Q1 2024 Host Hotels & Resorts Inc Earnings Call
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Operator: Good morning, and welcome to the Host Hotels and Resorts first quarter 2024 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the call over to Jaime Marcus, Senior Vice President of Investor Relations. You may begin.
Good morning, and welcome to the host hotels and resorts first quarter 2024 earnings conference call.
Jaime Marcus: Today's conference is being recorded.
Jaime Marcus: At this time I would like to turn the call over to Jamie Marcus Senior Vice President of Investor Relations you may begin.
Jaime Marcus: Thank you and good morning everyone. Before we begin, please note that many of the comments made today 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 from those expressed, and we are not obligated to publicly update or revise these forward-looking statements. In addition, on today's call, we will discuss certain non-GAAP financial information, such as FFO, adjusted EBITDA RE, and comparable hotel-level results.
Jaime Marcus: Thank you and good morning, everyone.
Jaime Marcus: You can find this information, together with reconciliations, the most directly comparable gap information in yesterday's earnings press release and our 8k files with the SEC and in the supplemental financial information on our website at hosthotels.com. With me on today's call are Jim Risoleo, President and Chief Executive Officer, and Sourav Ghosh, Executive Vice President and Chief Financial Officer. With that, I would like to turn the call over to Jim.
Jaime Marcus: Before we begin please note that many of the comments made today are considered to be forward looking statements under federal Securities laws.
Jaime Marcus: As described in our filings with the SEC. These statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed.
Speaker Change: And we are not obligated to publicly update or revise these forward looking statements.
Speaker Change: In addition on today's call, we will discuss certain non-GAAP financial information such as <unk>.
Speaker Change: Adjusted EBITDA, Ari and comparable hotel level results.
Jaime Marcus: You can find this information together with reconciliations to the most directly comparable GAAP information in yesterday's earnings press release.
James F. Risoleo: In our 8-K filed with the SEC and in the supplemental financial information on our website at post hotels Dot com.
Jaime Marcus: With me on today's call are Jeff <unk>, President and Chief Executive Officer.
Sourav Ghosh: <unk> Executive Vice President and Chief Financial Officer.
Jaime Marcus: With that I would like to turn the call over to Jack.
James F. Risoleo: Thank you, Jaime, and thanks to everyone for joining us this morning. In the first quarter, we delivered adjusted EBITRE of $483 million and adjusted FFO per share of $0.60, which included $10 million of business interruption proceeds from Hurricane Ian. Excluding the business interruption proceeds, our adjusted EBIT RRE was 7% above the first quarter of 2023, and our adjusted FFO per share was 8% above last year. We delivered a year-over-year comparable hotel total REBPAR improvement of 50 basis points, underscoring the continued strength of out-of-room revenue, while comparable hotel REBPAR declined 1.2%. In the first quarter, Red Park faced headwinds from tough year-over-year comparisons, particularly in Maui.
Jim: Thank you, Jamie and thanks to everyone for joining us this morning.
James F. Risoleo: In the first quarter, we delivered adjusted EBITDAR E $483 million and adjusted <unk> per share of <unk> 60 cents, which includes $10 million of business interruption proceeds from hurricane Ian.
James F. Risoleo: Excluding the business interruption proceeds our adjusted EBITDAR Ari was 7% above the first quarter of 2023, and our adjusted <unk> per share was 8% above last year we.
James F. Risoleo: We delivered a year over year comparable hotel total revpar improvement of 50 basis points underscoring the continued strength of out of room revenue, while comparable hotel Revpar declined one 2%.
James F. Risoleo: First quarter Revpar faced headwinds from top year over year comparisons, particularly in Maui.
Unknown Executive: The year-over-year decline in MAUI REB PAR had an actual drag of 170 basis points on our first quarter portfolio REB PAR. However, this understates the true impact of the wildfires, as we would have expected Maui to contribute 140 basis points to portfolio Red Park growth in the first quarter given the renovation disruption at Fairmont-Keelani in 2023. As a result, the total estimated impact of the wildfires on first quarter REPAR is 310 basis points.
James F. Risoleo: Year over year decline in Maui, Revpar had an actual drag up 170 basis points on our first quarter portfolio Revpar. However.
Unknown Executive: However, this understates the true impact of the wildfires as we would have expected married to contribute 140 basis points to portfolio Revpar growth in the first quarter given the renovation disruption at Fairmont Kea Lani in 2023.
Unknown Executive: As a result, the total estimated impact of the wildfires on first quarter Revpar is 310 basis points.
Unknown Executive: RepPAR was also impacted by unseasonable weather in Florida, Arizona, and California and unanticipated renovation delays at the Singer Oceanfront Resort. Despite these headwinds, our first quarter comparable hotel EBITDA margin of 31.2% was 30 basis points above 2019. As a reminder, our first quarter operational results discussed today refer to our comparable hotel portfolio, which excludes the Ritz-Carlton Naples in 2024. In addition, while Lila Ventana Big Sur is included in our first quarter results, it is currently closed, and it has been removed from our comparable hotel set for the remainder of the year after a portion of Highway 1 collapsed in late March. At this time, we expect the resort to reopen towards the end of the second quarter.
Unknown Executive: Revpar was also impacted by unseasonable weather in Florida, Arizona, and California, and unanticipated renovation delays at the singer Oceanfront resort.
Unknown Executive: Despite these headwinds our first quarter comparable hotel EBITDA margin of 31.2% was 30 basis points above 2019.
Unknown Executive: As a reminder, our first quarter operational results discussed today refer to our comparable hotel portfolio.
Unknown Executive: Which excludes the Ritz Carlton Naples in 2024.
Unknown Executive: In addition, while we live in times of Big Sur is included in our first quarter results. It is currently closed and it has been removed from our comparable hotel set for the remainder of the year. After a portion of highway one collapsed in late March at this time, we expect the resort to reopen towards the.
Unknown Executive: End of the second quarter.
Unknown Executive: During the first quarter, our portfolio results continued to be impacted by the evolving nature of demand on Maui. Our risk management team has reached an agreement with our insurance carriers, and we are now including between $18 million and $22 million of business interruption proceeds related to the Maui wildfires in our full year 2024 guide. Turning to business mix, it is worth noting that this quarter we are referring to revenue growth for our business mix segments as revenue per available room as a result of the leap year.
Unknown Executive: During the first quarter, our portfolio results continued to be impacted by the evolving nature of demand on Maui.
Unknown Executive: Our risk management team has reached an agreement with our insurance carriers and we are now including between 18 million and $22 million of business interruption proceeds related to the Maui wildfires and our full year 2020 for guidance.
Unknown Executive: Turning to business mix. It is worth noting that this quarter, we are referring to revenue growth for our business mix segment as revenue per available room as a result of the leap year.
Unknown Executive: Group revenue per available room grew 4% in the first quarter, driven by room nights. Our properties booked over 500,000 group room nights in the year, bringing our definite group room nights on the books for 2024 to $3.6 million, with total group revenue pace up 7% compared to the same time last year. In the first quarter, business transient revenue per available room grew 5%, driven by both rate and room nights, and leisure remained steady, with transient rates at our comparable resorts up 52% compared to 2019, including our three Maui resorts. Briefly touching on Out of Room Spend.
Unknown Executive: Group revenue per available room grew 4% in the first quarter driven by room nights.
Unknown Executive: Our properties booked over 500000 group room nights in the year for the year, bringing our definite group room nights on the books for 2024 to 3.6 million with total group revenue pace up 7% compared to the same time last year.
Unknown Executive: In the first quarter business transient revenue per available room grew 5% driven by both rate and room nights and leisure remains steady with transient rates at our comparable resorts up 52% compared to 2019, including our three Maui resorts.
Unknown Executive: Briefly touching on out of room spend.
Unknown Executive: Food & Beverage revenue per available room grew 2% in the first quarter compared to last year, driven by an all-time high banquet and catering contribution. Other revenue per available room grew 6%, driven by elevated attrition and cancellation. It is worth noting that nearly 40% of our total revenue in 2023 came from food and beverage and other revenue, and our 2024 guidance assumes a similar proportion.
Unknown Executive: Food and beverage revenue per available room grew 2% in the first quarter compared to last year, driven by an all time high banquet and catering contribution.
Unknown Executive: Other revenue per available room grew 6% driven by elevated attrition and cancellation fees.
Unknown Executive: It is worth noting that nearly 40% of our total revenue in 2023 came from food and beverage and other revenue in our 2024 guidance assumes a similar proportion.
Unknown Executive: Since 2017, non-room revenue has steadily grown as our portfolio has shifted toward more complex, higher-end properties, which benefit from substantial out-of-room spend from both guests and non-guests. In fact, there may be instances that the property teams at our hotels strategically forgo incremental room rates as they focus on the total revenue picture. The Ritz-Carlton Naples is a clear example of the positive impact of out-of-room spending. In the first quarter, the resort achieved a REBPAR of $900, which is only half of its $1,700 total REBPAR.
Unknown Executive: Since 2017 non room revenue has steadily grown as our portfolio has shifted toward more complex higher end properties, which benefited from a substantial out of room spend from both guests and I guess in fact, there may be instances that the property teams at our hotels.
Unknown Executive: Teasingly forego incremental room rate as they focus on the total revenue picture.
Unknown Executive: The Ritz Carlton Naples is a clear example of the positive impact of out of room spending.
Unknown Executive: In the first quarter the resort achieved revpar of $900, which is only half a bit 1700 dollar total revpar.
Unknown Executive: As a result of our meaningful expansion and transformational renovation, transient rates in the quarter were up 40% compared to 2019, driven by club level rooms, and food and beverage revenue grew 38%, driven by outlets. In March, the resort posted its best revenue month ever, aided by Easter Week's Red Park, which was 45% above the competitive set. In addition, the resort was recently named to Travel and Leisure's It List, and we are proud to say that it truly is firing on all cylinders.
Unknown Executive: As a result of our meaningful expansion and transformational renovation transient rates in the quarter were up 40% compared to 2019, driven by club level rooms, and food and beverage revenue grew 38% driven by outlets.
Unknown Executive: In March the resort posted its best revenue month ever aided by Easter weeks, Red part, which was 45% above the competitive set.
Unknown Executive: In addition, the resort was recently named the travel and leisure is it less and we are proud to say that it truly is firing on all cylinders.
James F. Risoleo: Turning to capital allocation, yesterday we announced the acquisition of the fee-simple interest in a two-hotel complex comprising the 215-room One Hotel Nashville and the 506-room Embassy Suites by Hilton Nashville Downtown for approximately $530 million in cash. The acquisition price represents a 12.6 times EBITDA multiple or a cap rate of approximately 7.4% on 2024 estimated results. The properties are each expected to rank among our top 25 assets based on estimated full-year 2024 results.
Unknown Executive: Turning to capital allocation yesterday, we announced the acquisition of the be simple interest and a two hotel complex comprising the 215 room, one hotel in Nashville, and the 506 room embassy suites by Hilton Nashville downtown were approximately 530.
James F. Risoleo: In cash.
James F. Risoleo: The acquisition price represents a $12 six times EBITDA multiple or a cap rate of approximately seven 4% on 2020 for estimated results.
James F. Risoleo: The properties are each expected to rank among our top 25 assets based on estimated full year 2024 results with an expected combined revpar of $275 revpar of $435 and EBITDA per key of 58500 <unk>.
James F. Risoleo: With an expected combined REB PAR of $275, TREB PAR of $435, and EBITDA per key of $58,550, further improving the quality of our portfolio. The newly built LEED Silver Complex opened in 2022 and stands directly across from the 2.1 million square foot Music City Convention Center, adjacent to the Bridgestone Arena, which is home of the NHL Nashville Predators, and within a 10 minute drive of Nissan Stadium, the Country Music Hall of Fame Museum, Vanderbilt University, Tennessee State University, and Centennial Park.
James F. Risoleo: The dollars further improving the quality of our portfolio.
James F. Risoleo: The newly built LEED silver complex opened in 2022.
James F. Risoleo: It's directly across from the $2 1 million square foot music City Convention center adjacent to the Bridgestone Arena, which is home of the NHL Nashville predators and within a 10 minute drive of Nissan Stadium. The country Music Hall of Fame Museum, Vanderbilt University, Tennessee State University.
James F. Risoleo: D and Centennial Park.
James F. Risoleo: It sits on 1.2 fee simple acres in Nashville's famed Lower Broadway Entertainment District. The two hotel complexes have a combined 721 oversized rooms that average approximately 500 square feet with a 75% suite mix. The properties offer seven separate food and beverage outlets, including Harriet's Rooftop at the One Hotel, which provides guests with exclusive views of Music City's skyline in an elevated nightlife setting. Other amenities include a spa, two fitness centers, a yoga studio, and 33,000 square feet of shared meeting space.
James F. Risoleo: It sits on one point to be simple acres in Nashville is famed lower Broadway Entertainment District.
James F. Risoleo: The two hotel complex has a combined 721 oversized rooms that average approximately 500 square feet with a 75% sweet mix <unk>.
James F. Risoleo: The properties offer seven separate food and beverage outlets, including areas rooftop at the one hotel, which provides guests with exclusive use of music city skyline and an elevated nightlife setting.
James F. Risoleo: Other amenities include a spa to fitness centers, a yoga studio and 33000 square feet of shared meeting space.
James F. Risoleo: From 2000 to 2023, the Nashville hotel market had a Repar CAGR of 7.7%, even while absorbing new supply. It is the number two ranked convention destination in the United States, and the convention center has continued to set record attendance numbers by attracting larger events with promising definite bookings in future years. The new Nissan Stadium, home of the NFL's Tennessee Titans, is also expected to generate increased demand as the stadium's dome attracts more entertainment and sporting events with year-round activation.
James F. Risoleo: From 2000 to 2023, the Nashville Hotel market had a revpar CAGR of seven 7%, even while absorbing new supply.
James F. Risoleo: It is the number two ranked convention destination in the United States and the Convention Center has continued to set record attendance numbers by attracting larger events with promising definite bookings in future years.
James F. Risoleo: The new Nissan Stadium home of the NFL, Tennessee Titans is also expected to generate increased demand.
James F. Risoleo: As the stadiums zone attracts more entertainment and sporting events with year round activation.
James F. Risoleo: In addition, Nashville has the fastest-growing airport in the United States, with current passenger traffic 33% above 2019. The recent $1.5 billion airport expansion added six international gates and eight satellite gates, and another $1.5 billion expansion is already underway, with expected completion in 2028. While supply growth is expected to continue in Nashville, most projects are in the planning stages and at the select service chain scale. We believe the One Hotel Nashville and the Embassy Suites by Hilton Nashville Downtown are highly differentiated from future supply due to their central location and diversified product offerings, which provide distinct value propositions to customers and guests.
James F. Risoleo: In addition, Nashville has the fastest growing airport in the United States with current passenger traffic, 33% above 2019.
James F. Risoleo: The recent one and a half billion dollar airport expansion added six international gates, and eight satellite gates and another one and a half billion dollar expansion is already underway with expected completion in 2028.
James F. Risoleo: While supply growth is expected to continue in Nashville, most projects are in the planning stages and in the select service chain scale.
James F. Risoleo: We believe the one hotel Nashville, and the embassy suites by Hilton Nashville downtown are highly differentiated from the future supply due to their central location and diversified product offerings, which provide distinct value propositions to customers and guests.
James F. Risoleo: With multiple demand generators and no expected near-term capital expenditure requirements, we believe that combined properties will stabilize at approximately 10 to 12 times EBITDA in the 2026 to 2028 time frame, driving additional value creation for our portfolio. Due to the timing of the acquisition, the One Hotel Nashville and the Embassy Suites by Hilton Nashville Downtown are not yet included in our comparable hotel guidance metrics, but they will be included starting in the second quarter.
James F. Risoleo: With multiple demand generators and no expected near term capital expenditure requirements. We believe the combined properties will stabilize at approximately 10 to 12 times EBITDA and the 2026 2028 time frame driving additional value creation for our portfolio.
James F. Risoleo: Due to the timing of the acquisition the one hotel Nashville, and the embassy suites by Hilton Nashville downtown are not yet included in our comparable hotel guidance metrics that will be included starting in the second quarter.
James F. Risoleo: The acquisition is expected to generate $29 million of adjusted EBITDA for our ownership period, which is included in our adjusted EBITDA RE and FFO guidance for 2024. Looking back on our transaction activity, we have acquired $4 billion of assets since 2018 at a 13.5 times EBITDA multiple and disposed of $5 billion of assets at a 17 times EBITDA multiple, including $976 million of estimated foregone capital expenditure. This creative capital recycling has allowed us to grow our adjusted EBITDA RE and dividend in excess of full year 2019 levels as we continue on the path towards $2 billion of adjusted EBITDA RE.
James F. Risoleo: The acquisition is expected to generate $29 million of adjusted EBITDA for our ownership period, which is included in our adjusted EBITDA R E and F F O guidance for 2024.
James F. Risoleo: Looking back on our transaction activity.
James F. Risoleo: We have acquired $4 billion of assets since 2018, and a 13.5 times EBITDA multiple and disposed of $5 billion of assets and a 17 times EBITDA multiple including $976 million of estimated foregone capital expenditures.
James F. Risoleo: This is accretive capital recycling has allowed us to grow our adjusted EBITDA R E and dividend in excess of full year 2019 levels as we continue on the path towards $2 billion of adjusted EBITDA R E.
James F. Risoleo: As we have demonstrated, we believe Host is well-positioned to continue capitalizing on value-enhancing acquisition opportunities. After adjusting for post-quarter transactions, we have $1.7 billion of total available liquidity and net leverage of 2.3 times, and we will continue using our size, scale, and relationships to uncover more acquisition opportunities. Turning to corporeal reinvestment, our 2024 capital expenditure guidance range remains $500 to $605 million, which reflects approximately $225 to $280 million of investment for redevelopment, repositioning, and ROI projects. During the first quarter, we started the Hyatt Transformational Capital Program renovations at the Grand Hyatt Atlanta and the Grand Hyatt Washington, which we expect to complete in the first half of 2025.
James F. Risoleo: As we have demonstrated we believe host is well positioned to continue capitalizing on value enhancing acquisition opportunities.
James F. Risoleo: After adjusting for post quarter transactions, we have $1 $7 billion of total available liquidity and net leverage of two three times and we will continue using our size scale and relationships to uncover more acquisition opportunities.
James F. Risoleo: Turning to portfolio reinvestment.
James F. Risoleo: Our 2024 capital expenditure guidance range remains $500 million to $605 million, which reflects approximately $225 million to $280 million of investment or redevelopment repositioning and ROI projects.
James F. Risoleo: During the first quarter, we started the Hyatt transformational capital program renovations at the Grand Hyatt Atlanta, and the Grand Hyatt, Washington, which we expect to complete in the first half of 2025.
Sourav Ghosh: We received $2 million of operating guarantees in the first quarter to offset business disruptions related to the HIA Transformational Capital Program, and we expect to benefit from an additional $7 million in 2024. More broadly, we have completed 24 transformational renovations since 2018, which we believe provide meaningful tailwinds for our portfolio. Of the 12 hotels that have stabilized post-renovation operations to date, the average REPPAR index share gain is 8.5 points, which is well in excess of our targeted gain of 3 to 5 points.
James F. Risoleo: We received $2 million of operating guarantees in the first quarter to offset business disruptions related to the Hyatt transformational capital program.
Sourav Ghosh: And we expect to benefit from an additional $7 million in 2024.
Sourav Ghosh: More broadly we have completed 24 transformational renovations since 2018, which we believe provide meaningful tailwind for our portfolio.
Sourav Ghosh: Of the 12 hotels that have stabilized post renovation operations to date. The average Revpar index share gain is eight five points, which is well in excess of our targeted gain of three to five points.
Sourav Ghosh: Wrapping up, we believe Host is well positioned to continue to outperform. Our successful capital allocation strategy has allowed us to deliver 2023 adjusted EBITDA RE and adjusted FFO per share above 2019 levels. Outperforming the other full-service lodging reach. We are encouraged by the supply picture for our markets and chain scales, which remains below historical levels, the improving international demand imbalance, the continued improvement in business transient demand, and increased activity in the transactions market.
Sourav Ghosh: Wrapping up we believe host is well positioned to continue to outperform.
Sourav Ghosh: Our successful capital allocation strategy has allowed us to deliver 2023, adjusted EBITDA and adjusted <unk> per share above 2019 levels outperforming the other full service lodging Reits, we are encouraged by the supply picture for our markets and chain scales.
Sourav Ghosh: Which remains below historical levels, the improving international demand imbalance. They continued improvement in business transient demand and increased activity in the transactions market.
Sourav Ghosh: We believe our EBITDA growth profile, our investment grade balance sheet, our diversified portfolio, and our continued portfolio reinvestment are key differentiators. As we have demonstrated, hosts can and will continue to do it all. With that, I will now turn the call over to Sourav to discuss additional operational detail in our revised 2024 Outlook.
Sourav Ghosh: We believe our EBITDA growth profile, our investment grade balance sheet, our diversified portfolio and our continued portfolio reinvestment are key differentiators.
Sourav Ghosh: As we have demonstrated post can and will continue to do at all with that I will now turn the call over to Sarath to discuss additional operational detail and our revised 2020 for outlook.
Sourav Ghosh: Thank you, Jim, and good morning, everyone. Building on Jim's comments, I will go into detail on our first quarter operations, updated 2024 guidance, and our balance sheet. Starting with business mix. Overall transient revenue per available room was down 6% compared to the first quarter of 2023, driven by tough comparisons, including the evolving nature of demand in Maui. Unseasonable weather in many markets and unanticipated renovation delays at the Singer Oceanfront Resort. Combined, we estimate that the renovation delay and Maui had a 440 basis point impact on transient REF PAR in the quarter.
Sourav Ghosh: Thank you Jim and good morning, everyone building on Jim's comments I will go into detail on our first quarter operations update in 2020 for guidance and our balance sheet.
Sourav Ghosh: Starting with business mix.
Sourav Ghosh: Overall transient revenue per available room was down 6% compared to the first quarter of 2023, driven by tough comparisons.
Sourav Ghosh: Including the evolving nature of demand in Maui.
Sourav Ghosh: Unseasonable weather in many markets and unanticipated renovation delays at the singer Oceanfront resort.
Sourav Ghosh: Combined we estimate that the renovation delay and Maui had a 440 basis point impact to transient revpar in the quarter.
Sourav Ghosh: However, the leisure rate is still strong. Transient rates at our resorts remained resilient at 52% above the first quarter of 2019, and resort food and beverage outlet revenue per occupied room grew over last year. Golf revenue continued to grow over the record levels set in the first quarter of the last two years, despite the impact of our Maui golf course. Looking ahead to holidays in the second quarter, for Memorial Day weekend, transient room revenue pace for the overall portfolio is up over last year and up high single digits, excluding mail. We are still outside the primary booking window for July 4th, but thus far, we are encouraged by strong bookings in San Diego, Houston, and New York.
Sourav Ghosh: However, leisure rate is still strong.
Sourav Ghosh: Transient rates at our resorts remained resilient at 52% above the fourth quarter of 2019 and resort food and beverage outlet revenue per occupied room grew over last year.
Sourav Ghosh: Golf revenue continued to grow over the record level set in the first quarter of the last two years, despite the impact from our Maui golf courses.
Sourav Ghosh: Looking ahead to the holidays in the second quarter for Memorial Day weekend transient room revenue pace for the overall portfolio is up over last year and up high single digits excluding milk.
Sourav Ghosh: We are still outside the primary booking window for July 4th, but thus far we are encouraged by strong bookings and San Diego, Houston, and New York.
Sourav Ghosh: Business transient revenue per available room was 5% above the first quarter of 2023, driven by an increase in rate and room nights, as business transient demand continued its slow and steady recovery. Seattle, Boston, and San Francisco led room-night growth, and both New York and Boston are within 2% of pre-pandemic demand. Turning to the group, revenue per available room was up 4% in the first quarter, driven by room-night growth in San Diego, San Francisco, Orlando, and Maryland.
Sourav Ghosh: Business transient revenue per available room was 5% above the first quarter of 2023, driven by an increase in rate and room nights as business transient demand continued its slow and steady recovery.
Sourav Ghosh: Seattle, Boston and San Francisco led room night growth in both New York and Boston are within 2% of pre pandemic demand.
Sourav Ghosh: Turning to group revenue per available room was up 4% in the first quarter driven by room night growth in San Diego, San Francisco, Orlando and milk.
Sourav Ghosh: Notably, Group Room Night volume reached 96% of the first quarter of 2019 levels, led by corporate and smurf groups. For full year 2024, we have 3.6 million definite group room nights on the books, representing a 17% increase since the fourth quarter and putting us ahead of the same time last year. Group rate on the books is up 4%, and total group revenue pace is up 7% over the same time last year. As Jim mentioned, our banquet and catering contribution per group room night in the first quarter was at an all-time high, coming in approximately 1% above the prior record set in the first quarter of 2023.
Sourav Ghosh: Notably group room night volume reached 96% of the first quarter of 2019 levels led by corporate and small groups.
Sourav Ghosh: For full year 2024, we have $3 6 million definite group room nights on the books, representing a 17% increase since the fourth quarter and putting US ahead of same time last year.
Sourav Ghosh: Group rate on the books is up 4% and total group revenue pace is up 7% over the same time last year.
Sourav Ghosh: As Jim mentioned, our banquet and catering contribution per group room night in the first quarter was at an all time high coming in approximately 1% above the prior record set in the fourth quarter of 2023.
Sourav Ghosh: We continue to be encouraged by the ongoing strength of group business as evidenced by the strong pace, lengthening booking windows, and double-digit citywide room night pace in key markets such as Nashville, New Orleans, San Antonio, Seattle, and Washington, D.C.
Sourav Ghosh: We continue to be encouraged by the ongoing strength of group business as evidenced by strong pace lending booking windows and double digit citywide room night pace in key markets, such as Nashville, New Orleans, San Antonio Seattle, and Washington D C.
Sourav Ghosh: Shifting gears to margins, as expected, margin declines year-over-year were driven by increases in wages, benefits, and fixed expenses, as well as impacts from malware. Despite these headwinds, our comparable hotel EBITDA margin was 31.2% in the first quarter, representing a 30 basis point increase over 2019 as a result of our continued efforts to redefine the operating model. We expect year-over-year margin comparisons to improve as the year progresses. Turning to our revised outlook for 2024, the midpoint of our guidance continues to contemplate steady demand for travel and low supply growth.
Sourav Ghosh: Shifting gears to margins as expected margin declines year over year were driven by increases in wages benefits and fixed expenses as well as the impacts of Mali.
Sourav Ghosh: Despite these headwinds our comparable hotel EBITDA margin was 31, 2% in the fourth quarter.
Sourav Ghosh: Representing a 30 basis point increase over 2019 as a result of our continued efforts to redefine the operating model.
Sourav Ghosh: We expect year over year margin comparisons to improve as the year progresses.
Sourav Ghosh: Turning to our revised outlook for 'twenty 'twenty four the midpoint of our guidance continues to contemplate steady demand in travel and low supply growth.
Sourav Ghosh: Our expectations for the year are driven by improvements in group business, a gradual recovery in business transient, softer short-term leisure transient demand, and a continued evolution of demand on Maui as the island recovers from the recent wildfires. At the low end, we have assumed slow group pickup and softer leisure trends in demand, and at the high end, we have assumed a faster recovery at our Maui resorts and increased group pickup.
Sourav Ghosh: Our expectations for the year are driven by improvements in group business, a gradual recovery in business transient.
Sourav Ghosh: Softer short term leisure transient demand and a continued evolution of demand on Maui as the island recovers from the recent wildfires.
Sourav Ghosh: At the low end, we have assumed slow group pickup and softer leisure transient demand and at the high end, we have assumed a faster recovery at our Maui resorts and increased group pickup.
Sourav Ghosh: For full year 2024, we anticipate comparable hotel REPPA growth of between 2% and 4% over 2023. We expect comparable hotel EBITDA margins to be down 80 basis points year-over-year at the low end of our guidance to down 30 basis points at the high end. Notably, we expect comparable hotel EBITDA margins to be up 10 basis points at the midpoint versus 2019, despite an estimated 20 basis point margin impact from Maui. At the midpoint of our guidance range, we anticipate comparable hotel total REFPA growth of 3.7% and comparable hotel REFPA growth of 3% compared to 2023.
Sourav Ghosh: For full year 2024, we anticipate comparable hotel revpar growth of between 2% and 4% over 2023.
Sourav Ghosh: We expect comparable hotel EBITDA margins to be down 80 basis points year over year at the low end of our guidance to down 30 basis points at the high end.
Sourav Ghosh: Notably, we expect comparable hotel EBITDA margins to be up 10 basis points at the midpoint versus 2019, Despite an estimated 20 basis point margin impact from Maui.
Sourav Ghosh: At the midpoint of our guidance range, we anticipated comparable hotel total revpar growth of three 7% and comparable hotel revpar growth of 3% compared to 2023.
Sourav Ghosh: This 100 basis point reduction in our REFPA growth midpoint is driven by lower than expected first quarter results, underperformance in Maui, and softer than expected short-term leisure transient demand. That said, the strength of out-of-room revenues allowed total REV PAR to decline only 60 basis points relative to our prior mid-term. We expect a comparable hotel EBITDA margin midpoint of 29.6%, which has improved 30 basis points from our initial guidance and is now only 50 basis points below 2023.
Sourav Ghosh: This 100 basis point reduction in our Revpar growth midpoint is driven by lower than expected fourth quarter results underperformance in Maui and softer than expected short term leisure transient demand.
Sourav Ghosh: That said the strength of out of room revenues allowed for total revpar to decline only 60 basis points relative to our prior midpoint.
Sourav Ghosh: We expect our comparable hotel EBITDA margin midpoint of 29, 6%, which has improved 30 basis points from our initial guidance and is now only 50 basis points below 2023.
Sourav Ghosh: We estimate the Maui wildfires will impact full-year comparable hotel TREVPAR by 90 basis points, REVPAR by 130 basis points, and comparable hotel EBITDA margin by 20 basis points. We also expect a 50 basis point impact from property taxes and insurance.
Sourav Ghosh: We estimate the Maui wildfires will impact full year comparable hotel revpar by 90 basis points Revpar by 130 basis points and comparable hotel EBITDA margin by 20 basis points.
Sourav Ghosh: We also expect a 50 basis point impact from property taxes and insurance.
Sourav Ghosh: In terms of REVFA growth pace for the year, we expect comparable hotel REVFA growth to be flat to low single digits in the first half of the year based on the drivers I just mentioned. We continue to expect mid-single-digit comparable hotel revenue growth in the second half of the year as a result of strong group booking pace, less renovation disruption compared to the second half of 2023, and the diminishing year-over-year impacts of the Maui wildfires which occurred in August of 2023.
Sourav Ghosh: In terms of Revpar growth cadence for the year, we expect comparable hotel revpar growth to be flat to low single digits in the first half of the year based on the drivers I just mentioned.
Sourav Ghosh: We continue to expect mid single digit comparable hotel revpar growth in the second half of the year as a result of strong group booking pace less renovation disruption compared to the second half of 2023, and the diminishing year over year impacts of the Maui wildfires, which occurred in August of 2023.
Sourav Ghosh: Our revised 2024 full-year adjusted EBITDA RE midpoint is $1,670,000,000, a 35 million or 2% increase over the prior quarter. This includes an expected additional $8 million from business interruption proceeds related to Hurricane Ian, $20 million of business interruption proceeds related to the Maui wildfires, an estimated $62 million contribution from operations at Wittsfels in Naples, which is up from $60 million in our prior guidance, and $6 million from operations at Alila Ventana Big Sur, a decline of $10 million compared to our prior guidance. As a reminder, Ritz-Carlton Naples and Alila Ventana Big Sur are excluded from our comparable hotel set for the full year 2024 forecast.
Sourav Ghosh: Our revised 2020 for full year, adjusted EBITDA midpoint is $1 billion $670 million.
Sourav Ghosh: $35 million or 2% increase over the prior quarter.
Sourav Ghosh: This includes an expected additional $8 million from business interruption proceeds related to hurricane in $20 million of business interruption proceeds related to the Maui wildfires and estimated $62 million contribution from operations at the Ritz Carlton Naples, which is up from 60.
Sourav Ghosh: Millions of dollars in our prior guidance.
Sourav Ghosh: And $6 million from operations at Billy Love and ton of Big sur a decline of $10 million compared to our prior guidance.
Sourav Ghosh: As a reminder, Ritz Carlton Naples, and Leila Ventana Big sur are excluded from our comparable hotel set for the full year 2024 forecast.
Sourav Ghosh: Our adjusted EBITDA and FFO guidance also includes an estimated $29 million contribution from the One Hotel Nashville and Embassy Suites by Hilton Nashville Downtown. Turning to our balance sheet and liquidity position, our weighted average maturity is 4.3 years at a weighted average interest rate of 4.7% after repaying the $400 million Series G senior notes in April. As Jim noted, we currently have $1.7 billion in total available liquidity, which includes $231 million in FF&E reserves.
Sourav Ghosh: Our adjusted EBITDA and <unk> guidance also includes an estimated $29 million contribution from the one hotel Nashville, and embassy suites by Hilton in Nashville downtown.
Sourav Ghosh: Turning to our balance sheet and liquidity position our weighted average maturity is four three years at a weighted average interest rate of four 7% after repaying the $400 million series G Senior notes in April.
Sourav Ghosh: As Jim noted, we currently have $1 $7 billion in total available liquidity, which includes $231 million of <unk> reserves.
Sourav Ghosh: Our quarter-end leverage ratio, adjusted for post-quarter transactions, was 2.3 times, and we have $1.3 billion of availability on our credit facility. Also, since our last call, Moody's upgraded the company's issuer outlook from stable to positive. Furthermore, in April, we paid a quarterly cash dividend of $0.20 per share, demonstrating our commitment to returning capital to stockholders. As always, future dividends are subject to approval by the company's Board of Directors.
Sourav Ghosh: Our quarter end leverage ratio adjusted for post quarter transactions was two three times and we have $1 $3 billion of availability on our credit facility.
Sourav Ghosh: Also since our last call Moodys upgraded the company's issuer outlook from stable to positive.
Sourav Ghosh: Further in April we paid a quarterly cash dividend of <unk> 20 per share demonstrating our commitment to returning capital to stockholders as always future dividends are subject to approval by the Companys Board of directors.
Operator: We will continue to be strategic and opportunistic in managing our balance sheet and liquidity position as we move through the remainder of 2024. To conclude, we believe our best-in-class portfolio and balance sheet uniquely position hosts to capitalize on opportunities for growth in the future. With that, we would be happy to take your questions. To ensure we have time to address as many questions as possible, please limit yourself to one question.
Sourav Ghosh: We will continue to be strategic and opportunistic in managing our balance sheet and liquidity position as we move through the remainder of 2024.
Operator: To conclude we believe our best in class portfolio and balance sheet uniquely position <unk> to capitalize on opportunities for growth in the future.
Operator: With that we would be happy to take your questions to ensure we have time to address as many questions as possible. Please limit yourself to one question.
Operator: Thank you. At this time, ladies and gentlemen, we'll be conducting our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is busy. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button.
Speaker Change: Thank you.
Speaker Change: At this time, ladies and gentlemen, we'd be conducting our question and answer session.
Operator: If you would like to ask a question. Please press star one on your telephone keypad.
Operator: A confirmation tone will indicate your line isn't the question queue. You May press star two if he would like to remove your question from the queue.
Operator: For participants using speaker equipment, it may be necessary to pick up your handset before.
Operator: We're pressing the star keys.
Michael Bellisario: And to facilitate enough time for people to have an opportunity to ask a question today, we do request that you please limit your questions to one per person. We appreciate your cooperation with this request. Thank you. Our first question is coming from Michael Bellisario with Baird. Your line is live.
Operator: Facilitates enough time for people to have an opportunity to ask a question today, we do request that you. Please limit your questions to one per person. We appreciate your cooperation with this request.
Michael Bellisario: Thank you. Our first question is coming from Michael Bellisario with Baird. Your line is life.
Michael Bellisario: Thanks, Good morning, everyone.
Michael Bellisario: Jim One long question for you on a national.
Michael Bellisario: Could you walk us through the timeline for this deal maybe how your cost of capital and view of the value evolved, especially given how much the capital markets have moved in the last three to six months and then just lastly, how youre thinking about the continued ramp up of these properties given that they're both less than two years old. Thank you.
Michael Bellisario: Sure Mike.
James F. Risoleo: Nashville is a market that we have had our eye on for a number of years. It is a market where I would say we're underrepresented, given the dynamic that is occurring in Nashville. Years ago, we did a 50-50 joint venture with White Lodging on a Hyatt Place. We were one of the early ones in Nashville, and that property has continued to outperform all of our expectations. I think we refinanced it two or three times along the way.
Michael Bellisario: Nashville is a.
James F. Risoleo: A market that we have had our eye on for a number of years.
James F. Risoleo: It is a market where I would say we're underrepresented given the dynamic that is occurring in Nashville them years ago. We did a 50 50 joint venture with white lodging on a a hyatt place are being one of the early ones in Nashville when that property.
James F. Risoleo: <unk> has continued to outperform all of our expectations I think we refinanced it two or three times along the way so you.
James F. Risoleo: We have been scouring the market and actually reached out to our friends at Starwood Capital and Crescent before the one hotel and embassy suites even opened when it was in the construction phase. We're not terribly keen on being a developer, but that was one deal that I really wanted to see if we could participate in when it was coming out of the ground. That was a non-starter for the development team.
James F. Risoleo: You know we have been scouring the market and are actually had reached out to.
James F. Risoleo: Our friends at Starwood capital and Crescent beef.
James F. Risoleo: Before I had the one hotel and embassy suites, even opened when it was in the construction phase.
James F. Risoleo: We're not much about not terribly keen on being a developer but that was one deal that I really wanted to see if we could participate in when it was coming out of the ground and Oh that was a non starter for the AR for the development teams. So we.
James F. Risoleo: We've been following it for a long time. It came out very strong in 2022. It was open for a part-year, and it had a REB PAR of $185 and EBITDA of $8.7 million. To proceed in a cautious way and really not— Having a clear view at that point in time with respect to how the macro picture was going to play out, whether we were going to really have a hard landing and end up in a serious recession or whether the Fed was going to engineer a soft landing, we elected to just watch the property over 23 and keep the dialogue going.
James F. Risoleo: We've been following it for a long time.
James F. Risoleo: It came out very strong.
James F. Risoleo: In 2022.
James F. Risoleo: It was open for a partial year and it had a revpar of $185 and up.
James F. Risoleo: EBITDA of $8 $7 million and.
James F. Risoleo: How to proceed in a cautious way.
James F. Risoleo: And really not.
James F. Risoleo: Having a clear view at that point in time with respect to how the macro picture is going to play out whether.
James F. Risoleo: Whether we were going to really have a hard landing and end up in a serious recession or the fed was going to engineer a soft landing we elected to do.
James F. Risoleo: So just watch the property over 'twenty, three and keep the dialogue going so obviously you know our cost of capital is a a fluid metric we look at it over time and it adjusts from from time to time and as we engaged in this transaction are earlier in this year as you know that the.
James F. Risoleo: So obviously, our cost of capital is a fluid metric. We look at it over time, and it adjusts from time to time. And as we engaged in this transaction earlier this year, the equity markets were in a different place. And, you know, so that's tick one to your question.
James F. Risoleo: The equity markets were in a different place.
James F. Risoleo: And you know so that that's ticked one too.
James F. Risoleo: Secondly, we wanted to make certain that the property was going to perform as anticipated. In 2023, the asset had a REB PAR of $257, and the out-of-room spend was very, very strong to result in EBITDA for $23 of $37.7 million. So our underwriting this year has us at $275 red par and $42.2 million of EBITDA.
James F. Risoleo: Your question.
James F. Risoleo: Secondly, we wanted to make certain that the property was going to perform as anticipated in 2023.
James F. Risoleo: I said had a revpar of $257 and the out of room spend was very very strong.
James F. Risoleo: To result in EBITDA for 23 of $37 $7 million, so our underwriting this year.
James F. Risoleo: Has I said 275 dollar revpar and $42 $2 million of EBITDA and we think Nashville is really just getting started as a market honestly. It's a there are so many good things are happening in Nashville.
James F. Risoleo: And, you know, we think Nashville is really just getting started as a market. There are so many good things happening in Nashville that it is the market of the future. You know, it's the number two convention market in the United States behind Orlando. They've just completed a $1.5 billion expansion of the airport, and they're immediately starting on another $1.5 billion expansion. Oracle just announced that they're moving to Nashville to be closer to the center of health care tech. You know, Amazon is.
James F. Risoleo: It is.
James F. Risoleo: A market of the future.
James F. Risoleo: The number two convention market in the United States behind Orlando.
James F. Risoleo: They've just completed a $1 5 billion dollar expansion of the airport and they're immediately starting on another $1 5 billion dollar expansion.
James F. Risoleo: Oracle, just announced that they're moving to Nashville to be closer to the center of health care Tech.
James F. Risoleo: You know Amazon is.
James F. Risoleo: Developing a significant presence in the city as well. I think they're going to have about 5,000 jobs in Nashville. The demographics of the city are very positive. You have a lot of demographic inflows into Nashville. The tax environment is very favorable. It's a favorable business environment. The asset itself is unmatched. It is a main-in-main location. It's literally right across the street from the Music City Convention Center, a $2.1 million facility. That facility for 2023 and 2024 on the books exceeds 2029 nights, all over 1 million citywide room nights.
James F. Risoleo: Developing a a significant presence in the city as well I think they're going to have about 5000 jobs in Nashville the <unk>.
James F. Risoleo: Demographics of the city are very positive you have a lot of demographic inflows.
James F. Risoleo: And.
James F. Risoleo: Into our Nashville are they you know the tax environment is very favorable it's a favorable business environment.
Speaker Change: Yeah, you know the asset itself it's.
James F. Risoleo: It's it's unmatched I mean, it is a it is a main and main location is literally right across the street from the music City Convention Center, a $2 1 million dollar facility.
James F. Risoleo: And that that that facility.
James F. Risoleo: For 2023, and 24 are on the books exceed 2029.
James F. Risoleo: The Knights are all over 1 million.
James F. Risoleo: Citywide room nights and you know the.
James F. Risoleo: The pace in 2024 is 19% over 2023, and the pace in 2025 is 10% over the same time last year. There are just a lot of really positive things that are happening in this market. I know there's been some talk about new supply. We spent a lot of time in the market. I spent a lot of time myself in the market.
James F. Risoleo: The the pace in 'twenty four is 19% over 23 the pace in 'twenty five is 10% over over same time last year or so are there just a lot of really positive things that are happening in this market and you know I know theres a theres been some talk about new supply and you know we.
James F. Risoleo: Spent a lot of time in the market I spent a lot of time myself in the market and.
James F. Risoleo: Really, to wrap our heads around what could possibly happen, I will tell you that a lot of the projects that were planned are still in the planning stage because the developers are finding out that it is costing more to build than they anticipated. When you layer higher construction costs on with a higher cost of debt and lower proceeds from a construction loan perspective, the deals just aren't getting done. As a matter of fact, there was a Ritz-Carlton planned for quite some time, but that transaction got completely pulled by Ritz because the site was tied up, and nothing was happening on it.
James F. Risoleo: Really to wrap our hands our head around.
James F. Risoleo: What could possibly happen I will tell you that a lot of the projects that.
James F. Risoleo: We're plan are still in the planning stage because the developers are finding out that it is costing more to build than they anticipated and would you layer higher construction costs on with a a higher cost of debt and in lower proceeds from a construction loan perspective, the deals just aren't getting.
James F. Risoleo: Done.
James F. Risoleo: As a matter of fact, there was a ritz Carlton plant for quite some time and that the the that transaction got completely pulled bye bye rich because you know the site was tied up in you know nothing was happening on it. So no there will be some select serve come come online.
James F. Risoleo: There will be some SelectServe come online in the marketplace. We've taken that into consideration in our underwriting. In terms of full-service, upper-upscale luxury hotels, if and when it happens, it's probably a three- or four-years-out best-case scenario. That's how we're thinking about Nashville.
James F. Risoleo: In the marketplace.
James F. Risoleo: We've taken that into consideration in our underwriting but in terms of our.
James F. Risoleo: Full service upper upscale and luxury hotels, if and when it happens, it's probably three or four years out a best case scenario. So.
James F. Risoleo: That's how we're thinking about Nashville, it's a it's a market we don't have an exposure in it's a market we wanted to get into and we follow this asset for a long time.
Speaker Change: Thank you.
Shaun Kelley: Thank you. Our next question is coming from Shaun Kelley with Bank of America. Your line is live. Hi, good morning everyone.
Shaun Kelley: It's a market we don't have an exposure to, it's a market we wanted to get into, and we've followed this asset for a long time. Our next question is coming from Shaun Kelley with Bank of America. Your line is live. Hi, good morning, everyone. Thank you for taking my question.
James F. Risoleo: Our next question is coming from Shaun Kelley with Bank of America. Your line is life.
Shaun Kelley: Hi, Good morning, everyone and thank you for taking my question.
Shaun Kelley: Jim Suraj and I apologize I joined a little bit late so if there's some pizza prepared remarks, it's a repeat here then my apologies, but hoping you can just dig in on what you're seeing on the leisure transient softness came up a couple of times that.
Shaun Kelley: Did I heard just some examples you could gave when you started to see that behavior shift is it continue into April just any any kind of sense by market or behavior that you can see right now that would be great.
Sourav Ghosh: Sure, Shaun. Where we started really seeing it was in the short-term leisure transient demand. And I want to specify demand, because in our prepared remarks, we talked about how rates for leisure have still surprised us to the upside. We are effectively, for our portfolio for Q1, 52% above 2019. And if you recall, you know, that's kind of where we were in the prior quarter as well.
Shaun Kelley: Sure Sean.
Shaun Kelley: Well, we started really seeing it as the short term leisure transient demand and I Wanna specified demands because then our prepared remarks, we talked about how rates for leisure has still surprised us to the upside we are effectively for our portfolio for Q1, 52% above 2019, and if you recall.
Sourav Ghosh: You know that's kind of where we were in prior quarter as well. So the rate is not letting down it's just the short term transient demand.
Sourav Ghosh: So, the rate is not letting down. It's just the short-term transient demand. The reality is, we started seeing that really March is probably when we did.
Sourav Ghosh: Reality is we thought we started seeing that.
Sourav Ghosh: Really March.
Sourav Ghosh: When we did and part of it is are we suspect it's really being driven also by the poor weather that we had in Q1.
Sourav Ghosh: And part of it is, we suspect, is really being driven by the poor weather that we had in Q1. And going into April, obviously, you have the user shift. We have a significant portion of our portfolio in resorts, and Q1 does extremely well for all our resorts. So, the user shift is a little, I would say, a little bit higher. Not as impactful for our portfolio. However, what does happen with the timing of Easter, it does shorten the time that the resorts can really drive rates and demand.
Sourav Ghosh: And going into April obviously, you have the Easter shift we have a significant.
Sourav Ghosh: A portion of our portfolio resorts in Q1 does extremely well for our resorts. So the Easter shift is.
Sourav Ghosh: A little I would say not.
Sourav Ghosh: Not as much impactful for all our portfolio. However.
Sourav Ghosh: However, it dealt what does happen with the with the timing of Easter. It does shorten the time that the resorts can really drive rates and demand. So that therefore, you know April sort of in the short term pickup is certainly slower however rates are still holding strong.
Sourav Ghosh: So therefore, you know, April's sort of short-term pickup is certainly slower. However, rates are still holding strong. What I can tell you with what data we have available as of right now, you know, we don't have the full month data yet, but April is trending effectively flat for the portfolio. But remember, that includes Maui; if you exclude Maui, we are actually, you know, closer to slightly above 1% for April.
Sourav Ghosh: What I can tell you with what data we have available as of right. Now we don't have the full month of data yet but April is trending.
Sourav Ghosh: Effectively flat for the portfolio, but remember that include Maui. If you exclude Maui, we were actually closer to slightly above a 1%.
Sourav Ghosh: For April so overall things are still looking very strong and you know when we look at the sort of the second half of the year. What I will say is the group piece is looking extremely strong for the second half and that's what really gives us confidence.
Sourav Ghosh: So overall, things are still looking very strong. And, you know, when we look at the sort of second half of the year, what I will say is the group piece is looking extremely strong for the second half. And that's what really gives us confidence. For the full year, we picked up 421,000 room nights for the remainder of the year, and 60% of that was for the second half. So clearly, we have tremendous confidence for the second half, and the overall total revenue pace is actually close to 9% for the second half of the year.
Sourav Ghosh: For the full year is we picked up a 421000 room nights for the remainder of the year at 60% of that was for the second half so clearly have.
Sourav Ghosh: Tremendous confidence for the second half and overall total revenue pace is actually close to 9% for the second half of the year.
Speaker Change: Thank you very much.
Aryeh Klein: Thank you. Our next question is coming from Aryeh Klein with BMO. Your line is live.
Aryeh Klein: Thank you very much. Thank you. Our next question is coming from Aryeh Klein with BMO. Your line is live. Thanks, and good morning.
Speaker Change: Thank you.
Sourav Ghosh: Our next question is coming from Ari Klein with BMO. Your line is live.
Aryeh Klein: Thanks, and good morning, maybe just going back to Nashville, and that now that that acquisition has been done yeah. How are you thinking about future M&A, and perhaps which markets are of interest or are there or Nashville types of markets that you're not in that you'd still like to get into and then maybe just on the overall M&A landscape with rates.
Aryeh Klein: Higher for longer and has there been any shift in market have you seen assets called or anything like that.
James F. Risoleo: A couple of questions there, Aryeh. Let's talk about the M&A landscape first. So you know, I think there was a fair amount of anticipation among the brokerage community that we would see a pickup in transaction activity as the Fed moved to lower interest rates. We haven't seen that happen yet because of where the Fed is sitting. However, I believe that there are some owners out there who will be sellers now because they just can't afford to wait any longer. And, you know, for a lot of reasons.
Aryeh Klein: A couple of questions there already.
James F. Risoleo: Let's talk about the M&A landscape first so you.
James F. Risoleo: You know I think there was a.
James F. Risoleo: A fair amount of anticipation among the brokerage community that we would see a pickup in transaction activity as the fed moved to lower interest rates.
James F. Risoleo: We haven't seen that happen, yet because of where.
James F. Risoleo: Where the fed is sitting however, I believe that there are some.
James F. Risoleo: I mean, they haven't invested in their assets. Over the course of the pandemic, they may have loans coming due, and they're going to have to refinance them into a higher interest rate environment. So we're hearing a little bit of chatter that we might see a more active M&A market in the second half of the year. That said, we don't sit around and host events and wait for marketed opportunities. We really prefer to continue to work with our long-standing partners, the relationships that we have, and that's how we got the Nashville deal done. You may recall that we also bought the One Hotel South Beach from Starwood Capital.
James F. Risoleo: Owners out there who will be sellers now because they just can't afford to wait any longer and you know for a lot of reasons I mean, they haven't invested in their assets over the course of the pandemic.
James F. Risoleo: They may have loans coming due and they're gonna have to refi them into a higher interest.
James F. Risoleo: Interest rate environments. So we're hearing a little bit of chatter that that we might see a more active M&A market in the second half of the year.
James F. Risoleo: That said we.
James F. Risoleo: But we don't sit around and at host in weight or marketed opportunities, we really prefer to.
James F. Risoleo: Continue to work with our long standing partners relationships that we have and that's how we got the Nashville deal done you may recall that.
James F. Risoleo: We also bought the one hotel South Beach from Starwood capital So.
James F. Risoleo: So we're very happy that Starwood Capital and Crescent have the confidence and faith and host as an owner to give us this deal on an off-market basis. And we're talking to a lot of other folks out there, and I'm hopeful, certainly not assured, but hopeful that over the course of the year, we'll be able to get additional transactions completed. We're in a unique position, and we're going to take advantage of the position that we're in. We don't have to go to the debt capital markets to get a deal done. Even post-Nashville, we're sitting here at 2.3 times leverage.
James F. Risoleo: We're very happy that.
James F. Risoleo: That starwood capital and Cressa and to have the the confidence and faith in host as an owner to to give us this deal on an off market basis and up.
James F. Risoleo: We're talking to a lot of other folks out there and.
James F. Risoleo: I'm hopeful I'm, certainly not assured but hopeful that over the course of the year that we'll be able to get.
James F. Risoleo: Additional transactions completed.
James F. Risoleo: We're in a unique position and we're going to take advantage of the position that we're in we don't have to go to the debt capital markets to get a deal done.
James F. Risoleo: Even post Nashville, we're sitting here at two three times leverage we have $1 $7 billion of available liquidity.
James F. Risoleo: We have $1.7 billion of available liquidity. The investment grade balance sheet is very important to us. We certainly intend to maintain our investment grade rating. That said, with a leverage ratio of circa three times, roughly, we have the ability to acquire another $1.1 billion of assets this year. So that is our focus. We continue to want to elevate the EBITDA growth profile of the portfolio. We told many of you who were at our Investor Day last May that we're on track to get to $2 billion in EBITDA. And I just encourage everyone to watch us and see what we do.
James F. Risoleo: The investment grade balance sheet is very important to us we certainly intend to maintain our investment grade rating that said.
James F. Risoleo: With.
James F. Risoleo: A leverage ratio of circa three times, roughly we have the ability to acquire another $1 $1 billion of assets this year Joe.
James F. Risoleo: So that is our focus and we continue to want to elevate the EBIT growth profile of the portfolio we.
James F. Risoleo: We told many of you who were at our Investor Day last May.
James F. Risoleo: That we're on track to get to $2 billion of EBITDA and I, just encourage everyone to watch and see what we do.
Speaker Change: Thank you.
Speaker Change: Thanks Keith.
Smedes Rose: Thank you. Our next question is coming from Smedes Rose with City.
James F. Risoleo: Next question is coming from Smedes Rose with Citi. Your line is life.
Smedes Rose: Hi, thanks. Sourav, I just wanted to circle back.
Smedes Rose: Hi, Thanks, I'm, sorry, if I just wanted to circle back I know you've talked about this a little bit in your opening remarks that the on a comparable basis your EBITDA outlook declined by over $20 million.
Smedes Rose: And.
Smedes Rose: So you that included some business insurance you know it turned out is going to be a lot more which is great, but I guess I just wanted to understand of that about $22 million decline you know how much did you think was isolated or sort of realized that they were in the first quarter and how much is.
Sourav Ghosh: I know you talked about this a little bit in your opening remarks, but on a comparable basis, your EBITDA outlook declined by over $20 million. And, you know, that included some business insurance. It turned out it's going to be a lot more, which is great. But I guess I just wanted to understand, of that about $22 million decline, you know, how much did you think was isolated, or sort of realized, as it were, in the first quarter, and how much is coming through the balance of the year, maybe related to your, you know, one point reduction in sort of red part forecasts.
Smedes Rose: Coming through the balance of the year and maybe related to your.
Sourav Ghosh: A one point reduction in sort of Revpar forecast.
Sourav Ghosh: I just want to clarify, and maybe I'll just quickly walk through the bridge from our prior guidance to this guidance, because on the comparable hotel operation, it's actually a $13 million decline, which is a result of the change of 1 point to our midpoint, so going down from the 4% to the 3%. So it's $13 million; it's not 22. You're adding $2 million incrementally for Naples because our forecast went from $60 million for the year to $62 million. And then you're adding $29 million for Nashville, the one hotel in the Embassy Suite, and then another $8 million of BI for the Ritz-Carlton. That's sort of how it lays out.
Speaker Change: Yeah sure thing I, just wanted to clarify and maybe I'll just quickly walk through the bridge from our prior guidance to this guidance.
Sourav Ghosh: Because on the comparable hotel operations.
Sourav Ghosh: It's actually a $13 million decline, which is a result of the change of one point and two our midpoint, so going down from the 4%.
Sourav Ghosh: To the 3% to $13 million is about 22, so that they can they start off with 1 billion 635, which was our previous guidance you take out $13 million of comparable operation and which is pretty impressive. If you think about it because typically a one point decline in revpar would equate to $30 million of EBIT decline.
Sourav Ghosh: And so we're developing only $13 million from there you have $20 million of comparable be eye from the Maui wildfires.
Sourav Ghosh: Would you be adding to that then you take out $10 million for Ventana, maybe that's where you're getting the 20.
Sourav Ghosh: <unk> to 'twenty, three because the $10 million moving to non comp from comps. So that's a 11 corner taking out 10 million of EBITDA, you're adding 2 million incremental for Naples, because our forecast went from 60 million for the year to $62 million and then you're adding $29 million for the for Nashville, The one hotel and the embassy.
Sourav Ghosh: And then another $8 million of B I for the rest of in April but that if you.
Sourav Ghosh: Really add that up you'll get to the 1 billion $6 70, So hopefully that helps bridge it from our prior guidance in terms of where that one point decline I would say its two third in Q1 and about one third in Q2 and as I mentioned earlier.
Sourav Ghosh: Our second half is looking very strong so we have a ton of confidence in terms of our group for the second half and their confidence has improved our total revenue pace for the second half is now over slightly over 9% and a lot of that is Q3.
Sourav Ghosh: What's driving it so.
Sourav Ghosh: That's sort of how it plays out hopefully that makes it clear.
Speaker Change: Thank you.
Stephen Grambling: Thank you. Our next question is coming from Stephen Grambling with Morgan Stanley. Hey, thanks, um, just a follow-up.
Speaker Change: Thanks Keith.
Stephen Grambling: Hopefully, that makes it clear. Thank you. Thank you. Our next question is coming from Stephen Grambling with Morgan Stanley.
Sourav Ghosh: Our next question is coming from Stephen Grambling with Morgan Stanley Your line is life.
Sourav Ghosh: Sure, so if you think about the $1.6 billion that we have guided to for the year, the way to think about the long-term run rate is to take out $38 million of BI, right, so it's effectively the $10 million that we already had in the previous guidance plus the $28 million that we have put into the guidance. So for this year, our estimated Maui EBITDA is about $114 million, and if you add the $46, that sort of gets you back to where we were pre-fire. So when you add that all up, I would say it comes to a pretty even $1.7 billion in terms of sort of ongoing run rate.
Stephen Grambling: Hey, Thanks, just a follow up on that so.
Sourav Ghosh: You know, there's a lot of moving parts in terms of bridging that guidance.
Sourav Ghosh: And some of that includes B I. Some of it is the core some of the B is covering some of the disruption what do you think is the kind of right recurring EBIT down.
Sourav Ghosh: In the year to build off of as we think about longer term.
Sourav Ghosh: Sure. So if you think about the 1 billion $6 70 that we have guided to for the year. The way to think about long term run rate you would take out $38 million of B I right. So it's effectively the 10 million that we already had in the previous guidance plus the 28 that were put into the guidance you'll pick up the 30.
Sourav Ghosh: Eight.
Sourav Ghosh: And then you will add 10 million for Leila Ventana, you would add 13 million for Nashville, So that as Jim mentioned, we are expecting about $42 2 million. This year, we already have 29 million in there. So that's where the 13th coming for for Nashville, and then you would add another about 46 million call it for Maui.
Sourav Ghosh: But for this year, our estimated Maui EBITDA is about $114 million and if you add the 46 that sort of gets you back to where we were pre fire. So when you add that all up I would say it comes to a pretty even a billion seven in terms of sort of ongoing run rate.
Speaker Change: Thank you.
Speaker Change: Thank you.
William Crow: Thank you. Our next question is coming from Bill Crow with Raymond James. Your line is live.
Sourav Ghosh: Our next question is coming from Bill Crow with Raymond James Your line is life.
William Crow: Perfect. Good morning, everybody.
William Crow: Perfect.
William Crow: Everybody.
James F. Risoleo: Jim, it seems like the Four Seasons Orlando is an interesting resort to look at. It seems, correct me if I'm wrong, but it seems like that asset in particular has benefited from pent-up inbound international demand and maybe what might be called aspirational or squirge spending over the past couple of years. I'm just curious how 2024 is shaping up relative to 23 and, maybe more generally, is squirge spending kind of coming down or cooling a bit?
William Crow: Jim It seems like the four seasons Orlando interesting resort to look at it. It seems to me correct me, if I'm wrong, but it seems like.
James F. Risoleo: That asset in particular benefited from pent up inbound international demand and maybe what might be called aspirational splurge spending over the past couple of years I'm, just curious how 2024 shaping up.
James F. Risoleo: Relative to 'twenty, three and maybe more generally as splurge spending kind of coming down or cooling a bit.
James F. Risoleo: Bill, it's yes, I would say that. I don't know if I want to say that it. The ADR is likely to be lower this year in Orlando than it was in 2023, but it's still meaningfully above where it was in 2019. So we're not seeing a reset really backwards by any means. One of the other things that will impact us a bit in Orlando this year is some disruption associated with our condo development. So, you know, we are steering guests away from a certain side of the building during times of construction.
James F. Risoleo: Though is that yes, I would say that.
James F. Risoleo: I don't know if I want to say that it's called me down or.
James F. Risoleo: Calling a bit.
James F. Risoleo: The ADR is likely to be.
James F. Risoleo: Lower this year and Orlando that it was in <unk>.
James F. Risoleo: 'twenty three but its still meaningfully above where it was in 2019. So we're not seeing a reset really backwards by any means and one of the other things that are that will impact us a bit.
James F. Risoleo: And so that is going to have an impact on Orlando as well. But, but all in all, you know, we've had, we still continue to have, I think, five resorts in the quarter that drove over $1,000 ADRs. And, you know, we're not seeing a real slowdown in the affluent customer. There has been a shift that we talked about last year with respect to, you know, an international inbound versus international outbound versus inbound imbalance.
James F. Risoleo: In Orlando this year is some disruption associated with our.
James F. Risoleo: Condo development. So we are.
James F. Risoleo: Hearing gas away from certain side of the building during.
James F. Risoleo: Times of constructions and so that that is going to be an impact on orlando as well, but but all in all I. You know we've had a we still continue to have a.
James F. Risoleo: Thank by resorts in the quarter that that.
James F. Risoleo: They drove our over $1000 Adr's and Oh, no, we're not seeing a real slowdown in the affluent customer there has been a rotation.
James F. Risoleo: That is still occurring. I think over time that will right itself and correct itself. You know, I think, going back to Orlando for a moment, the four seasons in the quarter we've had ADR of over $2,000. So people are still coming to Orlando, they still want to stay at the Four Seasons.
James F. Risoleo: We talked about last year with respect to you know an international inbound versus our international outbound versus inbound imbalance.
James F. Risoleo: That is still occurring I think over time that will write itself and correct itself.
James F. Risoleo: I think that you know going back to Orlando for a moment the four seasons in the in the quarter, we had an ADR of over $2000. So people are still they still want to go too.
James F. Risoleo: And, you know, what we have working against us a bit is a strong dollar. It's not weakening, but it will likely weaken once rates start to come down. And, you know, that's keeping the international traveler away from the United States right now. I mean, there was a fairly significant uptick in the first quarter. You know, as we all try to wrap our heads around the soft leisure demand. We talked a lot about weather in three states, Arizona, Florida, and California, and it was meaningful.
James F. Risoleo: Orlando, they still want to stay at the four seasons and we.
James F. Risoleo: Well, we have working against US a bit is a strong dollar.
James F. Risoleo: You know, it's not weakening at all it will likely weekend once rates start to come down and you know that's keeping the.
James F. Risoleo: The international traveler away from the United States right now I mean, there was a fairly significant uptick.
James F. Risoleo: It.
James F. Risoleo: In the in the first quarter.
James F. Risoleo: You know as we all try to wrap our head around the soft leisure demand.
James F. Risoleo: We talked a lot about weather in three states.
James F. Risoleo: States.
James F. Risoleo: Arizona, Florida, and California, and it was meaningful I mean, we lost group business.
James F. Risoleo: I mean, we lost group business at the Phoenician over the course of the waste management open because of the rain. Now, we dug into this a little more. And, you know, I tried to answer the question, where do these people go? You know, I mean, the demand didn't just disappear. People didn't just stay home. We found out that, as an example, international outbound to the Caribbean in the first quarter was 135% of where it was in 2019, and REBPAR in the Caribbean was up 17%.
James F. Risoleo: The Venetian and over the course of the waste management open because of the range now.
James F. Risoleo: We dug into this a little more and you know.
James F. Risoleo: <unk>.
James F. Risoleo: We.
James F. Risoleo: To answer the question, where do these people go well you know I mean, the demand didn't just disappear people didn't just stay home.
James F. Risoleo: We found out that.
James F. Risoleo: As an example.
James F. Risoleo: <unk>.
James F. Risoleo: International outbound.
James F. Risoleo: To the Caribbean in.
James F. Risoleo: In the first quarter was 135% of where it was in 2019 levels and Revpar in the Caribbean was up 17%. So that's just a longer way of saying that our belief is is that the consumer the affluent consumer is still healthy they're still spending money there are still prioritizing experiences over.
James F. Risoleo: So, that's just a longer way of saying that our belief is that the consumer, the affluent consumer, is still healthy, they're still spending money, they're still prioritizing experiences over goods, and we're just not seeing the reset back.
James F. Risoleo: Good.
James F. Risoleo: And we're just not seeing the reset back.
James F. Risoleo: That's helpful. Jim, you were one of the louder voices among your peers. I think everybody who talked about it is projecting that this inbound-outbound balance would correct itself, you know, this summer. Has the change in currency values and maybe some of the outbound activity you saw in the first quarter. Has that kind of..., me to reduce your conviction on that call.
Speaker Change: That's helpful. Jim you were one of the louder voice and some of your peers I think everybody talks about it but.
James F. Risoleo: Got a projected this inbound outbound balance would correct itself. This summer or is it has the has the change in currency values.
James F. Risoleo: And maybe some of the outbound activity you saw in the first quarter is that kind of.
Speaker Change: Uh huh.
James F. Risoleo: You know reduce your conviction on that call.
James F. Risoleo: I would say that... It's going to take longer than we anticipated. Yes, you know, it's just very difficult to wrap your arms around that. One of the other things that we as an industry are dealing with through US travel and HLA is working with the State Department to see what can be done to shorten visa wait times. I mean, visa wait times in the US are still running at 400 days. You know, and that is a discouraging factor to many people. You know, see, https://www.youtube.com
Jim: I would say that.
James F. Risoleo: It's going to take longer than we anticipated.
James F. Risoleo: Yes.
James F. Risoleo: We just it's just very difficult to wrap your arms around that you know one of the other.
James F. Risoleo: Things that we as an industry are dealing with through U S travel and H L. A is a is working with.
James F. Risoleo: The state department to to see what can be done.
James F. Risoleo: To shorten visa wait times, I mean visa wait times in the U S are still running at 400 days.
James F. Risoleo: As you know in that and that is a discouraging factor to many people.
James F. Risoleo: You know.
James F. Risoleo: As they are.
James F. Risoleo: Looking to come to the U S. A you know it is a corollary to that is in Canada, you can get a visa 40 days out so.
James F. Risoleo: There is a program.
James F. Risoleo: In place to try to break that logjam in to hiring more people to do the processing necessary.
Duane Pfennigwerth: That would be great. Thank you. I appreciate it. Thank you. Our next question is coming from Duane Pfennigwerth with Evercore ISI. Your line is: Hey, thanks. Most of my questions have been asked.
Speaker Change: Yeah that'd be great. Thank you appreciate it.
Duane Pfennigwerth: Yeah.
Duane Pfennigwerth: Thank you. Our next question is coming from Duane Pfennigwerth with Evercore ISI. Your line is live. Hey, thanks.
Duane Pfennigwerth: Thank you. Our next question is coming from Duane funding worth with Evercore ISI. Your line is life.
Duane Pfennigwerth: Hey, Thanks, most of my questions have been asked but just on the Naples rich can you remind us.
Duane Pfennigwerth: Oh, what seasonality is for that asset historically I know your guide implies about 50%.
Duane Pfennigwerth: Of the full year contribution in the in the March quarter.
Duane Pfennigwerth: But does that align with historical seasonality, what what did <unk> typically represent you know historically, if there's such a thing as a quote unquote normal year. Thank you.
Sourav Ghosh: Sure, Duane. So, your estimate is right. We made about $32 million of EBITDA from operations of the Rich Naples. What you will see, when you see the $42 million in the income statement, that really includes the $10 million of BI that was in our previous guidance.
Duane Pfennigwerth: Sure Duane so yes like your estimate is right or we did about 32 million of EBITDA from operations of the Reds Naples, what you will see when you see the $42 million in income statement that are really include the 10 million of the eye that wasn't in our previous guidance. So for purely from operations was $32 million that's about 50%.
Sourav Ghosh: So, purely from operations, $32 million, that's about 50%. I would say Q2 is about 25%. Q3 is relatively close to zero. And then Q4 is the remaining 25%. That's sort of how it breaks up for the year. And yes, it is pretty consistent with prior levels in terms of seasonality.
Sourav Ghosh: I would say Q2 is about 25% Q3 is relatively.
Sourav Ghosh: I was close to zero and then Q4 is the remaining 25% that's sort of how it breaks up for the year and yes. It is pretty consistent to.
Sourav Ghosh: Prior levels in terms of seasonality.
Speaker Change: Okay very clear thank you.
Sourav Ghosh: Okay.
Robin Farley: Thank you. Our next question is coming from Robin Farley with UBS. Your line is
Sourav Ghosh: Thank you. Our next question is coming from Robin Farley with UBS. Your line is life.
Robin Farley: Thanks, most of my questions that have already been drastic one I was just.
Robin Farley: commentary about the increase in revenue in the quarter, the different parts of revenue per room, and it sounded like the biggest increase was coming from, I think you said the other revenue up 6% from cancellation and attrition fees. So I'm just wondering if that increase was an unusually high level. Is that something you'll be comping next year that we should be thinking about or thinking about as one-time in nature? Thanks.
Robin Farley: Looking at your commentary about the increase in revenue in the quarter the different parts of revenue per room. It sounded like the biggest increases coming from I think he said the other revenue up 6% from the cancellation and attrition fees. So I'm just wondering if that was that.
Robin Farley: That increase is was an unusually high level is that something you'll be comping next year that we should be thinking about or thinking about it as onetime in nature. Thanks.
Sourav Ghosh: Yeah, Robin, clearly, attrition cancellation revenue is coming in higher, and I wouldn't say that's necessarily a systemic thing. We were expecting the attrition cancellation revenues to go back more to the norm. We had in our previous forecast for the year approximately $57 million or so for the year, and now we have closer to $71 million forecasted for the year. It's not across the portfolio, and part of it is that our managers are frankly doing a much better job of collecting those revenues, and contracts are tighter, so it's just been sort of a trend that we're seeing, and we may actually stabilize at those higher levels, but it's not a systemic issue across the portfolio or anything that suddenly jumped out on a one-time basis in Q1.
Speaker Change: Yeah, Robyn clearly attrition in cancellation revenue is coming in higher and I wouldn't say that's necessarily.
Sourav Ghosh: Systemic thing we were expecting thing.
Sourav Ghosh: Some cancellations that needs to go back more to norm, we had in our previous forecast for the euro approximately $57 million or so for the year and now we have you know closer to $71 million forecasted for the year, it's not across the portfolio and part of it as our managers are frankly doing a much better.
Sourav Ghosh: Job of collecting those revenues and contracts are tighter. So it's just been you know sort of a trend that we're seeing and we may.
Sourav Ghosh: Actually stabilize and build a higher level, but it's not a systemic issue about the portfolio or anything that was suddenly jumped out on a onetime basis in Q1.
Sourav Ghosh: So in that bridge that you built earlier, to kind of what's recurring and not recurring, would you say that, I guess, that kind of roughly like 14 million increase in your original expectations, you're saying we should assume that that cancellation stays at that level? Or, or would you say that something that would come out if we were thinking about it? Yeah, it's difficult to exactly predict.
Sourav Ghosh: So in that bridge that you built earlier to kind of what's.
Sourav Ghosh: Recurring and nonrecurring would you say that I guess that kind of roughly like 14 million increase in your original expectations.
Sourav Ghosh: You're saying, we we should assume that that cancellation stay at that level or or would you say that.
Sourav Ghosh: Something that we're.
Sourav Ghosh: Yeah, it's difficult to exactly predict what it will be for the following year, but it seems like, thus far, attrition cancellation is going to be at that elevated level, at least based on, you know, what we're seeing today. Okay, thank you. Sure. Thank you. Our next question is coming from David Katz with Geoffrey's. Your line is, Hi, everyone. Thanks for working with me. I appreciate it.
Sourav Ghosh: We're thinking about yeah, it's difficult to exactly predict.
David Katz: What it will be for the following year, but it seems like thus far attrition cancellation is going to be at that elevated level at least based on what we're seeing today.
David Katz: Okay. Thank you.
Sourav Ghosh: Sure.
David Katz: Thank you. Our next question is coming from David Katz with Jeffreys. Your line is...
David Katz: Yeah, David, I think the limiting factor is really the cost of debt. It's not so much the availability of debt right now because the CMBS market, for those buyers who need to tap CMBS financing, is wide open. And there's been a lot of volume across, you know, multiple asset classes in real estate this year. But, you know, the cost of debt is still such that it is preventing private equity firms from underwriting to their hurdle returns and concurrently with their underwriting, giving the seller the price that they're looking for in the asset. So I think that is the biggest gating issue, and that puts hosts at a really competitive advantage. I mean, I've talked about it before.
Sourav Ghosh: Thank you. Our next question is coming from David Katz with Jefferies. Your line is nice.
David Katz: Okay.
Speaker Change: Hi, everyone. Thanks for working together I. Appreciate it can you just talk about the deal market a little bit.
David Katz: Are there assets out there that would be sold but not for the cost of capital.
David Katz: Is there still some.
David Katz: Sort of sellers posturing with respect to price that needs to adjust itself, what what are the gating factors for.
David Katz: There are more active deal trading market to start to occur.
David Katz: Yeah, David I think the.
David Katz: The limiting factor is really the cost of debt, it's not so much the availability of debt right now because they see MBS market.
David Katz: For those buyers who.
David Katz: Need to tap a C M. B S financing is wide open and there's been a a lot of volume.
David Katz: Occur this year across multiple.
David Katz: Asset classes in real estate.
David Katz:
David Katz: But you know they the cost of debt is still such that it is.
David Katz:
David Katz: Precluding.
David Katz: Private equity firms.
David Katz: To underwrite to their hurdle returns are and are concurrently with their underwriting give the the salary of the price that they're looking for in the asset. So I think that is the the biggest gating issue.
David Katz: And you know that that puts hosted at a really competitive advantage I mean I've talked about it before we do not have to go to the debt window to get a deal done and you know.
Chris Woronka: We do not have to go to the debt window to get a deal done. I think there will be opportunities over the course of the year where you have certain private equity firms who might be coming up with end-of-fund issues with respect to certain assets that they have to trade. They've waited for the Fed to act. Sourav Ghosh, Jay Kornreich, Jaime Marcus, Nathan Tyrrell, Erich Jensen, Joseph Tapley, Kerry Gaber, Nate Tyrrell, Raj Contractor, Deanne Brand, Mari Sifo, Meredith Jensen, Host Hotels & Resorts Inc. Thank you very much. Thank you. Our next question is from Chris Woronka with Deutsche Bank. Your line is live.
Chris Woronka: I think there will be opportunities over the course of the year.
Chris Woronka: Where you have a certain private equity firms who might.
Chris Woronka: It might be coming up on our end of bond issues with respect to certain assets.
Chris Woronka: That they have to trade are they they waited ah they waited for the fed to.
Chris Woronka: <unk>.
Chris Woronka: To cut rates here, but are the other out of time.
Chris Woronka: Couple of deals that we did.
Chris Woronka: In 2018 and started with the one hotel South Beach that was an end of fund issue.
Chris Woronka: With the Starwood capital they had to trade that asset.
Chris Woronka: With the four seasons Orlando Ah. Another instance, where you know that that deal was at the end of fund.
Chris Woronka: Life as well so I can tell you that knee.
Chris Woronka: Neither a owner of those assets really wanted to part with them because they're just terrific properties and you know I hope, we're going to be able to find some additional opportunities in that vein as we oh.
Chris Woronka: <unk> worked our way through 2024.
Chris Woronka: Thank you very much.
Chris Woronka: Thanks Keith.
Chris Woronka: Thank you. Our next question is from Chris Woronka with Deutsche Bank. Your line is live. Hey, good morning guys.
Chris Woronka: Our next question is from Chris where Ranke with Deutsche Bank. Your line is life.
Chris Woronka: Hey, good morning, guys. Thanks for all the all the details so far wanted to kind of ask about Hawaii Maui. I mean, you guys are used to use the term evolution of demand just can you give us a little more color on kind of whats happening are you guys seeing reservations commitment cancel or are you seeing just the bookings.
Chris Woronka: Windows.
Chris Woronka: Get closer in just just trying to get a sense for how much visibility you think you had it's getting better it's getting worse and what are some of the factors around that thanks.
James F. Risoleo: Yeah, I'll start Chris, and I'll let Sourav jump in and add what additional color he might have on it. But, you know, we are obviously very close to what's happening on Maui, and I can't describe it in any more specific terms other than to say that the man continues to evolve on the island. You know, I think that when the devastating wildfires occurred, those folks who might have been new to Maui and maybe they were staying down in Wailea, in one of our two terrific properties, usually the Andaz or the Fairmont Keelani, you know, they just said, they listened to the governor, and the governor said, stay away from Maui. Travelers took the governor at his word. Now, that language has been tempered since.
Chris Woronka: Yeah, I'll I'll start, Chris and I'll, let Rob jump in and add.
Sourav Ghosh: Additional color he he might have on it but.
James F. Risoleo: We are obviously very close to the.
James F. Risoleo: What's happening on Maui, you know and I.
James F. Risoleo: Can't describe it in any more specific terms other than to say that demand continues to evolve.
James F. Risoleo: On the island are you know I.
Sourav Ghosh: I think that.
James F. Risoleo: When the wildfires occurred devastating wildfires occurred.
James F. Risoleo: Are those folks who had.
James F. Risoleo: Mike might have been new to Maui.
James F. Risoleo: And maybe they were staying down in Wailea and one of our two terrific properties, usually the andaz or the Fairmont Kea Lani.
James F. Risoleo: You know they just said they listened to the governor and the Governors said stay away from Maui.
James F. Risoleo: So.
James F. Risoleo: Travelers took the governor and his word now that that language has been tempered since.
James F. Risoleo: The cleanup continues on the west side. The good news is that the displaced residents are really moving into more permanent homes and apartments. We like that.
James F. Risoleo: You know the the.
James F. Risoleo: Clean up it continues on the west side.
James F. Risoleo: The good news is that are.
James F. Risoleo: They just place residents are really moving into.
James F. Risoleo: More permanent.
Sourav Ghosh: Homes and apartments, we we like that we like to see people get out of hotels and move into there.
James F. Risoleo: We like to see people get out of hotels and move into a home and start their way back because so many people lost so much. They lost everything as a result of these wildfires. So the Hotel Association and all the hotel owners on the island are working together to put a marketing plan in place. One of the other factors that are still out there with respect to the island is the fact that air capacity, the number of seats, is down around 19% over the first quarter of 2019, and that's consistent with where the capacity went post the wildfires in August of last year.
James F. Risoleo: Move into a home and and and start their way back because so many people have lost so much they lost everything as a result of these wildfires.
James F. Risoleo: So the Hotel Association is and all of our hotel owners on the island are are working together.
James F. Risoleo: To put our marketing plan in place.
James F. Risoleo: One of the other factors that still is out there with respect to the island is the fact that.
James F. Risoleo: Air capacity the number of seats is down around 19% over.
James F. Risoleo: The first quarter of 2019, and that's that's consistent with where are they at capacity went up post the wildfires in August of last year. So it's a bit of a chicken and egg situation right now.
James F. Risoleo: So it's a bit of a chicken-and-egg situation right now. You know, we've got to get people back to the island. We have to sell the beauty of Maui and the experiences that they can get, even if it's not on the west side, if it's in Wailea, and you know, we're confident that once that starts happening, the airlines will increase capacity, and the recovery will commence.
James F. Risoleo: You know we've got to get.
James F. Risoleo: People back to the island, we have to you know.
James F. Risoleo: <unk> to sell.
James F. Risoleo: The beauty of Maui and the experiences that they.
James F. Risoleo: If they can get a even if it's not on the west side, if it's an why lay up AR and AR.
James F. Risoleo: Confident that once that starts happening that the airlines will increase capacity in.
James F. Risoleo: The recovery will commence.
James F. Risoleo: Okay.
Speaker Change: Okay I appreciate all that color Jim Thank you.
Operator: Thank you. Ladies and gentlemen, we have reached the end of our allotted time for questions and answers, so I will now turn the call back over to Mr. Risoleo for any closing comments he may have.
Speaker Change: Thanks, Keith Ladies and gentlemen, we have reached the end of our allotted time for questions and answers. So I will now turn the call back over to Mr. <unk> for any closing comments you may have.
James F. Risoleo: Well, thank you again for joining us. We appreciate the opportunity to discuss our quarterly results with you, and we look forward to seeing many of you on the road and, certainly, at NARED in New York. Have a good day.
Operator: Thank you, everyone. This concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.
Risoleo: Well. Thank you again for joining us we appreciate the opportunity to discuss our quarterly results with you and we look forward to seeing many of you on the road and certainly a NAREIT in New York.
Operator: Have a good day. Thank you.
Operator: Thank you everyone. This concludes today's conference and you may disconnect. Your lines at this time, we thank you for your participation.