Q1 2024 Park Hotels & Resorts Inc Earnings Call
Greetings and welcome to Fox and the sorts, Inc. First quarter 'twenty 'twenty four earnings conference call. At this time, all participants are in a listen only mode.
If anyone should have quiet 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 Mr. Ian Weissman Senior VP corporate strategy. Thank you. Mr. Weissman you may begin.
Ian C. Weissman: Thank you operator, and welcome everyone to the park hotels <unk> resorts first quarter 2024 earnings call.
Ian C. Weissman: Four we began I would like to remind everyone that many of the comments made today.
Are considered forward looking statements under federal Securities laws.
As described in our filings with the SEC. These statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed and we are not obligated to publicly update or revise these forward looking statements.
Actual future performance outcomes and results may differ materially from those expressed in forward looking statements. Please refer to the documents filed by park with the SEC specifically the most recent reports on Form 10-K, and 10-Q, which identify important risk factors that could cause actual result.
Ian C. Weissman: To differ from those contained in the forward looking statements.
In addition on today's call, we will discuss certain non-GAAP financial information, such as <unk> and adjusted EBITA.
Ian C. Weissman: You can find this information together with reconciliations to the most directly comparable GAAP financial measure.
In Yesterdays earnings release, as well as in our 8-K filed with the SEC and the supplemental financial information available on our website at PK hotels and resorts dotcom.
Additionally, unless otherwise stated all operating results will be presented on a comparable hotel basis.
Ian C. Weissman: This morning, Tom Baltimore, our chairman and Chief Executive Officer will provide a review of park's first quarter performance and update you on our 2020 for.
Ian C. Weissman: Sean Dellorto, our Chief Financial Officer will provide additional color on first quarter results Q2, and full year guidance and an update on our balance sheet.
Thomas Jeremiah Baltimore: Following our prepared remarks, we will open the call for questions with that I would like to turn the call over to Tom.
Thomas Jeremiah Baltimore: Thank you Ian.
Tom: And welcome everyone before we begin.
Tom: I would like to take a moment to acknowledge and remember former Senator Joe Lieberman.
Tom: He served on the Park Board since January 2017.
Thomas Jeremiah Baltimore: Senator Lieberman was a great American a wonderful board member.
Tom: And a dear friend.
Tom: I wish to convey my heartfelt condolences to the Lieberman family.
Tom: And I know I speak for the entire Park Board and management team when I say that his wisdom and integrity will be greatly missed by all of us.
Tom: I am pleased to report.
Tom: Another incredibly successful quarter marked by outstanding performance across our portfolio as demand trends improved.
Tom: Across all segments.
Tom: I'll start by the strategic investments made in <unk>.
Tom: Key West Orlando and Hawaii.
Tom: In addition to other prudent decisions we've made over the past few years.
Tom: We remain laser focused on achieving the highest returns on our invested capital with our ROI pipeline, providing the groundwork for outperformance in 2024 and beyond.
Tom: Having invested nearly $300 million of capital last year.
Tom: We are targeting targeting an additional 260.
Tom: So $280 million in strategic investments this year.
Tom: As we seek to unlock the significant embedded value within our portfolio.
Tom: We also believe the decision we made last year to exit the two Hilton San Francisco hotels meaningfully improved our balance sheet and operating metrics and change the narrative for park.
Tom: Through these efforts, we were able to return $630 million of capital to shareholders last year and as we continue our momentum in 2024.
Tom: We're excited about the growth potential in our portfolio.
Tom: Focused on maximizing returns for shareholders.
Tom: Turning to our first quarter results.
Tom: Revpar in Q1 increased a sector, leading seven 8%.
Tom: Which was 50 basis points above the high end.
Tom: Of our Q1 guidance range.
Tom: It also exceeded the Smith travel reported upper upscale performance by nearly 500 basis points.
Tom: This is an exceptionally strong performance given the tough year over year comparison, with 2023 first quarter Revpar growing 28% over 2022.
Tom: We experienced broad based strength across our portfolio with our urban and resort portfolios each reporting 8% revpar growth during the quarter.
Tom: While our suburban and airport hotels also reported an aggregate revpar increase over $6, 5%. These.
Tom: These results.
Tom: Highlight the continued upside potential in our portfolio driven by particularly strong group demand and convention calendars positive trends in business travel across our key urban markets.
Tom: Ongoing resiliency.
Tom: Of our resorts.
Tom: Group demand remains a key driver of growth for park in 'twenty 'twenty four and beyond this was evident in the first quarter as group room revenues increase.
Tom: 15% year over year to $123 million, which exceeded our expectations as rates grew by 5%.
Tom: The elevated demand drove an increase in banquet and catering revenue.
Tom: Over 11%.
Tom: As we look over the balance of 'twenty 'twenty four.
Tom: Group demand is expected to remain very strong with full year revenue pace as of March 31st up nearly 11% compared to the same time last year.
Tom: Benefiting from strong convention in citywide activity expected for New York, Chicago, and New Orleans.
Tom: And healthy in house group booking activity and the resorts.
Tom: <unk>, our Bonnet Creek complex in Orlando.
Tom: In the year for the year bookings also remain very active.
Tom: With a portfolio of picking up approximately 240000 room nights for 2024 during the quarter accounting for $56 million of incremental revenues with gains primarily concentrated in New York Orlando and Hawaii.
Tom: Turning to several of our core markets. We are pleased to report another solid quarter in Hawaii.
Tom: Achieved impressive revpar growth of nearly 7% versus last year.
Tom: Hilton Hawaiian village led the way with exceptional revpar growth of nearly 8% supported by strong domestic air lift.
Tom: In a steady recovery of inbound travel from Japan.
Tom: Overall February year to date, inbound air lift and Japan increased by 65% compared to the previous year.
Tom: Zoning and nearly an 85% increase to 55000 monthly passenger arrivals to Oahu and the Big Island.
Tom: All Japanese air lift still lags 2019 by 31%.
Speaker Change: Very encouraged by the ongoing improvement.
Speaker Change: Group book Group bookings increased by 41%.
Speaker Change: Which helped to push occupancy to nearly 92%.
Tom: During the first quarter.
Tom: While driving the average daily rate to $304, marking the highest first quarter average daily rate and the hotels nearly 60 year history.
Tom: At our Casa Marina resort in key West.
Tom: The transformative investments we made to re imagine this iconic hotel as you know.
Tom: Exceptional results.
Tom: Performance during the first quarter meaningfully exceeding expectations.
Tom: Revpar increased by over 34% during the quarter Pri.
Tom: Primarily driven by an impressive 24% increase in rate.
Tom: Strong.
Tom: Leisure and group demand drove occupancy higher by over 600 basis points to 82% in the first quarter.
Speaker Change: As a reminder.
Tom: First quarter is a clean quarter to quarter comparison is a resort.
Tom: Not closed for renovation.
Tom: Until may of last year.
Tom: The resort also achieved our highest banquet revenue quarter on record, helping to drive food and beverage revenues up nearly 32% compared to the prior year period.
Tom: Food and beverage offerings at Casa has been further enhanced with the introduction of the New Beach side Dorado Bar, which opened April 13th and is expected to have the restaurant fully operational by the end of Q2.
Tom: Overall, we are thrilled about the potential of this iconic resort.
Tom: With current projections for 2024 trending ahead of our underwriting.
Tom: In Orlando our.
Tom: Bonnet Creek resort complex, which includes the Waldorf Astoria, and Signet Bonnet Creek hotels.
Tom: Shaved impressive results following the completion of a comprehensive renovation and meeting space expansion.
Tom: Revpar for the complex increased by nearly 9% versus 2023 during the quarter.
Tom: At Cigna. The addition of the 35000 square foot Waterside ballroom contributed to a 43% increase in group revenues during the quarter, helping the asset improve its revpar index by over 8% for the quarter.
Speaker Change: Looking ahead.
Tom: 24 group revenue was pacing up over 36% or 2025 group revenue pace is up over 17%.
Tom: Look forward to welcoming many of you at our upcoming Bonnet Creek property tour later this month.
Tom: We will showcase our best in class development capabilities.
Tom: And the incredible work achieved by the team.
Tom: Shifting to our urban portfolio of hotels, we delivered solid results.
Tom: As both business travel and international demand continue their path towards a full recovery.
Tom: New York continues to be one of the strongest urban recovery stories in the country.
Tom: Exemplified by our Hilton Midtown hotels, revpar growth of 11% over the first quarter of 2023.
Tom: With group revenue exceeding 2019 levels by nearly 28%.
Tom: As a result.
Tom: Occupancy improved 570 basis points above.
Tom: Above the prior year period, with 14 sellout nights during a seasonally low occupancy quarter.
Tom: There remains significant embedded upside potential at the hotel.
Tom: Transient room nights still 16% below 2019.
Tom: While the overall occupancy versus 2019 trials by 440 basis points.
Tom: Our GAAP, we expect to close.
Tom: With the eventual rebound in travel from Asia.
Tom: With continued improvements in business transient demand.
Tom: In New Orleans proactive efforts to generate in house group, given the significant drop in citywide events during the first quarter of.
Tom: To drive solid results at our Hilton Riverside Hotel.
Tom: Revpar growth exceeding 13%.
Tom: Versus a 4% decline for the comp set.
Tom: [noise] in Chicago a.
Tom: A 70% increase in citywide production helped to drive an 11% increase in revpar across our three hotels with contributions from both transient and group segments.
Tom: As we look out over the balance of the year, we remain well positioned to deliver sustained growth throughout the year as we execute against our strategic priorities.
Tom: Supported by an expected favorable macro backdrop.
Tom: Clothing, a resilient U S consumer improving inbound international travel and a continued acceleration of group demand.
Tom: We remain optimistic about the growth potential of our portfolio.
Tom: As a result.
Tom: We are increasing our full year 2024 guidance to reflect the better than expected performance during the first quarter.
Tom: And remain on track to deliver sector, leading revpar and earnings growth this year.
Tom: Sean will provide more details on our improved outlook for the year.
Sean Dellorto: From a capital allocation perspective, we remain very focused on maximizing returns on invested capital.
Sean Dellorto: While we continue to assess potential acquisitions.
Tom: Firmly believe that our portfolio of holds significant embedded value.
Tom: Which we seek to unlock through targeted ROI projects at Hilton Hawaiian village, we expect to commence a two year phase two room renovation with nearly half of the 796 rooms.
Tom: In the Rainbow tower being renovated during the second half of this year.
Tom: The remaining rooms expected to be renovated during this same time next year.
Tom: Along with 26 additional keys being added as part of the project.
Tom: Similar to H H B.
Tom: We plan to renovate nearly half of the rooms in their 400 room Palace tower at the Hilton Weicker lower village later this year with a balance of rooms expected to be renovated next year, along with 11 keys being added as part of the project.
Tom: Both renovations are expected to begin in August with an anticipated completion date of early 'twenty 'twenty five for phase one.
Tom: In total we expect to only $8 million of EBITDA disruption this year from both projects and 40 basis points of Revpar disruption.
Tom: Overall, we are very excited by the impact of these re imagine rooms will have on our results. Following the success of our Tapa tower renovation at Hilton Hawaiian village, which wrapped up last year.
Tom: And generated a 60 dollar.
Tom: Average daily rate premium to other resort room types.
Tom: In addition, we continue to evaluate other major ror projects, among our core hotels, including a comprehensive renovation of our Royal Palm Ocean Front hotel in South Beach Miami.
Tom: Which is currently contemplated for 2025.
Tom: While making significant progress on the entitlement process for a ground up development project at Hilton Hawaiian village to add our fifth tower at approximately 515 rooms.
Tom: I want to reemphasize that our team remains intensely focused on executing our internal growth strategies and capital allocation priorities, which we're confident will create long term shareholder value and positioning the company for long term success.
Tom: With that I will turn the call over to Sean.
Sean Dellorto: Thanks, Tom So overall, we're very pleased with our first quarter performance Q.
Sean Dellorto: Q1, Revpar increased an impressive seven 8% year over year with occupancy up 350 basis points to nearly 71% for the quarter and average rate higher by two 5% over the same period last year.
Sean Dellorto: Hotel revenue was $618 million during the quarter and hotel adjusted EBITDA was $168 million.
Sean Dellorto: Resulting in hotel adjusted EBITDA margin of 27, 3% 190 basis points above the same period in 2023.
Tom: She went to adjusted EBITDA was $162 million and adjusted <unk> per share was 52% first quarter results were positively impacted by double digit revpar gains in several key markets, including key West New York, New Orleans, and Chicago, while ongoing strength in Hawaii drove our stronger than <unk>.
Tom: Expected results.
Tom: In addition margin outperformance was also aided by approximately $4 million of state unemployment tax refunds received at both of our Hawaii resorts and $5 million of relief grants awarded to our three Boston properties.
Tom: Excluding these items first quarter hotel adjusted EBITDA margin still expanded by approximately 40 basis points.
Tom: Turning to the balance sheet. Our current liquidity is approximately $1 3 billion, including $400 million of cash our net debt is currently $3 $5 billion.
Tom: Our net debt to adjusted EBITDA ratio on a trailing 12 month basis has improved significantly to just five two times.
Tom: Overall, our balance sheet remains in excellent shape with a focus on extending near term maturities, while maintaining sufficient liquidity and optionality to execute our strategic initiatives.
Tom: With respect to our dividend on April 15th we paid our first quarter cash dividend up <unk> 25 per share and on April 19th Our board approved a second quarter dividend of 25 per share to be paid on July 15th to stockholders of record as of June 28.
Tom: The dividend translates to an annualized dividend yield of 6% based on recent trading levels.
Tom: As we stated last quarter, we expect to resume our target payout ratio in the range of 65% to 70% of adjusted <unk> per share for the full year, which based on our current guidance would translate into an incremental top off dividend at the end of the year.
Tom: Turning to guidance as Tom noted earlier, given stronger than expected results. During the first quarter. We are increasing our 2020 for revpar forecast by 25 basis points at the midpoint to a new range of $186 to $188 representing year over year growth of 4% to <unk>.
Tom: Five 5%, while our hotel adjusted EBITDA margin forecast improved by 30 basis points at the midpoint to a new range of 27, 1% to 28, 1% or.
Tom: Or down 70 basis points to up 30 basis points versus 2023.
Tom: Additionally, given the stronger than expected performance during the first quarter, we are increasing our adjusted EBITDA forecast by $10 million at the midpoint.
Tom: To a new range of $655 million to $695 million, while our adjusted <unk> per share guidance increases by approximately <unk> at the midpoint to a new range of $2.07 to $2 27 per share.
Tom: Representing year over year, adjusted EBITDA growth of two 5% and <unk> per share growth of 6%.
Tom: Overall, we expect our portfolio to continue to deliver solid revpar growth over the balance of the year.
Tom: Year to date preliminary revpar growth through April is pacing up over 5%, while we forecast Q2, revpar growth to range between 3% and 5%.
Tom: Our April performance was impacted by difficult year over year comparisons coupled with the Easter holiday shift, which impacted leisure transient demand into Hawaii. We are anticipating performance to accelerate in May and June driven by key west as we lap the Casa Marina renovation disruption beginning in may of 2023.
Tom: Along with continued improvement in our urban markets and solid group base across the portfolio.
Tom: In addition to back half of the year looks solid with Revpar growth expected to be about three 5%, which includes 80 basis points of renovation disruption. During this time at both of our Hawaii hotels and at our Hilton New Orleans Hotel, where we will renovate 250 of the 1167 rooms in the main tower.
Tom: During the low operating season from July through October. This concludes our prepared remarks, we will now open the line for Q&A to address each of your questions. We ask that you limit yourself to one question and one follow up.
Speaker Change: Operator may we have the first question. Please.
Speaker Change: Thank you Vivek.
Speaker Change: We will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Information tone will indicate your line isn't the question came up I stopped to if you would like to move to questions from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment, please while you're pulling for questions.
Florida's Vandyke: The first question comes from the line of Florida's Vandyke them with Compass point. Please go ahead.
Florida's Vandyke: Hey, guys. Thanks for taking my question.
Florida's Vandyke: So.
Florida's Vandyke: Good report, obviously, a little puzzling the initial reaction here by the market but.
Florida's Vandyke: One of the things that are that I find fascinating here you know obviously you your expectations for free cash flow and EBITDA has increased but you are still not getting.
Florida's Vandyke: Based on your guidance back to.
Florida's Vandyke: 2019 levels of Saint.
Florida's Vandyke: Same property EBITDA, although I, if I'm not mistaken I think your first quarter EBITDA. This year actually surpassed 2019 on a same property basis.
Florida's Vandyke: Can you maybe talk about some of where the the latent upside appears to be in terms of your your EBITDA recapture in particular talk about maybe talk about some of the upside potential on your urban assets, where your occupancy still appears to be lagging 2019.
Florida's Vandyke: Yeah.
Florida's Vandyke: There's a lot lots of impact there, but I think you really hit the nail on the head it's look youre seeing and I think our our first quarter is a great example, I think sometimes people sort of overly focus on sort of Hawaii.
Florida's Vandyke: Noticed obviously, we had really broad based.
Florida's Vandyke: An acceleration in both urban and in our resort markets as well so we're still.
Florida's Vandyke: 500 basis points below I believe plus or minus in occupancy from.
Florida's Vandyke:
Florida's Vandyke: Pre pandemic levels, but that continues to accelerate and you know as we look across the portfolio. We're incredibly encouraged them I know that there are some concerns about second quarter in sort of April and April is sort of isolated.
Florida's Vandyke: And it's probably best that I sort of addressed some of that now and you know obviously April is trending to about negative negative 1%, but that's really we believe our softest month.
Florida's Vandyke: And the entire year.
Florida's Vandyke: It's our soft as a group month as well were about three 7%.
Florida's Vandyke: But as you sort of look out to may and in June we see a real acceleration.
Florida's Vandyke: Looking at group pace in and kind of May and June were probably in the 8% to 9%.
Florida's Vandyke: We're looking at Seattle being above 15% in Revpar D C up probably in the.
Florida's Vandyke: 10% to 11% range, Boston, 8% to 9%.
Florida's Vandyke: Chicago kind of 5% to 6% and if you think about Casa obviously, not a clean comps since it was closed.
Florida's Vandyke: Up really a whopping sort of 900%.
Florida's Vandyke: So what I think it is.
Florida's Vandyke: It's embedded in your question that.
Florida's Vandyke: The acceleration is.
Florida's Vandyke: The recovery is accelerating and its broadening and we certainly continue to see that in our portfolio. So we're very encouraged as we look out in <unk>.
Florida's Vandyke: We've given guidance of 3% to 5% here in the second quarter and feel good about that.
Florida's Vandyke: A little frustrating to see the early response in the market, but I think once people sort of dig in and understand a little better. We are we are very very confident as we look out for the balance of 2024.
Speaker Change: Great and Tom maybe if I could follow up on on Hawaii, you talk about obviously you know.
Thomas Jeremiah Baltimore: Hawaii village I think I had $51 million of EBITDA in the first quarter. I mean, you annualize that I mean, not not a fair assumption but.
Thomas Jeremiah Baltimore: You're at a run rate of close to $200 million of EBITDA at one asset. That's that's some companies that produce that but if you think about.
Speaker Change: The error of uplift in <unk> and the Japanese tourists demand how much is that driving some of that occupancy gain there and do you see more upside there.
Speaker Change: Yeah.
Speaker Change: Another great question, Floris, but let's if we sort of back up for a second look the last two years in Hawaii had been near record performance. We expect this year that that is likely to continue and if you look at pre pandemic the.
Speaker Change: The Japanese travelers accounted for about 18% to 20% of revenue.
Speaker Change: Last year, they were about three 5% of revenue in it look year to date. This year, it's only three 5% of revenue we think it probably gets back to.
Speaker Change: 4% to 5% this year, so huge upside so despite the fact that we don't have the Japanese traveler back.
Speaker Change: We're still generating and part of that is just obviously increased penetration in the U S market, but also in other international markets as well so are.
Speaker Change: We are bullish on Hawaii. The other thing that we would note is it's near impossible to add more supply. So when you think about that backdrop and we're working very hard to add.
Speaker Change: Fifth tower, there, which we think obviously there is huge upside as well now you know we're not done the entitlement process, but certainly very encouraged as we look out.
Speaker Change: Yeah. Thank you for the questions and the observation and your comment about are.
Speaker Change: We generate more EBITDA in Hawaii, when you add both properties then candidly most of our peers.
Speaker Change: It's a startling, but if youre going to bet anywhere we think bed in Hawaii is a solid bid.
Speaker Change: Thanks, Tom.
Speaker Change: Thank you.
Speaker Change: Thank you next question comes from the line of Smedes Rose with Citi Bank. Please go ahead.
Smedes Rose: Hey, Smedes hi.
Smedes Rose: Hi.
Smedes Rose: I mean look you you've talked about this a fair amount, but I just wanted to ask a little bit more because the trends in leisure.
Smedes Rose: I spoken about by the larger branded companies you know it sounds like that kind of keeping the couch. It in terms of expectations over the course of the year.
Smedes Rose: And.
Smedes Rose: It sounds like trends in Hawaii are very strong, but I think I'm correct in thinking that kind of a middle market property kind of a lot of tour and travel maybe a slightly more susceptible consumer and I'm just wondering it sounds like you're not.
Smedes Rose: Might you or have you sort of factored in that.
Smedes Rose: Segment of the market might be a little weaker as we worked through the year or is that already in your expectations or I guess, just maybe a little more color on how you're thinking about leisure trends at this point.
Smedes Rose: Yeah.
Speaker Change: I would say.
Speaker Change: Thinking about the last couple of years and think about this year and what we saw obviously in the first quarter.
Speaker Change: Take Hilton Hawaiian village is a great example of north of 7% and we're probably low to mid single digit we think for probably the balance of the year. One smedes one comment I'd make is this is not a a lower end property. It's nearly 2900 rooms, historically, we were averaging about.
Speaker Change: Mm 150.
Speaker Change: Our mid market.
Speaker Change: Hi, N weddings, it's not ultra luxury certainly no doubt about that but I think that's really part of the appeal and part of the reason that it continues and has done so incredibly well and as we noted near record EBITDA in the last two years, and certainly believe and trending in that direction. This year.
Speaker Change: Some are looking at some of the leisure trends.
Speaker Change: Maui.
Speaker Change: Took an incredible blow it is recovering but at wahoo continues to be really strong and solid.
Speaker Change: To me this is Sean.
Speaker Change: I mean, if you focus on your questions focused on leisure, but also consider that Hawaiian village, especially this year has a good group component with it and the convention calendar and while again not the primary source of demand in the business and the hotel per se in the market, but in the end, it's a strong very strong citywide calendar for her.
Speaker Change: Honolulu in Q3, and if we look at Q2 for our property specifically, we've got some great pace up 50% and in in this quarter in May and 100% in June. So I think we feel that you know while our leisure, it's something very important to the to the comp.
Speaker Change: Plex, we certainly have a different layer and diversified layer in there with group as well.
Speaker Change: Great and can I just ask one more.
Speaker Change: You have the two sort of the Q.
Smedes Rose: Positive impacts in the quarter with the Massachusetts grants and the employment.
Smedes Rose: We found in Hawaii.
Smedes Rose: Would those in your full year guidance initially contemplated.
Smedes Rose: And I think maybe this is more of a comment but I think maybe the reason people are struggling a little bit with the sockets, you know what kind of backing that out.
Speaker Change: And I'm just wondering you know what did you have embedded and maybe are there any other things like that that we should be expecting over the course of the year.
Smedes Rose: Speed. So we had the massive keybanc, yeah, we had the Massachusetts grants in our guidance we booked those in February.
Smedes Rose: But we are we did not have the Hawaii suitor.
Smedes Rose: Reimbursement that occurred in March.
Smedes Rose: Which is about four point something million.
Smedes Rose: So we think about her right. If you think about as we think about the shift smedes sorry to cut you off there, but you think about the shift in EBITDA you know what it ultimately.
Smedes Rose: Honestly includes is the suite, a four and a half and five and change or sell off of.
Speaker Change: Yeah, Okay I, just you know I just.
Speaker Change: Because I think we I mean, even if it was in your full year outlook, we wouldn't necessarily have kind of Maryland that would hit in the first quarter on the Massachusetts things I think people are naturally kind of back that out. So I think that's just kind of maybe what's going on a little bit. Although you know look it was obviously a strong quarter, even taking that stuff out, but it's just kind of a comment.
Speaker Change: It's more of them that's more than a question.
Speaker Change: Thank you.
Speaker Change: Yep.
Speaker Change: Thank you next question comes from the line of Duane <unk> with Evercore.
Duane: Evercore ISI. Please go ahead.
Duane: Hey, Thanks, good morning, good morning.
Duane: Hey, Tom.
Duane: Kim.
Duane: Can you talk a little bit about your Miami renovation plans when we when we last met it sounded like you saw an opportunity to go bigger in that market.
Duane: And maybe the timing is pushing a little bit to the right. Here. So can you just talk a little bit about.
Duane: The analysis and the opportunity you see there.
Speaker Change: Yes, I would liken it in many cases to what we've just done it and the costs are.
Duane: The iconic property its ocean front at South Beach.
Duane: We see a great opportunity to re imagine that iconic asset.
Duane: And if you think about what we're seeing already in Casa.
Duane: Not only is it incredibly well received and throwing out numbers in the second quarter, we expect will be up.
Duane: Yeah.
Duane: I think we May June we're looking at 900% increase in Revpar, but we see that kind of upside with that again, great real estate.
Duane: So we continue to sort of investigated continue to study it.
Duane: Carl Mayfield, who heads our design and construction certainly best in class.
Duane: His team are working hard and working with local architects there and figuring out it's three buildings, it's about 393 rooms approximately.
Duane: Don't have it all scoped out yet, but it's it's something we're really excited about as we look out and if you think about what we just completed.
Duane: And Bonnet Creek, we can't wait to really show the talents of the team and that extraordinary work that was done there and then of course, we continue to invest in Hawaii and as we mentioned in the.
Duane: In the script when you think about just the Tapa tower. There in fact, there were already seeing a $60 increase in average daily rates. So we see considerable upside in Miami. When you look at over the last 20 years would have been the two strongest markets are two of the strongest markets certainly Miami in Hawaii have been too and when you think about the.
Duane: Altria luxury projects that are being contemplated obviously, we're not envisioning the royal Palm would compete at that level, but there is certainly plenty of space right beneath that and our lifestyle hotels that we can really take it to the next level.
Speaker Change: Thanks for that Tom and maybe just for a follow up would love your thoughts on the outlook for New York, It's been a positive surprise a pleasant surprise frac.
Speaker Change: Frankly for a while now we would love to hear your thinking or maybe the you know the balance of the year.
Thomas Jeremiah Baltimore: Well, if you think back for a second and New York was up 30% of Revpar in 2023, we were up 11% in the first quarter.
Thomas Jeremiah Baltimore: I think supply is down about 9% and you're obviously seeing.
Speaker Change: Now there have been no new permits I think issue through the city Council since December of 'twenty, one I think plus or minus.
Speaker Change: And you know Airbnb is finally being regulated so a lot of the illegal hotels are.
Speaker Change: Certainly.
Speaker Change: Not in supply So New York is a is a more compelling market today than it has been.
Speaker Change: And if you look historically look back 10 years plus or minus.
Speaker Change: New York certainly was among among the strongest market. So we're very encouraged and I.
Speaker Change: I would say as you sort of look across the urban portfolio and I think obviously evidenced by by New York, but not just New York Youre seeing markets really broadened and begin to recover which is a good thing and certainly benefiting the park portfolio.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: <unk>.
Speaker Change: Thank you.
Speaker Change: Next question comes from the line of Chris Ranke, but Berkshire Bank. Please go ahead.
Chris Jon Woronka: Yeah, Hey, guys. Good morning, Nice nice corridor.
Chris Jon Woronka: Hmm.
Chris Jon Woronka: Tom.
Chris Jon Woronka: Wanted to drill down a little bit of group. If we could I think you said that your your pace.
Chris Jon Woronka: The second quarter paints up 11%.
Chris Jon Woronka: As you were negotiating some of these new new group contracts, whether it's for the rest of them I assume not a lot to go in 'twenty four but more for 25 and beyond what kind of I guess room rate increase can you still get and also on the on the ancillary rights you mentioned strength in catering banqueting or are you still able to push pushed through.
Chris Jon Woronka: Of inflationary price increases on those.
Chris Jon Woronka: I think the general answer is yes, Chris this is Sean.
Sean Dellorto: As we look at kind of where group pace is to you know as you kind of look to 19 on the right side.
Sean Dellorto: We're about 111% over 19, and as you think about 25 pace, we're actually up another call of 114%.
Speaker Change: So I think which as we as we look out I think we continue to see the ability to kind of roll forward and and.
Speaker Change: Charge groups more I mean, clearly the the operators quickly when does he came out of cobalt the booking things and being happy to do so like kind of 19 rates, but I think quickly realize that a pivot as inflation was it was coming on strong to kind of be more dynamic with with the right pricing and I think we're seeing the benefits of that now as we come through it.
Speaker Change: We're seeing what we saw last year was about 5% to 19 and now we're seeing again 11 for this year and up 14. So I think we are seeing the ability to further drive price.
Speaker Change: With the groups and on top of that the out of room spend has been pretty.
Speaker Change: Pretty robust as well as we noted for Q1.
Speaker Change: We had some 11% banquet and catering and I think we continue to continue to drive that pricing.
Speaker Change: Okay very good thanks, Thanks, Sean.
Speaker Change: Follow up question is kind of on the on the cost side I think margin performance pretty good in the quarter, even if you kind of adjust for the you know the one.
Speaker Change: One time, how much visibility or I guess conviction do you think you have I know labor you have some that are on union contracts, but across the whole portfolio is there anything we have to the unknown for the rest of the year, whether it's our insurance or utilities or anything else.
Speaker Change: I don't think Theres anything unknown clearly people have marked a the the negotiation as you noted on the C. B as in budgets and whatnot planning for things like that so I would say I think potentially.
Speaker Change: Potential upside from reinsurance.
Speaker Change: They did they got some great rate improvements everybody last year with no major loss lease it certainly domestically. So I think that's kind of changed the tables, a little bit in favor of us and the insureds are they kind of have a better renewal of the gears in the last year or so I think that's something that we continue to kind of budget at a higher level right. Then I think well actually actualized I think that could be.
Speaker Change: A positive going forward, we continue to appeal real estate taxes, which are up over 10%. This year forecasted so I think if.
Speaker Change: We can kind of get some are not.
Speaker Change: We're not counting on them, but if we can get some appeal wins there we'll get some benefits on the real estate tax side, but in the end I think we feel good about the cost control of the teams and that you mentioned you're doing a great job working the operators to maintain those and manage those we probably looked around two 5% cost per occupied room across all operating expenses going in and and we achieved.
Speaker Change: Just about over a percent one 5% on that even if you adjust for those one timers. So I think we saw some benefits in Q1, I think we hope to carry that into the.
Speaker Change: The next couple of quarters, I think we will still see some positions being added but you know again as occupancy goes we'll see nominal expense growth and we've certainly said 3% occupancy.
Speaker Change: Growth in Q1, we won't have as much as in Q2, and therefore, we wouldn't expect expenses to grow as much either.
Speaker Change: Okay.
Speaker Change: Helpful. Thanks, guys.
Speaker Change: Yep. Thank you.
Speaker Change: Thank you next question comes from the line of Anthony Powell with <unk>.
Anthony Franklin Powell: Please go ahead.
Anthony Franklin Powell: Hey, Anthony.
Anthony Franklin Powell: Hi, Tom.
Anthony Franklin Powell: I wanted to drill in a bit more on the Capex and ROI projects. It seems like with the Hawaii renovations in Miami you may be at an elevated level in a couple of years should we expect kind of as high $200 million range to be your capex bandwidth for maybe 25 to 26.
Speaker Change: Yeah, I would say historically, Anthony we've been sort of in that 6% range of revenue.
Anthony Franklin Powell: No as we said, we really believe that as we think about capital allocation priorities.
Anthony Franklin Powell: We're still focused on selling noncore and continuing to reshape the portfolio.
Anthony Franklin Powell: Mind listeners that we have to.
Anthony Franklin Powell: Think about since the spin we've sold or disposed of 42 assets just south of $3 billion. So it's a very different portfolio today than it was.
Anthony Franklin Powell: And then our top 25 assets really account for about 90% of the value.
Anthony Franklin Powell: And what we've concluded is it really makes sense to reinvest where we're making money and where there are real competitive advantages. So thinking about Hawaii as an example, Orlando clearly what we're talking about in Miami.
Anthony Franklin Powell: You know.
Anthony Franklin Powell: A little bit of that is sort of catch up to from the pandemic. So I don't know there will be in the $300 million range consistently but $2 60 to $2 <unk>. So would it make sense given the priorities and what we're doing another tower, we went to renovate both at Hilton Hawaiian village and Hilton Hawaiian Aloha and of course another tranche.
Anthony Franklin Powell: Formative project and what we wanted to do in Miami and you can see the early results that we're getting in the customer arena now probably I don't think without question the best asset in key west and really performing accordingly.
Anthony Franklin Powell: Okay.
Speaker Change: Got it thanks, and maybe a follow up on the asset sales what are you seeing in the market right now in terms of just demand for asset pricing and whatnot. Yeah look it's it's it's choppy, we're not a distressed seller Tom <unk>, our chief investment officer and his team are doing a fabulous job.
Anthony Franklin Powell: We're out in discussions and assets at various stages of the marketing process, but you know, we're we're we're going to be disciplined.
Anthony Franklin Powell: I think we've been able to demonstrate again given the track record that I outlined them.
Anthony Franklin Powell: We've been able to sell assets.
Anthony Franklin Powell: Well, we will certainly get some asset sales done this year and we'll use those proceeds to.
Anthony Franklin Powell:
Anthony Franklin Powell: Ah reinvest back in the portfolio pay down debt or depending on where we're trading buyback stock and we bought back obviously 15 million shares last year.
Anthony Franklin Powell: NAV gap remains so wide or widens, we clearly will be buying back stock.
Speaker Change: Thanks Al.
Speaker Change: Alright, thank you.
Speaker Change: Thank you next question comes from the line of David Katz with Jefferies. Please go ahead.
David Brian Katz: Hey, David Good day, everyone. It's almost afternoon.
David Brian Katz: Yeah. Thanks for taking my question.
David Brian Katz: I wanted to just drill down just a little farther on on Hawaii, because the commentary is quite positive.
David Brian Katz: We have heard and seen across our platform.
David Brian Katz: Instances, where inbound travel from Japan to Hawaii has been challenged by currency and cost are you seeing any of that or is it.
David Brian Katz: Just a relatively small piece and the rest of what's going on kind of overshadows. It.
Speaker Change: Yeah, It's a fair point I don't I don't.
Speaker Change: Thank you can deny that.
Speaker Change: The yen has certainly weakened if you think back to 2019 I think it was around 110 two per U S. Dollar.
David Brian Katz: Today, obviously, it's about 155 plus or minus in.
David Brian Katz: And then theres some fuel surcharges. So it's clearly a long gating the recovery of the Japanese traveler.
David Brian Katz: We had about.
David Brian Katz: You think back to pre pandemic is about $1 5 million visitors from Japan.
David Brian Katz: That's been pretty consistent for probably the last 25 years, plus or minus 2023, I think was about 600000, so you're about 65% down.
David Brian Katz: This year forecast is about 852 to 900000.
David Brian Katz: A huge credit to our operators and our asset management team.
David Brian Katz: We've really worked hard to have less reliance on while we're still.
David Brian Katz: A little more efficiently than perhaps so we were able to do in the past and as I noted earlier.
David Brian Katz: Japanese traveler revenue coming from the Japanese travelers only about three 5%.
David Brian Katz: Down from the traditional level of 18% to 20%. So we see that as really a tailwind of future tailwind and continued growth, but despite that we're trending towards perhaps our third record year in a row in terms of overall performance and as you know we are I think last year total EBITDA.
David Brian Katz: Those two assets approaching that.
David Brian Katz: That $240 million to $250 million, so if you're going to bet anywhere we think betting bidding Hawaii is a solid bed and as you know given the constraints on new supply certainly among the lowest if not the lowest in any market.
David Brian Katz: In the U S continental or outside.
David Brian Katz: Understood.
Speaker Change: And just my follow up.
David Brian Katz: Yeah.
Speaker Change: I just wanted to touch on.
David Brian Katz: The cost of labor.
David Brian Katz: Yeah.
David Brian Katz: I hope that feedback as you're coming on my side and you can hear me okay. Yes.
David Brian Katz: Yes.
Speaker Change: We can hear you fine okay, alright, okay, great. So there's been there's obviously been you know over.
Speaker Change: Over the past call. It six months to 12 months a lot of labor Union activity.
Speaker Change: Which I think is sort of irrelevant dynamic.
Speaker Change: Okay.
Speaker Change: Are you expecting or factoring in.
Speaker Change: Further costs.
Speaker Change: As a result of some of what you know at least gives the appearance of being out there.
Speaker Change: Yeah, It's a fair question and as you can appreciate we're not going to negotiate obviously.
Speaker Change: <unk> on the record that line.
Speaker Change: I would just say this that we have.
Speaker Change: We've got about 60% of our business that.
Speaker Change: Or no.
Speaker Change: Certainly.
Speaker Change: Contractually obligated to the CBA, we enjoy very strong relationships.
Speaker Change: We've always been able to work through those obviously, we do that primarily through the operators largely hilton, but not exclusively Hilton.
Speaker Change: And we're confident that in this environment I don't think anybody wants.
Speaker Change: Protracted strikes or our ongoing battles.
Speaker Change: Particularly when our our industry suffered through much of us so much during the pandemic.
Speaker Change: And so and when you think through it.
Speaker Change: We are cautiously optimistic and have we built in some of our cost.
Speaker Change: To account for them.
Speaker Change: For for overall budget as Sean outlined earlier in the earlier question that we got.
Speaker Change: For sure, but we're not overly alarmed David and and I would encourage listeners to not be overly concerned about it.
Speaker Change: I hope you.
Speaker Change: I appreciate the context of the question. Thanks, very much yeah, no no very fair question.
Speaker Change: Okay.
Speaker Change: Thank you next question comes from the line of Stephen Grambling with Morgan Stanley. Please go ahead.
Stephen White Grambling: Hi, Thanks, perhaps as a follow up to pay there is a response to your wrist.
Stephen White Grambling: A question from Anthony.
Stephen White Grambling: Look at it the positioning of the portfolio and take into consideration the upside that you've been seeing from the success of renovations, but also taking into consideration changing demand dynamics does that change how you are evaluating deploying into the portfolio or even redefining core versus noncore assets.
Stephen White Grambling: Yes.
Speaker Change: Great question and the answer is yes.
Speaker Change: We are constantly going through and looking at.
Stephen White Grambling: At the portfolio.
Stephen White Grambling: And we've done that again as I said earlier we've.
Stephen White Grambling: We've sold or disposed of 42 assets in.
Stephen White Grambling: The vast majority of that are noncore, a couple and we were in a minority position had a small joint venture I think about San Diego is an example, where we ended up selling our interest there to to sunstone, we didn't want to be in a 25%.
Stephen White Grambling: Interest.
Stephen White Grambling: But we constantly look at the portfolio and we look at really where we're making money and where we think there is huge upside.
Stephen White Grambling: Obviously, we believe that there is huge upside in Hawaii, and hence the investments that we've made and the others that were contemplating now obviously you feel the same way about key west and we're seeing the results. There. If you think about Orlando Orlando and what we've done there and I think people forget you've got about 45 million visitors into Vegas.
Stephen White Grambling: Obviously, you've got the entertainment and gaming piece, but you actually have 75 million visitors into Orlando.
Stephen White Grambling: You've got the epic Universal.
Stephen White Grambling: $5 billion hundreds of acres in a new park opening next year, you've got Disney coming out now and talking about 60 billion that theyre looking to invest over the next 10 years, when we see all of that or real tailwind and real benefit plus you've got a.
Stephen White Grambling: Top five top seven convention center in Orlando as well, so we use those markets as examples where we're certainly.
Stephen White Grambling: Investing in assets that we own and you know and we're not looking to add new assets necessarily in those markets.
Stephen White Grambling: We're certainly investing in the ones that we have and we see considerable upside in <unk>.
Stephen White Grambling: Pair that too.
Stephen White Grambling: Paying a 15 times multiple for an asset versus investing in our portfolio, where we can generate mid teens unlevered returns and where we're trading at a at a sub 10 EBITDA multiple I mean that the <unk>.
Stephen White Grambling: Math is pretty simple and we think the benefit to shareholders.
Stephen White Grambling: Is.
Stephen White Grambling: A pretty strong in.
Stephen White Grambling: And we will continue to use that kind of disciplined thought process as we move forward.
Stephen White Grambling: Yeah.
Speaker Change: Maybe as an unrelated follow up it seems like there's a lot of concern around the leisure consumer and you touched on this a bunch, but maybe to ask the question a different way what are the things that you would be looking out for to try to assess whether there is.
Speaker Change: You know some underlying pressure or deterioration in the leisure consumer in particular.
Speaker Change: Yeah, I think you can't look at a one size fits all Steven I think if you. If there is no doubt that those at the lower end of the socioeconomic.
Speaker Change: A framework are struggling the most and youre seeing it you're seeing it in all the credit metrics youre seeing it in their spending patterns.
Speaker Change: But as you think about.
Speaker Change: Our customer base.
Speaker Change: The upper upper.
Speaker Change: For a middle class.
Speaker Change: More affluent incomes over 150000 plus or minus.
Speaker Change: That consumer is still resilient and.
Speaker Change: Another stat to look at is look at the personal savings I mean, I think last quarter. It was about 775 million I think this quarter, it's down to about 600.
Speaker Change: $70 million plus or minus in.
Speaker Change: About three 2% of disposable income so the consumer is still healthy.
Speaker Change: So when we look out from that standpoint.
Speaker Change: And think about as we think about demand patterns and our.
Speaker Change: Our guidance is we think Florida.
Speaker Change: Five 5% I mean, we're not we're not we're not seeing softening you see pockets of it obviously April is down for us, but again, we believe that's our softest month of the year.
Speaker Change: <unk> got the holiday shift you've got obviously slower group you've got transient was less in April, but we see reacceleration as we look out in both May and June and its and its pretty significant and so I think the.
Speaker Change: The worries if you will on the.
Speaker Change: Leisure front I think are a bit over.
Speaker Change: Overdone, we were never going to trees don't grow to the sky and so when you saw the kind of growth that some of our peers had those had to normalize.
Speaker Change: We didn't see that because in many respects, we didn't have that type of product.
Speaker Change: But we're seeing lift.
Speaker Change: And we're seeing it again in the urban areas, we're seeing it through the group, we're seeing a broadening and embedded in that are levered leisure trips as well a lot of people go into New York not all are going for business.
Speaker Change: Many of those are also going for leisure.
Speaker Change: As part of that trip.
Speaker Change: Yeah.
Speaker Change: Really appreciate the insight.
Speaker Change: No I appreciate.
Speaker Change: Good question. Thanks.
Speaker Change: Thank you next question comes from the line of Bill Crow with Raymond James. Please go ahead.
William Andrew Crow: Hey, good morning.
William Andrew Crow: So Sean.
William Andrew Crow: One of your peers express some caution over June you.
William Andrew Crow: You did that.
William Andrew Crow: And I'm wondering if given the importance of leisure demand in that months and the important importance of the month relative to the entire quarter, especially with a weak April.
William Andrew Crow: As June maybe the biggest pivot point on your ability to achieve guidance for the year or is that really the month, we need to kind of focus on them.
Speaker Change: Yeah, It's a great question.
Bill: Bill a couple of things when you look at our kind of our mix if you will.
Bill: First quarter, we had obviously group up about <unk> 15, 4% as we reported.
Bill: We're trending at about 7%.
William Andrew Crow: In second quarter.
William Andrew Crow: Also tough comps, but if you think about third quarter.
William Andrew Crow: Probably 16% to 18% so third quarter is really strong for us, but as you unpack kind of May and June we're seeing revpar, probably in the 5% to 6% range.
William Andrew Crow: And then I gave some stats earlier, where you've got Seattle and D. C. Boston all high single digits or mid mid double digits in the case of Seattle.
William Andrew Crow: And then group pace.
William Andrew Crow: For just May and June alone I think is around 9%. So to your point that really gives us a tailwind.
William Andrew Crow: And that re acceleration so that answers your question.
William Andrew Crow: April was sort of at the bottom of the barrel. If you will for us as we sort of looked at and saw our demand patterns, but.
William Andrew Crow: Very encouraged as we as we look out.
Speaker Change: Yes, I appreciate that.
Speaker Change: Follow up question actually for Sean Congratulations on the improvement in the balance sheet I'm just curious you're at five two right now net debt to EBITDA as you think of the Capex projects that the tower that you want to build in Hawaii.
Sean Dellorto: Everything else going on is it alert likely that we're gonna be funding the additional capital with asset sales is that is that kind of the path that we're still at this point.
Sean Dellorto: I think thats certainly part of it Bill near term as we as we certainly continue to explore that the noncore asset sales and we're focused that way and redeploying that capital you between between the balance sheet and the ROI projects I think that's a fair.
Sean Dellorto: Assessment and in the near term.
Sean Dellorto: The tower, we're working through to get the entitlements and everything else.
Sean Dellorto: It's still a ways away from seeing any shovels in the ground, but that's I think for a future discussion as to kind of how we capitalize that.
William Andrew Crow: It sounds like any any acquisitions are.
William Andrew Crow: Probably a ways away at this point.
William Andrew Crow: Yeah.
Thomas Jeremiah Baltimore: Tom here.
Thomas Jeremiah Baltimore: I would not say a ways away I just think.
Thomas Jeremiah Baltimore: As we as we look at the playing field and I think the comment I made earlier are we.
Thomas Jeremiah Baltimore: We think reinvesting in our portfolio, where we can generate unlevered.
Thomas Jeremiah Baltimore: Mid teens returns investing in AR and a great portfolio versus buying something at 15 times is really just.
William Andrew Crow: It's a better way to create value for shareholders.
William Andrew Crow: We are focused on continuing to reshape the portfolio and sell noncore in and reinvest take that cash pay down debt reinvest back in the portfolio buy back shares.
William Andrew Crow: There's also a better alternative to that.
William Andrew Crow: And going out and buying assets. So we continue to underwrite look.
William Andrew Crow: Tom more and the team are.
William Andrew Crow: Underwriting occasionally bidding.
William Andrew Crow: But it's also got to make economic sense, and it's got to be accretive.
William Andrew Crow: We don't we just don't think that.
William Andrew Crow: We've seen some of our peers do it and pay up for some of the luxury assets and.
Speaker Change: I can't see one that's worked out so well as my view Bill.
Speaker Change: I appreciate the time thank you.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Thank you next question comes from the line of Dori Kesten Wells Fargo. Please go ahead.
Dori Lynn Kesten: Hi, Thanks.
Speaker Change: Good.
Dori Lynn Kesten: The European Union.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Is it fair to say the phase one renovation tailwind in.
Speaker Change: Hawaii should offset the phase two headwinds.
Speaker Change: Next year, and then I guess, if we just put the two projects.
Speaker Change: I forget what the EBITDA growth that you underwrite them.
Speaker Change: Stabilization.
Speaker Change: So dori I would say the first part yes.
Speaker Change: We saw like Tapa tower, we did a three phased renovation and as we've delivered the newly renovated rooms, we're able to get premium.
Speaker Change: Right on that so as you think about you know Rainbow tower, especially as the big driver right Ravi.
Speaker Change: We're obviously right there on the on the beach, it's highly sought after so to start out with the phase one and take some of the rooms off aligned to renovate them I think will have the biggest disruption this year than it did come through next year and a half have renovated rooms, we can charge a higher premium and then take the others offline I think that I think that kind of talks about what youre thinking right now on that.
Speaker Change: I wouldn't say I'm not at this point relate to kind of looking to.
Speaker Change: You have any kind of pure EBITDA numbers to.
Speaker Change: That I mean, we talked about disruption being about $8 million for this.
Speaker Change: Renovation phase again, we pick probably expect that certainly would be less next year as we as I discussed, but as you kind of look to recover I would certainly think that we beginning a premium and I wouldn't say that we underwrote any kind of ROI type IRR, but we certainly expect a decent return on it just a rooms renovation.
Speaker Change: Okay. Thanks.
Speaker Change: We will see you guys next week.
Speaker Change: Okay.
Speaker Change: Thanks.
Speaker Change: Thank you next question comes from the line of Jay Kornreich.
Jay Bradley Kornreich: Wedbush Securities. Please go ahead.
Jay Bradley Kornreich: Alright, thanks very much for taking the question I guess just one question for me just going back to the urban segment, which saw Revpar improvement of 8% in the quarter.
Jay Bradley Kornreich: Yet occupancy is still set at 63%. It's I'm wondering how does that compare to I guess, the first quarter of <unk> 19 for the comparable portfolio and what are the goalposts.
Jay Bradley Kornreich: Perfect occupancy getting to as the year progresses with maybe also is there any opportunity to see upside from pushing rate there as well.
Speaker Change: Sorry, you were breaking up a little bit there so.
Speaker Change: So if you could kind of repeat six just a brief briefly kind of what you're trying to.
Speaker Change: Yes.
Speaker Change: Yeah sure.
Speaker Change: On Oh.
Speaker Change: Urban occupancy upside in the first quarter.
Speaker Change: Urban Revpar grew 8% yet urban occupancy still sits at 63%. So just curious as to how much urban occupancy upside you see in 2024, and if there is additional opportunity to push rate on the urban markets as well.
Speaker Change: Yes.
Speaker Change: I think if you think about just 19 for a second and kind of how we're performing occupancy overall portfolio is still about 500 basis points below 19.
Speaker Change: But ADR is about 15% over.
Speaker Change: So we look theres still an opportunity to drive more occupancy.
Speaker Change: Out of the team and the fact that we've been disciplined from a pricing standpoint.
Speaker Change: But there is there is definitely upside.
Speaker Change: On the occupancy front, obviously some markets I believe we're going to ask.
Speaker Change: Accelerated faster than others I think New York is an example, where we've seen that really take off and part of that is given the fact that you've got better regulation.
Speaker Change: And obviously supply taken out.
Speaker Change: There'll be other markets that will be a little slower to recover.
Speaker Change: For for a whole host of reasons, but we.
Speaker Change: We haven't given up some perhaps some have abandoned certain markets I think New York is a great example.
Speaker Change: It's not back fully to where it was but it certainly is approaching and more compelling market today than it has been certainly over the last several years.
Speaker Change: So we use that obviously Chicago is having a great year citywide at or near record.
Speaker Change: New Orleans continues to be solid and saw the first quarter and what were another another good year citywide Boston D C.
Speaker Change: Certainly improving there are other challenging markets out there Seattle should have a very strong second quarter.
Speaker Change: But there are other markets out there that continue to remain challenged town la San Francisco or two that will lag and probably lag for some time.
Speaker Change: Okay. That's it for me thanks, very much for the color Okay alright. Thanks.
Speaker Change: Thank you next question comes from the line of Ryan Lambert.
Ryan Lambert: J P. Morgan. Please go ahead.
Ryan Lambert: Hi, Good afternoon, Ryan on for Joe Greff, just kind of wanted to frame occupancy.
Ryan Lambert: Yes. Thanks, just wanted to frame the occupancy question, a little bit differently, when you kind of look across industry.
Ryan Lambert: Segments, whether it's manufacturing or tech or consulting.
Ryan Lambert: Yeah.
Ryan Lambert: Do you have any sort of color there on how those are recovering and how meaningful those are for you guys to kind of make a full occupancy recovery.
Ryan Lambert: I mean, I think ultimately as you think about those kinds of groups Youre kind of.
Ryan Lambert: Aligning with corporate negotiated type of demand and that certainly would've been.
Ryan Lambert: From the business transient and that's certainly been a laggard as you think about relative to <unk> 19.
Ryan Lambert: I'd say on the demand side.
Ryan Lambert: Oxford related we're still down call it 35, 40%.
Ryan Lambert: Is that in that specific sub segment of business transient.
Ryan Lambert: We are seeing improvement in that and we've seen some of that demand come back in the business transient side overall, we were.
Ryan Lambert: I think outperformed our expectations for the first quarter were up 13000 room nights about 3% and that was across the board inclusive, including corporate negotiated as well as local negotiated in government. So we are seeing that kind of trickle back still.
Ryan Lambert: And I think it's certainly a good sign as we kind of look to Q2 into Q3.
Ryan Lambert: But it's I think there's certainly a ways to go there and we certainly know professional services Deloitte to the world Pwc in the Lake.
Ryan Lambert: Or ultimately traveling less and probably will be for the foreseeable future remote remote work and return to office is has been coming back a little bit slowly to and ultimately helped the business transient, but I would say that in the end, we don't expect that to really fully recover that said at this at this point that corporate negotiated segment is really about call. It five per.
Ryan Lambert: <unk> overall demand historically so.
Ryan Lambert: If it ultimately gets back to 80% of it was I wouldn't say, it's a it's a big drag on the overall portfolio I think we'll overcome that with other aspects of whether it's leisure or group.
Speaker Change: Thanks, that's helpful and following up on sort of the capital markets discussion from earlier.
Ryan Lambert: You know in the past.
Ryan Lambert: Maybe we've kind of heard.
Ryan Lambert: Management teams across the industry, you're talking about the difference between large and small assets and wondering with what youre seeing in the rate environment right now if that differences.
Ryan Lambert: Starting to be less meaningful areas. If that's all at all changed in your view.
Ryan Lambert: Thanks.
Ryan Lambert: Yeah.
Speaker Change: I think it depends on the individual market right, if you're in a market like key west.
Ryan Lambert: Were you already supply constrained and in our case, we've and we've got costs. As an example, 311 rooms I mean, we're driving as strong a rate as anyone there might be hotels that are little smaller of many that are larger.
Ryan Lambert: You know as you think about other markets New York is and we've got obviously, a larger box, but if you've got.
Ryan Lambert: The right demand supply balance and you've got demand generators and a tailwind.
Ryan Lambert: And you've got multiple sources of demand maybe youre anchored with group and then you can layer in your transient business more efficiently.
Ryan Lambert: I think the thesis that.
Ryan Lambert: And you're always that a smaller hotel is always going to be more and more efficient.
Ryan Lambert: In theory.
Ryan Lambert: You would you would think that smaller hotel has more pricing integrity.
Ryan Lambert: But.
Ryan Lambert: Yeah.
Ryan Lambert: Yeah.
Ryan Lambert: Not it's not a perfect story.
Ryan Lambert: And I think that we've demonstrated throughout our portfolio and if you think about Hilton Hawaiian village.
Ryan Lambert: Where you've got 2900 rooms, and we run north of high Eighty's to 90% occupancy.
Ryan Lambert: We can yield additional sources of revenue.
Ryan Lambert: It's done quite well for us and you're generating significant cash as a result of that so.
Speaker Change: It's a really good question, but I think.
Speaker Change: It really depends on the facts and circumstances those that argue that.
Speaker Change: The smaller hotels.
Speaker Change: The only way to invest I would I would vehemently dispute that and love to engage in a dialogue about that.
Speaker Change: Okay.
Speaker Change: Okay.
Mr Lambert: Mr Lambert.
Mr Lambert: Are there any questions.
Speaker Change: No that's great. Thank you.
Mr Lambert: Okay. Thank you. Thank you.
Mr Lambert: Yeah.
Mr Lambert: Yeah.
Speaker Change: Thank you there are no further questions at this time I would like to.
Speaker Change: We have one more question from do you want to take it.
Speaker Change: Sure sure.
Speaker Change: Alright. This question comes from the line of Robin Farley with UBS. Please go ahead.
Robin Margaret Farley: Great. Thanks.
Robin Margaret Farley: Hopefully this wasn't already Mike.
Robin Margaret Farley: How are you my line got dropped three times during this call. So I think you already answered my question about what was included in your original EBITDA guidance.
Robin Margaret Farley: Just two other things one.
Robin Margaret Farley: One is can you clarify that it is there anything at all in your Capex budget right now for Miami.
Robin Margaret Farley: Or would that not be anything in 2020 for any spend on that.
Robin Margaret Farley: So you mentioned you expect some asset sales.
Robin Margaret Farley: To be done this year is terrace particular interest rate scenario.
Robin Margaret Farley: Net debt that you need for that catheter that you would need what are your expectations to be Matt. Thanks.
Robin Margaret Farley: Yes.
Matt: Pre development cost on Miami as you would imagine architects engineers other.
Matt: Selling design work, so theres work like that but I would say not significant dollars being spent this year and 24.
Robin Margaret Farley: Regarding asset sales we've sold in an all all conditions I think back to the pandemic.
Robin Margaret Farley: We sold two assets in early San Francisco at record pricing in the middle of the pandemic. So.
Robin Margaret Farley: We're not a distressed seller, we've set a target of at least $100 million in asset sales this year.
Robin Margaret Farley: We're confident that we'll achieve that we will be thoughtful about it.
Speaker Change: Clearly.
Speaker Change: Uncertainty is the enemy of sort of decision, making and for.
Speaker Change: For both buyer and seller until the fed sort of.
Speaker Change: It makes its final decision, we think we all want to believe that the tightening cycle is over and at some point down the fed will begin to lower rates.
Speaker Change: That certainly will help the debt the debt markets, but I think there's so much liquidity out there that.
Speaker Change: Youll start to see I think more activity here in the second half of the year.
Speaker Change: Transaction side.
Speaker Change: Okay, great. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: There are no further questions at this time I would like to turn the floor over to Tom Baltimore for closing comments.
Operator: Operator, Thank you and thank you for your help today.
Thomas Jeremiah Baltimore: Look forward to seeing many of you next week and also at <unk>.
Thomas Jeremiah Baltimore: <unk> REIT and safe travels.
Thomas Jeremiah Baltimore: Thank you.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: [music].