Q1 2024 DiamondRock Hospitality Company Earnings Call

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Operator: Good day, and thank you for standing by. Welcome to the DiamondRock Hospitality Company's first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Briony Quinn, Executive Vice President and Chief Financial Officer. Please go ahead.

Speaker Change: Good day, and thank you for standing by welcome to the Diamond Rock Hospitality Company's first quarter 2024 earnings conference call.

Speaker Change: At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then hear an automated message advising you. Your hand is raised to withdraw your question. Please press star one again, please be advised today's conference is being recorded.

Speaker Change: I would now like to hand, the conference over to your Speaker today, Briony Quinn Executive Vice President and Chief Financial Officer. Please go ahead.

Briony R. Quinn: Thank you, Michelle. Good morning, everyone.

Briony R. Quinn: Thank you Michele good morning, everyone welcome to Diamond rocks first quarter 2024 earnings call and webcast. Joining me today are Jeff Donnelly, our Chief Executive Officer, and Justin Leonard Our President and Chief operating Officer.

Briony R. Quinn: Welcome to DiamondRock's first quarter 2024 earnings call and webcast. Joining me today are Jeff Donnelly, our Chief Executive Officer, and Justin Leonard, our President and Chief Operating Officer. Before we begin, let me remind everyone that many of our comments today are not historical facts and are considered to be forward-looking statements under federal securities laws. As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ materially from what we discussed today.

Briony R. Quinn: Before we begin let me remind everyone that many of our comments today are not historical facts and are considered to be forward looking statements under federal securities laws.

Briony R. Quinn: As described in our filings with the SEC. These statements are subject to numerous risks and uncertainties that could cause future results to differ materially from what we discuss today.

Briony R. Quinn: In addition, on today's call, we will discuss certain non-GAAP financial information. A reconciliation of this information to the most directly comparable GAAP financial measure can be found in our earnings press release. With that, I'm pleased to turn the call over to Jeff.

Briony R. Quinn: In addition on today's call, we will discuss certain non-GAAP financial information a reconciliation of this information to the most directly comparable GAAP financial measure can be found in our earnings press release.

Briony R. Quinn: With that I'm pleased to turn the call over to Jeff.

Jeffrey John Donnelly: Good morning, and thank you for joining us. Before we discuss our first quarter results, I'd like to briefly highlight the leadership and organizational changes we announced last month. As you saw from today's earnings release, DiamondRock's strong performance is continuing into 2024. Our new leadership appointments and organizational structure position us to build on the momentum we are seeing. We have outstanding talent across the organization, and we are now able to tap into that talent in a deeper way.

Jeffrey John Donnelly: Good morning, and thank you for joining us before we discuss our first quarter results I'd like to briefly highlight the leadership and organizational changes we announced last month.

Jeffrey John Donnelly: As you saw from today's earnings release Diamond Rock strong performance is continuing into 2024 are new leadership appointments and organizational structure position us to build on the momentum we are seeing we have.

Jeffrey John Donnelly: Outstanding talent across the organization and we are now able to tap into that talent in a deeper way.

Jeffrey John Donnelly: I am honored to lead DiamondRock as CEO and excited by the opportunity to leverage my experience in this new role. Justin's promotion to president underscores both his contributions to DiamondRock and his deep industry expertise. For those of you who haven't had the chance to meet Justin, he is perhaps the sharpest and most talented hotel investment professional I've met, and I'm proud he's on our team. In addition to continuing his responsibilities as Chief Operating Officer, Justin will be assuming responsibilities for transactions as well.

I'm honored to lead Domino, Entre CEO and excited by the opportunity to leverage my experience in this new role.

Jeffrey John Donnelly: Jostens promotion to President underscores both his contributions the diamond rock and his deep industry expertise for.

Jeffrey John Donnelly: For those of you haven't had the chance to meet Justin He is perhaps the sharpest and most talented hotel investment professional I've met and I'm proud he's on our team and.

Jeffrey John Donnelly: In addition to continuing his responsibilities as chief operating officer, Justin will be assuming responsibilities for transactions as well.

Jeffrey John Donnelly: As the company's treasurer and chief accounting officer, Briony has been a trusted partner, a leader in the organization, and she has excelled in each of her finance and accounting positions over her 17-year career at DiamondRock. To me, Briony is the ideal choice for the company's next chief financial officer.

Jeffrey John Donnelly: As the company's Treasurer, and Chief Accounting Officer, Brian has been a trusted partner to me a leader in the organization and she has excelled in Egypt for finance and accounting positions over her 17 year career at Diamond rocks to me Brian. He is the ideal choice for the company's next Chief Financial Officer.

Jeffrey John Donnelly: With the opportunity to leverage all this experience in new ways and establish a more simplified organizational structure than we had with our previous six-member executive team, we can expedite decision-making in a more opportunistic and dynamic investment world and accelerate performance and value creation. In short, DiamondRock was great before this transition, and with it, we will be even better. Our goal is to drive superior long-term total shareholder return. To do this, we will maintain our investment focus primarily on lifestyle resorts and urban hotels, no different than we have in the past.

Jeffrey John Donnelly: With the opportunity to leverage all this experience in new ways and establish a more simplified organizational structure than we had with our previous six member executive team, we can expedite decision, making and a more opportunistic and dynamic investment world and accelerate performance in value creation and short Domino arc was great before this transition and with it we will.

Jeffrey John Donnelly: Be even better.

Jeffrey John Donnelly: Our goal is to drive superior long term total shareholder return to do this we will maintain our investment focused primarily on lifestyle resort in urban hotels no different than we have in the past we.

Jeffrey John Donnelly: We will continue to mine our network of independent owners to unearth unique destination resorts, but we are equally in favor of uncovering attractive urban market opportunities with growth potential. We will be more deliberate in harvesting capital from slower-growth, capital-intensive assets and recycling proceeds into higher-return investments such as share repurchases, internal ROI projects, or new investments. Value creation is our magnetic north. It is important to me that I personally recognize Mark and Troy as we make this shift.

Jeffrey John Donnelly: We will continue to mine our network of independent owners to unearth unique destination resorts, but we're equally in favor of uncovering attractive urban market opportunities with growth potential.

Jeffrey John Donnelly: We will be more deliberate and harvesting capital from slower growth capital intensive assets and recycling proceeds into higher return investments such as share repurchases internal ROI projects on new investments value creation is our magnetic north.

It is important to me that I personally recognize mark and Troy as we make this shift their individual contributions established diamond rock as an industry leader and Mark was instrumental in assembling the independent board and team. We have today all of us at Domino rock wish them, both the absolute best in their future endeavors.

Jeffrey John Donnelly: Their individual contributions established DiamondRock as an industry leader, and Mark was instrumental in assembling the independent board and team we have today. All of us at DiamondRock wish them both the absolute best in their future endeavors. Before I turn to our first quarter results, I want to recognize the teams at three of our hotels recognized by the Michelin Guide. Cavallo Point, which earned a Michelin 2 star rating, Gwen, which earned a Michelin 1 star rating, and Shorebreak Huntington Beach. These are rare honors.

Jeffrey John Donnelly: Before I turn to our first quarter results I want to recognize the teams at three of our hotels recognized by the Michelin Guide.

Jeffrey John Donnelly: Kabbalah point, who are into Michelin <unk> rating, the Gwen who R&D Mitchell and <unk> rating in the short break Huntington Beach. These are rare honors.

Jeffrey John Donnelly: 80 hotels received <unk> status and only 33 achieved two key status Domino was among the few winters of multiple keys.

Jeffrey John Donnelly: Just 80 hotels received 1 key status, and only 33 achieved 2 key status. DiamondRock was among the few winners of multiple keys. Okay, let's get into Q1.

Jeffrey John Donnelly: Okay, let's get into Q1 overall, the leisure segment proved a little softer than expected due to inflation the pressure of higher interest rates and an uncertain economic picture.

Jeffrey John Donnelly: Overall, the leisure segment proved a little softer than expected due to inflation, the pressure of higher interest rates, and an uncertain economic picture. However, group demand remains strong, with first quarter group sales production steady versus last year. RevPAR declined 0.4% in the quarter compared to the prior year. This was slightly weaker than our original expectation due to a little softness from the top line at the resort. Despite the small rep part decline, total revenues increased 3.8% on strong food and beverage performance from increased group activity.

Jeffrey John Donnelly: Group demand remains strong with first quarter group sales production steady versus last year.

Jeffrey John Donnelly: Revpar declined 4% in the quarter compared to the prior year.

Jeffrey John Donnelly: It was slightly weaker than our original expectations from a little softness in top line at the resorts.

Despite the small revpar decline total revenues increased three 8% on strong food and beverage performance from the increased group activity.

Jeffrey John Donnelly: Total expenses increased a little over 6%, driven in large part by group banquet volumes that were up 24% over Q1 last year, while those revenues drove a significant increase in both food and beverage margin and overall portfolio profit. The growth in food and beverage revenue does drive higher headline expense growth and overall margin erosion, given that food and beverage is a less profitable part of our business than rooms. That segmentation shift to groups was most evident at three of our largest hotels in the quarter.

Jeffrey John Donnelly: Total expenses increased a little over 6% driven in large part by group banquet volumes they were up 24% over Q1 last year.

Jeffrey John Donnelly: While those revenues drove a significant increase to both food and beverage margin and overall portfolio of profit.

Jeffrey John Donnelly: The growth in food and beverage revenue does drive higher headline expense growth and overall margin erosion, given that food and beverage is a less profitable part of our business then routes.

Jeffrey John Donnelly: That segmentation shift of group was most evident at three of our largest hotels in the quarter.

Jeffrey John Donnelly: Chicago Marriott, Weston Boston, and Weston Fort Lauderdale, where expenses grew over 15% due to an increased segmentation shift to groups with great food and beverage spend. If we exclude these three hotels, our overall expense growth increased just 3.4%. Overall expense growth is highly dependent on revenue mix, with increases in food and beverage driving higher overall expense growth.

Jeffrey John Donnelly: The Chicago, Marriott, Westin, Boston, and Westin Fort Lauderdale, where expenses grew over 15% due to increased segmentation shift to group with great food and beverage spend.

Jeffrey John Donnelly: If we exclude these three hotels, our overall expense growth increased just three 4%.

Jeffrey John Donnelly: Overall expense growth is highly dependent on revenue mix with increases in food and beverage driving higher overall expense growth.

Jeffrey John Donnelly: Given our significant increase in group pace year-over-year, we expect the corresponding group spend on food and beverage will keep our expense run rate at around 5% for the remainder of the year. Turning to resorts, The first quarter is a critical season for our resorts. The resort segment contributed approximately 45% of total first quarter revenue but 60% of hotel adjusted EBIT. As we said in the last call, the first quarter would be the toughest quarter for our resort.

Jeffrey John Donnelly: Given our significant increase in group pace year over year, we expect the corresponding group spend on food and beverage will keep our expense run rate at around 5% for the remainder of the year.

Jeffrey John Donnelly: Turning to resorts.

Jeffrey John Donnelly: First quarter is a critical season for our resorts. The resorts segment contributed approximately 45% of first quarter total revenue with 60% of hotel adjusted EBITDA.

Jeffrey John Donnelly: As we said on the last call the first quarter would be the toughest quarter for our resorts Revpar in the resort segment declined 4% from the prior year, which was a little weaker than our original expectations due to a seven 6% revpar decline at our highest rated luxury resorts versus nearly flat for our lifestyle resorts.

Jeffrey John Donnelly: Revpar in the resort segment declined 4 percent from the prior year, which was a little weaker than our original expectation due to a 7.6 percent Revpar decline at our highest rated luxury resorts versus nearly flat for our lifestyle resorts. However, favorably, our outside-of-the-room outlet spend performed very well, driving a total revenue increase at the resorts of 0.4%. Despite a shift to lower-margin F&B revenues, we were still able to manage expense growth down to 4.1% for the quarter.

Jeffrey John Donnelly: Favorably or outside of the room outlet spend performed very well driving a total revenue increase at the resorts of <unk>, 4%.

Despite a shift to lower margin F&B revenues, we were still able to manage expense growth down to four 1% in the quarter.

Jeffrey John Donnelly: The Florida Keys were a highlight, with collective red power up 6.6% in the quarter, consistent with the growth for this trio in Q4'23. The lodge at Sonoma experienced a 28% RevPAR decline, pushing EBITDA $1 million below last year.

Jeffrey John Donnelly: The Florida keys were a highlight with collective revpar up six 6% in the quarter consistent with the growth for this trio in Q4 23.

Jeffrey John Donnelly: The lodge at Sonoma experienced a 28% revpar decline pushing EBITDA $1 million below last year.

Jeffrey John Donnelly: Excluding this one hotel, our resort segment RevPAR would have been 110 basis points better. As we discussed in the last earnings call, the wine country market was very weak this quarter, but we underperformed in Sonoma because we faced a particularly difficult Q1-23 comparison. We had a smaller group on the books for the quarter, and our revenue management strategy was simply too aggressive for this setup. The market is stabilizing, the team is course-corrected, and we have seen our recent results return to in-line market performance. The height and veil were also behind our expectation due to lower visitation owing to what is best described as lumpier snowfall patterns.

Jeffrey John Donnelly: Excluding this one hotel or resort segment, Revpar would have been 110 basis points better.

Jeffrey John Donnelly: As we discussed in our last earnings call. The wine country market was very weak this quarter, but we underperformed in Sonoma, because we faced a particularly difficult Q1 'twenty three comparison.

Jeffrey John Donnelly: We had less group on the books for the quarter and our revenue management strategy was simply too aggressive for the setup.

Jeffrey John Donnelly: The market is stabilizing the team is of course corrected and we have seen our recent results returned in line market performance.

Jeffrey John Donnelly: The heightened Vale was also behind our expectation due to lower visitation owing to what is best described as lumpier snowfall patterns more ski destinations available than under the prior season as well as a drop off in loyalty redemption rights.

Jeffrey John Donnelly: More ski definitions available than in the prior year, as well as a drop-off in Loyalty Redemption. Revpar was down 9%, and Hotel Adjusted Ibiza was $1 million behind first quarter 2023. Encouragingly, our group pace on the books for the rest of 2024 at this hotel is up over 30% compared to last year. A note on redemptions, loyalty redemptions at our resorts were down 23% from the prior year and 40% from 2022. The sharp reduction in redemptions means there are a larger number of room nights to fill, and sometimes that means turning to OTAs or other less profitable channels.

Revpar was down 9% and hotel adjusted EBITDA was $1 million behind the first quarter of 2023.

Jeffrey John Donnelly: Encouragingly, our group pace on the books for the rest of 2020 for this hotel is up over 30% compared to last year.

Jeffrey John Donnelly: A note on redemptions loyalty redemptions at our resorts were down 23% from prior year and 40% from 2022 the sharp.

Duction and redemptions means there is a larger number of room nights to fill and sometimes that means turning to otas or other less profitable channels.

Jeffrey John Donnelly: Looking ahead, we believe our resorts are positioned to deliver better results in the second half of 2024. The difficult comparisons in South Florida and the Keys have been lapped, and we expect the remaining resort markets will follow suit by the end of the year. We recognize high interest rates and inflation are placing pressure on consumer spending, but these same pressures should drive incremental preference for domestic travel over international travel and drive-to destinations over fly-to destinations. Based on the latest data, there was a 12% year-to-date increase in total international arrivals into our markets versus 2023. And the loyalty redemption data could foreshadow fewer outbound trips to international destinations.

Jeffrey John Donnelly: Looking ahead, we believe our resorts are positioned to deliver better results in the second half of 2020 for the difficult comparisons in South, Florida, and the keys have been lapped and we expect the remaining resort markets will follow suit by the end of the year we.

Jeffrey John Donnelly: We recognize high interest rates and inflation are placing pressure on consumer spending, but these same pressures should drive incremental preference for domestic travel over international travel and drive to destinations over fly to destinations based on the latest airlift data there was a 12% year to date increase in total international arrivals into our market.

Jeffrey John Donnelly: Versus 2023, and our loyalty redemptions data could foreshadow fewer outbound for international destinations.

Jeffrey John Donnelly: Turning to our Urban Portfolio, first quarter RevPAR increased 2%, group room nights increased 10.7%, and the strong accompanying out-of-room spend pushed total revenue growth up 6.8%. Business transient revenue increased 9.4%, but BT is still 23% behind 2019. However, expenses were higher than expected, owing mainly to the staffing increases that accompanied the increases in banquet revenue.

Jeffrey John Donnelly: Turning to our urban portfolio <unk>.

Jeffrey John Donnelly: First quarter Revpar increased 2% group.

Jeffrey John Donnelly: Group room nights increased 10, 7% and the strong accompanying out of room spend pushed total revenue growth up six 8%.

Business transient revenue increased nine 4%, but BT is still 23% behind 2019.

Jeffrey John Donnelly: Expenses were higher than expected, owing mainly to the staffing increases that accompany the increases in banquet revenues.

Jeffrey John Donnelly: Overall, EBITDA at our urban hotels was up 3.1%. The Dagny and Boston continue to outperform Proforma. Last year's renovation has placed the Dagny as the top three hotel in the entire Boston market on TripAdvisor, compared to number 56 in the market prior to renovation.

Jeffrey John Donnelly: Overall EBITDA at our urban hotels was up three 1%.

Jeffrey John Donnelly: The <unk> and Boston continue to outperform pro forma.

Jeffrey John Donnelly: Last year's renovation has placed the diagnosis is.

Jeffrey John Donnelly: As the top three hotel on the entire Boston market on Tripadvisor compared to number 56 and the market prior to renovation.

Briony R. Quinn: This has been a well-executed transformation by the team at DiamondRock and the hotel, and we are elated to see the follow-through and performance. The Westin Seaport, also in Boston, delivered 17% REVPAR growth in the quarter, increasing total revenues by $3 million over the prior year. Our 1200-room Chicago Marriott had an excellent quarter with ref par up 7.4% and total ref par up 24.8%. Group room nights were up 50% over last year, and banquet contribution per group room up 10%.

Jeffrey John Donnelly: This has been a well executed transformation by the team at Diamond rocks and the hotel and we are related to see the follow through in performance.

Jeffrey John Donnelly: The Western Seaport also in Boston delivered 17% Revpar growth in the quarter, increasing total revenues $3 million over the prior year.

Jeffrey John Donnelly: Our 200 room, Chicago Marriott had an excellent quarter with Revpar up seven 4% and total Revpar up 24, 8%.

Jeffrey John Donnelly: Group room nights were up 50% over last year with the banquet contribution per group room up 10%.

Briony R. Quinn: The net result was a better than 100% increase in EBITDA and a 313 basis point improvement in margins. Downtown Washington, D.C., turned a corner, and we are seeing market improvement, albeit from a depressed level. RevPAR increased just shy of 3% in the quarter, but total revenue increased over 11% on the improvement in group activity. Accordingly, EBITDA was almost half a million dollars better than last year. We are most positive about the group outlook for 2024.

Jeffrey John Donnelly: The net result was a better than 100% increase in EBITDA and 313 basis point improvement in margin.

Jeffrey John Donnelly: Downtown Washington D. C turned the corner and we are seeing market improvement, albeit from a depressed level at our Westin.

Jeffrey John Donnelly: Revpar increased just shy of 3% in the quarter with total revenue increased over 11% on the improvement in group activity.

Jeffrey John Donnelly: Accordingly, EBITDA was almost half a million dollars better than last year.

Briony R. Quinn: We believe our strong volume of business on the books is a competitive advantage. At the end of the quarter, we had 85% of our budgeted full-year group revenue on the books, representing a 14% increase over the same point in 2023. Looking at the quarterly breakdown, our group revenue is up 10% in Q1, and pace is up approximately 5% in Q2 and over 15% in the third and fourth quarter. Looking at just our big box hotels, our group pace for 2024 is up 16%, or about 200 basis points better than our total portfolio.

Jeffrey John Donnelly: We are most positive on the group outlook for 2024, we believe our strong volume of business on the books as a competitive advantage.

Jeffrey John Donnelly: At the end of the quarter, we had 85% of our budgeted full year group revenue on the books, representing a 14% increase over the same point in 2023.

Jeffrey John Donnelly: Looking at the quarterly breakdown our group revenue was up 10% in Q1 and pace is up approximately 5% in Q2 and over 15% in the third and fourth quarters.

Jeffrey John Donnelly: Looking at just our big box hotels, our group pace for 2024 is up 16% or about 200 basis points better than our total portfolio the.

Briony R. Quinn: The most notable performers are our Renaissance Worthington up 32%, the Haif up over 25%, Chicago Marriott up 22%, the Westin Fort Lauderdale up 19%, and Washington, D.C., up 15th. Looking ahead to next year, at the end of Q1, our big box room night pace for 2025 is flat with 2024 with time to go. Let me turn the floor over to Briony to talk about financial highlights and our revised guidance.

Jeffrey John Donnelly: The most notable performers our Renaissance Worthington up 32% the highest up over 25%.

Jeffrey John Donnelly: Chicago Marriott up 22%, the Westin Fort Lauderdale up 19% and in Washington D C up 15%.

Jeffrey John Donnelly: Looking ahead to next year at the end of Q1, our Big box room night pace for 2025 is flat with 2024 with time to go.

Jeffrey John Donnelly: Let me turn the floor over to Brian to talk about financial highlights and our revised guidance Brian.

Briony R. Quinn: As Jeff mentioned previously, topline results were slightly below our original expectation, but we were nonetheless able to achieve our original expectation of $0.17 of FFO per share. Although first quarter REVPAR declined slightly, total revenues increased 3.8% on an 11% increase in food and beverage income, driven by the strong group contribution in the quarter, which exceeded our expectations. Approximately 65% of the incremental F&B revenues above our expectation flowed to gross operating profit.

Thanks, Jeff as Jeff mentioned previously topline results were slightly below our original expectation, but we were nonetheless able to achieve our original expectation of 17.

Brian: <unk> per share.

Brian: Although first quarter Revpar declined slightly total revenues increased three 8% on an 11% increase in food and beverage income driven by the strong group contribution in the quarter, which exceeded our expectations.

Brian: Approximately 65% of the incremental F&B revenue was above our expectation slowed to gross operating profit.

Briony R. Quinn: Gross operating profit was up nearly 1% compared to 2023, which was slightly behind our expectations. Food and Beverage Profits and Support Cost Savings all but offset the decline in Rooms Department profits. Comparable hotel-adjusted EBITDA was $61.4 million, or approximately $2 million below the prior year, on a 169 basis point decline in margin.

Brian: Gross operating profit was up nearly 1% compared to 2023, which is slightly behind our expectation food and beverage profits and support cost savings all that offset the decline in rooms Department profit.

Brian: Comparable hotel adjusted EBITDA was $61 4 million or approximately $2 million below the prior year on a 169 basis point decline in margin.

Briony R. Quinn: Corporate DNA costs were $8.9 million, which was approximately $700,000 higher than we originally expected due to the announcement in the first quarter of our General Counsel's intention to retire on June 30. This required us to accelerate the compensation expense of his outstanding equity awards during the quarter. Unlike severance costs, we do not add back retirement expenses to our G&A.

Brian: Corporate G&A costs were $8 9 million, which were approximately 700000 higher than we originally expected due to the announcement in the first quarter of our general counsel of intention to retire on June 30th.

Brian: Required us to accelerate the compensation expense of his outstanding equity awards during the quarter.

Brian: Unlike severance costs, we do not add back retirement expenses to our G&A.

Briony R. Quinn: Turning to our 2024 guidance, let me start with the changes to our DNA outlook. Earlier in the year, we provided guidance of $33 to $34 million for full-year corporate expenses. We expect the net savings from the leadership realignment will reduce our 2024 GNA by nearly $4 million.

Speaker Change: Turning to our 2024 guidance, let me start with the changes to our G&A outlook.

Speaker Change: Earlier in the year, we provided guidance of $33 million to $34 million for full year corporate expenses.

Speaker Change: We expect the net savings from the leadership realignment will reduce our 2020 for G&A by nearly $4 million.

Briony R. Quinn: The result is a reduced corporate expense outlook of $29.5 to $30.5 million for 2024. We are raising our 2024 adjusted EBITDA guidance range to $270 million to $290 million, with a midpoint that is $5 million higher than the prior guidance range, in large part due to the G&A cost savings, but also due to our confidence in our group pace. Our adjusted FFO per share guidance is increased by one cent per share at the midpoint.

Speaker Change: The result is a reduced corporate expense outlook of $29 to $30 5 million for 2024.

Speaker Change: We are raising our 2024, our adjusted EBITDA guidance range to 270 million to $290 million with a midpoint that is $5 million higher than the prior guidance range in large part due to the G&A cost savings, but also our confidence in our group pace.

Speaker Change: Our adjusted <unk> per share guidance is increased by <unk> <unk> per share at the midpoint.

Briony R. Quinn: A higher for longer interest rate outlook has shifted the prospect of rate cuts to much later in the year, increasing our interest expense outlook to $65 to $66 million from prior guidance of $61 to $63 million. Additionally, we are comfortable with the current Q2 consensus estimates for adjusted EBITDA and adjusted FFO per share. Turning to capital allocation, there were no acquisitions or dispositions during the quarter, and we did not repurchase any shares.

Speaker Change: A higher for longer interest rate outlook has shifted the prospect of rate cuts to much later in the year, increasing our interest expense outlook to 65% to $66 million from prior guidance of $61 million to $63 million.

Additionally, we are comfortable with the current Q2 consensus estimates for adjusted EBITDA and adjusted <unk> per share.

Speaker Change: Turning to capital allocation, there were no acquisitions or dispositions during the quarter and we did not repurchase any shares.

Briony R. Quinn: We continue to explore dispositions, the proceeds of which can fund share repurchases, internal ROI projects, or external growth. Although maximizing shareholder value is the singular focus of our capital allocation strategy, we remain committed to having a flexible balance. Our leverage is conservative, as demonstrated by the low net debt to EBITDA ratio of 3.9 times trailing four-quarter results. Our liquidity is strong with $120 million of corporate cash, $108 million of hotel level cash, and an undrawn $400 million revolver.

Speaker Change: We continue to explore this positions the proceeds of which can fund share repurchases internal ROI projects or external growth.

Speaker Change: Maximizing shareholder value is the singular focus of our capital allocation strategy.

Speaker Change: We remain committed to having a flexible balance sheet, our leverage is conservative as demonstrated by the low net debt to EBITDA ratio of three nine times trailing four quarter results.

Speaker Change: Our liquidity is strong with $120 million of corporate cash $108 million of hotel level cash and an undrawn $400 million revolver.

Briony R. Quinn: We have a $73 million CMBF loan on our Courtyard Midtown East property, maturing in early August. It is our current expectation that we will repay this mortgage with cash on hand at maturity. If the capital markets cooperate, we may look to a larger corporate financing transaction in the near future to address our remaining mortgage maturities through 2025. With that, I will turn the floor back to Jeff.

Speaker Change: We have a 73 million <unk> loan on our courtyard Midtown east maturing in early August.

Speaker Change: It is our current expectation that we will repay this mortgage with cash on hand at maturity.

Speaker Change: If the capital markets cooperate we may look to a larger corporate financing transaction in the near future to address our remaining mortgage maturities through 2025.

Speaker Change: With that let me turn the floor back to Jeff.

Jeffrey John Donnelly: I want to conclude with a few points before Justin, Briony, and I answer your questions. First, I mentioned at the beginning that our investment strategy remains unchanged, but I believe our execution will be more analytical and our actions more deliberate. To borrow a term from my partner, Justin, that means we will work to manufacture a core product, ideally with limited capital intensity. To us, competitive auctions for a brand-managed big box hotel are not the path to success.

Jeffrey John Donnelly: Thank you. Thank you.

I want to conclude with a few points before Justin Brian and I answered your questions.

Jeffrey John Donnelly: I mentioned at the onset that our investment strategy remains unchanged, but I believe our execution will be more analytical and our actions more deliberate tomorrow.

Jeffrey John Donnelly: Nabarro return from my partner, Justin that means we will work to manufacturer core product ideally with limited capital intensity to us competitive auctions for our brand managed Big box Hotel is not the path to success in the investment community has limited patients for big ticket highly disruptive renovations instead, we want to collect.

Jeffrey John Donnelly: And the investment community has limited patience for big-ticket, highly disruptive renovations. Instead, we want to select situations where our capital and creativity can unlock value that will drive long-term outperformance. Similarly, we will be thoughtful about how and when we elect to dispose of assets. Proceeds will be recycled to the uses we believe create the most value at the time, whether that is a new investment, share repurchases, or internal ROI project. Concerning the transaction market, activity was down 35% in the first quarter, which is off a 53% decline last year.

Jeffrey John Donnelly: Situations, where our capital and creativity can unlock value that will drive long term outperformance similar.

Jeffrey John Donnelly: Similarly, we will be thoughtful about how and when we elect to dispose of assets proceeds will be recycled to the users. We believe create the most value at the time, whether that is a new investment share repurchases, our internal ROI project.

Jeffrey John Donnelly: Concerning the transaction market activity was down 35% of the first quarter, which is off a 53% decline last year.

Jeffrey John Donnelly: It is still early, but we are starting to hear of a little more product trickling into what I'll call the shadow pipeline. To the extent interest rates remain higher for longer, it's likely we will see more distressed owners bring product to the market, or transactions may emerge where the path to ownership may require a little extra creativity. We continue to have success with our ROI project. Dagny Boston, which was converted in the third quarter of last year, continues to outperform our expectations as it ramps up to its full potential. The Hilton Burlington will convert this summer to the Hotel Champlain, a lifestyle curio hotel with a specialty restaurant led by a James Beard nominated chef.

Jeffrey John Donnelly: It's still early but we're starting to hear a little more product trickling into what I'll call the shadow pipeline.

Jeffrey John Donnelly: To the extent interest rates remained higher for longer it's likely we see more distressed owners bring product to the market.

Jeffrey John Donnelly: Our transactions may emerge with a path to ownership may require a little extra creativity.

Jeffrey John Donnelly: We continue to have success with our ROI projects.

Jeffrey John Donnelly: The designee, Boston, which was converted in the third quarter of last year continues to outperform our expectations as it ramps to its full potential.

Jeffrey John Donnelly: The Hilton Burlington will convert this summer to the hotel Champlain, a lifestyle carry a hotel with a specialty restaurants led by James Beard nominated Jeff.

Jeffrey John Donnelly: In the Florida Keys, we are making progress on building a small marina with a high ROI at Tranquility Bay, and we expect to complete a new bar at Havana Cabana in Key West this summer that we anticipate will generate over $1 million a year in revenue at a 25% margin on a $1.5 million cost. We are moving ahead with expanding the room count at the Landing Resort in Lake Tahoe by 20%, which is expected to be completed in 2025. Finally, we are also moving ahead with integrating the Orchards Inn into our luxury L'Auberge de Sedona Hotel through an upgraded room product and new shared cliffside pool and bar.

Jeffrey John Donnelly: In the Florida Keys, we are making progress on building a smaller arena with a high ROI at Tranquility Bay, and we expect to complete a new bar Havana Cabana in key West. This summer that we anticipate will generate over $1 million a year in revenue at a 25% margin on our $1 $5 million cost.

Jeffrey John Donnelly: We are moving ahead on expanding the room count at the landing resort in Lake Tahoe by 20%, which is expected to be completed in 2025.

Jeffrey John Donnelly: Finally, we are also moving ahead with integrating the orchards inn into our luxury low barriers to Sedona hotel through an upgraded room product and new shared Cliffside Poland Bar. We believe once completed this will be a strong financial performer for us.

Jeffrey John Donnelly: We believe once completed, this will be a strong financial performer for us. In conclusion, DiamondRock is well positioned to continue its top-tier performance in the sector. We believe our group bookings and market footprint position us well to outperform in 2024. Our substantial group revenue on the books provides a significant level of embedded growth, and we are optimistic our resort properties will see momentum return over the remainder of the year. ROI projects will add incremental growth in the next 12 to 24 months as projects such as DAGNY are completed in RAMP.

Jeffrey John Donnelly: In conclusion, I'm Gonna rock is well positioned to continue our top tier performance in the sector.

Jeffrey John Donnelly: We believe our group bookings and market footprint position us well to outperform in 2024.

Jeffrey John Donnelly: Our substantial group revenue on the books provides a significant level of embedded growth and we are optimistic our resort properties will see momentum returned over the remainder of the year.

Jeffrey John Donnelly: ROI projects will add incremental growth in the next 12 to 24 months as projects such as the <unk> are completed and ramp.

Jeffrey John Donnelly: In conclusion, we really like our setup, and we are singularly focused on accelerating and enhancing our earnings growth. At this time, we would like to open it up to any of your questions. Thank you.

In conclusion, we really like our setup and we are singularly focused on accelerating and enhancing our earnings growth at this time, we would like to open it up to any of your questions.

Operator: Thank you. As a reminder, to ask a question at this time, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Speaker Change: Thank you as a reminder to ask a question at this time. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, we ask that you. Please limit yourself to one question and one follow up one moment, while we compile our Q&A roster.

Operator: We ask that you please limit yourself to one question and one follow-up. One moment while we compile our Q&A roster. And our first question is going to come from the line of Dori Kesten with Wells Fargo. Your line is open. Please go ahead. Thanks. Good morning.

Speaker Change: And our first question is going to come from the line of Dori Kesten with.

Dori Lynn Kesten: Wells Fargo. Your line is open. Please go ahead.

Jeffrey John Donnelly: By your last comments, Jeff, is it fair to say that DiamondRock will likely be more active recycling capital going forward than

Dori Lynn Kesten: Thanks, Good morning by your last comments, Jeff is it fair to say that Iraq will likely be more active recycling capital going forward than you have been previously.

Jeffrey John Donnelly: We're under no mandate, or let me say good morning, Dori. I would say we're under no mandate to necessarily be more inquisitive or more, you know, more focused on sales, I think, but we are trying to be more thoughtful, I would say about, you know, and I use the word deliberate in my remarks about, you know, the assets that we hold and the assets that we acquire. So, I think in the next, you know, 24 to 36 months, as we've said in prior calls, that we do intend to look to dispose of assets and recycle that capital, but I wouldn't presume from that that there's any, you know, sort of mandate on us to be moving quicker.

Dori Lynn Kesten: We're under no mandate or let me say good morning, Dori I would say, we're under no mandate to necessarily be more acquisitive or more more focused on sales I think but we are trying to be more thoughtful I would say about.

Dori Lynn Kesten: And I used the word deliberate in my remarks about the assets that we hold in the assets that we acquired so I think in the next 24 to 36 months as we've said in prior calls that we do intend to look to dispose of assets and recycle that capital, but I wouldnt presume from that that there is any.

Dori Lynn Kesten: Sort of mandate on us to be moving quicker.

Jeffrey John Donnelly: Okay, and if you were providing total REVPAR guidance, where would that be today, and how has that changed since your initial guide? And I apologize if I missed it. Did you say what April REVPAR was? On the total REVPAR question, we made the comment at the beginning of the year that our comparable room REVPAR growth is about 2 to 4%, and we thought that including out-of-room spend, you would add about 50 to 75 basis points to that. And that view really hasn't changed. What was the second question? I apologize. Oh, April Rev Par is trending about Flatish right now.

Speaker Change: Okay and.

Speaker Change: If you were providing total revpar guidance.

Speaker Change: Or would that be today, and how has that changed since your initial guide.

Speaker Change: And I apologize if I missed it did you say what April Revpar wise.

Speaker Change: On the total Revpar question, we made the comment at the beginning of the year that.

Our comparable Revpar growth was about 2% to 4% and we thought that our including out of room spend you would add about 50 to 75 basis points to that and that you really hasnt changed.

Speaker Change:

Speaker Change: What was the second question I apologize.

Speaker Change: Oh.

Speaker Change: April Revpar is right now trending about flattish.

Speaker Change: Okay. Thank you.

Operator: Thank you, and one moment for our next question. And our next question is going to come from the line of Austin Wurschmidt with KeyBank Capital Markets. Your line is open. Please go ahead.

Speaker Change: Welcome. Thanks.

Speaker Change: Thank you and one moment for our next question.

Speaker Change: And our next question is going to come from the line of Austin <unk> with Keybanc capital markets. Your line is open. Please go ahead.

Operator: Hey, good morning, everybody. Just wanted to start off a little bit on resorts and some of the leisure-oriented assets. I mean, the ADRs for this bucket of hotels have clearly been under a little bit of pressure here now for around a year, a little over a year. I'm just wondering if you think we're at a point where we could begin to see that stabilize or even increase. I'm just curious what the outlook looks like from a booking perspective and how we should be thinking about rates for that pool of assets.

Austin: Hey, good morning, everybody just wanted to start off a little bit on on resorts and some of the leisure oriented assets.

Austin: The <unk> for this bucket of hotels has clearly been under a little bit of pressure here now for.

Austin: Around a year a little over a year and I'm. Just wondering if you think we're at a point, where we could begin to see that stabilize or even increase.

Austin: Just curious what sort of the outlook looks like from a booking perspective, and how we should be thinking about rate.

Austin: That pool of assets.

Justin L. Leonard: Thanks, Austin and Justin. So we've seen a little bit of weakness, I would say, over the last 60 days compared to the first 60 days of the year, but nothing to be too concerned about. I think one thing to note is that we are sort of shifting segmentation throughout the portfolio, not just on the urban side, but also on the resort side. And I think, portfolio-wide for us, we do have a bit of a discount between the group rate and the transient rate.

Speaker Change: Thanks afternoon, Justin So we've seen a little bit of weakness I would say over the last 60 days versus the first 60 days of the year, but nothing to be too concerned about I think one thing to note is we are sort of shifting segmentation throughout the portfolio not just on the urban side, but also on the resort side and I think portfolio wide for us we do have a.

Speaker Change: Bit of a discount between group and transient rate. So some of what youre seeing from a rate deterioration perspective is not necessarily a rate fall off but it's actually just the segmentation shift away from transient to resort and that's intentional we're trying to build base given some of the weakness we saw at the end of last year and the hope is as we continue to.

Justin L. Leonard: So some of what you're seeing from a rate deterioration perspective is not necessarily a rate fall-off, but it's actually just a segmentation shift away from transient and towards resort. And that's intentional. We're trying to build a foundation, given, you know, some of the weakness we saw at the end of last year. And the hope is, as we continue to group up some of these hotels and make them smaller and require less transient demand, we'll be able to see some more rate stability and compressed transient rates.

Speaker Change: <unk> some of these some of these hotels and make them smaller and require less transient demand that we'll be able to see some more rate stability and compress transient rate.

Justin L. Leonard: When do you lap some of the, you mentioned that loyalty redemption nights are down; when do you start to lap, you know, some of the comps there and see the mix, you know, on a more comparable basis year over year with the strategy you're currently pursuing with the group?

Speaker Change: When do you lap some of the you mentioned that loyalty redemption nicer down when do you start to lap.

Speaker Change: Some of the comps there.

Speaker Change: And see the mix on a more comparable basis year over year with the strategy you're currently pursuing with group.

Justin L. Leonard: This is from the Redemption perspective. So, you know, I can't really be a better question for Marriott. I wish they had a little bit more disclosure, a little bit more disclosure about what the point balance is that they hold kind of from a global perspective. But, you know, we have seen a continued deterioration of that balance into our hotels over the course of the last two years, and so we're optimistic, hopefully, by the time we get to summer, we'll start to see some stability, but it has been a bigger and a longer slide than we would have expected.

Just from a redemption.

Speaker Change: Perspective.

Speaker Change: <unk>.

Speaker Change: I candidly probably be a better question for Mary I wish they had a little bit disclosure a little bit more disclosure about what the point balance is that they hold kind of from a global perspective, but.

Speaker Change: We have seen a continued deterioration of that balance into our hotels over the course of the last two years and so we're optimistic hopefully by the time, we get to summer we will start to see some stability, but it has been a bigger slide at a longer life than we would've expected.

Speaker Change: Okay.

Jeffrey John Donnelly: Okay, that's helpful. And then just last one for me, you mentioned the shadow pipeline in the transaction market building, Jeff, but capital markets remain challenging. You alluded to using some cash to maybe repay a mortgage later this year. I guess I'm curious if you guys are starting to build a pipeline of potential dispositions to kind of prepare for any opportunities that emerge and have the strategy on which assets to sell and when, you know, versus maybe what the previous executive team had flagged for potential sale. Yeah, I mean, Justin and I can both speak.

Speaker Change: That's helpful. And then just last one for me you mentioned the shadow pipeline in the transaction markets building, Jeff, but capital markets remained challenging you alluded to using some cash can they be repay a mortgage later this year I guess I'm curious if you guys are starting to build a pipeline of potential dispositions to kind of prepare.

Speaker Change: For for any opportunities that emerge and has the strategy on which assets to sell and when changed versus maybe what the previous executive team had flagged for a potential sale.

Jeffrey John Donnelly: Yeah, I mean, Justin and I can both speak to this. I think when we think about dispositions, it's trying to be, and I keep using the word, a little more deliberate, rather than maybe trying to be reacting to the situations that are in the market, to be a little bit more planned around our dispositions and making sure that we're positioning assets to be in their best position for sale. So yes, there are assets, and some that we've discussed in prior calls that really, I think we think of as either non-core or we think are less likely to return to their prior peaks that at some point we would like to move away from, but there's no mandate that we have to do that, just to be clear. In the next few quarters, we're trying to be opportunistic about it as we move ahead.

Jeffrey John Donnelly: Yeah, and Justin and I can both speak to this I think when we think about dispositions is trying to be and I keep using the word a little more deliberate rather than maybe trying to be reacting to the situations that are in the market has to be a little bit more planned around our dispositions and making sure that we're positioning assets to be in their best best position for sale. So yes.

Jeffrey John Donnelly: There are assets and something that we've discussed in prior calls that really I think we think of is either noncore or we think are less likely to return to their prior peaks that at some point, we would like to move away from but there is no mandate that we have to do that just to be clear in the next few quarters.

Jeffrey John Donnelly: We're trying to be opportunistic about it.

Jeffrey John Donnelly: As we move ahead.

Speaker Change: Thanks for the time.

Operator: Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Duane. Smedes Rose, Anthony Powell, Briony Quinn, Mark Brugger, Floris Dijkum, Duane Pfennigwerth

Jeffrey John Donnelly: Thanks.

Speaker Change: Thank you and one moment as we move on to our next question.

Speaker Change: And our next question is going to come from the line of Duane <unk>.

Duane: And of course with Evercore ISI. Your line is open. Please go ahead.

Operator: Hey, thanks. Firstly, congratulations to the team on the new roles. Jeff, it's important for cell site analysts to find higher and better uses. So, congratulations to the team.

Duane: Hey, Thanks, Firstly, congratulations to the team on the new roles Jeff.

Duane: Jeff it's important for sell side analysts defined.

Duane: Higher and better uses so congrats to the team.

Jeffrey John Donnelly: Thank you, Duane. I'll try to carry the flag. Thank you.

Thank you you do it.

Speaker Change: I'll try to carry the flag so thank you.

Jeffrey John Donnelly: We're rooting for you. Can you talk a little bit about some of the pitches you maybe did not swing at over the past few years or what types of pitches you'd be more willing to swing at with the new streamlined organizational structure?

Speaker Change: We're rooting for you can you can you talk a little bit about some of the pitches, maybe you did not swing at over the past few years or what types of pitches you'd be more willing to swing at with the new <unk>.

Speaker Change: Streamlined or structure.

Jeffrey John Donnelly: That's a good question. I mean, there's always going to be situations where we look at acquisitions or disposition opportunities that, you know, weren't, or weren't pursued. I don't know, I think, I think going forward, we're just going to be trying to be thoughtful about, and this is an often used line about, you know, sort of skating to where the puck is going, as opposed to where the puck was. And that's, I guess, how I think about it.

Speaker Change: That's a good question I mean, there's always going to be situations that we've looked at acquisitions or disposition opportunities that werent werent pursued.

Speaker Change: I don't know I think our I think going forward, we're just going to be try to be thoughtful about and this is an often used line about skating to where the puck is going as opposed to where the puck was.

Speaker Change: That's how I think about it I think there's oftentimes when I look at the lodging REIT industry over the last two or three decades.

Jeffrey John Donnelly: I think there's oftentimes, when I look at the lodging REIT industry over the last, you know, two, three decades, I find that there is always going to be a little bit of groupthink in terms of the markets that got crowded around the same time. And, you know, oftentimes, when everyone's buying in one place is, frankly, where I wish we were selling at that time. So I couldn't give you a specific example.

Speaker Change: I find that Theyre always tended to be a little bit of group think.

Jeffrey John Donnelly: But when I think forward, and I borrowed a term from Justin, where I do like the idea of manufacturing core assets, meaning that, you know, we want to be doing things today that will become core products in the future, because that's really how you can create value.

Speaker Change: In terms of the markets that got crowded around the same time and oftentimes when everyone's buying in one places frankly, where I wish we were selling at that time so.

Speaker Change: I Couldnt give you a specific example, but when I think forward.

Speaker Change: We borrowed a term from Justin where I do like the idea of manufacturing core assets, meaning that we want to be doing things today that will become core product in the future because that's really how you can create value.

Jeffrey John Donnelly: Appreciate those thoughts and, um.., certainly don't want to lock you into quarterly guidance. But could you expand a little bit on, you know, how you see the comps for May and June relative to the April Flattish commentary?

Speaker Change: I appreciate those thoughts.

Speaker Change: Certainly don't want to lock you into them.

Speaker Change: Quarterly guidance, but.

Speaker Change: Could you expand a little bit on.

Speaker Change: How you see the comps for May and June.

Speaker Change: Relative to the April flattish commentary.

Jeffrey John Donnelly: I don't know. Yeah, Duane, I think it's predominantly driven by what our group's outlook is. And we knew that April was going to be our toughest month from a group perspective. And so, coming out of April flat, given where we stood from a group-based perspective, and it's probably our worst month of the year on a year-over-year basis, I think we're pretty optimistic that we'll see continued growth from that flat range for the last two months of the quarter because we're in a much better position, just, So assuming we see, you know, the same type of transient booking trends, we should see that sort of 300 basis point escalation from what we saw in April.

Speaker Change: Uh huh.

Speaker Change: Yeah, Duane I think it's predominantly driven by what our group outlook is and we knew that April was going to be our toughest month from a group perspective, and so I think coming out of April flat, given where we stood from a group based perspective, and that's probably our worst month of the year on a year over year basis, I think we're pretty optimistic that we'll see continued growth from that that flat range for the <unk>.

Speaker Change: Last two months of the quarter, because we're in a much better position.

Speaker Change: In group pace, so assuming we see the same type of transient booking trends, we should see that sort of 300 basis point escalation from what we saw in April on.

Speaker Change: On Revpar.

Operator: Okay, thank you.

Speaker Change: Okay. Thank you.

Operator: Thank you. Thank you. And one moment as we move on to our next question. And our next question is going to come from the line of Anthony Powell with Barclays. Your line is open. Please go ahead.

Speaker Change: Thanks, Thank you and one moment as we move on to our next question.

Speaker Change: And our next question is going to come from the line of Anthony Powell with Barclays. Your line is open. Please go ahead.

Operator: Hi, good morning, and congratulations to everyone on the new roles. I wanted to dig in a bit more on the redemption comments, which I think are interesting and important. You know, in terms of points per room, I noticed myself that the points required to redeem have gone up. So is that kind of a driving issue there? And also, how much control do you have as an owner on the whole points per night, I guess, value?

Anthony Franklin Powell: Hi, good morning, and congrats everyone on the new rules.

Anthony Franklin Powell: I wanted to dig in a bit more on the redemption comments you can make your interesting and important.

Anthony Franklin Powell: You know in terms of a points per room night, I know with myself.

Anthony Franklin Powell: Points required to redeem them gone up so is that kind of a driving issue there and also how much control do you have an owner on the whole points per night I guess values.

Jeffrey John Donnelly: Well, I'll have Justin speak to that. He's pretty intimately involved with it.

Okay, well have that adjusted to speak to that he's pretty intimately involved with it I think the way I sort of think about it as you know as these programs have evolved there not just the accumulations are not just about hotel stay and a lot of ways, they've really become more focused on the credit card spend until the middle of the pandemic you had a lot of people that we're spending.

Justin L. Leonard: I think the way I sort of think about it is, you know, as these programs have evolved, they're not just the accumulations are not just about hotel stays. In a lot of ways, they've really become more focused on credit card spend. And so, you know, in the middle of the pandemic, you had a lot of people that were spending on their credit cards, generating these large point balances while not traveling and not using them.

On their credit cards generating these large point balances, while not traveling and not utilizing so I think part of what we're seeing is just the continued burn off of that accumulation that happened during the pandemic and that's why we saw a big uptick.

Justin L. Leonard: So I think part of what we're seeing is just a continued burn off of that accumulation that happened during the pandemic. And that's why we saw a big uptick, you know, as the sort of revenge travel started two years ago. We've seen a fall off since that point, as opposed to just the increase in the points required. There is some of that as well. I think as occupancy has returned, the brands have reoriented their programs in order to try and not run those programs at a loss on an annual basis.

Anthony Franklin Powell: As the sort of revenge travel started two years ago, we've seen a falloff since that point.

Anthony Franklin Powell: As opposed to just the increase in the points required there is some of that as well I think as Occupancies returned the brands have reoriented their programs in order to try and not run those programs at a loss on an annual basis and so there's been a significant uptick as rates have risen to that number of points required to get into the hotels in terms of our control.

Justin L. Leonard: And so there's been a significant uptick as rates have risen to the number of points required to get into the hotels. And in terms of our control, I would say fairly little; we have the ability to lobby for changes to the programs, but they are a bit of a black box in terms of where the point totals are set. Yeah, I would chime in that I think that's one of the reasons why we'd like some of these independent, you know, more destination resort locations where I think we're a little more in control of our own future at those properties.

I would say fairly little and we have the ability to lobby for changes to the programs.

Anthony Franklin Powell: They are a bit of a black box in terms of where the point totals are.

Anthony Franklin Powell: Percent.

Speaker Change: Yeah, and I would I would chime in that I think thats one of the reasons why we like some of these independent more destination resort locations, where I think we're little more in control of our own future at those properties.

Jeffrey John Donnelly: Yeah, thanks. So maybe one more broad picture on, I guess, asset, asset mix. The group has done well over the past couple years and looks good over the next couple years. I know there's been discussion in the past about reducing your group exposure. So maybe can you just, you know, discuss what your approach to the group is as a, you know, percentage of your hotel bed.

Speaker Change: Got it thanks, and maybe one more broad picture on I guess asset our asset mixing our group has done well over the past couple of years and it looks good over next couple of years I know there's been discussion in the past about reducing NPT soldiers. So maybe.

Speaker Change: Discuss what your profit.

Speaker Change: Some of your thoughts are there.

Jeffrey John Donnelly: We're roughly about a third group right now, give or take, and I don't think there's an intention on our part to reduce that meaning like exit group assets if I heard you correctly. It does provide stability to our portfolio; we do like that business. I think it's all about you know making sure that we have assets that are well positioned in Excel as being good group houses, but yeah, if I heard your question correctly, we're happy with that concentration in our portfolio.

Speaker Change: We're roughly about a third group right now give or take and I don't think theres, a theres not an intentional on our part to reduce that meaning like exit group assets, if I heard you correctly.

Speaker Change: It does provide stability to our portfolio, we do like that business I think it's all about making sure that we have assets that are.

Speaker Change: Well positions and excel at being good group houses.

Speaker Change: Yes, if I heard your question correctly.

We're happy with that that concentration in our portfolio.

Jeffrey John Donnelly: Got it. So like properties like Chicago Marriott are now kind of, you know, still core as opposed to maybe, you know, potential asset sales. But I wouldn't necessarily

Speaker Change: Got it so like properties that Chicago Marriott are now kind of still.

Speaker Change: So core as opposed to maybe.

Jeffrey John Donnelly: I wouldn't necessarily say that Chicago Marriott per se or any of those assets are core. I'm just saying that I think you know we're not trying to exit the group segment.

Speaker Change: Potential asset sale.

Speaker Change: I wouldn't necessarily say that like Chicago Marriott per se or any of those assets are core I'm, just saying that I think.

Jeffrey John Donnelly: I think we talked about in the past that Chicago Marriott is actually a terrific property. It's very well located. It's very well run. But I think we questioned whether or not it sort of fits with the rest of our portfolio. So that's really been our thinking on Chicago Marriott.

We're not trying to exit the group segment I think we've talked about it in the past that Chicago Marriott for US is it's actually a terrific property is very well located and it's very well run I think we question, whether or not that sort of fits with the rest of our portfolio. So that's really been our thinking on Chicago Marriott.

Okay. Thank you.

Operator: Thank you, and one moment as we move on to our next question. Our next question is going to come from the line of Smedes Rose with Citi. Your line is open. Please go ahead.

Speaker Change: Thanks.

Thank you and one moment as we move on to our next question.

Speaker Change: Our next question is going to come from the line Smedes Rose with Citi. Your line is open. Please go ahead.

Operator: Hi, thanks and congratulations to each of you on the new roles. I wanted to just ask a little bit. You kept your RevPower Outlook 2 to 40% unchanged, but it sounds like things were lighter than expected in the first quarter. You mentioned a little bit of color around the second quarter. So what do you need to see to get to the high end of that range? It sounds like the group is kind of locked in. Is it more business transient, or is it more leisure?

Smedes Rose: Hi, Thanks, and congratulations to each of you on the new roles.

Jeffrey John Donnelly: What would need to happen then?

Smedes Rose: I wanted to just ask a little bit you kept your revpar outlook too.

Smedes Rose: An unchanged, but it sounds like things were lighter than expected in the first quarter, you mentioned a little bit of color on the second quarter. So what what you need to see to get to the high end of that range. It sounds like group is kind of locked into is it is it more the parenting and or is it more leisure like what would need to happen.

Jeffrey John Donnelly: I think it's a combination of factors, Smedes. I think we have a very strong group pace. Of course, you know, that can come in, you know, at or above the level of the year-ahead group, depending on how the year, for the year group, is shaping up. And obviously, there's, you know, the risks to the downside are obvious both in leisure and in group. I think to get to the high end, you know, we would have to see our group continue to come in very strong with less attrition and fewer cancellations. In leisure, to have a more pronounced ramp, probably. But we're not expecting anything too dramatic in the back half of the year for leisure.

I think it's a combination of factors needs I think we have very strong group pace of course.

Smedes Rose: That can come in.

Smedes Rose: At or above depending on how in the year for the year group is shaping up and obviously, there's the risks to the downside or obvious both in leisure and in group.

I think to get to the high end you know what you would have to see our group continued to come in very strong.

Smedes Rose: Less attrition and fewer cancellations and.

Smedes Rose: In leisure to have a more pronounced ramp probably but not we're not we're not expecting anything too dramatic in the back half of the year for leisure.

Jeffrey John Donnelly: Okay, and then for leisure, it sounds like it was the sort of the higher end of your kind of leisure customer that came in weaker than expected. Is it, I mean, are you hearing or seeing anything that just would suggest like just an overall economic pullback? Or do you think it's more of a sort of a comp issue? I think in our case, it's a little bit more of a combo.

Okay, and then Felicia so it sounds like it was the sort of the higher end of your kind of leisure.

Felicia: A customer that came in weaker than expected is it I mean you hear.

Felicia: Hearing or seeing anything that would suggest so I could just on overall economic pullback or do you think it's more of a sort of a comp issue.

Jeffrey John Donnelly: I think in our case it's a little bit more of a comp issue frankly because you know we're not of the size that we necessarily have a lens that's so broad that we're able to make that type of a determination and the two examples I called out in my remarks I mean one Sonoma seemed to be fairly asset specific as is the case of Vail those two in particular really were the source of the majority of the weakness for what we would call our luxury resort group so I don't think there's necessarily a you know very specific trend impacting though I so I'm aware that there are concerns in the broader economy that I'm sure affect people's purchases at some level I don't think it was solely driven by that

Felicia: I think in our case, it's a little bit more of a comp issue frankly, because we're not of the size that we necessarily have a lens that so broad that we're able to make that type of determination.

Felicia: And the two examples I called out in my remarks, I mean, one Sonoma it seemed to be very asset specific as is the case with Vale.

Felicia: Two in particular are really where the source of the majority of the weakness for what we would call our luxury resort group.

Felicia: So I don't think there's necessarily a very specific trend impacting the.

Felicia: So I am aware that there are concerns in the broader economy that I'm sure affect people's purchases at some level I don't think.

Felicia: It was solely driven by that.

Speaker Change: Okay alright, thank you.

Speaker Change: Thanks.

Operator: Thank you, and one moment as we move on to our next question. Our next question is going to come from the line of Dany Asad with Bank of America. Your line is open. Please go ahead.

Speaker Change: Thank you and one moment as we move on to our next question.

Speaker Change: Our next question is going to come from the line of Danny Assad with Bank of America. Your line is open. Please go ahead.

Operator: Hi, good morning, everybody, and congratulations to Jeff and Briony and Justin. Jeff, in your prepared remarks, you mentioned that you're at 85% of budgeted rooms on the books at the end of Q1. How much would you normally have on the books for the year at this time?

Dany Asad: Hi, good morning, everybody and congrats Jeff and Brian Justin.

Dany Asad: Uh huh.

Jeff in your prepared remarks, you mentioned that you're at 85% of budgeted rooms on the books at the end of Q1, how much do you normally have.

Dany Asad: On the books for the year at this time.

Jeffrey John Donnelly: That's a good question. I think last year we were around 80 at this point, maybe the high 70s. Yeah, I think it was. We're up certainly year over year.

Jeffrey John Donnelly: Oh, that's a good question I think last year, we were around 80 at this point maybe high <unk>. Yeah. I think it was we're up certainly year over year.

Jeffrey John Donnelly: Okay, and then, um... Look, I know it's probably not a very clean answer for this, but, you know, historically, what has your, you know, you're just thinking about the group pace color that you gave on in your prepared remarks. What has this group pace historically resulted in terms of actualized group ref par?

Speaker Change: Understood, Okay and then.

Speaker Change: Look I know, there's not probably a very clean answer for this but you don't historically what has your.

Speaker Change: Just thinking about the group pace color that you gave on the in your prepared remarks, what is this group pace historically resulted in terms of Actualized group Revpar.

Jeffrey John Donnelly: Yeah, that's a good question, Danny. I mean, as you progress through the year, it begins to, of course, as you sort of realize the group, that number naturally sort of averages down. I think, you know, if you kind of think about where we could end up, if this is roughly a third of our business, that This is just a guess at this point. I would say you're probably in the high single digits in total revenue growth for groups.

Speaker Change: Yeah. That's a good question Danny I mean, its as you progress through the year. It begins to of course as you sort of realize group that number naturally sort of averages down.

Speaker Change: I think.

Dany Asad: You kind of think about where we could end up if this is roughly a third of our business.

Dany Asad: This is just a guess at this point I would tell you probably in the high single digits total revenue growth for group.

Operator: Super helpful. Thank you very much.

Speaker Change: Got it.

Speaker Change: Super helpful. Thank you very much.

Operator: Thank you, and one moment as we move on to our next question. Our next question is going to come from the line of Michael Bellisario with Baird. Your line is open. Please go ahead.

Speaker Change: Yeah.

Speaker Change: Thank you and one moment as we move on to our next question.

Speaker Change: Our next question is going to come from the line of Michael Bellisario with Baird. Your line is open. Please go ahead.

Operator: Thank you. Good morning, everyone.

Michael Joseph Bellisario: Thank you and good morning, everyone.

Operator: Just one more on loyalty redemptions. Can you just size that up for us? Like, how important is that? What percentage of nights at your resorts are actual redeemed nights? And then what is it for the rest of the portfolio, x resorts?

Michael Joseph Bellisario: Good morning.

Michael Joseph Bellisario: Just one more on loyalty redemptions can you just size that up for us.

Michael Joseph Bellisario: How important is that what percentage of room nights at your resorts are actual.

Michael Joseph Bellisario: Redeemed nights and then what is it for the rest of the portfolio ex resorts.

Jeffrey John Donnelly: It's funny. It's going to vary by property, so I'm not sure we're going to be able to give you a number that's company-wide. We could probably follow up with you on something like that. I think there are specific examples of properties where, maybe Justin can share, that will give you a flavor for it.

Speaker Change: It's funny I was going to vary by property. So I'm not sure we're going to be able to give you a number that's companywide, we could probably follow up with you on something like that I think there is specific examples at properties where they.

Justin L. Leonard: I think that's really where it manifested itself for us in the first quarter. As Jeff said, it's kind of all over the map. I could come back to you on a portfolio-wide number, because obviously, we have a number of assets that are not branded, so it's 0% of our segmentation. But I would say in the resorts, in season, for an asset like Vail, in the height of season, it can be as high as 40%.

Speaker Change: And then maybe just and can share that.

Speaker Change: We will give you a flavor for it I think that's really where it manifested itself for us in the first quarter.

And as Jeff said, it's kind of all over the map I could come back to you on a portfolio wide number because obviously, we don't have a number of assets that are not brand and so its a zero percent of our segmentation, but but I would say in the resorts in season for an asset like Vale.

Speaker Change: In the height of season, it can be as high as 40% as we go seize it why it it's probably in the high teens.

Justin L. Leonard: As we go season-wide, it's probably in the high teens. But for an asset like Charleston, which might surprise people, it was our number one redemption hotel. So in 22, redemptions in Charleston were over 30% of our total segmentation. So when you get a significant fall-off in that number, that's 30% of your business. It's tough to maintain share against a comp set that's not completely branded. So I'd say it is very variable depending on asset, but for the resorts, it's a meaningful piece of the puzzle.

Speaker Change: But for an asset like Charleston, which might surprise people is our number one redemption hotel. So in 'twenty two redemptions in Charleston, we're over 30% of our total segmentation in that so when you get a significant falloff in that number it's 30% of your business, it's tough to maintain share against the comp set thats not completely brand.

So I'd say it is it is very variable depending on asset but for the resorts, it's a meaningful piece of the segmentation.

Justin L. Leonard: It's a meaningful piece of the segmentation.

Operator: Got it. That's helpful. I was just trying to understand the absolute change there with the negative 20 plus percent year over year figure that you provided. So that's helpful.

Speaker Change: Got it that's helpful. I was just trying to understand the absolute change there with.

The negative 20 plus percent year over year.

Speaker Change: Figure that you provided so that's helpful. And then just switching gears just one more on transactions.

Jeffrey John Donnelly: And then, just switching gears, just one more on transactions. It does sound like urban is on the list. I know that it wasn't off the list before, but it did seem like there wasn't as much interest or focus on acquiring urban assets previously. So maybe what does the urban acquisition target look like to you guys? And then how do you think about returns, underwriting any differently, especially in some of the slower to recover markets, or maybe looking at deeper turn renovation projects as well today? Thanks. Yeah, it's a good question. Concerning the past

Speaker Change: It does sound like urban is on the list I know that it wasn't off the list before but it did seem like there wasn't as much interest or focus on acquiring urban assets previously so what does the urban acquisition target look like to you guys and then how do you think about returns underwriting any differently, especially in some of the <unk>.

Speaker Change: Lower to recover markets or maybe looking at deeper turn renovation projects as well today.

Jeffrey John Donnelly: Yeah, it's a good question. Concerning the past, I will just say that it's difficult to buy what's really not available to be bought. I would say that there really wasn't a lot of urban product in the market in the last few years that was appealing to us. There was some high-quality product, but candidly, I would say the pricing was a little rich, either per key or on cap rates, or, as you mentioned, there were some where it really required a strong view on recovery that could be three to five years away.

Speaker Change: Yes, it's a good question concerning in the past I will just say is that it's difficult to buy whats really not available to be bought I would say that there really wasn't a lot of urban product in the market in the last few years that was appealing to US there were some high quality product, but candidly I would say the pricing was a little rich either per key or on cap rates or as you mentioned theres somewhere.

Speaker Change: It really required a strong view on recovery that could be three to five years away I think it was just that I think about it now I think we're getting to that point, where we're a little later into this cycle that youre starting to see more stress on some of these owners or assets that will probably start to shape more loose in the next six to 12 months.

Jeffrey John Donnelly: I think, you know, as Justin and I think about it now, I think we're getting to that point where we're a little later into this cycle, and you're starting to see more stress on some of these owners or assets that will probably start to shake more loose in the next six to 12 months. But I think we look at it, you know, very similarly to the way that we think about resources; it's all sort of a risk-adjusted return.

Speaker Change: But I think we look at it it's very similarly in the way that we think about resorts as it's all sort of a risk adjusted return the resorts the benefits. They have right. Now is generally speaking they produce a lot of cash flow today, and currently and I think we can get a little more comfortable with where they'll settle out.

Speaker Change: But urban I think generally speaking requires a little bit more view on where the future comes I don't know Justin if there's anything you want to add I think it's also maybe a little bit more focus on basis right. When I think about what our advantages, especially as we look towards the urban markets today against.

Jeffrey John Donnelly: You know, the resorts, the benefits they have right now are, generally speaking, they produce a lot of cash flow today and currently, and I think we can get a little more comfortable with where they'll settle out. But cities, I think, generally speaking, require a little bit more vision on where the future comes. I don't know, Justin, if there's anything you want to add?

Justin L. Leonard: I think it's also maybe a little bit more focused on the basis, right? When I think about what our advantage is, especially as we look towards the urban markets today against, you know, other capital sources that utilize a lot more leverage than we do, it's really a cost-to-capital advantage. And so I think maybe looking at an asset that's at a significant discount to what it would cost to replace it. I don't mean a, you know, 60-year-old sort of functionally obsolete asset where, you know, replacement costs may not be as relevant, but something that was new or built but maybe doesn't, you know, maybe in a market that's had some issues.

Justin L. Leonard: Other capital sources that utilize a lot more leverage than we do it's really a cost of capital advantage and so I think maybe looking at an asset that's at a significant discount to what it would cost to replace it I don't mean.

Justin L. Leonard: 60 are all sort of functionally obsolete asset where replacement costs may not be as relevant but something that was newer built but maybe it doesn't maybe in a market. That's had some issues I think that's something that we might find more interesting than we would have before because we do have we have an advantage against some of the people who are bidding against he'll have to underwrite levering it up and carry.

Justin L. Leonard: I think that's something that we might find more interesting than we would have before because, you know, we do have an advantage against some of the people we're bidding against who still have to underwrite levering it up and carrying it from a negative carry perspective two to three years until recovery. So if that gives us an opportunity to go into a market with an asset that we really like at a discount to replacement costs, we just think that's the proper investment decision and is going to give us opportunities for growth before the development pipeline gets started up again.

Justin L. Leonard: And yet from a negative carry perspective, two years to three years until recovery. So effective as an opportunity to go into a market with an asset that we really like at a discount to replacement cost do you think thats. The proper investment decision is going to give us opportunity for growth before the development pipeline gets started up again.

Speaker Change: All helpful. Thank you.

Operator: Thank you, and one moment for our next question. And our next question is going to come from the line of Floris Van Dijkum with Compass Point, LLC. Your line is open. Please go ahead.

Speaker Change: Thank you and one moment for our next question.

Speaker Change: And our next question is going to come from the line of Floris Van <unk> with Compass point LLC. Your line is open. Please go ahead.

Operator: Good morning, guys. Thanks for taking the question. Congratulations, Jeff, Justin, and Briony for your new roles. Obviously, I'm not the first one to do this, but... you know, kudos.

Floris Gerbrand Hendrik Van Dijkum: Good morning, guys. Thanks for taking the question.

Floris Gerbrand Hendrik Van Dijkum: <unk>, Jeff just and then Brian for your your new roles.

Speaker Change: Obviously, not the first one to do this but.

Speaker Change:

Jeffrey John Donnelly: Just curious, maybe Jeff, if you can talk a little bit about what you're able to share with your discussions with the new board, which you've just joined as well, which is, I'm glad to see that you're part of that as opposed to some other companies. Maybe talk about some of the issues like, you know, the ensuring change of control statutes or, and the discussions around share buybacks. Is there any sort of meaningful change that you've seen there? And how focused are you on those kinds of issues?

Kudos.

Speaker Change: Just curious maybe Jeff if you can talk a little bit about.

Speaker Change: Whats youre able to share on your discussions with the with the New Board, which you've just joined as well, which is I'm glad to see that.

Speaker Change: You are part of that as opposed to some other companies.

Speaker Change: Maybe talk about the.

Speaker Change: Some of the issues like.

Speaker Change: Ensuring change of control statues or.

Speaker Change: And the discussions around share buybacks is there any any sort of meaningful change that you've seen there and how focused are you on those kinds of kinds of issues.

Jeffrey John Donnelly: Yeah, it's a good question on the share repurchases. To me, that's a very valuable tool.

Speaker Change: Yeah. It's a good question on the share repurchases to me that's a.

Speaker Change: Valuable tool.

Speaker Change: Tool I would say my experience has been that the our shareholder base is somewhat split on it but I do think it's a useful tool for returning capital to shareholders in a tax efficient way and frankly, a good way to invest capital that can be superior risk adjusted returns relative to going out to the market, sometimes in buying a new asset.

Jeffrey John Donnelly: I would say my experience has been that our shareholder base is somewhat split on it, but I do think it's a useful tool for returning capital to shareholders in a tax-efficient way and, frankly, a good way to invest capital that can provide superior risk-adjusted returns relative to going out to the market sometimes and buying a new asset. That is something that we actively discuss with our board. As a general comment, I would say I think they'd like us to lean in on areas that we have conviction in, whether it's acquisitions, dispositions, or share repurchases.

Jeffrey John Donnelly: It's not necessarily in one direction. I think they are looking for us to be bold in our decision-making, but to be clear, I would not derive from that that there's any big pending announcement or anything along those lines. I apologize. Was there another part to your question?

Speaker Change: That is something that we actively discussed with our board.

Speaker Change: The general comment I would say I think they like us to lean in on areas that we have conviction in whether it's acquisitions dispositions share repurchases. It is not necessarily one direction I think they are looking for us to be.

Speaker Change: Bold in our decision, making but I wouldnt.

Speaker Change: To be clear I would not derived from that that there is any big pending announcement or anything along those lines.

Speaker Change: I apologize was there another part to your question.

Jeffrey John Donnelly: Did the change of control, you know, Did you talk about that? Did you ensure to make sure that everybody in the team gets, you know, participates in the same way that senior management does? Yeah, that's it.

Speaker Change: Did the change of control.

Speaker Change: <unk>.

Speaker Change: Yeah.

Speaker Change:

Speaker Change: Did you talk about that did you insurer to make sure that everybody in the team gets get.

Speaker Change: Participates in the same way that that senior management does.

Jeffrey John Donnelly: Yeah, that's a great question. That's really been a focus of mine in assuming this role is to make sure that the executive leadership of the company is all aligned and shares the same view and same incentives on change of control. Thanks, Jeff. And maybe...

That's a great question, that's really with a focus of mine and assuming this role is making sure that executive leadership of the company is all aligned and shares the same view the same incentives on change of control.

Operator: Thanks, Jeff, and maybe, you know...

Speaker Change: Thanks, Jeff and maybe.

Speaker Change: Did I lose you floors.

Operator: Thank you. We will go ahead and move on to our next question. One moment, please. And our next question will come from the line of Chris Darling on Green Street. Your line is open. Please go ahead.

Speaker Change: Thank you we will go ahead and move on to our next question one moment. Please.

Speaker Change: And our next question will come from the line of Chris Sterling with Green Street. Your line is open. Please go ahead.

Operator: Thanks. Good morning. Going back to the leadership transition, do you feel appropriately staffed in all areas of the organization below the C-suite level, just given the additional responsibilities that each of you on the call have taken on?

Chris Jon Woronka: Thanks, Good morning.

Chris Jon Woronka: Going back to the leadership transition do you feel appropriately staffed in all areas of the organization below the C suite level, just given the additional responsibilities that each of you on the call are taken on.

Jeffrey John Donnelly: We do. I don't think there will be any major staffing changes in the organization. There were some open positions that we had, one or two, prior to this announcement, and those would continue to be pursued, but there are no major staffing changes that are anticipated.

Speaker Change: We do I don't think there'll be any major staffing changes in the organization and there were some open positions that we had one or two.

Speaker Change: Prior to this announcement and those continue to be pursued but.

Speaker Change: There are no major staffing changes that are anticipated.

Operator: Okay, and then just one question for maybe Justin or Jeff: can you talk about the appetite among private buyers to transact at scale today? You know, I know for really the better part of the last year, year and a half, we've talked about that $100 million or less. PricePoint really being the sweet spot, but I wonder if that dynamic is either beginning to change, or maybe it was changing before the recent move higher in interest rates. So any comments you have around that would be interesting to hear.

Speaker Change: Okay.

Speaker Change: And then just one either for you or maybe just center, Jeff can you talk about the appetite among private buyers to transact at scale today I don't know for really the better part of the last year year and a half we've talked about that 100 million or less.

Jeffrey John Donnelly: Price point really being the sweet spot, but I wonder if that dynamic either is beginning to change or maybe it was changing before the recent move higher in interest rates. So any comments you have around that would be interesting to hear yes.

Jeffrey John Donnelly: Justin can chime in as well. I would say that from talking to folks in the brokerage community recently, I really think that for a lot of private buyers, they tend to be much more reliant upon debt capital for their transactions. And just given the interest rate environment right now, it just does not feel that not only are there not a lot of products coming to market, though that's changing, but it doesn't feel like a lot of those buyers are equipped to be the best buyers. So I don't think that's changing. I don't know, Justin, if you think that.

Speaker Change: Justin can chime in as well I would say that from talking to folks in the brokerage community recently.

Speaker Change: We think that for a lot of private buyers they tend to be much more reliant upon debt capital for their transactions and just given the.

Speaker Change: The interest rate environment right now it just does not feel that not only is there not a lot of products coming to market, though that's changing it doesn't feel like a lot of those buyers are equipped to be the best buyer. So I don't think thats changing I don't know just and if you think that.

Justin L. Leonard: No, I think that's right. I think the only encouraging sign we've seen is that it does feel like there's been a bit of a thawing of the SASB markets or the large-scale single asset securitization market. Unfortunately, at the same time, we've seen an uptick in the underlying base rate. So despite the fact that that market seems to be coming alive and the spreads are tightening a little bit, the overall cost of that debt is probably more expensive than it was three months ago, just given how much SOFR has gone up.

Speaker Change: I think that's right I mean, the only encouraging sign we've seen as it does feel like there's been a bit of a thawing of the SaaS markets or the Super large scale single asset securitization market. So unfortunately at the same time, we've seen it.

Speaker Change: An uptick in the in the underlying base rate. So despite the fact that that market seems to be coming alive and the spreads are tightening a little bit. The overall cost of that debt is still probably more expensive than it was three months ago, just given how much sofer's come out. So I think we are.

Justin L. Leonard: So I think we're happy to see a little bit more liquidity come into the market, but given where we would like to transact some of our assets, we feel like people need to see the Fed's trajectory start to move lower and see that movement in SOFR before that leverage becomes accretive and will really drive price.

Speaker Change: We're happy to see a little bit more liquidity to come into the market, but just given where we would like to transact some of our assets, we feel like people need to see the fed's trajectory start to move lower and see that movement and so far before that leverage becomes accretive and will really drive pricing.

Operator: Got it. That's helpful. Thank you.

Speaker Change: Got it that's helpful. Thank you.

Operator: Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Stephen Grambling with Morgan Stanley. Your line is open. Please go ahead.

Thank you and one moment as we move onto our next question.

Speaker Change: And our next question is going to come from the line of Stephen Grambling with Morgan Stanley. Your line is open. Please go ahead.

Operator: Hi, thanks. I heard the comments about the mixed-shift impact on margins from S&B, but I wonder if there's any other major costs? https://www.smedesrosocialmedia.com

Stephen Grambling: Hi, Thanks.

Stephen Grambling: I heard the comments about.

Stephen Grambling: The mix shift impact on margins from F&B, but I'm wondering if there's any other major costs.

Stephen Grambling: Considerations over the back half of the year.

Stephen Grambling: Think about wages and other factors insurance property taxes et cetera that you have line of sight on and then any other broader comments just around.

Stephen Grambling: Inflation and expenses across the different property types.

Jeffrey John Donnelly: Yeah, I mean, I'll take the tax and insurance side. That's the easy answer.

Justin L. Leonard: I would say there's really no concerns that we have there. I mean, tax increases can surprise you just as tax rebates can, but none that we really have today that I would say are particularly notable to our portfolio that we think will cause any sort of major disruption or headwind. I don't know.

Speaker Change: Yes, I'll take the tax and insurance side, that's the easy answer I would say, there's really no concerns that we have there.

Tax increases can surprise you just as tax rebates can but none that we really have today that I would say a pretty particularly notable to our portfolio that we think will cause any sort of major disruption.

Justin L. Leonard: Do you want to talk about labor? Yeah, I think wages have definitely, you know, at least the rate of growth seems to have cooled a little bit. It's still definitely above, you know, kind of prior run rate pre-pandemic, but nothing like what we saw over the course of the last 24 months. I think we were encouraged to see that sort of per hour worked wage rate, inflationary rate, kind of creep down, you know, towards the 3, 3.5% in the first quarter. We obviously, as Jeff mentioned, added a lot more hours worked just given that shift to food and beverage and the number of hours that are required to deliver that product.

Speaker Change: Our headwind I don't know do you want to talk about labor.

Speaker Change: Wages are definitely at least the rate of growth seems to have cooled a little bit I still definitely above.

Speaker Change: Prior run rate pre pandemic, but nothing like what we saw over the course of the last 24 months I think we were encouraged to see that sort of per hour worked wage rate inflationary rate kind of creep down.

Speaker Change: Towards the three to three 5% in the first quarter, we obviously as Jeff mentioned added a lot more hours work, just given that shift to food and beverage in the number of hours that are required to deliver that product, but I think that was encouraging I think the one thing that maybe caused a little concern for US is just we continue to see growth in benefit specifically in health and welfare that I think everyone sees it.

Operator: But I think that was encouraging. I think the one thing that maybe caused a little concern for us is that we continue to see growth and benefits, specifically in health and welfare, that I think everyone sees in an operating business, that those costs continue to run at high single digits in Europe. That's helpful. Maybe one unrelated follow up.

Speaker Change: Operating business that those those costs continue to run at high single digit numbers on.

Operator: I just want to make sure I understood you correctly. I think that you made comments in terms of being more deliberate in terms of transactions. Have you had any unsolicited inbounds on assets at this point? Because you were referencing being, you know, maybe more offensive rather than reactive. Yeah, not that we have had any unsolicited requests for any of our assets in the last few months that I can think of. There are lots of times that you do get those requests just for your benefit, but you really have to assess the quality of the buyer beyond just their pricing in terms as well.

Speaker Change: On a year over year.

That's helpful. Maybe one unrelated follow up I, just want to make sure I understood you correctly I think that you made.

Speaker Change: Some comments in terms of.

Speaker Change: Being more deliberate.

Speaker Change: In terms of transactions.

Speaker Change: Have you had any like unsolicited inbounds on assets at this point.

Speaker Change: Could you were referencing being maybe more offensive rather than reacting.

Speaker Change: Yes.

Speaker Change: No <unk>.

<unk>.

Speaker Change: Requests for any of our assets.

Speaker Change: The last few months that I can think of.

Speaker Change: Theres lots of times that you do get those requests just for your benefit, but you really have to assess the quality of the buyer beyond.

Just their pricing and terms as well.

Speaker Change: Yeah.

Speaker Change: Got it thank you.

Operator: Thank you, and one moment as we move on to our next question. And our next question is going to come from the line of Chris Woronka with Deutsche Bank. Your line is open. Please go ahead.

Speaker Change: Thanks.

Thank you and one moment as we move on to our next question.

Speaker Change: And our next question is going to come from the line of Chris <unk> with Deutsche Bank. Your line is open. Please go ahead.

Operator: Hey, good morning, everyone. Thanks for taking the time to answer the question. We've covered a lot of ground so far. But Jeff, I guess, are you guys seeing any, any increase in the level of what I would call churn on reservations at your hotels? I mean, I think we've heard that in the more select service world, which you're not in, but that there's just more churn, there's cancellations, and booking windows are actually shortening a little bit. Is there anything like that going on in your portfolio, whether it's a market or a segment?

Chris Jon Woronka: Hey, good morning, everyone and thanks for taking the question.

Chris Jon Woronka: Covered a lot of ground so far but.

Chris Jon Woronka: So Jeff I guess.

Chris Jon Woronka: Are you guys seeing any any increase in the level of what I would call churn on reservations at your hotels.

Justin L. Leonard: No, I mean, I think in the aggregate, I'd say, no, we probably have seen maybe a little bit more in a couple of selective places. But clearly, we've been very focused on base building. And so, for example, in addition to group bookings, we've really been leaning into advanced prepay, which gives us some insurance against that, you know, race to the bottom when we have those clients that are in the hotel that are sticky and can't effectively cancel and rebook. It gives us just a little bit more ability to keep rates high without sort of flushing through the, you know, the entire reservations deck in a hotel on So I'd say in the aggregate, we really haven't seen a change in the cancellation policy in the short term, on a per booking basis.

Chris Jon Woronka: We've heard that kind of in the more in the select serve world, which youre not in but that there is more churn there's cancellations and booking windows are actually shortening a little bit is there anything like that going on in your portfolio, whether it's a margin or a segment.

Speaker Change: No I mean, I think in the aggregate I'd say no.

Speaker Change: You've seen maybe a little bit more and a couple in a couple of selective places, but candidly we've been very focused on base building and so for example in addition to group, we've really been leaning into advanced prepay, which gives us some insurance against that race to the bottom when we have those clients that are in the hotel that are sticky and can't effectively cancel and rebook. It gives.

Speaker Change: US just a little bit more ability to keep rate high.

Speaker Change: I'll sort of Flushing through.

Speaker Change: The entire reservations DAC and a hotel on a given day, so I would say in the aggregate, we really haven't seen a change the cancellation policy in the short term on a per booking basis.

Operator: Okay, thanks, Justin. And then just kind of going back to the, I guess, the new, I wouldn't call it new, you know, revamped acquisition strategy, perhaps, does that, should we take away that that could imply more chunkier assets? And you guys have obviously done a lot of smaller assets. And I know there are, you know, good returns on those, but there's also probably some friction costs. Is that kind of a theme that we should look for? Or would we not necessarily conclude that? Yeah, I mean,

Speaker Change: Okay. Thanks, Thanks, Justin and then just kind of going back to the I guess, the new iron called Nu.

Speaker Change: Revamped acquisition strategy, perhaps.

Speaker Change: Does that should we take away that could imply more chunkier assets and you guys have obviously done a lot of smaller assets and I know there's.

Speaker Change: Good returns of those but Theres also probably some friction costs as that kind of a theme that we should look for or not.

Jeffrey John Donnelly: I mean, I would say, and I'm being a little funny when I say this, we'd like to buy assets that are bigger than $30 million. You know, that's actually, it's not new.

Speaker Change: Necessarily conclude that.

I mean, I would say I'm being a little funny when I say this we'd like to buy assets that are bigger than $30 million.

Speaker Change: That's actually it's not new I mean, we've always aimed for larger assets I would say generally speaking I think given a company our size, we've shied away from transactions that start to get into that three or four or $500 million range, just because they create a little bit of a concentration issue for us and sometimes we're not going to be the most competitive buyer given the risks that presents to our portfolio.

Jeffrey John Donnelly: I mean, we've always aimed for larger assets. I would say, generally speaking, I think given a company our size, we've shied away from transactions that start to get into that $300 million, $400 million, $500 million range just because they create a little bit of a concentration issue for us. And sometimes we're not going to be the most competitive buyer, given the risk that presents to our portfolio versus what it does to perhaps one of our peers or one of the private equity firms who might be more comfortable stretching there.

Speaker Change: Leo versus what it does to perhaps one of our peers are one of the private equity firms who might be more comfortable stretching there, but I think in the past, we've always kind of thought of our sweet spot is sort of that $50 million to $150 million range. So there is certainly an efficiency to putting capital into those assets and we understand that people want assets to be needle moving so I think.

Jeffrey John Donnelly: But I think in the past, we've always kind of thought of our sweet spot as sort of that $50 million to $150 million range. So there is certainly an efficiency to putting capital into those assets. And we understand that people want assets to be needle moving. So I think I can't tell you that we won't buy or won't come across something that's sort of smaller and interesting. But I think our preference is to be a little more efficient in how we put out capital.

Speaker Change: I can't tell you that we won't buy.

Speaker Change: I'll come across something that sort of smaller and interesting, but I think our preference is to be a little more efficient in how we put our capital.

Operator: Okay, I got it. Very helpful. Thanks, Jeff. Thanks, Rose.

Speaker Change: Okay got it very helpful. Thanks, Jeff.

Chris Jon Woronka: Thanks, Chris.

Operator: Thank you, and one moment as we move on to our next question. Our next question is going to come from the line of Bill Crow with Raymond James. Your line is open. Please go ahead.

Speaker Change: Thank you and one moment as we move on to our next question.

Speaker Change: Our next question is going to come from the line of Bill Crow with Raymond James Your line is open. Please go ahead.

Operator: Good morning. Congratulations all. Justin, I wanted to start with you. Is there any research on changes in the amount of points that are being redeemed up or down at any given time for the health of the consumer? Do consumers lean more on points redemptions when times get tougher?

William Andrew Crow: Good morning.

William Andrew Crow: Congrats al.

William Andrew Crow: Just in order to start with you.

William Andrew Crow: Is there any read through.

William Andrew Crow: Changes in the amount of points that are being redeemed up or down.

William Andrew Crow: <unk> to the health of the consumers.

William Andrew Crow: Consumers lean Maura points redemptions.

Justin L. Leonard: I think you'd find it

William Andrew Crow: When times get tougher.

Justin L. Leonard: Bill, maybe not surprisingly, the consumer is actually pretty smart about it. I mean, I think they have sort of an idea in their minds about what the value of the points is and use them when they see there's a perceived value. I don't think it's just a consumer that has no ability to vacation unless they use points.

William Andrew Crow: I think you'd find bill maybe not surprisingly the consumers actually pretty smart about it.

William Andrew Crow: <unk> sort of an idea in their mind about what the value of the points are and use them. When they see there is a perceived value I don't think it's just a consumer that has no ability vacation and last day use point I think a lot of times people look at them as just another form of currency and you really look at them relative to the ADR and so.

Justin L. Leonard: I think a lot of times people look at them as just another form of currency, and you really look at them relative to the ADR. And so I'm not sure if that necessarily changes pricing decisions. It just maybe reallocates their decision to different markets based on their perceived value.

William Andrew Crow: I'm not sure that necessarily changes pricing decision is just more maybe reallocate their decision to different markets based on their perceived value.

Operator: has done so with their perceived value.

Jeffrey John Donnelly: Okay, interesting. Jeff, I know you, and this is a topic that I think has surfaced three or four times already this morning, but you asked but didn't answer the question about how big box hotels might or might not fit into your portfolio. I want to give you a chance to answer that question, because I think that's what a lot of people are asking. Is that really the difference between maybe your philosophy and Mark's prior philosophy?

Speaker Change #100: Okay interesting.

Speaker Change #101: I know you.

Speaker Change #101: This is a topic that I think has surfaced three or four times already this morning.

Speaker Change #102: The U S, but didnt answer the question, but how big box hotels might or might not fit into your portfolio. When it gives me a chance to answer that question.

I think that's what a lot of people are asking is that really the difference between maybe your philosophy.

Speaker Change #102: March prior.

Jeffrey John Donnelly: I don't think there's necessarily a difference there. I guess, you know, I made a comment in our opening remarks about maybe not pursuing sort of the, you know, the big box, you know, brand managed hotels. You know, really what I was meaning by that is, I think there's a tendency historically in the sector to buy sort of a, you know, the fully renovated, it doesn't necessarily have to be brand managed, but the fully renovated, you know, hotel and then argue that it's somehow worth more than what someone just paid.

Speaker Change #102: Prior philosophy.

Speaker Change #102: I don't think there's necessarily a difference there I guess I made a comment in my opening remarks about maybe not pursuing sort of the.

Speaker Change #102: The big box.

Speaker Change #102: Brand managed hotels, you know really what I was I was meaning by that is I think there's a tendency historically in this sector to buy sort of a fully renovated it doesn't necessarily have to be brand managed but the fully renovated hotel and then argue that it's somehow it worth more than what someone just paid I think we're trying to find situations, where we can create that.

Jeffrey John Donnelly: I think we're trying to find situations where, you know, we can create that value. And whether it's through a renovation, it's through repositioning, or frankly, being smart about identifying assets that we're able to buy at, you know, attractive discounts in the marketplace, because perhaps the owner is under some moment of distress, or they don't see something that we see in the market. Or conversely, it's, you know, a market that we think is going to be improving.

Speaker Change #102: Whether it's through a renovation through repositioning or frankly being smart about identifying assets that we are able to buy at attractive discounts in the marketplace, because perhaps the owners under some moment of distress or they don't see something that we see in the market, where Conversely, it's a market that we think is going to be improving and becoming a little more mainstream and more.

Speaker Change #102: Sure.

Operator: And then, for me, any indication that the hotel worker...

Speaker Change #102: And then finally for me any indication that.

Speaker Change #102: The hotel worker turnover is called me down a little bit.

Justin L. Leonard: Yeah, yeah, I think we've definitely seen that in the portfolio, but one way we see it is a continued shift away from contract work. And that's really, you know, we kind of gauge what the turnover is, sort of looking at the number of hours we have that are coming in through contract labor as opposed to full time. And, you know, we have it; we have sort of a desired intent to bring more of our employees in house. We just think it helps us from a productivity perspective and helps build, you know, more loyalty and goodwill in the workplace.

Speaker Change #103: Yeah Yeah.

Speaker Change #104: I think we definitely see that in our portfolio, but one way we see it as a continued shift away from contract and Thats really we kind of gauge what the turnover as sort of looking at the number of hours. We have that are coming in through contract labor as opposed to full time, and we havent, we have sort of a desire and intent to bring more of our employees in house. We just think it helps us from a productivity.

Speaker Change #104: <unk> helps build more loyalty goodwill in the box and we definitely saw a bit of that shift in the first quarter, but I think that's really probably the best indication I have of less turnover.

Justin L. Leonard: And we definitely saw a bit of that shift in the first quarter. So I think that's really probably the best indication I have of less turnover that, you know, we're not having to backfill with contract labor hours, and we're actually shifting more of those hours of work towards, you know, managers and direct employees.

Speaker Change #104: We're not having to backfill with contract labor hours that we're actually shifting more of those hours worked towards the managers directed poise.

Operator: Okay. Thanks. That's it for me.

Speaker Change #105: Okay. Thanks, that's it from me.

Operator: Thank you, and one moment for our next question. And our last question is going to come from the line of Floris Van Dijkum with Compass Point LLC. Your line is open. Please go ahead.

Speaker Change #106: Thank you and one moment for our next question.

Speaker Change #106: Our last question is going to come from the line of Floris Van <unk> with Compass point LLC. Your line is open. Please go ahead.

Operator: Hey, thanks guys. So, I have just a follow-up question for you. Maybe you could talk a little bit about your vision for branded versus unbranded. The discussion on redemption points is, obviously, very interesting. It can be really good if you get high occupancy and you use the redemptions to fill, you know, and create that compression and get maximum revenues. But as you think about DiamondRock's portfolio in three years' time, it sounds like you're probably more tempted to have more unbranded where you're more in control of the revenue. Maybe if you can talk, or maybe I'm interpreting that incorrectly, if you can talk a little bit about your vision for branded versus unbranded going forward and how that shapes the portfolio. Yeah, and thanks.

Floris Gerbrand Hendrik Van Dijkum: Hey, Thanks, guys.

Floris Gerbrand Hendrik Van Dijkum: A follow up question for me.

Floris Gerbrand Hendrik Van Dijkum: Yes.

Floris Gerbrand Hendrik Van Dijkum: Maybe if you could talk a little bit about your vision for branded versus unbranded. The discussion on redemption points, obviously very interesting. It can be really good if you get high occupancy and you get these and.

Speaker Change #107: And you use the redemptions to Phil.

Speaker Change #107: And create that compression and get maximum revenues, but.

Speaker Change #107: As you think about.

Speaker Change #107: Diamond rocks portfolio.

Speaker Change #107: In three Years' time.

Speaker Change #107: It sounds like Youre, probably more.

Speaker Change #107: Tempted to have more unbranded, where you're more in control of the revenue maybe if you can talk or maybe im interpreting that incorrectly, but if you could talk a little bit about your your your vision on.

Speaker Change #107: On branded versus unbranded going forwards.

Speaker Change #107: And.

Jeffrey John Donnelly: Yeah, and thanks for re-queuing. I would say, you know, to me, the decision to brand is really just a choice. You know, at the end of the day, I'm not necessarily pro-brand or anti-brand. I think it's one where it's just a choice for an owner about whether or not we can maximize our returns and be realistic around the costs that are associated with a brand. I think there are real benefits that they can deliver to you on the top line, but there are effectively costs as well through the expense structure and, of course, on the capital side. I think they're important to consider.

Speaker Change #107: How that shapes the portfolio.

Speaker Change #108: Yes, and thanks for thanks for re queuing.

Speaker Change #108: I would say to me like the the decision to brand. It's really just a choice at the end of the day I'm not necessarily pro brand our anti brand I think it's one where it's just a choice for an owner about whether or not we can maximize our returns and being realistic around the costs that are being associated with the brand.

Speaker Change #108: Think there's real benefits that they can deliver to you on the topline, but there are effectively costs as well through the expense structure and of course on the capital side and I think they are important to consider I think one area, where you would probably see us.

Jeffrey John Donnelly: I think one area where you would probably see us... maybe if I cut that answer a little differently, is that we likely remain more unencumbered or not brand managed. I think we feel like we appreciate the flexibility of having independent management from the brands. And I think we feel like we have more success from that standpoint. But we do have a lot of branded hotels in our portfolio, predominantly franchised, and I think we're very happy with them. So I don't think there's any desire to necessarily move away from those. I think, ultimately, as I said, it really just comes down to a choice for each asset.

Speaker Change #108: Maybe if I cut that the answer a little differently as we likely remain more unencumbered or brand managed I think we feel like we appreciate the flexibility of.

Speaker Change #108: Having independent management from the brands and I think we feel like we have more success from that standpoint, but we do have a lot of branded hotels in our portfolio of predominantly franchise and I think we're very happy with them. So I don't think there's any desire to necessarily.

Speaker Change #108: Move away from those I think it ultimately as I said really just comes down to a choice for each asset.

Speaker Change #109: Thanks, Jeff.

Operator: Thank you, and I'm showing no further questions at this time, and I would like to hand the conference back to CEO Jeff Donnelly for closing remarks.

Jeffrey John Donnelly: Thanks, Laura.

Thank you and I'm showing no further questions at this time I would like to hand, the conference back to CEO, Jeff Donley for closing remarks.

Jeffrey John Donnelly: Thank you everybody for joining us today. I appreciate all the questions, and we look forward to speaking with you next quarter.

Jeffrey John Donnelly: Well. Thank you everybody for joining us today I appreciate all the questions and we look forward to speaking with you next quarter.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change #110: This concludes today's conference call. Thank you for participating you may now disconnect.

Speaker Change #110: Okay.

Speaker Change #110: Okay.

Speaker Change #110: Okay.

Speaker Change #110: Sure.

Okay.