example.

Thomas J. Bardenett: Or are you thinking about when and where to renovate and similarly for your conversions are renovation costs being higher impacting your underwriting or return expectations at all.

Thomas J. Bardenett: Hey Mike, we'll tag team on this question. I would say that on the renovation side, I actually find your question interesting. I would say a year ago, we were eating into our contingency on most projects and that more recently, in the last three quarters or so, we've been getting our contingency back, which means that the cost of renovations has stabilized from a standpoint of inflationary pressures around inputs and labor relative to our renovation pool. So we feel good about the way we've been estimating and how they've been performing.

Thomas J. Bardenett: Hey, Mike what will tag team on this question I would say that on the renovation side I actually.

Thomas J. Bardenett: Find your question interesting I would say a year ago, we were eating into our contingency on most projects in that you know more recently in the last sort of three quarters or so.

Thomas J. Bardenett: We've been getting a contingency back which means that the cost of renovations a.

Thomas J. Bardenett: Have stabilized and you know from a standpoint of inflationary pressures around inputs and labor relative to our renovation pool. So we feel good about the way, we've been estimating and how they've been performing.

Thomas J. Bardenett: The things that are driving that are obviously the supply chain and inflationary impact have waned, one. The second is that our contractors and subcontractors are more hungry today. The labor issues that they dealt with getting bodies in place have waned, which has allowed them to be much more competitive in how they're bidding. And then third, we've been able to leverage our scale from our design and construction team such that we are a preferred bidder, if you will, for this work. And so we've used all of those things, which has translated into a lower cost for our renovation.

Mike: And the things that are driving that as obviously the supply chain and inflationary impact has waned is one the second is that.

Thomas J. Bardenett: Our our contractors and subcontractors are.

Thomas J. Bardenett: Our more hungry today right the labor issues that they've dealt with getting bodies in place has waned, which has allowed them to be much more competitive and how they are bidding and then third we've been able to leverage our scale from our design and construction team such that we are a preferred.

Thomas J. Bardenett: You know better if you will for this work and so we've used all of those things, which is translated into lower cost for our IDE for our renovations.

Thomas J. Bardenett: And lastly, Mike, the choices in regards to where we've spent dollars. I think if you look at Leslie's prepared remarks, you'll see those are growth markets. And where we've, you know, really allocated dollars is where we see ROI opportunities, not just the conversions, but those atrium evolutions, opportunities where we can create meeting space and have more banquet sales in addition to group mix. So that's where we're thinking about allocating dollars. And I think you'll see that in our ROIs as we continue to have growth above and beyond just the conversions that we're doing. Yeah, and I think we've outlined that before.

Thomas J. Bardenett: And lastly, Mike the choices in regards to where we've spent dollars I think if you look at last night's prepared remarks, youll see those are growth markets.

Thomas J. Bardenett: And where are we really allocated dollars is where we see ROI opportunities not just the conversions, but those Adrian rebel evolution.

Thomas J. Bardenett: Opportunities, where we can create meeting space.

Thomas J. Bardenett: Have more banquet sales in addition to group mix. So that's where we are thinking about allocating dollars and I think youll see that in our rois as we continue to have growth above and beyond just the conversions that we're doing.

Thomas J. Bardenett: I think we've outlined on prior calls that we go through a very robust prioritization of spend on our conversions. We have a very similar process for renovations, to Tom's point, around prioritizing renovation dollars in the highest return markets. The other thing is that we've been capturing the trend around activity that's going to drive out-of-room spend. As you've seen in our first quarter results and our results last year, we are continuing to prioritize capital that is going to maximize out-of-room spend because we think that has tremendous returns associated with it.

Thomas J. Bardenett: And then I think we've outlined on prior calls that we go through a very robust.

Thomas J. Bardenett: Our organization of Av.

Thomas J. Bardenett: Spend on our on our conversions, we have a very similar process for renovations to Toms point around prioritizing renova.

Thomas J. Bardenett: The renovation dollars that may highest return markets. The other thing is that we've been capturing that trend around.

Thomas J. Bardenett: Activity, that's going to drive out of room spend.

Thomas J. Bardenett: Yeah.

Thomas J. Bardenett: As you've seen that in our at our first quarter results and our results last year. We are continuing to prioritize capital that is going to maximize out of room spend because we think that has.

Thomas J. Bardenett: So tremendous returns associated with it.

Thomas J. Bardenett: Okay.

Michael Joseph Bellisario: That's all very helpful. Thank you.

Speaker Change: That's all helpful. Thank you.

Michael Joseph Bellisario: Next question caller Batori with Oppenheimer <unk> Company. Please go ahead.

Tyler Anton Batory: Next question: Tyler Batory with Oppenheimer and Company. Please go ahead.

Tyler Anton Batory: Thank you. Good morning, everyone.

Tyler Anton Batory: Well. Thank you good morning, everyone.

Tyler Anton Batory: I really want to dive into the commentary around April and what Youre seeing in Q2 overall I'm sorry, if I missed this but can you tell us what April revpar was and it sounded like from the commentary April maybe accomplish you maybe something going on with the group business, but there's a lot of concern in the market about just the health of the consumer.

Leslie D. Hale: I really want to dive into the commentary on April and what you're seeing Q2 overall. Sorry if I missed this, but can you tell us what April's RevPAR was? And it sounded like from the commentary, April, maybe a comp issue, maybe something going on with group business, but there's a lot of concern in the market about just the health of the consumer broadly and what's going on with leisure travel. So if you could just touch on what you're seeing right now, just kind of help us think about a little bit more what's driving some of the softness.

Leslie D. Hale: Broadly what's going on with leisure travel. So you could just touch on what you're seeing right now I'm just kind of help us think about you know a little bit more what's driving some of the softness in April.

Leslie D. Hale: Sure. So there's a lot to address in your question, Tyler, so I'm going to try to address it all. First, let me just say this more broadly, which is that we're not seeing anything today that changes our view of the cadence for the year. And so your question about April. Our April, we're still closing the books, but it's going to be sort of flat to slightly down. But you really have to deconstruct April. And if you look at the first half of April, April was relatively strong. All the segments performed well.

Speaker Change: Yes, sure. So theres a lot impacting your question tell us how many kind of dress at all yeah first of all let me just say this more broadly which is that there were not seeing anything today that changes our view of the cadence for the year and so your question on April or April.

Leslie D. Hale: Still closing the books, but it can be sort of flat to slightly down, but you really have to deconstruct April and if you look the first half of the April April was a relatively strong all the segments performed well when you look at the back half of April our group was clearly impacted by by Passover.

Leslie D. Hale: When you look at the back half of April, the group was clearly impacted by Passover, and that obviously had an impact on us for the month of April. But we don't believe, based on how the first half of the month performed, there's any read-through on underlining fundamentals. And when we deconstruct the actual performance of April, we see in our preliminary numbers that demand is actually up, but rate was down, and that makes sense because group is our highest rated segment today, and that's what was impacted.

Leslie D. Hale: Our and and that obviously had an impact on us for for the month of April but we don't believe based on how the first half of the month perform there's any read through on underlying fundamentals and when we deconstruct. The actual performance of April Youll see in our preliminary numbers that demand is actually up.

Leslie D. Hale: Rate was down and that makes sense because group is our highest rate of segment today and that's what was impacted.

Leslie D. Hale: But when we look at the cadence for the year based on the current trends we see, there's no change in our view. We still expect Q1 to be the slowest quarter of the year. We expect Q2 to be better than Q1. However, as we mentioned in our prepared remarks, we do expect Q2 to be below the midpoint of our range because of April. But we are seeing the trends shaping up for May for re-acceleration based on May's normal pattern and also because of our footprint.

Leslie D. Hale: But when we look at the cadence for the year based on the current trends. We say we see there is no change in our view, we still expect Q1 to be the slowest quarter of the year, we expect Q2 to be better than Q1, as we mentioned in our prepared remarks, we do expect Q2 to be below the midpoint of our range.

Leslie D. Hale: Because of April, but we are seeing the trends shaping up for me Hum for Reacceleration.

Leslie D. Hale: Just on amaze normal pattern, but also because of our footprint and we talked about in prepared remarks number of markets like Louisville, which is going to benefit from the Kentucky Derby, Tom can give some more color on some other markets are and then we expect June to be healthy as well as you move into the summer when we look at group third and fourth quarter are expected.

Leslie D. Hale: We talked about in prepared remarks a number of markets like Louisville, which is going to benefit from the Kentucky Derby, Tompkins, and some other markets, and then we expect June to be healthy as well as we move into the summer. When we look at the group, the third and fourth quarters are expected to be the strongest quarters for us. So we still expect the same strength in the back half of the year as we had at the beginning of the year on that. What I would say, though, is that we're very sober about your point about the consumer.

Leslie D. Hale: To be the strongest quarters for us and so we still expect the same strength in the back half of the year as we as we has had at the beginning of the year you know on that what I would say, though is is that were very silver you know about your point of on the consumer you.

Leslie D. Hale: The fact of the matter is that the Fed is trying to slow the economy. We see that reflected in the lower end of the consumer spectrum, whether it's in the form of their spending, their credit, and in what's happening in the hotel industry. If the Fed is successful in slowing the economy, travel will not be immune to the impact of that.

Leslie D. Hale: You know the fact of the matter is is that the fed is trying to slow the economy, we see that reflected in the lower end of the consumer spectrum, whether it's in the form of their spending their credit and or what's happening in the economy sector for hotels.

Leslie D. Hale: If the fed is successful and slowing economy travel will not be immune to the impact of that having said that we're not seeing it in our numbers and the trends that we see today and that's also supported by the fact that the fed Didnt taken action. Most recently you know on that so and in terms of what we are.

Leslie D. Hale: Having said that, we're not seeing it in our numbers and the trends that we see today, and that's also supported by the fact that the Fed didn't take any action most recently on that. In terms of what we are seeing, we are seeing BT continue to steadily improve. It was up 12 points for us in the first quarter.

Leslie D. Hale: We are seeing <unk> continue to steadily improve it was up 12 points for us in the first quarter, we're seeing a group remains strong our paces at 106% with third and fourth quarter being the strongest month on that we're seeing.

Leslie D. Hale: We're seeing group remain strong. Our pace is at 106 percent, with the third and fourth quarter being the strongest months on that. We're seeing urban leisure remain strong. Our leisure business was up 2 percent in the first quarter, while urban leisure was up 3 percent relative to that.

Leslie D. Hale: Urban leisure remains strong our leisure was up 2% in the first quarter urban leisure was up 3% you know relative to that.

Leslie D. Hale: So we're monitoring it this real time, you know perspective, we do have a transit but transient portfolio.

Leslie D. Hale: We're monitoring it, this real-time perspective. We do have a transient portfolio, but by and large, depending on the success of the Fed, it could have an impact on where we land within our range, but we're not seeing that today. There's nothing today that we see that changes our cadence or changes our view on the strength of the back half of the year. And then, Tyler, I think we still remain confident that our portfolio, as it has demonstrated over the last year and in the first quarter, will continue to outperform the industry. And I think that's the baseline takeaway, yeah. Okay, great commentary there. I think I asked about four questions in this one, so I'll pass. Next question, Austin Wurschmidt with KeyBank Capital Markets, please go ahead.

Leslie D. Hale: But by and large depending on his successor.

Leslie D. Hale: Fed it could have an impact on where we land within our range, but we're not seeing that today. So there's nothing today that we see that changes our cadence nor changes our view on the strength of the back half of the year.

Austin Todd Wurschmidt: And then wrapping all of that out.

Leslie D. Hale: Yeah, Tyler I think we still remain confident that our portfolio and that's demonstrated over the last year and ended the first quarter will continue to outperform the industry and I think that's the baseline takeaway yeah.

Austin Todd Wurschmidt: Okay, great Great commentary, there I think I asked about four questions in one so I'll pass it all thank you.

Leslie D. Hale: Okay.

Austin Todd Wurschmidt: Next question Austin, <unk> with Keybanc capital markets. Please go ahead.

Austin Todd Wurschmidt: Josh Friedland on for Austin. Just wondering, given the limited visibility and recent trends.

Leslie D. Hale: It's Joshua <unk> on for Austin.

Josh Friedland: I was just wondering given the limited visibility in recent trends how comfortable are you with the acceleration implied in the Revpar guidance.

Josh Friedland: But I would say that.

Leslie D. Hale: I would say that our portfolio is indexed to urban, and urban is indexed to BT.

Josh Friedland: Our portfolio is index to urban urban is index to be T. The strength that we're seeing in <unk> is going to play a role and you know our cadence for the year, but urban is benefiting from all segments right now as I've mentioned before VT contingent.

Leslie D. Hale: The strength that we're seeing in BT is going to play a role in our cadence for the year, but urban is benefiting from all segments right now. As I mentioned before, BT continues to steadily improve, the group remains robust, and urban leisure is healthy. In addition to our conversions, which we outlined in our prepared remarks, we're going to benefit from that as well as our overall footprint. I would say to you that, based upon what we know today and what we're seeing, we've reaffirmed our range. We've looked at a variety of different scenarios and different outcomes, and those scenarios still fit within the range that we provided.

Leslie D. Hale: The improved group remains robust and urban leisure is healthy in addition to our conversions, which we outlined in our prepared remarks, I'm, we're going to benefit from that as well in our overall footprint and so I would say to you that you know based upon what we know today and what we're seeing.

Leslie D. Hale: You know we've reaffirmed our range, we looked at a variety of different scenarios.

Leslie D. Hale: And different outcomes and no scenario still fit within the range that we provided.

Speaker Change: Alright. Thank you that's helpful.

Leslie D. Hale: Just wondering how much of a revpar benefit could you potentially see from any incremental.

Leslie D. Hale: International inbound in any markets you would call out there.

Thomas J. Bardenett: That's helpful, markets you would call out. Yeah, I would say that when we look at our footprint, and I'll let Tom give some color on Asia, but when we look at our footprint, New York, San Francisco, and South Florida are typically our markets that have the strongest amount of international business. In aggregate, for our footprint, international historically has only represented about 3%. But for markets like New York, San Francisco, and South Florida, it was much more substantial. South Florida and New York are generally back to 2019 levels from an international perspective, but Asia is not back on the West Coast. And to give you a little color on China.

Thomas J. Bardenett: Yeah.

Thomas J. Bardenett: Yeah, I would say that when we look at our footprint and I'll, let Tom give some some color on on Asia, but when we look at our footprint New York, San Francisco and South Florida are typically there are markets that have the strongest amount of international in aggregate for our footprint International historically has only represented about 3% but for.

Thomas J. Bardenett: Markets like New York, San Francisco, and South, Florida was much more substantial South, Florida, and New York are generally back at 2019 levels from an international perspective, but Asia is not back on the West coast.

Thomas J. Bardenett: And to give you a little color around China. So what we're seeing is flights are increasing in 24 versus 23. And the primary reason is that collecting a visa is only taking about eight days. And so we're seeing better flight patterns in regards to having almost 50 per week as of March 31st versus 35 most recently, still below 2019 levels. But what's encouraging is that we're already seeing growth in LAX as well as in San Francisco in regards growth from China with the weekly seats that are actually being purchased in advance.

Tom: And to give you a little color around China. So what we're saying is flights are increasing in 24 versus 23 and the primary reason. It's a visa is collecting a visa is only taking about eight days and so we're seeing better flight patterns in regards to having almost 50 per week as of March 31 versus <unk>.

Thomas J. Bardenett: 35, most recently still below 2019 levels, but what's encouraging we're already seeing growth in L. A X as well as San Francisco in regards to growth from China with the weekly seats that are actually being purchased in advance and then lastly to Leslie point when we look at.

Thomas J. Bardenett: And then lastly, to Leslie's point, when we look at, you know, where we are completely outside of Asia, you know, you're in San Francisco, you have almost 100% now in January and February because what's going on there is Korea, Canada, Singapore, and the UK have kind of taken the place of China, with China having momentum. So it's encouraging that international tourism is up, and we're seeing it going in the right direction, and that can only be good for urban markets, as Leslie mentioned about New York and Boston as well. Great Thank you very much.

Thomas J. Bardenett: We are completely outside of Asia, you're in San Francisco, you have almost 100% now in January February because what's going on there is Korea, Canada, Singapore and U K have kind of taken the place of China with China, having momentum. So it's encouraging that international is up and we're seeing it and going in the right.

Thomas J. Bardenett: Directionally that can only be upside to urban markets as Leslie mentioned about New York and Boston as well.

Speaker Change: Great. Thank you very much.

Dori Lynn Kesten: Next question, Dori Kesten with Wells Fargo, please go ahead.

Thomas J. Bardenett: Next question Dori Kesten with Wells Fargo. Please go ahead.

Dori Lynn Kesten: Hi, Thanks, good morning.

Dori Lynn Kesten: We've heard from some peers that they've seen a softening in their short term leisure transient pickup of late have you seen any of that.

Dori Lynn Kesten: Okay.

Leslie D. Hale: Dori, I would say that, you know, leisure still continues to be a tale of two cities. And so, as I mentioned, our leisure was up two points in the first quarter, but urban leisure was up three points. And urban leisure continues to remain healthy given our footprint and the demand dynamics. I would also say to you that if you deconstruct leisure down even further into rate versus demand, you know, we all knew that resorts would pull back from their peak on rate, but urban leisure's rate continues to remain, you know, at or near its peak, and we haven't seen any degradation in that. And so, from our perspective, what we're seeing in our portfolio is that leisure remains strong.

Dori Lynn Kesten: Dori I would say that.

Leslie D. Hale: Leisure is still continues to be a tale of two cities and so as I mentioned you know our leisure was up two points in the first quarter, but urban leisure was up three points and urban leisure continues to remain healthy given our footprint and the demand dynamics I would also say to you that if you deconstruct.

Leslie D. Hale: Leisure down even further into rate versus our demand. We all knew that resorts would pull back from from its peak on rate, but urban leisure as rate continues to remain at or near its peak and have we haven't seen any degradation in that and so from our perspective, what we're seeing in our portfolio is that leisure remains healthy.

Thomas J. Bardenett: And then on the resort leisure side, again, a smaller percentage of the overall portfolio, but just as a reminder, in our footprint, that's where our conversions sit, right? So when you think about Zucari Dunes as well as Santa Monica, we are experiencing significant growth, as Leslie mentioned in the prepared remarks, and then Charleston continues to, you know, present positive growth based on what's happening in that market. So our conversions are a part of resort leisure, in addition to some of the hotels that we mentioned in regards to the ROIs, as in Deerfield Beach and other locations that have had some renovation dollars, helping us with other room spend as well.

Leslie D. Hale: And then on the resort leisure side again smaller percentage of the overall portfolio.

Thomas J. Bardenett: Just as a reminder, in our footprint, that's where our conversion set right. So when you think about Zachary dunes as well as Santa Monica, We're having significant growth as Leslie mentioned in the prepared remarks, and then Charleston continues to.

Thomas J. Bardenett: <unk> positive growth based on what's happening in that market. So our conversions are a part of the resort laser in addition to some of the hotels that we mentioned in regards to the Rois as in Deerfield Beach and other locations that have had some renovation dollars, helping us on other other room spend as well.

Leslie D. Hale: Yeah, and I think, Dori, the latest month we have the segmentation data for is March, and I think that really tells the story for our leisure's ability to be able to backfill, particularly in the last couple weeks when Group was soft. I mean, our March leisure business was up 7% year-over-year, with resorts up 8%, and so what that demonstrated to us is the ability for our portfolio to capture that leisure demand because of sort of who our core customer is, and so I think that's the latest data point.

Thomas J. Bardenett: And I think.

Leslie D. Hale: The latest month, we have the segmentation data for as March and I think that really tells the story for our leisure is ability to be able to backfill, particularly in the back couple weeks. When group was soft I mean, our March leisure was up 7% year over year with resorts up 8% and so what that demonstrated to us is the ability for our portfolio.

Leslie D. Hale: So to capture that leisure demand, because it's sort of who our core customer is and so I think that's the latest data points and some of the things that you've seen maybe from peers is probably more of a function of they are leaning more resort in our portfolio, which is more urban leisure and just one more data point that distinguishes our portfolio.

Leslie D. Hale: Some of the things that you've seen maybe from peers are probably more of a function of their leaning more towards the resort than our portfolio, which is more urban leisure. And just one more data point that distinguishes our portfolio, Dori, is that our suite product, which I spoke about in my previous remarks, also is very...

Leslie D. Hale: And just one more data point that distinguishes our portfolio, Dori, is that our suite product, which I spoke about in my previous remarks, also is very attractive during spring break, you know, with families, etc. And so, you know, we saw a great premium in that particular category as well.

Leslie D. Hale: Lori is is that our suite product, which I spoke about in my prepared remarks also is very attractive during spring break.

Leslie D. Hale: Families etcetera, and so we saw rate premium in that particular category as well.

Dori: Got it and then a brief.

Leslie D. Hale: And then can you just update us on where you stand today with the NIC? Are you considering this a core or non-core asset? And can you just give us your read on the relative health of the New York transaction market right now? Yeah, I would say, as we said on the last call, that when you look at the NIC in terms of its size, number of keys, its amount of meeting space, it fits perfectly within our portfolio.

Leslie D. Hale: Update us on where you stand today with the neck or you are you considering that the core or noncore asset.

Leslie D. Hale: Can you just give us your read on the relative health of that the New York transaction market right now.

Leslie D. Hale: Yeah, I would say you know as we said on the last call that when you look at the Knick in terms of its size number of keys its amount of meeting space that fits perfectly within our portfolio.

Leslie D. Hale: We have, you know, basically reduced our exposure to New York with the sale of the DTMET, and so we're very happy with our current footprint, you know, in New York, and we consider the NIC a core asset at this point in time. It's an irreplaceable asset, you know, in an irreplaceable location, you know, overall.

Leslie D. Hale: We have a.

Leslie D. Hale: Basically reduced our exposure to New York with the sale of the D. C met and so we're very happy with our current footprint you know in New York when we consider that the Nic a core asset at this point in time.

Leslie D. Hale: Its irreplaceable asset in an irreplaceable location you know overall in terms of transactions in the New York market.

Leslie D. Hale: In terms of, you know, transactions in the New York market, I would say I don't think they're tracking any differently than the broader transaction market. Overall volume for the transaction market still remains constrained. While it's improving, it's still not, you know, it's still slower than we expected because rates, you know, rate cuts have been sort of pushed out.

Leslie D. Hale: I would say I don't think they're tracking any differently than broader transaction market. Our overall volume for the transaction market is still going remains constrained.

Leslie D. Hale: While it's improving.

Leslie D. Hale: It's still not it's still slower than we expected because rates.

Leslie D. Hale: Rate cuts have been sort of pushed out.

Speaker Change: Okay. Thank you.

Leslie D. Hale: Next question, Anthony Powell with Barclays, please go ahead.

Leslie D. Hale: Next question Anthony Powell with Barclays. Please go ahead.

Anthony Franklin Powell: Hi, good morning. I kind of want to dig in more on April because looking at the SCR data that we have, I think month to date in April, they're reporting a 4.8% increase in REPAR. Same thing with urban up 7.1%. So maybe you can talk about what you saw in the first half of the month in April. Did you not see that kind of Easter shift, the rebound that the overall market did? And maybe talk about some market performance in April, just so we can understand better what's going on there.

Anthony Franklin Powell: Hi, Good morning, I don't want to get more and more on April because it's I'm looking at the STR data that we have I think month to date in April.

Anthony Franklin Powell: Reporting a four 8% increase in Revpar same thing with urban up seven 1% so.

Anthony Franklin Powell: Maybe if you could talk about what you saw in the first half of the month in April that did you not see.

Anthony Franklin Powell: That kind of Easter shift a rebound that the overall market did it maybe talk about some market performance in April just so we can understand better what's going on there.

Thomas J. Bardenett: Yeah, Anthony, the first half obviously got the benefit of the Easter shift that Leslie talked about earlier. In addition to that, you had some anomalies like the eclipse that also provided a little bit of an uptick in some of those Sunbelt markets that you saw where they were on that path. In addition to that, I think the fundamentals held up pretty well in the first couple weeks, so that's where you got the lead, if you will, going into the back half.

Speaker Change: Yeah. So Anthony the first half obviously, you got the benefit of the Easter shift that Leslie you talked about earlier. In addition to that you had some anomalies like the eclipse that also provided a little bit of an uptick in some of those sun belt markets that you saw where they were on that path.

Thomas J. Bardenett: In addition to that I think the fundamentals held up pretty well in the first couple weeks. So thats, where you got the lead if you will going into the back half, but if you look at the most recent star data. This week that just occurred industry was down two and a half urban was down eight eight and most importantly group was down 30.

Thomas J. Bardenett: So if you look at the most recent star data, this week that just occurred, industry was down 2.5, urban was down 8.8, and most importantly, group was down 13%. So what happened this last week with Passover is that you decoupled Easter and Passover, which were at the same time, into now having two different moments in time in April. So we had to look at every single week as a different week in regards to how it got to that point.

Thomas J. Bardenett: 10%. So what happened this last week with Passover as now you decoupled Easter and Passover, which was at the same time to now having two different moments in time in April. So we have to look at every single week as a different week in regards to how it got to that point, but still April as an overall.

Thomas J. Bardenett: But still, April, as a whole, did get the benefit of the front half, and that's why we were referring to the fundamentals of BT demand during the weeks that didn't have the holiday impact as a positive step in the right direction. So hopefully that helps you answer the question.

Thomas J. Bardenett: We did get the benefit of the front half and that's why we were referring to the fundamentals of BT demand during the weeks that didn't have the holiday impact as a positive step in the right direction.

Thomas J. Bardenett: Hopefully that helps you answered the question.

Anthony Franklin Powell: Yeah, I guess I'm just kind of surprised that the first half didn't cancel out the second half, but it seems like the second half was a bit more impactful, given the urban and group decline.

Speaker Change: Yeah, I guess I'm, just kind of surprised that that the first half and cancel that with second half, but it seems like the second half was a bit more impactful given the urban group clients.

Anthony Franklin Powell: Yes.

Leslie D. Hale: The last few days, which are going to be impacted and have limited group activity, are really going to move the needle for the month. We saw similar trends in March that were very strong in the first half, and so I think when you get next week's data, which is going to show that the last few days are where you'll see the impact.

Anthony Franklin Powell: I mean I think this is what I think the last few days, which are going to be impacted and have limited group activity are really going to move the needle for the month. We saw similar trends in March that were very strong in the first half and so I think when you get next week's data, which is going to show you over the last few days is where youll see the impact got it okay and maybe some.

Anthony Franklin Powell: Got it. Okay.

Anthony Franklin Powell: And maybe there's one more in Southern California. I think that market's been a bit soft across the board for a lot of companies. So maybe talk about what you're seeing there in terms of demand for those hotels.

Anthony Franklin Powell: One more on southern California, I think that market's been a bit soft across the board for a lot of companies. So maybe you can talk about what you're seeing there.

Speaker Change: In terms of demand.

Anthony Franklin Powell: For those hotels.

Leslie D. Hale: Yeah, I mean, our Southern California is actually relatively strong and performing well, you know, Anthony. We were up four and a half percent in the first quarter.

Speaker Change: Yeah, I mean, our southern California's vaccine relatively strong and performing well Anthony you know we were up four and a half a percent in the first quarter San Diego is very strong city wides as well as Tom mentioned before our conversions are in southern California market as well that market has a strong <unk> base.

Leslie D. Hale: San Diego has very strong city-wide coverage as well, as Tom mentioned before; conversions are in the Southern California market as well. That market has a strong BT base from aerospace and defense. And so I'm not sure what data you're looking at, but our Southern California is performing well.

Leslie D. Hale: From the aerospace and defense and.

Leslie D. Hale: And so I'm not sure what data Youre looking at but our southern California is performing well.

Anthony Franklin Powell: Yes, sorry, I didn't see the breakouts, but I think the STR data has been kind of weak in LA in particular, so you're doing better there, so that's good. All right, thank you.

Speaker Change: Okay, Yeah, sorry, I guess I didn't see the breakout, but I think the STR data has been kind of weekend in L. A in particular, so but are you doing.

Anthony Franklin Powell: So that's a that's good alright. Thank you.

Gregory Jay Miller: Next question, Gregory Miller with Truist Securities. Please go ahead.

Anthony Franklin Powell: Next question Gregory Miller with Truest Securities. Please go ahead.

Gregory Jay Miller: Thanks, Good morning.

Sean M. Mahoney: I'd like to start off with a modeling question. What would you recommend we consider as we model operating expenses for the remaining quarters of the year? And I'm particularly focused on the other operating expenses line item because, to me, that's one that's harder to model, but in dollar terms, it's very significant. So I was hoping that you could provide a little perspective in terms of how we should consider modeling that line in particular, or POPx more generally speaking, as we shift from a relatively softer 2Q to a theoretically relatively stronger back half of the year. Thanks.

Gregory Jay Miller: To start off with a modeling question.

Sean M. Mahoney: What would you recommend we consider as we model operating expenses for the remaining quarters of the year and I'm, particularly focused on the other operating expenses line item.

Sean M. Mahoney: Has to meet that when it is harder to model, but in dollar terms, it's very significant.

Sean M. Mahoney: So I was hoping that if you can provide a little perspective in terms of how you think we should consider modeling that line in particular opex more generally speaking as we shift from a rapidly softer to Q2.

Sean M. Mahoney: Theoretically rallies stronger back half of the year.

Sean M. Mahoney: Sure, Greg. I think, you know, let me helicopter off to total operating expenses because I don't think we're going to be able to provide granular line item by line item guidance outside of what we've already provided for the four-year guidance. But from an overall operating expense perspective, what we believe for the year is roughly in that high 5 to 6 percent for total operating expenses. Within those operating expenses, the fixed costs, which are primarily property insurance and property taxes, we would encourage you to model sort of double digits for those two line items, which, you know, are roughly 10 percent of our expenses.

Speaker Change: Sure Greg Let me helicopter opt our total operating expenses because I don't think we're going to be able to provide granular line item by line item guidance outside of what we've already provided for the full year guidance, but from an overall operating expense perspective, what's the what we believe for the year is roughly in that high 5% to 6% for the year.

Sean M. Mahoney: <unk>.

Sean M. Mahoney: On total operating expenses within those operating expenses, the fixed cost, which is primarily property insurance and property taxes. We would we would encourage you to model to sort of up low double digits for those for those two line items, which are roughly 10% of them.

Sean M. Mahoney: Our expenses, but I think when you when you think about the cadence right. So our first quarter.

Sean M. Mahoney: But I think when you think about the cadence, right, so in our first quarter, you know, we were up in total operating expenses mid-fives on a per occupied room basis. It was sub-3. The variable costs were, you know, were lower than that when I'm defining variable costs or costs outside of the fixed expenses. On a per occupied room basis, we're up 1.6 and a little under 3 for whole dollars. But the way I would think about modeling is that as the year progresses, inflationary pressures decline.

Sean M. Mahoney: We were up in total operating expenses mid fives on a per occupied room basis. It was up three the variable costs were.

Sean M. Mahoney: And that one I'm defining variable costs, our cost outside of the fixed expenses.

Sean M. Mahoney: On a product by room basis were up one six and a little under three.

Sean M. Mahoney: Four four.

Sean M. Mahoney: For whole dollars, but the way I would think about modeling is is that as the year progresses.

Sean M. Mahoney: Inflationary pressures decline and so I would model.

Sean M. Mahoney: And so I would model, you know, kind of that, you know, higher in the early quarters and have that wane down. Now, I don't think it's going to be measured in 300 basis points spread between the first quarter and the last quarter. But I would just say incrementally a little better each quarter as the comps as we're comping against the period where we were just an easier comp to 23.

Sean M. Mahoney: You know kind of that higher in the early quarters and have that weighing down no I don't think its going to be measured in 300 basis points spread between the first quarter in the last quarter, but I would I would just say incrementally a little better each quarter as the comps.

Sean M. Mahoney: As we're comping against the period, where where are we where works its an easier comp.

Sean M. Mahoney: 23.

Speaker Change: Okay I appreciate that.

Gregory Jay Miller: Okay, I appreciate that. And then for my follow-up, this is more of a broader question on the Foliar Guide. In order for you to achieve the top end of your full year guidance based on 1Q results and the 2Q REF PAR outlook that you've provided, what variables do you think have to materialize in order for you to hit that top end of the guidance?

Speaker Change: And then for my follow up this is more of a broader question on the full year guide.

Gregory Jay Miller: In order to for you to achieve the top end of your full year guidance based on <unk> results.

Gregory Jay Miller: And the <unk> revpar outlook that you've provided.

Gregory Jay Miller: What variables do you think <unk> have to actualize in order for you to hit that top end of the guidance.

Speaker Change: Yeah, Yeah, I mean, what we said before was that.

Leslie D. Hale: Yeah, I mean, what we said before was that our portfolio indexes to urban, and urban indexes to BT. And so really, as goes BT, as goes our portfolio. And that's sort of the way to think about it. I think that is the biggest input to your question.

Leslie D. Hale: Our portfolio indexes to urban urban indexes to BT.

Leslie D. Hale: And so really you know as those Bts goes our portfolio and that's sort of a way to think about it I think that is the biggest input.

Leslie D. Hale: To your to your question.

Speaker Change: Okay. Thanks, a lot.

Chris Darling: Next question: Chris Darling from Green Street, please go ahead.

Leslie D. Hale: Next question Christa <unk> with Green Street. Please go ahead.

Chris Darling: Thanks. Good morning, everyone.

Chris Darling: Hey, Thanks, good morning, everyone.

Leslie D. Hale: Leslie, I think in your prepared comments you mentioned plus or minus 7% growth in out-of-room spend during the quarter, so a pretty significant spread relative to REVPAR growth. What's your expectation for how that gap in growth between room revenue and non-room revenue trends throughout the year? Should we expect a pretty similar sizable gap there?

Chris Darling: Let's see I think in your prepared comments, you mentioned plus or minus 7% growth and out of them spend during the quarter. So a pretty significant spread relative to revpar growth, what's your expectation for how that gap growth between revenue and non <unk>.

Leslie D. Hale: The new trends throughout the year should we expect a pretty similar sizable gap there.

Leslie D. Hale: Yeah, for the full year, Chris and Sean, we expect, you know, anywhere from 50 to 100 basis points of total revenue growth versus Red Park. That's kind of how we're thinking about the year. So, you know, when you look at out-of-room spend, obviously, that equates to a larger percentage when you look at those lines in a vacuum. But in total, when you think about total revenue growth versus room revenue growth, you know, it's that 50 to 100 basis points is what we're thinking about for the year.

Leslie: Yeah for the full year Christmas Shawn we expect anywhere from 50 to 100 basis points premium of total revenue <unk>.

Leslie D. Hale: Total revenue growth versus versus Revpar is kind of how we're thinking about the year. So when you look at it at a room spend obviously that equates to a larger percentage when you look at those lines in a vacuum but in total when you think about total revenue growth versus room revenue growth. It's about 50 to 100 basis points of how we're thinking about for a year right and that's.

Chris Darling: And that's really being influenced by a lot of things that we sort of talked about before in our prepared remarks and that Tom hit on as well, such as what we're doing in our public space and taking non-revenue-generating space and turning it into revenue.

Leslie D. Hale: Really being influenced by a lot of things that we sort of talked about before in our prepared remarks and that Tom hit on as well from what we're doing in our public space and taking non revenue generating space and turn it into revenue.

Leslie D. Hale: All right, yeah, all helpful comments there. And then, you know, maybe a follow up to the prior question. You know, Leslie, you mentioned kind of as far as DT goes, the portfolio goes. Can you talk a little bit about what you're seeing on the larger corporate account side? I think we've heard from, you know, some of the brand companies that maybe there's a little bit more encouraging movement in that regard more recently.

Speaker Change: All right Yeah. All helpful comments, then and then maybe a follow up to the to the prior question.

Leslie D. Hale: Leslie you mentioned kind of as the S. E. T goes the portfolio goes can you talk a little bit about what youre seeing on the larger corporate accounts side I think we've heard from them.

Leslie D. Hale: The brand companies that maybe there's a little bit more encouraging movement in that regard more recently.

Leslie D. Hale: Yeah, I mean, I would say that, in general, BT continues to benefit from SMEs, which remain very strong and healthy, and that we are continuing to see a ramp in national accounts on the corporate side. Industries from the tech and financial services, consulting, all of that is ramping up in general, but it's also being aided by the return to work mandates that we're seeing as well. So, I mean, Tom can give some additional color, but the big picture, you know, it's strong.

Leslie: Yeah, I mean, I would say that in general V T K.

Leslie D. Hale: <unk> continues to benefit from Smes, which remained very strong and healthy.

Leslie D. Hale: And that we are we're continuing to see a ramp in national accounts on the corporate side, you know industries from attack.

Leslie D. Hale: Financial services consulting all of that is ramping up.

Leslie D. Hale: And in general, but it's also being aided by the return to work mandates that were seeing as well and so I mean, Tom can give some additional color, but big picture.

Tom: So I think the other thing that's worth noting as well is that what we're seeing on the BT side is that it is balanced between rate and hot is not just one or the other and that is a very important.

Leslie D. Hale: I think the other thing that's worth noting as well is that what we're seeing on the BT side is that it is balanced between rate and OC, it's not just one or the other. And that is a very important point as well.

Leslie D. Hale: <unk> as well.

Thomas J. Bardenett: Yeah, and I think that's where I was going to add some color, Chris. When you think about it, the RFP season was healthy. We had rate growth, so you automatically have that as a backdrop when the national corporate accounts come back with demand. And so what we're encouraged about is that demand was just as healthy as the average rate. And that's where we see growth by day of the week. Our Monday, Tuesday, and Wednesday are where our most significant growth and REVFAR was in the first quarter. We don't see that changing.

Tom: And I think Thats, where I was going to add some color Chris when you think about it. So the RFP season was healthy we had rate growth. So you automatically have that as a backdrop when the national corporate accounts come back with demand and so what we're encouraged about is advance was just as healthy as the average rate and Thats, where we see.

Thomas J. Bardenett: See the growth on day of week or Monday, Tuesday, Wednesday is where our most significant growth in revpar was in the first quarter, we don't see that changing that's where the opportunity are is because thats, where you look at the percentage of 19 is still from an occupancy and demand standpoint still in the low ninety's to high 80.

Thomas J. Bardenett: That's where the opportunity is, because that's where you look at the percentage of 19 is still, from an occupancy and demand standpoint, still in the low 90s to high 80s. And so that's where we think BT can give us that REVFAR lift. From an account standpoint, Leslie's right.

Thomas J. Bardenett: And so that's where we think BT can give us that revpar lift from an account standpoint lessons right national corporate is where we see volume increasing and I think you've heard that from the brand calls already and Thats, where youre seeing some additional demand coming in on those days as far as return to office the highest among.

Thomas J. Bardenett: National corporate is where we see volume increasing, and I think you heard that from the brand calls already. And that's where you're seeing some additional demand coming in on those days. As far as returning to the office, the highest amount of people going back to the office is Tuesday night at about 61%, 62% nationally for our industry. And the lowest demand is Friday at 34%. No surprise, right? So Thursday is still a check-in day for weekends, and midweek we see that office demand. That's the Monday, Tuesday, and Wednesday that we're trying to yield with that BT traffic coming back at those moments in time. And that midweek...

Thomas J. Bardenett: <unk> of people going back to the offices Tuesday night at about 61, 62% nationally for our industry and the lowest demand is is Friday at 34, no surprise right. So Thursday is still a check and Dave or weekends and midweek, we see that office demand. That's the Monday Tuesday Wednesday, they were trying to yield with that BT.

Thomas J. Bardenett: Coming back at those.

Thomas J. Bardenett: Those moments in time.

Leslie D. Hale: And that midweek translated into 2.5% growth for us in the first quarter, and we're still seeing that strength. And May is a month that generally benefits significantly from BT.

Thomas J. Bardenett: Midweek is translated into two 5% growth for us.

Leslie D. Hale: In the first quarter and we're still seeing that that strength in may is a month that generally benefits significantly from DT.

Chris Darling: All right, very helpful, thanks to all.

Leslie D. Hale: All right very helpful. Thanks Al.

Leslie D. Hale: I would now like to turn the floor over to Leslie Hale for closing remarks.

Chris Darling: I would now like to turn the floor over to Leslie Hale for closing remarks.

Leslie D. Hale: Thank you everybody for joining our call. We look forward to seeing many of you over the next several weeks at various conferences. For those of you who we don't see, we hope you have a great summer. Thank you, everybody.

Leslie D. Hale: Thank you everybody for joining our call. We look forward to seeing many of you over the next several weeks at various conferences and for those of you who don't see we don't see a we hope you have a great summer. Thank you everybody.

Operator: This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.

Operator: Hum.

Operator: Hello.

Operator: Oh.

Operator: Mhm.

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