Q1 2024 Pebblebrook Hotel Trust Earnings Call
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Operator: Greetings and welcome to the Pebblebrook Hotel Trust first quarter earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Due to the fact that there is another industry call this morning at 9 a.m. Eastern, we will be keeping today's call to an hour. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Raymond Martz, Co-President and Chief Financial Officer. Thank you. You may begin.
Greetings and welcome to the Pebble broke hotel Trust first quarter earnings call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation due to the fact that there was another industry called this morning at nine a M. Eastern will be keeping today's call to an hour if any would you.
Acquire operator assistance during the conference. Please press Star Zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce your host Raymond Martz Co President and Chief Financial Officer. Thank you you may begin.
Raymond D. Martz: Thank you, Donna. And good morning, everyone.
Raymond D. Martz: Thank you Donna and good morning, everyone welcome to our first quarter 2024 earnings call and webcast.
Raymond D. Martz: Welcome to our first quarter 2024 earnings call and webcast. Joining me today is Jon Bortz, our Chairman and Chief Executive Officer, and Tom Fisher, our Co-President and Chief Investment Officer. Before we begin, please note that today's comments are effective only for today, April 24th, 2024. And our comments may include forward-looking statements as defined under federal securities laws, and actual results could differ materially from those discussed.
Raymond D. Martz: Turning me today is Jon Bortz, our chairman and Chief Executive Officer, and Tom Fischer, Our co President and Chief Investment Officer before we begin. Please note that today's comments are effective only for today April 24 2024.
Raymond D. Martz: Our comments may include forward looking statements.
Raymond D. Martz: And under Federal Securities laws, and actual results could differ materially from those discussed.
Raymond D. Martz: For a comprehensive analysis of potential risk, please consult our most recent SEC filings and visit our website for detailed reconciliations of any non-GAAP financial measures mentioned today. Now, let's move on to our first quarter results. We are pleased to share our solid financial results in Q1, despite the negative impact of some challenging weather conditions on both coasts. Our urban markets, which continue to recover, led the portfolio. Coupled with diligent operating cost reduction efforts by our hotel teams, asset managers, and the company, we handily exceeded the top end of our financial outlook in key metrics including same property hotel EBITDA, adjusted EBITDA, and adjusted FFO. Our urban markets were led by Washington, D.C., which has been a standout performer.
Raymond D. Martz: A comprehensive analysis of potential risks. Please consult our most recent SEC filings and visit our web site for detailed reconciliations of any non-GAAP financial measures mentioned today.
Speaker Change: Now, let's move on to our first quarter results.
Speaker Change: We are pleased to share our solid financial results in Q1, despite the negative impact of some challenging weather conditions on both coasts are urban markets, which continue to recover led the portfolio cut.
Speaker Change: Coupled with diligent operating cost reduction efforts by our hotel teams asset managers in the company, we handedly exceeded the top end of our financial outlook and key metrics, including same property hotel EBITDA adjusted EBITDA and adjusted <unk>.
Speaker Change: Our urban markets were led by Washington, D C, which has been a standout performer in Q1 hotel occupancy in D. C gained an impressive eight points ryzen is 61% and revpar increased by 7%.
Raymond D. Martz: In Q1, hotel occupancy in D.C. gained an impressive 8 points, rising to 61%, and rent part increased by 7%. San Diego also produced significant gains, benefiting from a strong convention calendar that, in our case, was bolstered by our prior year of redevelopment investment programs. In downtown San Diego, occupancy at our properties climbed 8 points to nearly 75%, and rent prices surged by an impressive 21.8%. Our recently redeveloped properties, the Hilton San Diego Gaslamp Quarter and the Margaritaville Hotel San Diego Gaslamp Quarter, have been very well received by the market.
Speaker Change: San Diego also produce significant gains benefiting from a strong convention calendar that in our case was bolstered by a prior year redevelopment investment program and.
Speaker Change: In downtown San Diego occupancy at our properties climbed eight points to nearly 75% and revpar surge by an impressive 21, 8%.
Speaker Change: Our recently Redeveloped properties, the Hilton San Diego, Gaslamp quarter, and a Margaritaville hotel, San Diego Gaslamp quarter had been very well received by the market.
Raymond D. Martz: Rampart growth for these properties exceeded Q1 2023 by 88% and 60%, respectively. These downtown San Diego hotels quickly recovered from last year's redevelopment disruptions, regaining more revenue in EBITDA than was displaced last year. San Francisco and Los Angeles were also solid markets this quarter.
Speaker Change: Revpar growth for these properties exceeded Q1, 2023 by 88% and 60% respectively.
Speaker Change: These downtown San Diego Hotel has quickly recovered from last year's redevelopment disruptions regaining more revenue and EBITDA that was displaced last year.
Speaker Change: San Francisco and Los Angeles were also solid markets. This quarter, the one hotel San Francisco known for its sustainability in luxury focus grew revpar by 16% in Q1, continuing to gain market share following its redevelopment and reflagging.
Raymond D. Martz: The One Hotel San Francisco, known for its sustainability and luxury focus, grew REPR by 16% in Q1, continuing to gain market share following its redevelopment and reflagging. Overall, our urban properties increased REPR by almost 5% year-over-year, which helped offset a 4.4% decline in REPR across our resort portfolio. Notably, our same property resort portfolio, excluding La Playa Beach Club and Resort and Newport Harbor Island Resort, maintained stable occupancy levels compared to Q1 2023, though ADR declined 4.7%.
Speaker Change: Overall, our urban properties increased revpar by almost 5% year over year, which helped to offset a four 4% decline in revpar across our resort portfolio.
Speaker Change: Notably our same property resort portfolio, excluding apply a beach club and resort and Newport Harbor Island resort maintained stable occupancy levels compared to Q1 2023.
Speaker Change: <unk> declined four 7%.
Raymond D. Martz: Challenging weather conditions in California, the Pacific Northwest, and South Florida affected our resorts, hindering traditional short-term leisure bookings and led to increased cancellations. In contrast, our Key West resorts experienced a robust recovery in Q1 compared with last year, generating positive red part growth, reflecting the area's traditional strength in the first quarter.
Speaker Change: Weather conditions in California, the Pacific Northwest and South, Florida effected our resorts hindering traditional short term leisure bookings alluded to increased cancellations.
In contrast, our key west resorts experienced a robust recovery in Q1, compared with last year generating positive revpar growth, reflecting the areas traditional strength in the first quarter.
Speaker Change: Despite the very performance of our resort markets in Q1, they maintain a very significant 36% premium and rates compared to 2019.
Raymond D. Martz: Despite the varied performance of our resort markets in Q1, they maintained a very significant 36% premium in rates compared to 2019. Overall, our same property portfolio has shown a continued recovery from the pandemic, getting another two points in occupancy and a 1.7% increase in rent par versus Q1 of last year. Compared with Q1 2023, our weekday occupancy improved three points, with gains in both our urban and resort markets, demonstrating the continued recovery of business travel. Our weekend occupancy declined roughly 60 basis points, which was largely due to weather issues that discourage leisure travel.
Speaker Change: Overall, our same property portfolio has shown a continued recovery from the pandemic getting another two points in occupancy and a 1.7% increase in revpar versus Q1 of last year.
Speaker Change: Compared with Q1 2023, our weekday occupancy has improved three points with gains in both our urban and resort markets demonstrating the continued recovery of business travel.
Our weekend occupancy has declined roughly 60 basis points, which was largely due to weather issues that discouraged leisure travel. However, it is noteworthy that weekend occupancies at our urban properties improved by 50 basis points in March perhaps an indicator that leisure events and spring break travel continued to drive travelers into the city at a greater clip.
Speaker Change: The last year.
Speaker Change: In terms of our mix the group segment led the portfolio as group demand increased five 7% from Q1 2023, the group revenues growing four 9% and group segment, increasing to roughly 27, 4% of our customer mix in Q1.
Raymond D. Martz: However, it is noteworthy that weekend occupancies at our urban properties improved by 50 basis points in March, perhaps an indicator that leisure events and spring break travel continue to drive travelers into the cities at a greater clip than last year. In terms of our mix, the group segment led the portfolio as group demand increased 5.7% from Q1 2023, with group revenues growing 4.9% and the group segment increasing to roughly 27.4% of our customer mix in Q1.
Speaker Change: Transient demand also improved increasing 4% over last year as transient revenues two point.
Speaker Change: Transit revenues rose two 1%.
Speaker Change: On a monthly basis Revpar increased five 1% in January.
Speaker Change: 0.1% in February and 0.6% in March which was negatively impacted by the Easter holiday shift.
Speaker Change: February room revenues rose three 8% higher than the 0.1% Revpar growth due primarily to the extra day from leap year.
Speaker Change: Our same property EBITDA reached $59 8 million, surpassing the upper end of our Q1 outlook by $2 8 million.
Speaker Change: In addition, our recently reopened will apply beach resort in a much better than expected Q1 exceeding our outlook by $2 3 million.
Speaker Change: This performance inspired our enthusiastic by most other player so our hotel Playa team, which you heard from our opening song this morning.
Raymond D. Martz: Transient demand also improved, increasing 4% over last year as transient revenues rose 2.1%. On a monthly basis, REPR increased 5.1% in January, 0.1% in February, and 0.6% in March, which was negatively impacted by the Easter holiday shift.
Speaker Change: The strength of our same property hotel EBITDA results also bolstered was bolstered by the success of our highly focus efficiency and cost reduction efforts across all operating departments, which led to an EBITDA margin of 23% in Q1 on.
Speaker Change: On a per occupied room basis total hotel operating expenses declined by <unk>, 7% and before fixed expenses declined by two 1%.
Raymond D. Martz: February room revenues rose 3.8%, higher than the 0.1% REPAR growth due primarily to the extra day from the LEAP year. Our same property EBITDA reached $59.8 million, surpassing the upper end of our Q1 ALEC by $2.8 million. In addition, our recently reopened La Playa Beach Resort had a much better than expected Q1, exceeding our outlook by $2.3 million. This performance inspired our enthusiastic Vamos a La Playa to our Hotel La Playa team, which you heard from our opening song this morning.
Speaker Change: This reflects our ongoing progress in combating inflationary pressures through an intense focus on efficiency improvements. These measures include optimizing our staffing levels and job sharing enhancing procurement processes implementing our own workers compensation program.
Speaker Change: Leveraging favorable contracts negotiated a rate in a range by curator.
Speaker Change: We also reduced our reliance on third party contract providers by successfully filling positions internally and reducing staff turnover, while also continuing to invest in productivity enhancement and energy saving technologies and equipment.
Speaker Change: These strategies are part of a broader initiative to offset above inflationary cost increases in wages and benefits energy and insurance across our portfolio.
Raymond D. Martz: The strength in our same property hotel EBITDA results was bolstered by the success of our highly focused efficiency and cost reduction efforts across all operating departments, which led to an EBITDA margin of 20.3% in Q1. On a per-occupant room basis, total hotel operating expenses declined by 0.7%, and before fixed expenses, they declined by 2.1%. This reflects our ongoing progress in combating inflationary pressures through an intense focus on efficiency improvement. These measures include optimizing staffing levels and job sharing, enhancing procurement processes, implementing our own workers' compensation program, and leveraging favorable contracts negotiated and arranged by curators. We have also reduced our reliance on third-party contract providers by successfully filling positions internally and reducing staff turnover, while also continuing to invest in productivity enhancement and energy-saving technologies and equipment.
Speaker Change: As a result of the better than expected same property EBITDA and apply a strong performance adjusted EBITDA was $5 3 million above the top end of our outlook and adjusted <unk> per share was <unk> <unk> better.
Speaker Change: Shifting to our strategic reinvestment program. This quarter, we made significant capital investments in progress at several properties the $49 million transformation of Newport Harbor Island resort into a premier New England luxury destination is substantially completed and the resorts should open soon.
Speaker Change: Estancia La Jolla is hotel and Spa $26 million multi phased redevelopment is also substantially complete and at Skamania Lodge, we introduced eight new alternative lodging accommodations, including the completion of two two bedroom cabins, a three bedroom villa and on May 1st the expected opening of five unique luxury glamping units.
Speaker Change: Over the next year, we will evaluate the performance of these new types of experiential accommodations, which also includes nine successful luxury treehouses.
This analysis will guide our decision to what types of alternative lodging to add its Canadian in the coming years as we have an opportunity to add 200 or more additional units over the long term.
Speaker Change: With the $33 9 million invested throughout the portfolio in the first quarter, we remain on track to invest $85 million to $90 million in the portfolio for the year.
Raymond D. Martz: These strategies are part of a broader initiative to offset above-inflationary cost increases in wages, benefits, energy, and insurance across our portfolio. As a result of the better-than-expected same property EBITDA and La Playa's strong performance, adjusted EBITDA was $5.3 million above the top end of our outlook, and adjusted FFO per share was five cents better. Shifting to our strategic reinvestment program, this quarter, we made significant capital investments and progress on several properties.
And we are confident about the substantial upside these reposition properties will generate in both market share and cash flow in the foreseeable future.
In terms of our balance sheet, we remain a very good shape with no meaningful debt maturities until October 2025, followed our successful refinancing efforts, we completed just three months ago.
Speaker Change: The weighted average cost of our debt is an attractive four 6% with 75% currently at fixed rates and 91% of it unsecured.
Speaker Change: And with that comprehensive update I'd like to turn the call over to John John.
John: Hey, Thanks Ray.
Raymond D. Martz: The $49 million transformation of Newport Harbor Island Resort into a premier New England luxury destination is substantially completed, and the resort should open soon. Estancia La Jolla's Hotel & Spa's $26 million multi-phase redevelopment is also substantially complete. And at Skamania Lodge, we introduced eight new alternative lodging accommodations, including the completion of two two-bedroom cabins, a three-bedroom villa, and on May 1st, the expected opening of five unique luxury glamping units. Over the next year, we will evaluate the performance of these new types of experiential accommodations, which also include nine successful luxury tree houses. This analysis will guide our decision on what types of alternative lodging to add at Skamedia in the coming years as we have an opportunity to add 200 or more additional units over the long term.
John: As Ray indicated we're very pleased with our overall performance in the first quarter.
John: Our topline operating performance was toward the upper end of our outlook range.
John: Our revpar growth handily, beating the industry.
John: Our bottom line results well exceeded the top end of our outlook.
We benefited from our intense focus on creating further efficiencies in the operations of our properties as ray detail.
John: We also realized reduced energy usage and cost thanks to targeted sustainability initiatives and milder weather conditions.
John: And although the bad weather negatively impacted leisure demand and revenues.
John: Provided a silver lining in terms of energy savings.
John: When we look at the industry results overall in the first quarter, the industry's 2% revpar growth turned out a little softer than we were expecting.
John: Year over year demand declined every month in the quarter now representing 10 straight months of year over year declines.
And 12 straight months of year over year declines in occupancy.
Raymond D. Martz: With the $33.9 million invested throughout the portfolio in the first quarter, we remain on track to invest $85 to $90 million in the portfolio for the year. And we are confident about the substantial upside these repositioned properties will generate in both market share and cash flow in the foreseeable future. In terms of our balance sheet, we remain in very good shape, with no meaningful debt maturities until October 2025, following the successful refinancing efforts we completed just three months ago.
John: And even if you exclude Las Vegas from the industry's results.
John: You'll get a Revpar result that is 90 basis points worse at zero negative 0.7% for the quarter.
John: It doesn't paint are particularly positive view of the rest of the industries first quarter performance.
John: We believe some of the industry's weaker performance in the quarter was related to bad weather impacting travel and potentially a greater negative impact.
John: From the Easter holiday shift.
John: But clearly the mid to lower price scale hotels continued to struggle in a major way.
John: We believe the challenges at the mid to lower end are likely related to the economic pressures being experienced by the mid to lower socio economic class of consumers and businesses.
Raymond D. Martz: The weighted average cost of our debt is an attractive 4.6%, with 75% currently at fixed rates and 91% of it unsecured. And with that comprehensive update, I'd like to turn the call over to Jon. Jon? Hey, thanks.
John: This is consistent with what is being called out by many other industries and businesses and their operating reports.
John: [laughter].
John: Industry results also mirror, our results and segmentation performance.
Jon E. Bortz: Hey, thanks Ray. As Ray indicated, we're very pleased with our overall performance in the first quarter. Our top-line operating performance was toward the upper end of our outlook range, with our REVPAR growth handily beating the industry. Our bottom-line results well exceeded the top end of our outlook. We benefited from our intense focus on creating further efficiencies in the operations of our properties, as Ray detailed. We also realized reduced energy usage and costs thanks to targeted sustainability initiatives and milder weather conditions.
John: Demand from the leisure customer was flat to slightly weaker impacted by bad weather as evidenced by softer weekend performance.
John: Encouragingly business travel continued to improve with group, leading the way, but with business transient clearly seeing further recovery.
John: ADR growth was slightly softer than in prior quarters, and urban and upper upscale performed the best.
John: Supply growth continues to run well below 1%.
John: We think it will continue to run below 1% through at least 2026 and.
John: And likely 'twenty 'twenty, seven or even later for our urban and resort markets, where it takes longer to build and the project sizes are larger and harder to finance.
Jon E. Bortz: And although the bad weather negatively impacted leisure demand and revenues, it provided a silver lining in terms of energy savings. When we look at the industry results overall in the first quarter, the industry's 0.2% rev par growth turned out a little softer than we were expecting. Year-over-year demand declined every month in the quarter, now representing 10 straight months of year-over-year declines and 12 straight months of year-over-year declines in occupancy
John: In the case of the city's hotel economics are far below those needed to justify these much higher new development costs.
John: For our portfolio Revpar growth was led by our urban markets, which grew 4.9%, despite Portland and Chicago being substantially negative.
John: Our urban Revpar performance exceeded the industry's urban category, which delivered two 6% growth in the quarter.
Jon E. Bortz: And if you exclude Las Vegas from the industry's results... You get a REVPAR result that is 90 basis points worse at negative 0.7% for the quarter, which doesn't paint a particularly positive view of the rest of the industry's first quarter performance. We believe some of the industry's weaker performance in the quarter was related to bad weather impacting travel, and potentially a greater negative impact from the Easter holiday ship. But clearly, the mid-to-lower price scale hotels continue to struggle in a major way. We believe that challenges at the mid-to-lower end are likely related to the economic pressures being experienced by the mid-to-lower socioeconomic class of consumers and businesses.
John: As Ray indicated we gained two four points of occupancy or four 2% growth.
John: However, we still have a huge occupancy recovery opportunity as our urban occupancy was almost 16 points or 21% below 2019 levels.
John: And 2019 was not even our prior peak level of occupancy.
John: We've laid out the occupancy recovery opportunity for our urban portfolio in financial terms in our Investor presentation, which we posted last night on our website. So you might want to take a look at that.
John: Our best performing Revpar growth properties in the quarter were led by our properties that were redeveloped in the last few years.
John: All of these redeveloped and repositioned properties are gaining share and have significant opportunities for revpar share growth and other revenue growth over the next few years.
Jon E. Bortz: This is consistent with what is being called out by many other industries and businesses in their operating reports. Industry results also mirror our results in segmentation performance. Demand from the leisure customer was flat to slightly weaker, impacted by bad weather, as evidenced by softer weekend performance.
John: As Ray indicated the two downtown San Diego properties gained the most in the quarter.
John: They were both under redevelopment last year. So the comparisons were easier, but they grew beyond last year's displacement impact.
The next best performers for hotel Zena in D C with almost 34% growth viceroy.
John: Viceroy, Santa Monica at 18, 1%.
Jon E. Bortz: Encouragingly, business travel continued to improve, with group leading the way, but with business transient clearly seeing further recovery. ADR growth was slightly softer than in prior quarters, and while urban and upper upscale performed the best, supply growth continues to run well below one percent. We think it will continue to run below 1% through at least 2026 and, likely, 2027 or even later for our urban and resort markets, where it takes longer to build and the project sizes are larger and harder to finance. In the case of the cities, hotel economics are far below those needed to justify these much higher new development costs.
John: Viceroy D C at 16, 4%.
John: One hotel San Francisco at 16, 2%.
And low bears del Mar at 15, 6%.
John: Again, all of these properties were Redeveloped and repositioned in the last few years and demonstrate the upside opportunity of our very substantial investments.
John: We have also detailed the upside opportunity related to these strategic investments in our investor presentation.
John: With Newport Harbor Island resort, and Estancia, La Jolla, as Redevelopments being substantially completed this month.
John: We feel we're in a great position to drive significant revpar share and revenue growth over the rest of this year and the next few years and now we'll be able to do it without all of the noise and disruption impact that comes along with these major redevelopments.
Jon E. Bortz: For our portfolio, RevPAR growth was led by our urban markets, which grew 4.9%, despite Portland and Chicago being substantially negative. Our urban REVPAR performance exceeded the industry's urban category, which delivered 2.6% growth in the quarter. As Ray indicated, we gained 2.4 points of occupancy or 4.2% growth.
John: In addition, with the rebuilding of La Playa finally complete.
John: We believe its ramp up will be reasonably quick.
John: And we're already beginning to see that play out.
John: In Q1, and apply achieved $8 $3 million of EBITDA.
John: Exceeding our expectations by $2 $3 million.
Jon E. Bortz: However, we still have a huge occupancy recovery opportunity as our urban occupancy was almost 16 points or 21% below 2019 levels, and 2019 was not even our prior peak level of occupancy. We've laid out the occupancy recovery opportunity for our urban portfolio in financial terms in our investor presentation, which we posted last night on our website. So you might want to take a look at that.
John: This was just $240000 below 2019.
John: But it was ahead of 2019 in total revenues and G O P.
John: Driven by the outperformance of the food and beverage outlets and the membership Beach club.
John: We expect to apply to deliver.
John: Approximately $7 million of EBITDA in Q2.
John: Which if achieved would be more than $2 $4 million ahead of 2019 second quarter.
John: Combined with the first quarter. These first half results would give us greater confidence in hitting or beating our $22 million EBITDA forecast for la Playa for this year, which would put US well ahead of 19th $17 $7 million of EBITDA.
Jon E. Bortz: Our best performing Revpart growth properties in the quarter were led by our properties that have been redeveloped in the last few years. All of these redeveloped and repositioned properties are gaining share and have significant opportunities for REVPAR share growth and other revenue growth over the next few years. As Ray indicated, the two downtown San Diego properties gained the most in the quarter.
John: And well on our way to recovering to our $35 million pre hurricane forecast for 2022.
John: As another example of the returns on our major redevelopment investments I also wanted to provide some color on the performance of one hotel San Francisco.
Jon E. Bortz: They were both under redevelopment last year, so the comparisons were easier, but they grew beyond last year's displacement impact. The next best performers were Hotel Zena in D.C. with almost 34% growth, Viceroy Santa Monica at 18.1%, Viceroy DC at 16.4%, One Hotel San Francisco at 16.2%, and Lauberge Del Mar at 15.6%.
John: Which was the beneficiary of a $28 million transformative redevelopment and reflagging from the independent Hotel Vitale.
John: And also our property team that recently won several Pepe Awards.
John: So far we're really impressed by the power of the one hotel eco luxury brand and how well it resonates with the San Francisco customer.
John: Recall that we reopened one hotel San Francisco on June one 2022.
Jon E. Bortz: Again, all of these properties have been redeveloped and repositioned in the last few years and demonstrate the upside opportunity of our very substantial investment. We've also detailed the upside opportunity related to these strategic investments in our investor presentation, with Newport Harbor Island Resort and Estancia, La Jolla's redevelopments being substantially completed this month.
John: In 2023, just our first full year of operations in what is a very difficult market.
John: One hotel San Francisco achieved a $116 seven ADR share.
John: And our revpar share of a $128 three.
John: First is its luxury competitive set.
Jon E. Bortz: We feel we're in a great position to drive significant RevPAR share and revenue growth over the rest of this year and the next few years. And now we'll be able to do it without all of the noise and disruption impact that comes along with these major redevelopments. In addition, with the rebuilding of La Playa finally complete.
John: Which was up from 94.9 ADR share.
John: And 93.1 Revpar share for the property is in on renovated Vitale in 2019.
John: So it has gained more than 'twenty 100 basis points of ADR share and 3500 basis points of Revpar share.
John: And it's far from being stabilized.
Jon E. Bortz: We believe its ramp-up will be reasonably quick, and we're already beginning to see that play out. In Q1, La Playa achieved $8.3 million of EBITDA, exceeding our expectations by $2.3 million. This was just $240,000 below 2019, but it was ahead of 2019 in total revenues and GOP, driven by the outperformance of the food and beverage outlets and the Membership Beach Club.
John: In 2024, so far through March.
John: One hotels gained another 150 basis points and ADR share.
John: And another 1400 plus basis points in Revpar share.
John: In 2023, we achieved 63% of 2019 as EBITDA.
Speaker Change: We recognize that may not sound great.
Speaker Change: But in a very slow to recover market like San Francisco It represents by far the best performance against 2019 of all of our San Francisco properties.
Jon E. Bortz: We expect La Playa to deliver approximately $7 million of EBITDA in Q2, which, if achieved, would be more than $2.4 million ahead of the 2019 second quarter. Combined with the first quarter, these first half results would give us greater confidence in hitting or beating our $22 million EBITDA forecast for La Playa for this year, which would put us well ahead of 19's $17.7 million EBITDA and well on our way to recovering to our $35 million pre-hurricane forecast for 2022.
Speaker Change: Please feel free to tell you look in our Investor presentation. At this case study and a few other examples that show the returns we've achieved on our redevelopment and repositioning projects.
Speaker Change: As we look out into Q2 and the rest of the year as indicated in our press release, we're maintaining our full year outlook. Despite our bottom line beat in the first quarter.
Speaker Change: As you know Q1 is our smallest EBITDA contributor of all four quarters and.
Speaker Change: And we've become increasingly concerned about the macroeconomic environment for the rest of the year, given the changing expectations regarding the timing and number of fed rate cuts.
Jon E. Bortz: As another example, the returns on our major redevelopment investments. I also wanted to provide some color on the performance of One Hotel San Francisco, which was the beneficiary of a $28 million transformative redevelopment and re-flagging from the independent Hotel Vitale, and also a property team that recently won several Pebbe Awards. So far, we're really impressed by the power of the One Hotel eco-luxury brand and how well it resonates with the San Francisco customer. Recall that we reopened One Hotel, San Francisco, on June 1, 2022.
Speaker Change: And the continuing trend of weak demand and very modest industry revpar growth.
Speaker Change: And the continuing normalization of the booking window as short term bookings have not been keeping up with last year.
Speaker Change: We're not reducing our expectations for the second half of the year, we're just not ready to bank the Q1 beat.
Speaker Change: So far for the first 13 days of April we've achieved revpar growth of almost 10%.
Speaker Change: While that is certainly very positive it should be recognized that these days have significantly benefited from both the Easter shift as well as the Passover shift.
Jon E. Bortz: In 2023, just our first full year of operations in what is a very difficult market, one hotel, San Francisco, achieved a 116.7 ADR share and a REVPAR share of 128.3% versus its luxury competitive set, which was up from a 94.9 ADR share and a 93.1 REVPAR share for the property as an unrenovated Vitale in 2019. So it's gained more than 2,100 basis points of ADR share and 3,500 basis points of REVPAR share, and it's far from being stabilized.
Speaker Change: With Passover covering the last 10 days of the month.
Speaker Change: Revpar for our portfolio is currently tracking to be negative between one and 2% for the entire month.
Speaker Change: For the rest of the quarter.
Speaker Change: May looks to be strong and then June looks to be soft again.
Speaker Change: Convention timing has some impact on our monthly variability.
Speaker Change: For the second quarter, our outlook is for Revpar growth to range from 0.5 to two 5%.
Speaker Change: Similar to the first quarter, we expect our Revpar performance in Q2, we will exceed the industry's results.
Jon E. Bortz: In 2024 so far through March, one hotel has gained another 150 basis points in ADR share and another 1,400 plus basis points in REVPAR share. In 2023, we achieved 63% of 2019's EBITDA. We recognize that may not sound great.
Speaker Change: And similar to our first quarter outlook. This is not a conservative outlook.
Speaker Change: It is a realistic forecast at this point in time.
Speaker Change: For Q2, we anticipate finalizing and recording several significant real estate tax benefits from prior year periods and these have been included in our Q2 outlook.
Speaker Change: Despite the unpredictability of these credits and assessments over which we have no control.
Jon E. Bortz: But in a very slow-to-recover market like San Francisco, it represents by far the best performance against 2019 of all of our San Francisco properties. Please feel free to take a look at this case study and a few other examples that show the returns we've achieved on our redevelopment and repositioning projects. As we look out into Q2 and the rest of the year, as indicated in our press release, we're maintaining our full-year outlook despite our bottom-line beat in the first quarter. As you know, Q1 is our smallest EBITDA contributor of all four quarters.
These credits would result in an estimated net reduction of approximately $4 million compared to our Q2 2023 tax expense.
This will contribute to reduced expense growth rate for both the quarter and the year.
Speaker Change: Looking forward, we expect to continue to achieve substantial savings from real estate tax assessments and credits, although the timing remains uncertain.
Speaker Change: Typically these results stem from efforts spanning as much as three to five years.
Jon E. Bortz: And we've become increasingly concerned about the macroeconomic environment for the rest of the year, given the changing expectations regarding the timing and number of Fed rate cuts, and the continuing trend of weak demand and very modest industry revenue growth, and the continuing normalization of the booking window as short-term bookings have not been keeping up with last year. We're not reducing our expectations for the second half of the year. We're just not ready to bank on the Q1 beat.
Speaker Change: We also continue to be encouraged by our current group in total pace.
Speaker Change: Our group pace for quarters, two through four shows group room nights ahead of the same time last year by eight 5% and group revenue I had by 10, 2%.
Speaker Change: With transient revenue pace up by three 9%.
Speaker Change: Our total room night pays US ahead by seven 9% and our total revenue pace on the books is ahead by seven 1%.
Speaker Change: Q3 continues to represent the quarter with the largest pace advantage followed by Q4 on a percentage basis.
Jon E. Bortz: So far, for the first 13 days of April, we've achieved REF PAR growth of almost 10%. While that is certainly very positive, it should be recognized that these days have significantly benefited from both the Easter shift as well as the Passover shift, with Passover covering the last 10 days of the month. REVPAR for our portfolio is currently tracking to be negative between 1 and 2 percent for the entire month. May looks to be strong, and then June looks to be soft again. Convention timing has some impact on our monthly variability.
Nevertheless, given the slower in the month for the month and in the quarter for the quarter booking trends we've been experiencing.
Speaker Change: We remain cautious about the second half due to this normalization of the group booking window as well as the softening macro economic environment.
Speaker Change: Finally, as Ray indicated we're very excited about the completion of the $26 million of estancia, La Jolla, multi phased redevelopment and repositioning.
Speaker Change: The property looks fantastic and it's already receiving glowing reviews from customers.
Jon E. Bortz: For the second quarter, our outlook is for Red Park growth to range from 0.5 to 2.5 percent. Similar to the first quarter, we expect our REVPAR performance in Q2 will exceed the industry's results. And similar to our first quarter outlook, this is not a conservative outlook. It is a realistic forecast at this point in time. For Q2, we anticipate finalizing and recording several significant real estate tax benefits from prior year periods, and these have been included in our Q2 outlook.
Speaker Change: We should be able to drive strong growth as the La Jolla Submarket of San Diego is extremely robust due to the vast amount of capital flowing into the expanding.
Speaker Change: Biomedical industry that surrounds the property.
Speaker Change: In addition, UCSD, which is the largest university in the California system and is located directly across the street from the property.
Speaker Change: Is also growing like Crazy and we will continue to drive increased demand into the resort.
Speaker Change: With the additional completion of Newport Harbor Islands, 49 million dollar comprehensive transformation.
Speaker Change: And the completed rebuilding of applying in Naples.
Jon E. Bortz: Despite the unpredictability of these credits and assessments, over which we have no control, these credits would result in an estimated net reduction of approximately $4 million compared to our Q2 2023 tax expense. This will contribute to a reduced expense growth rate for both the quarter and the year. Looking forward, we expect to continue to achieve substantial savings from real estate tax assessments and credits. Although the timing remains uncertain, typically, these results stem from efforts spanning as much as three to five years.
Speaker Change: Along with the recent Redevelopments of Jackal Island Club resort Chaminade resort southernmost resort, San Diego Mission Bay, and the alternative lodging being added at Skamania Lodge or.
Speaker Change: Our resort portfolio is poised for strong growth in the future as leisure and group demand strengthened.
Speaker Change: That completes our prepared remarks Donna you May proceed with the Q&A.
Donna: Thank you the floor is now open for questions.
Donna: I'd like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Total indicate that your line is in the question queue.
Donna: A question from the queue. Please press star two for participants using speaker equipment, it may be necessary to pick up the handset before pressing the starkey.
Jon E. Bortz: We also continue to be encouraged by our current group and total pay. Our group pay for quarters 2 through 4, shows group room nights ahead of the same time last year by 8.5%, and Group Revenue Ahead by 10.2%, with transient revenue pay up by 3.9%. Our total room night pace is ahead by 7.9%, and our total revenue pace on the books is ahead by 7.1%. Q3 continues to represent the quarter with the largest pace advantage, followed by Q4 on a percentage basis. Nevertheless, given the slower in-the-month, for-the-month, and in-the-quarter, for-the-quarter booking trends we've been experiencing, we remain cautious about the second half.
Donna: Due to the fact that there isn't another industry call at nine a M. We.
Donna: We will be keeping the call to one hour. So we ask that you.
Donna: Please limit yourself to one question again Thats Star one to register a question at this time. Today's first question is coming from Dori Kesten of Wells Fargo. Please go ahead.
Donna: Thanks.
Dori Lynn Kesten: Hey, you know what in that short term group bookings has slowed can you provide a bit more context around that.
Dori Lynn Kesten: Have you seen anything else that is giving you pause.
Dori Lynn Kesten: Meeting planners question, Hello, our academia and others are pushing harder on room rates.
Dori Lynn Kesten: Sure.
Dori Lynn Kesten: Yeah, I mean, our best guess today based upon conversations with clients is that it has more to do with the booking pattern normalizing so.
Jon E. Bortz: Due to this normalization of the group booking window, as well as the softening macroeconomic environment. Finally, as Ray indicated, we're very excited about the completion of the $26 million Estancia, LA multi-phase redevelopment and repositioning. The property looks fantastic, and it's already receiving glowing reviews from customers. We should be able to drive strong growth as the La Jolla Submarket of San Diego is extremely robust due to the vast amount of capital flowing into the expanding biomedical industry that surrounds the property.
Dori Lynn Kesten: Really what's been happening over the last year.
Dori Lynn Kesten: Is that meeting planners in and businesses are booking their meetings further out.
Dori Lynn Kesten: They were a year before and so when we're coming upon in the year for the year or in the quarter for the quarter certainly in the month for the month were.
Dori Lynn Kesten: We're seeing we're seeing less pick up versus last year.
Jon E. Bortz: In addition, UCSD, which is the largest university in the California system and is located directly across the street from the property, is also growing like crazy and will continue to drive increased demand for the resort. With the additional completion of Newport Harbor Island's $49 million comprehensive transformation and the completed rebuilding of La Playa in Naples, along with the recent redevelopments of Jekyll Island Club Resort, Chaminade Resort, Southernmost Resort, San Diego Mission Bay, and the alternative lodging being added at Skamania Lodge. Our resort portfolio is poised for strong growth in the future as leisure and group demand strengthens. That concludes our prepared remarks. Donna, you may proceed with the Q&A. Press Enter.
Cuz, they've already booked the meeting and so the pace advantage. We we've we have that's part of why we're being a little more cautious with assuming it all converts into.
Dori Lynn Kesten: You know the same kind of percentage growth over last year, because we think we're going to lose some of that pace advantage due to this normalization of the group booking window.
Dori Lynn Kesten: We're not seeing any changes in attrition.
Dori Lynn Kesten: In cancellation, we're definitely not seeing any reductions in in spend outside of the room.
Dori Lynn Kesten: Or what groups are committing to.
Dori Lynn Kesten: So from.
Dori Lynn Kesten: Our perspective, we don't think it's indicating any change in confidence on the part of businesses reacting to.
Operator: Thank you. The floor is now open for questions. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. If you would like to remove your question from the queue, please press star 2. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star key. Again, due to the fact that there is another industry call at 9 a.m., we will be keeping the call to one hour, so we ask that you please limit yourself to one question. Again, that's star one to register a question at this time. Today's first question is coming from Dori Kesten of Wells Fargo. Please go ahead.
Dori Lynn Kesten: A more cautious economic environment.
Dori Lynn Kesten: We do think it has it's primarily due to the normalization of the bookings booking timing window.
Speaker Change: Okay. Thanks, Sean.
Sean: Thanks Dory.
Speaker Change: Thank you. The next question is coming from Floris Van <unk> of Compass point. Please go ahead.
Floris Gerbrand Hendrik Van Dijkum: Lawrence a float your phone is not on mute.
Floris Gerbrand Hendrik Van Dijkum: I'll move on to the next question coming from Smedes Rose of Citi. Please go ahead.
Smedes Rose: Hi, Thanks.
Smedes Rose: I was just wondering if you could talk about it a little bit more about any kind of visibility you're seeing into summer leisure trends across your resorts.
Smedes Rose: Yeah, I mean, I think it's a little premature to two.
Jon E. Bortz: Sure. Yeah, I mean, our best guest today, based upon conversations with clients, is that it has more to do with the booking pattern normalizing. So really, what's been happening over the last year is that meeting planners and businesses are booking their meetings further out than they were a year before. And so when we're coming up with the year for the year or in the quarter for the quarter, certainly in the month for the month. We're seeing less pickup versus last year because they've already booked the meeting. And so the pace advantage we have.
Smedes Rose: Have a any kind of judgment based upon what we're seeing.
Smedes Rose: From the river from our resorts I mean the.
Smedes Rose: The comment I would make that we feel good about right now and I and we indicated in our call is that the group pace is up significantly in the third quarter.
Smedes Rose: And some of that is in the in the summer months of July and in August So.
Smedes Rose: We certainly look like we have a good base on the books.
Smedes Rose: From a transient perspective, it's not quite as clear.
Jon E. Bortz: That's part of why we're being a little more cautious with assuming it all converts into, you know, the same kind of percentage growth over last year because we think we're going to lose some of that pace advantage due to this normalization of the group booking window. And we're not seeing any changes in attrition. In cancellation, we're definitely not seeing any reductions in spend outside of the room or what groups are committing to. So from our perspective, we don't think it's indicating any change in confidence on the part of businesses reacting to a more cautious economic environment.
Smedes Rose: And as you know folks make airline reservations.
Smedes Rose: Well before typically they make their hotel reservations. So we're encouraged by the commentary thats coming out of the airlines about strong summer bookings.
Smedes Rose: But I think.
Smedes Rose: In terms of how we how we look I think it's it's too early to make a judgment as to whether there are there going to be up a lot or theyre going to be positive or negative.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you. The next question is coming from Floris Van <unk> with Compass point. Please go ahead.
Floris Gerbrand Hendrik Van Dijkum: Hi, Hey, guys good morning.
Jon E. Bortz: Thanks Jon. Thanks Dori.
Floris Gerbrand Hendrik Van Dijkum: Good morning.
Operator: Thank you. The next question is coming from Floris Van Dijkum of Compass Point. Please go ahead. Floris, please ensure your phone is not on mute. I'll move on to the next question coming from Smedes Rose of Citi. Please go ahead. Hi, thanks.
Floris Gerbrand Hendrik Van Dijkum: Wanted to ask you if I look at your your deck the the upside potential on your urban portfolio.
Floris Gerbrand Hendrik Van Dijkum: Polyol appears larger than some of the.
Floris Gerbrand Hendrik Van Dijkum: The returns that you're penciling in for mostly Europe, largely your resorts.
Jon E. Bortz: Yeah, I mean, I think it's a little premature to have any kind of judgment based upon what we're seeing from the resorts. The comment I would make that we feel good about right now, and we indicated in our call, is that the group pace is up significantly in the third quarter, and some of that is in the summer months of July and August. We certainly look like we have a good base on the books.
Floris Gerbrand Hendrik Van Dijkum: Assets that have been renovated as you think about capital allocation, Jon where where would you put.
Floris Gerbrand Hendrik Van Dijkum: Incremental capital today.
Floris Gerbrand Hendrik Van Dijkum: Where would you invest it would you invest in your resorts or would you invest more in urban assets.
Jon E. Bortz: From a transit perspective, it's not quite as clear. And as you know, folks make airline reservations well before, typically, they make their hotel reservations. So we're encouraged by the commentary that's coming out of the airlines about strong summer bookings. But I think... In terms of how we look, I think it's too early to make a judgment as to whether they're going to be up a lot or whether they're going to be positive or negative.
Jon E. Bortz: Sure So I think.
Jon E. Bortz: You know that the answer is as sort of different than the two alternatives that you provided.
Jon E. Bortz: So any incremental capital we have been and would continue to invest in buying our own stock back so basically we'd be buying.
Jon E. Bortz: A greater percentage if you will.
The assets that we already own.
Operator: Thank you. The next question is coming from Floris Dijkum of Compass Point. Please go ahead.
Jon E. Bortz: We feel like it's a good mix between urban and resort between.
Floris Gerbrand Hendrik Van Dijkum: Hi. Hey, guys. Good morning. Good morning.
Jon E. Bortz: Business group and transient and leisure.
Jon E. Bortz: I wanted to ask you, if I look at your deck, the upside potential on your urban portfolio appears larger than some of the returns that you are pencilling in for largely your resort assets that have been renovated. As you think about capital allocation, Jon, where would you put incremental capital today? Where would you invest it? Would you invest in your resorts, or would you invest more in urban assets?
Jon E. Bortz: We've invested hundreds of millions of dollars.
Jon E. Bortz: Into the portfolio repositioning properties to where we think.
Jon E. Bortz: They have their highest and best positioning where theres significant upside in share growth revenue.
Jon E. Bortz: Revenue growth and profitability and so today, we'd be buying our existing stock back which trades at.
Somewhere in the range of a 50% discount to.
Jon E. Bortz: Where we think the individual assets would sell.
Jon E. Bortz: Sure. But, I think, you know, the answer is sort of different than the two alternatives that you provided. So, any incremental capital that we have been and would continue to invest in buying our own stock back. So, basically, we'd be buying, you know, a greater percentage, if you will, of the assets that we already own. We feel like it's a good mix between urban and resort, between, you know, business, group, and transient, and leisure.
Jon E. Bortz: So I think from from that perspective, it's an easy answer.
Jon E. Bortz: <unk>.
Jon E. Bortz: Based upon where we sit.
Jon E. Bortz: In our in the portfolio and maybe this answers your question in in one way, we're still likely if were selling assets, we're still likely to be selling some urban assets and.
Jon E. Bortz: Markets that have been slower to recover not.
Jon E. Bortz: Not because their growth rate or the recovery rate isn't great, but the alternative capital usage returns are much higher meaning buying our stock back.
Jon E. Bortz: We've invested, you know, hundreds of millions of dollars into the portfolio, repositioning properties to where we think they have their highest and best positioning where there's significant upside in share growth, revenue growth, and profitability. And so today we would be buying our existing stock back, which trades at somewhere in the range of a 50% discount to where we think the individual assets would sell. So I think from that perspective, it's an easy answer.
Jon E. Bortz: And paying down debt along with the EBITDA that we sell.
Jon E. Bortz: So it wouldn't generally involve selling our resort assets within the portfolio, which again, we continue to believe have very significant upside in the portfolio.
Jon E. Bortz: And for US also just to highlight.
Jon E. Bortz: In our in our deck, yes, we have over $50 million of upside where.
Jon E. Bortz: We are in the in the branch from the urban recovery, that's but that's primarily because as you know the urban markets.
Jon E. Bortz: The most evidently more than leisure markets out of the pandemic and slowly recover. So we ended the twenty-three at 69% occupancy at our urban hotels and the bridges shows got scared if we get to 80% of what the upside opportunity, which is still below where our prior peaks were so that's against shows the tremendous growth from the urban assets that are.
Jon E. Bortz: I think based upon where we sit in the portfolio, and maybe this answers your question in one way, we're still likely, if we're selling assets, we're still likely to be selling some urban assets in... markets that have been slower to recover, not because their growth rate or their recovery rate isn't great, but the alternative capital usage returns are much higher, meaning buying our stock back and paying down debt along with the EBITDA that we sell So it wouldn't generally involve selling our resort assets within the portfolio, which we continue to believe have very significant upside.
Jon E. Bortz: To be realized in the portfolio and we expect the next couple of years to achieve that.
Speaker Change: Thanks Scott.
Scott: Thanks, Lars. Thank you. The next question is coming from Duane.
Duane: Evercore ISI. Please go ahead.
Duane: Okay.
Duane: Hey, thanks.
Duane: Just on the group pacing and the give back kind of in the quarter.
Duane: Wonder if theres any trend of a predictability to it kind of emerging so maybe you could just replay although last couple of quarters. How much pace was ahead at the start of the quarter and then ultimately where it ended up at just to kind of help put that 20% pacing in context.
Jon E. Bortz: And Floris also just...
Raymond D. Martz: And Floris, also, just to highlight in our deck, yes, we have over $50 million of upside we have in the bridge from the urban recovery, but that's primarily because, as you know, the urban markets fell the most significantly more than the leisure markets after the pandemic and slowly recovered. So we ended the year at 69% occupancy in our urban hotels, and the bridge just shows us if we can get to 80% with the upside opportunity, which is still below where our prior peaks were. So that again shows the tremendous growth from the urban assets that are to be realized in the portfolio, and we expect the next couple of years to achieve that.
Speaker Change: Sure well in in Q1.
Speaker Change: For Q1 of this year versus the pickup from the.
Speaker Change: Prior Q1.
Speaker Change: We we were short.
Little less than a $1 million in group revenue.
Speaker Change: Which represented about a little under 3000 group rooms.
Speaker Change: If if we go back to the quarter before that.
Speaker Change: I think.
Speaker Change: That was relatively flat, but we'll see if we can pull up that data Floris I.
Operator: Thank you. The next question is coming from Duane Pfennigwerth of Evercore ISI. Please go ahead.
Speaker Change: I mean.
Speaker Change: Duane.
Speaker Change: Sorry.
Duane Thomas Pfennigwerth: Hey, thanks. Just on the group pacing and the give back in the quarter, I wonder if there's any trend of predictability to it emerging. Maybe you could just replay the last couple quarters, how much pace was ahead at the start of the quarter, and then ultimately where it ended up, just to help put that 20% pacing in context.
Duane: No worries yeah no.
Duane: Vince.
Duane: I and I think what's been hard the reason it's been hard to predict is it's it's kind of been bouncing all over the place so.
Gabby just pulled up the <unk>.
Duane: Order before.
Duane: And it looks like.
Duane: Am I looking at here.
Jon E. Bortz: Well, in Q1, for Q1 of this year, and prior to Q1, we were short a little less than a million dollars in group revenue, which represented about a little under 3,000 group rooms. If we go back to the quarter before that, I think... That was relatively flat, but we'll see if we can pull up that data, Floris.
Duane: Three months to come.
Duane: Okay.
Duane: Oh I see okay. Yeah. So so yeah. It was about a half a million dollars of of less pick up in Q4 for Q4, so again pretty pretty modest.
Pretty minor but.
Duane: I think it's it's evidence of the the normalization of the of the of the booking window.
Jon E. Bortz: I mean, Duane.
Duane Thomas Pfennigwerth: No worries; yeah, no, that makes sense.
Jon E. Bortz: And I think what's been hard, the reason it's been hard to predict is that it's...
Speaker Change: Makes sense, so that setup up 'twenty, I think which is specific to the third quarter.
Jon E. Bortz: [inaudible]
Jon E. Bortz: Oh, I see, okay, yeah, it was about a half a million dollars of less pickup in Q4 for Q4, so again, pretty modest and pretty minor, but I think it's evidence of the normalization of the booking window.
Speaker Change: If you had to guess like where do we end up in kind of realized revenue and you can punt on that and say well, we'll tell you when we get there.
Speaker Change: Well I think the challenge is certainly here's the one thing I know is going to happen the percentage will be much lower.
Jon E. Bortz: So that up 20 percent, I think, which is specific to the third quarter. If you had to guess, where do we end up in terms of realized revenue? And you can punt on that and say we'll tell you when we get there.
Speaker Change: Alright, so I mean, as we put more business on the books, obviously that percentage is going to come down.
Speaker Change:
Speaker Change: And I think right now we have.
Jon E. Bortz: Well, I think the challenge is, certainly, here's the one thing I know is going to happen. The percentage will be much lower. Alright, so I mean as we put more business on the books, obviously that percentage is going to come down. And I think right now we have, I don't know how much what percentage that represents of our target for the quarter, maybe 60. Maybe 60%. We'll see if we can pull that up, Duane, but the percentage is going to come down. It comes down naturally just as we book more and the numbers get larger, right? It's just the math from that perspective. In terms of the impact of the booking window, it's just really hard to forecast that at this point in time.
Speaker Change: Do you know how much what percentage that represents of the of our target for <unk> for the quarter maybe 60.
Maybe 60%, we'll see if we can pull that up Duane but.
Speaker Change: The percentage is going to come down it comes down naturally just as we as we book more and and the numbers get larger right. It's just it's just the math from that perspective in terms of the impact of the booking window.
Speaker Change: It's just really hard to forecast that at.
Speaker Change: At this point in time.
Duane Thomas Pfennigwerth: Thanks for taking the questions on an early conference call.
Speaker Change: Thanks, Thanks for taking the questions on on our early conference call.
Operator: Thank you. The next question is coming from Bill Crow of Raymond James. Please go ahead.
Speaker Change: Okay.
Speaker Change: Thank you. The next question is coming from Bill Crow of Raymond James. Please go ahead.
Bill Crow: Hey, good morning. Jon, I'm hoping you can dig into the ADR decline at Leisure Properties, not just in the fourth quarter but kind of what you're expecting going forward. How much of that was reactionary to maybe some, I don't know, some normalization of consumer spending, how much of that was a mixed shift. And then you state in your release that you're kind of bullish on inbound international travel this year, but you're also saying you really don't have much of a window into the summer months. So if you could just kind of square all that up, I'd appreciate it.
Bill Crow: Hey, good morning, John I'm, hoping you could dig into the ADR decline at leisure properties not just in the fourth quarter, but kind of what you're expecting going forward how much of that was.
Bill Crow: The reaction married to maybe some.
Bill Crow: Some some normalization in the consumer spending how much of that was mix shift and then you you stated in your release that your your kind of bullish on inbound international travel.
This year, but you're also saying you're you really don't have much of a window into the summer months. So if you could just kind of square all that up I would appreciate it.
Jon E. Bortz: Well, I'll take a shot at it, Bill. I don't know if my comments will square it all up, but I think when we look at the resorts, the ADR changes are kind of all over the place. It really depends upon the property, what's been going on at the property, the region, and the weather has had an impact as well. There is a mix shift going on at the resorts. So let's talk about the mix shift first because that's the easiest one to look at.
Well I'll take a shot at a bill I know I don't know if my comments ill square it all up but I think when we look at the resorts.
Speaker Change: The ADR changes are kind of all over the place it really depends upon the property what's been going on at the property the region the weather.
Speaker Change: Had an impact as well.
Speaker Change: There is mix shift going on at the resorts. So so let's talk about the mix shift first because that's the easy easiest one to look at as we rebuild group.
Jon E. Bortz: As we rebuild groups at our resorts... Generally speaking, the group rates are substantially lower than the transient rate. [inaudible] You know, it's the base build, it's the midweek, particularly out of season. And so it gets priced lower, and it competes with, you know, urban markets as much as other resort markets. So as we rebuild that group, which is a significant part of our resorts, our resort mix, that naturally brings the rate down in terms of the overall average.
Speaker Change: At our resorts generally speaking the group rates are.
Speaker Change: Substantially lower than the transient rates.
Speaker Change: It's the base build its the mid week.
Speaker Change: Particularly out of season.
Speaker Change: And so it gets priced lower and it competes with you know urban markets as much as other resort markets. So.
Speaker Change: As we rebuild that group, which is a significant part of our resorts our resort mix.
Speaker Change: That naturally brings.
Speaker Change: The rate down.
Speaker Change: In terms of the overall average.
Jon E. Bortz: As we add and continue to recover Leisure, which is still below where it was in 19, you know, that business has tended to be, business that's being stimulated like it was pre-pandemic through promotions, or it represents wholesale international business, which comes in at lower rates, or it's the off-season, where you typically have to stimulate demand, particularly local demand in markets like Florida that you live in, gets pretty hot in the summer. And so, getting people to come to your location, hopefully driven by cooler beach weather, bringing people in from inland Florida, it comes at a lower rate.
Speaker Change: As we add.
Speaker Change: And continue to recover leisure, which is still below where it was in 19.
Speaker Change: That that business has tended to be.
Speaker Change: <unk>.
Speaker Change: Business, that's being induced like it was pre pandemic through promotions.
Speaker Change: Or it represents wholesale international business, which comes in at lower rates.
Speaker Change: Or it's off season.
Speaker Change: There are where you have to stimulate typically up to stimulate demand.
Speaker Change: Particularly local demand in markets like Florida that you live in <unk>.
Speaker Change: <unk> gets pretty hot in the summer.
Speaker Change: And so getting people to come to your location hopefully driven by a cooler beach, whether bringing people in from inland, Florida. It comes at a lower rate.
Jon E. Bortz: So there's a good bit of this that is mixed. I think behavioral normalization has mostly happened, meaning the big premiums we were getting on compressed days, around some holidays, for people coming out of their caves after the pandemic and splurging and paying up. I think most of that has normalized and gone away. And so it's really why where we're losing ADR, we're losing it at a relatively small amount at this point.
Speaker Change: So there's a good bit of this that is mix.
Speaker Change: Think the behavioral normalization has mostly happened, meaning the big premiums we were getting on compressed days around some holidays.
Speaker Change: For people coming out of their caves after the pandemic in and Splurging and paying up.
Speaker Change: I think most of that is normalized and gone away.
Speaker Change: And so it's really why we're we're losing ADR, we're losing it at a relatively small amount at this point.
Jon E. Bortz: And as we look into Q2 as an example, our rate decline for our resorts looks to be lower than what it was in the first quarter, and right now, it looks like rates for the second half of our resorts will be better than the first half. So I think we're getting pretty darn close to stabilization. And also, we're benefiting from the ability to charge more at some of the resorts that we've repositioned to a higher level in the portfolio, and Bill, and then all the others.
Speaker Change: And as we look into Q2 as an example.
Speaker Change: You know our rate.
Speaker Change: Decline for our resorts looks to be.
Speaker Change: Lower than what it was in the first quarter and right now it looks like rates for the second half of our resorts will be better than the first half so.
Speaker Change: I think we're getting pretty darn close to stabilization.
Speaker Change: And also we're benefiting from the.
Speaker Change: The ability to charge more at some of the resorts that we've we've repositioned.
Speaker Change: To a higher level on the portfolio.
Speaker Change: And Bill and then.
Bill Crow: And Bill, and then the second part of your question, international inbound, just a couple things to note on that. At least year-to-date through March, international inbound is up over last year, so that shows it's improving. In fact, March on a percentage basis was closest to 2019 than any month in the recovery, so it's heading in the right direction. It's still driven more by transatlantic demand versus Pacific demand, but encouragingly, you know, noted on a couple of the airlines' calls this recent quarter, they're forecasting record summer travel, especially as relates to international.
Speaker Change: The second part of your question on International inbound.
Bill Crow: Just a couple things to note on that at least a year to date through March.
Bill Crow: International inbound is over the last year. So that shows it's improving in fact March on a percentage basis. It was closer to 2019 than any month in recovery. So its heading in the right direction, it's still driven more by the trans Atlantic versus the Pacific <unk>.
Bill Crow: Demand, but encouragingly noted on a couple of airlines calls this recent quarter, therefore, Catherine record summer travel.
Bill Crow: Especially as it relates to international now a lot of that of course is U S. Outbound and we encourage more Americans to stay here to travel then go to Europe.
Bill Crow: Now, a lot of that, of course, is U.S. outbound, and we encourage more Americans to stay here to travel than go to Europe, but it does represent it, and it has more increased the number coming up, and that fell significantly from the pandemic, but it's heading in the right direction.
Bill Crow: It does represent a more increased a number coming up and that it fell significantly from the pandemic, but it's heading in a good direction.
Operator: Thank you. The next question is coming from Sean Kelley of Bank of America. Please go ahead.
Speaker Change: Thanks, guys I appreciate it.
Speaker Change: Thanks, Paul.
Speaker Change: Thank you. The next question is coming from Shaun Kelley of Bank of America. Please go ahead.
Shaun Clisby Kelley: Hi, good morning, everyone. Ray or Jon, one thing that's come up on some of the other travel calls this earnings season has been a bit of a rebound on the technology side. You know, I think this would probably be more on BT. I think we've talked a lot about the group this morning, but I'm kind of curious about what you're seeing. You know, you have exposure, you know, a lot of exposure in San Francisco, plenty in the Pac Northwest as well.
Shaun Clisby Kelley: Hi, good morning, everyone Ray or John.
Shaun Clisby Kelley: One thing that's come up on some of the other travel calls this earnings season has been a bit of a rebound on the technology side.
Shaun Clisby Kelley: This would probably be more on BT I think we've talked a lot about group. This morning, but kind of curious on what you are seeing you know you have exposure a lot of exposure in San Francisco plenty in the Pac northwest as well. So just are you seeing.
Shaun Clisby Kelley: Are you seeing, you know, signs of life on the sort of large technology accounts? How has that trended? And, you know, is there more room here? I mean, we've heard, you know, you've been pretty clear that by segment, you know, groups are still the strongest, but I'm kind of curious if you've seen at least maybe some increased lead generation from the BT side from some of those technology accounts. Sure. So, I think the best...
<unk> of life on a sort of large technology accounts, how has that trended in and is there is there more room here I mean, we've heard you've been pretty clear that by segment groups still the strongest but I'm kind of curious if.
Shaun Clisby Kelley: You have seen at least maybe some increased lead gen from the BT side from some of those those technology accounts.
Speaker Change: Sure. So I think the our general comment has been.
Jon E. Bortz: Sure, so I think that our general comment is, you know, business transient travel continues to recover, and it's noticeable, and it's represented in the stronger weekday occupancy numbers. And as we look...
Speaker Change: Business transient travel continues to recover and it's noticeable and it's it's represented in the stronger weekday occupancy numbers and as we look.
Jon E. Bortz: Throughout our portfolio, there's no doubt that we've seen significant increases in the technology firms that represent themselves in markets like San Francisco, like Boston, our Santa Cruz property, which doesn't benefit from corporate transient on the technology side, but has seen a very significant change in lead volume and group bookings from the technology firms in the adjacent Silicon Valley. So there's no doubt we're seeing it in technology. We're also seeing increased corporate transient in the consulting businesses and on the financial side of your business as well.
Speaker Change: Throughout our portfolio. There is no doubt that we have seen significant increases in the technology firms.
That represents itself in markets like San Francisco.
Speaker Change: Like Boston.
Speaker Change: Our Santa Cruz property, which doesn't benefit from corporate transient in the technology side.
Speaker Change: That has seen a very significant change in lead volume and group bookings from the technology firms in in the adjacent Silicon Valley.
Speaker Change: So there's no doubt, we're seeing and in technology. We're also seeing.
Speaker Change: Increased corporate transient in AR in the consulting businesses.
Speaker Change: On the financial side in your business as.
Speaker Change: As well and you know these these are in a way that's sort of I don't know if its the later to recover.
Jon E. Bortz: And these are, in a way, the later to recover sectors or the ones that just got, maybe in the case of technology, maybe got ahead of itself during the pandemic and, you know, went through this period of time, over the last 12 or 18 months of job cuts and a little more cautiousness in total spend. And we've definitely seen that turnaround so far this year.
Speaker Change: The sectors or the ones that just got maybe in the case of technology, maybe got ahead of itself during the pandemic and went.
Speaker Change: Went through this period of time.
Speaker Change: Over the last 12 or 18 months of of of job cuts and a little more cautiousness in in total spend and we've definitely seen that turnaround.
Shaun Clisby Kelley: Great, thank you very much. Thank you, the next question is coming from Michael Bellisario. Thanks. Good morning, everyone.
Speaker Change: So far this year.
Speaker Change: Great. Thank you very much.
Speaker Change: Sean.
Michael Joseph Bellisario: Thank you. The next question is coming from Michael Bellisario Baird. Please go ahead.
Michael Joseph Bellisario: Thanks, Good morning, everyone.
Speaker Change: Good morning, John just want to go back to your expense commentary and maybe help us what's new what's incremental compared to your prior forecast our prior outlook and then how much of the savings that you recognized in <unk> and expect to recognize in <unk>, what's a run rate.
Operator: Thank you. The next question is coming from Michael Bellisario of Baird. Please go ahead.
Speaker Change: Savings look like and how much of it is maybe just more one time savings that you've been able to achieve on the expense side. Thanks.
Michael Joseph Bellisario: Sure, so it's a combination of the two. I mentioned the real estate taxes. I think we were pretty clear, in our call 60 days ago, that we did not forecast any real estate tax benefits because we had no idea of timing, and lo and behold, 60 days later, we've seen some success in at least one of our major markets within the portfolio of those real estate tax benefits. I mean, those.
Speaker Change: Sure. So it's a combination of the two.
Speaker Change: I mentioned, the real estate taxes.
Speaker Change: I think we were pretty clear.
Speaker Change: In our call 60 days ago that we did not forecast any real estate tax benefits.
Speaker Change: Because we had no idea of timing and Lo and Behold 60 days later, we've seen some success.
Speaker Change: And at least one of our major markets within the portfolio and.
Speaker Change: Of those real estate tax benefits I mean those.
Jon E. Bortz: Much of that is one-time, but there is a reduction in the run rate in our taxes that relate to those properties, which are primarily in Southern California. And as it relates to the other expenses, I mean, we have, I mean, our number one initiative within the company right now is a focus on efficiencies, creating efficiencies within the portfolios, collaborating with our partners to do that, getting back to fundamentals, re-implementing all of our best practices, and taking advantage of new learnings.
Speaker Change: Much of that is one time, but there is a reduction in the run rate and our taxes that relate to those properties.
Speaker Change: Which are primarily in southern California.
Speaker Change: And as.
Speaker Change: As it relates to the other expense I mean, we've we have I mean, our number one initiative within the company right now is our focus on efficiencies, creating efficiencies within the portfolios collaborating with our partners to do that I'm getting back to fundamentals.
Speaker Change: <unk> re implementing all of our best practices.
Taking advantage of new learnings.
Jon E. Bortz: Some of these efforts were put in place years ago, and Ray, you can talk a little bit about our workers' comp program that we put in place and what we were doing before. But those are ongoing run rate savings. The bulk, the vast majority, I mean, maybe almost all of the savings in Q1 related to our efforts to lower expenses that should result in a run rate reduction and give us much more confidence in our ability to be well in the range in terms of our expense growth rate, of course, depending upon whether, you know, if we get a material acceleration in revenue in the second half beyond what we're currently contemplating, well, there are going to be expenses that come along with that and increase the growth rate.
Speaker Change: Some of these efforts have were put in place years ago, and Ray you can talk a little bit about our workers comp program, but that we put in place and what we were doing before.
Ray: But those are those are ongoing run rate savings that the the bulk of the.
Ray: The vast majority I mean, maybe almost all of the savings and in Q1 related to our efforts to lower expenses that should result in a run rate reduction and give us much more confidence in our ability to be well in the range in terms of our expense growth rate of course.
Ray: Depending upon weather.
Ray: If we get a material acceleration in revenue in the second half beyond what we're currently contemplating while theyre going to be expenses that come along with that and increase the growth rate, but obviously that would that would dramatically increase the bottom line as well. So so we feel really good about where we're going we have a long way to go on this.
Jon E. Bortz: But obviously, that would dramatically increase the bottom line as well. So we feel really good about where we're going. We have a long way to go on this effort. There are a lot of programs and projects that are in place to reduce costs and, I think, will be increasingly effective over the course of the year.
Ray: This effort, there's a lot of programs and projects that are in place to reduce cost and I think we'll be increasingly effective over the course of the year.
Raymond D. Martz: And Mike, some additional color on some of those programs. So the workers' comp program that Jon mentioned, that was something we, it's unique. We took it back from our third-party managers because we thought we could do a better job actively managing it and being on top of it. So as a result of that program, we reduced our costs at our — these are the independent properties. Again, the benefit of independent hotels is that we have more control than, say, if it's a brand-managed property, which we can't control. So we've reduced our workers' comp costs by over 60% versus what it was when our managers were operating. So that's millions of dollars a year.
Ray: And Mike maybe just some additional color on some of those programs. So workers comp program that John mentioned that that was something we it's unique it's.
Ray: We took it back from our third party managers, because we thought we could do a better job actively managing it.
Mike: And being on top of it so as a result that program. We've reduced our cost that are these are the independent properties again, the benefit of the independent hotels, we have more controls and save its brand managed properties, which we can't control.
Mike: But we've reduced our workers comp costs by over 60% versus what it was when our managers.
Mike: Operating and so that's millions of dollars a year, we're getting their outcome.
Raymond D. Martz: We're getting better outcomes. We're also, the other side is the curator. Curator is, in a way, our internal R&D group, and they've gone out with new technology. We have new housekeeping tools that the housekeepers can be more efficient in how they clean rooms and schedule rooms and those areas. We're also working on a new tool that a curator put in place as an AI chatbot, which will reduce the call center volume and pressure on the staff of the hotels, which frees up the staff there.
Mike: We're also the other side as curator.
Mike: <unk> in a way he's also our internal R&D group.
Mike: They have gone out with new technology, we have new housekeeping tools that the housekeepers can be more efficient for how they clean rooms and scheduled rooms in those areas.
We're also working on a.
Mike: Neutral that are put.
Mike: Put in place as a AI chatbot, which will reduce the call center volume.
Mike: And and pressure on the staff at the hotels when frees up the staffing there and ultimately result in lower staffing. So there's a lot of those areas that we're actively doing and we have a lot more flexibility at our independent hotels, because we could put those programs in place.
Raymond D. Martz: And ultimately, we're resulting in lower staffing. So there's a lot of those areas that we're actively doing, and we have a lot more flexibility at our independent hotels because we could put those programs in place. And there are hundreds of them that are in place. Some of them add more value than others, but some that we're excited about and we should We've also, we've also been making
Mike: And there was 100 of them that are in place some of them add more value than others, but some of it we're excited about and we should see the results in the coming quarters here.
Mike: We've also we've also been making investments in.
Jon E. Bortz: We've also been making investments in reducing energy usage and sustainability. A couple examples I'll give you, which, you know, again, some of this stuff is not rocket science.
Mike: In reducing energy usage and sustainability.
Mike: Couple of examples I'll give you which.
Mike: You know again, it's the same as some of this stuff is not rocket science and it's it's not new technology, but you know the installation of filtered water.
Jon E. Bortz: It's not new technology, but, you know, the installation of filtered water dispensers in our hotels, as we're replacing ice machines, we're replacing them with dual machines that also provide filtered water so that we can eliminate plastic bottles and all bottled water in our hotels. As we near the end of life on many HVAC systems, we're installing new, higher efficiency systems in those programs, in those properties. We've also added solar. We now have solar at two properties, Chaminade out in Santa Cruz, but we also have solar on the Monaco DC in the center of the city.
Mike: Dispensers.
Mike: In our hotels.
Mike: As we're replacing ice machines, we're replacing them with dual machines that also provide filtered water. So that we can eliminate plastic bottled water.
Mike: All bottled water in our hotels.
Mike: As <unk>.
Mike: As we near the end of life on many HVAC systems, we're installing new higher efficiency systems in those programs.
Mike: In those properties, we've also added solar.
Mike: We now have a solar two properties chaminade out in Santa Cruz, but we also have solar on the Monaco DC.
Mike: In the in the center of the city so.
Jon E. Bortz: So there are a lot of things we've been implementing over time, but this year, a much more intensive focus on, frankly, some of these things is just doing things the right way and not getting sloppy. And I think, you know, perhaps we've gotten a little bit sloppy in the last 18 months.
Mike: There's a lot of things we've been implementing over time, but this year a much more intensive focus on.
Mike: Frankly, some of this is just doing things the right way and not getting sloppy and I think you know.
Mike: Perhaps we have gotten a little bit sloppy in the last 18 months.
Operator: Thank you. The next question is coming from Gregory Miller of Truist Securities. Please go ahead.
Speaker Change: Thank you.
Speaker Change: Thank you. The next question is coming from Gregory Miller of <unk> Securities. Please go ahead.
Gregory Jay Miller: Thank you good morning.
Gregory Jay Miller: Given your commentary on a softening macroeconomic environment, I thought to ask specifically about any affluent leisure trade down. When you review your star competitive set reports for your resorts, have you seen any evidence of a transient leisure consumer trade-down? For example, are your upper-upscale resorts gaining share from competitive luxury resorts, or do you sense that you may be losing share to lower-priced resorts, or just curious if you're seeing any impact?
Gregory Jay Miller: Given your commentary on a softening macroeconomic environment I thought to ask specifically on any affluent leisure trade downs.
Gregory Jay Miller: When you review your stronger competitive set reports for your resorts have you seen any evidence of a transient leisure consumer trade down for.
For example, our upper upscale resorts gaining share from competitive luxury resorts or do you sense that you may be losing share to lower price resorts for Im just curious if youre seeing any impact.
Jon E. Bortz: [inaudible]
Gregory Jay Miller: Sure.
Gregory Jay Miller: <unk>.
Jon E. Bortz: That's a tough one. I would say, I mean, the answer is no, to competitive trade-down. I think I mentioned earlier, certainly, when we've seen sort of a trade-down from the perspective of trading back to maybe what people can actually afford versus the splurge suites or view rooms that, at 22, you know, just coming out of being stuck in their homes during the pandemic. So there's no doubt we saw that again. I think we've, I think that's normalized within the portfolio. We've continued generally to gain share within our resort portfolio. Our occupancy index, as an example, in Q1 was, for our resorts in total, was up over 200 basis points.
Speaker Change: That's a tough one.
Speaker Change: I would say I mean, the answer is no we're not seeing.
Speaker Change: Competitive trade down I think I mentioned earlier, certainly when we've seen sort of a trade down from the perspective of trading back to maybe what people can actually afford versus the splurge suites or view rooms.
Speaker Change: That in 'twenty two.
Speaker Change: You know just coming out of.
Of being.
Speaker Change: Stuck in their homes during the pandemic. So theres no doubt we saw that again I think we've I think thats normalized.
Speaker Change: Within the portfolio.
Speaker Change: We've continued generally to gain share.
Speaker Change: Within our resort portfolio.
Speaker Change: Our occupancy index as an example in Q1 was for our resorts in total were up over was up over 200 basis points.
Jon E. Bortz: So, I don't think... I think that's probably more to do with the dollars we've invested in our properties and the benefits of having higher quality properties with better service versus the properties we've been competing with in the market. Okay, thank you very much.
Speaker Change: So I don't think.
Speaker Change: I think thats, probably more to do with the the dollars we've invested.
Speaker Change: In our properties and the benefits of having higher quality properties with better service versus the properties, we've been competing with in the market.
Speaker Change: Okay. Thank you very much.
Gregory Jay Miller: Hey, Greg, one other thing, just one thing I want to respond to, because it's sort of a general comment in your question. I don't think we're seeing a slowdown in the economy and in travel, per se, and I think we're just more cautious, trying to be pragmatic about what impact the feds hiring for longer is going to have on the economy later this year. It may not materialize. To some extent, the fact that it hasn't materialized to any great extent yet, but it's also cautiousness based upon what we saw in Q1, although, again, how much was weather, how much was the holiday shift, and how much was... softer performance.
Speaker Change: Hey, Hey, Greg one other thing just one thing I want to respond to because it's sort of a general.
Speaker Change: It was a comment in your question.
Speaker Change: I don't think we're seeing.
Speaker Change: A slowdown in the economy and in travel.
Speaker Change: Per se and I think were just more cautious.
Speaker Change: Trying to be pragmatic about what impact the feds.
Speaker Change: Higher for longer.
Speaker Change: Is going to have on the economy later this year it may not materialize.
Speaker Change: To some extent the fact that it hasn't materialized to any great extent yet.
Speaker Change: But it's also cautiousness based upon what we saw in Q1.
Speaker Change: Although again, how much was weather how much was the holiday shift and how much was softer performance.
Gregory Jay Miller: It's hard to differentiate those three at this point in time. What we're not hearing, we're not hearing comments from clients saying, we're changing our policy, we're slowing down, you have to get 35 approvals to travel. We are not hearing those things from the customer base. We're not seeing a reduction in lead volume for group business other than the normalization of the booking trend that we've been talking about.
Speaker Change: It's hard to differentiate those three at this point in time, what we're not hearing we're not hearing comments from clients, saying, we're changing our policy we're slowing down.
Speaker Change: You have to get 35 approvals to travel.
Speaker Change: We are not hearing those things from the customer base, we're not seeing a reduction in lead volume for group business other than the normalization of the booking trend that we've that we've been talking about.
Jon E. Bortz: Great. I appreciate the clarification on that. Sure. Thank you. The next question is coming from Anthony Powell of Barclays. Please go ahead.
Speaker Change: Great I appreciate the clarification on that.
Speaker Change: Sure.
Speaker Change: Thank you. The next question is coming from Anthony Powell of Barclays. Please go ahead.
Anthony Franklin Powell: Hi, Good morning, I guess, what are you seeing on the transaction side I know rates are higher now so are you still seeing buyer interest for urban assets.
Operator: Hey Anthony, this is Tom Fisher. Good morning.
Anthony Franklin Powell: I was kind of the volume out there maybe a broad overview would be helpful.
Anthony Franklin Powell: I think it would be, you know, to Jon's earlier point on the Fed and the previous answer to the question, I think uncertainty and I think everybody continues to wait for what the Fed's going to do. I would tell you, as we started the year, investor sentiment was pretty strong. I think there was kind of a spring to action, but I think that that's somewhat been delayed as people wait for the Fed to pivot.
Thomas Charles Fisher: Hey, Anthony Tom Fischer, Good morning, I think to John's earlier point on the.
Thomas Charles Fisher: Previous answer to supply chain.
Thomas Charles Fisher: I think the uncertainty and I think everybody continues to wait for what the fed's going to do I would tell you is we started the year the investor sentiment was pretty strong I think there is kind of a spring into action I think that thats somewhat been delayed as people wait for the fed to pivot.
Anthony Franklin Powell: I think that there is debt availability, but the debt's expensive, and that's impacting pricing. So I still think at this point there's some pricing discovery out there, but I think, in terms of actual volume of transactions, I think that's going to continue to be somewhat stalled or delayed until we see some real movement in terms of the basis.
Thomas Charles Fisher: That there is that availability, but that gets expensive and that impacting pricing. So I still think at this point theres some pricing pricing discovery out there, but I think that in terms of actual volume of transactions I think that is going to continue to be somewhat style. They are delayed until until we see some.
Thomas Charles Fisher: Real movement in terms of the base rates.
Thomas Charles Fisher: And there's not a lot on the market today. What I would say to you is, kind of, doing my survey of... You know, broker interviews, so to speak, or just surveys of the brokers, I would tell you that there seems to be a very, very high level of the brokers doing Brokers' Opinions of Values, or BOVs, but not necessarily a lot of them. That's not necessarily translating into listings. And I'd also say that the listings that are out there, the conversion rate from listing to closing is probably as low as it's ever been, given the fact that it's very difficult to secure any type of financing.
Thomas Charles Fisher: And there is there.
Thomas Charles Fisher: Not a lot on the market today.
I would say to you is kind of doing my survey.
Thomas Charles Fisher: Broker interviews so to speak or just surveys of the brokers that would tell you that there seemed to be a very very high level of the brokers doing brokers' opinions of values or <unk>, but not necessarily a lot of that's not necessarily translating into listings and.
Thomas Charles Fisher: I'd also say that the lifting that are out there that conversion rate from lifting the closing is probably is smaller than it's ever been given the fact that it's very difficult to secure any type of financing.
Raymond D. Martz: And Anthony, we were very successful last year with the seven transactions that we had. We generated over $330 million in sales proceeds. So as we look, as Tom mentioned, with the Fed keeping rates up, it's likely to reduce the number of transactions that are going to happen this year, including for potentially us. We'll still be active in the face of that, but I just think things are maybe taking a little bit slower now, given everything that's going on with the interest rates in the Fed.
Thomas Charles Fisher: And then Anthony we were very successful last year with the seven transactions that we had would generate over $330 million of sale proceeds.
Thomas Charles Fisher: Certainly as we look whether it's as Tom mentioned with the fed keeping the rates up it's likely to reduce the number of transactions, they're going to happen this year, including for potentially us.
Thomas Charles Fisher: We'll still be active and look at that but.
Thomas Charles Fisher: Just thinking things are maybe to go a bit slower now given everything that's going on with the interest rates and the fed.
Jon E. Bortz: Thank you. At this time, I'd like to turn the floor back over to Mr. Bortz for closing comments.
Speaker Change: Alright, thank you.
Speaker Change: Thanks Anthony.
Jon E. Bortz: At this time I'd like to turn the floor back over to Mr. Bortz for closing comments.
Jon E. Bortz: Hey, great job, everybody. I didn't think you'd actually follow the rules and limit your questions to one, so thanks for doing that. Clearly, we're here for additional questions that you have. We're happy to chat with you, and we thank you for your interest. Please enjoy the Hilton call that starts at 9, and we appreciate your interest in Pebblebrook, and we look forward to talking with you next quarter.
Bortz: Okay, great great job, everybody I didn't I didn't think you'd actually follow the rules and limit your questions to one so thanks for doing that clearly we're here for.
Jon E. Bortz: For additional questions that you have we're happy to chat with you and.
Speaker Change: We think we thank you for your interest.
Speaker Change: Please enjoy the Hilton call.
Speaker Change: That debt.
Speaker Change: It starts at nine and and we.
Speaker Change: We appreciate.
Operator: Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.
Speaker Change: Your interest in Pebble broke and we look forward to talking with you next quarter.
Speaker Change: Ladies and gentlemen, thank you for your participation. This concludes today's event you may disk.
Speaker Change: Connect your line to log off the webcast at this time and enjoy the rest of your day.
Speaker Change: Yeah.
Speaker Change: Okay.
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Speaker Change: Thanks.
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Speaker Change: Hello.
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Speaker Change: Tom.
Speaker Change: Thanks, Tom.
Speaker Change: Okay.
Speaker Change: Tom.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Yes.
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Speaker Change: Okay.
Speaker Change: Yes.