Q1 2024 Braemar Hotels & Resorts Inc Earnings Call

Operator: Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Braemar Hotels and Resorts, Inc. first quarter 2024 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press

Hello, and thank you for standing by my name is Regina and I will be your conference operator today at this time I would like to welcome everyone to the Braemar hotels <unk> Resorts, Inc. First quarter 'twenty 'twenty four results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a.

Operator: Question and answer session. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad simply press star one again, if you'd like to withdraw your question I would now like to turn the conference over to Jordan Jennings Director of Investor Relations. Please go ahead.

Operator: Good morning and welcome to today's call to review results for Braemar Hotels and Resorts for the first quarter of 2024 and to update you on recent developments. On the call today will be Richard Stockton, President and Chief Executive Officer, Deric Eubanks, Chief Financial Officer, and Chris Nixon, Executive Vice President and Head of Asset Management.

Operator: Good morning, and welcome to today's call to review results for Braemar hotels, <unk> resorts first quarter 2024 and to update you on recent developments on the call today will be Richard Stockton, President and Chief Executive Officer, Derek Eubanks, Chief Financial Officer, and Chris Nicholson Executive Vice President and head of asset management as a result of all of them.

Operator: The results, as well as notice of accessibility of this conference call on a listen-only basis over the Internet, were distributed yesterday in impressive numbers. At this time, let me remind you that certain statements and assumptions in this conference call contain or are based upon forward-looking information and are being made pursuant to the safe harbor provisions of the Federal Securities Regulations. Such forward-looking statements are subject to numerous assumptions, uncertainties, and known or unknown risks which could cause actual results to differ materially from those anticipated. These factors are more fully discussed in the accompanying files of the Securities and Exchange Commission.

Operator: Notice of accessibility of this conference call when I listen only basis over the Internet or did you read yesterday in our press release.

Operator: At this time, let me remind you that certain statements and assumptions in this conference call contain or are based upon forward looking information and are being made pursuant to the safe Harbor provisions of the federal Securities regulation.

Operator: Such forward looking statements are subject to numerous assumptions, uncertainties and known or unknown risks, which could cause actual results to differ materially from those anticipated.

Operator: As more fully discussed in the company's filings with the Securities and Exchange Commission before looking statements included in this call are only made as of the date of this call and the company is obligated to publicly update or revise the.

Operator: The forward-looking statements included in this call are only made as of the date of this call, and the company is not obligated to publicly update or revise them. Statements made during this call do not constitute an offer to sell or solicitation of an offer to buy any security. Securities will only be offered by means of a registration statement and prospectus, which can be found at www.sec.gov. In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in the company's earnings release and in company tables or schedules, which will be filed in Form 8K with the SEC on May 8, 2024.

Operator: Statements made during this call do not constitute.

Operator: Cost of an offer to sell or certification of an offer to buy any securities.

Operator: Basal only.

Operator: I'll start by means of a registration statement and prospectus, which can be found at www SEC Gov.

Operator: In addition, certain terms using our call are non-GAAP financial measures reconciliations of which are provided in the company's earnings release and accompanying tables or schedules, which have been filed on form 8-K with the SEC on May eight 2024 may also be accessed to the company's website at www Dot BH Army dotcom equally.

Operator: It may also be accessed through the company's website at www.bhre.com. Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release. Also, unless otherwise stated, all reported results discussed in this call compare the first quarter ended March 31st, 2024 with the first quarter ended March 31st, 2023. I will now turn the call over to Richard Stockton. Please go ahead, Richard. Good morning.

Richard J. Stockton: And I was encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release.

Operator: Also unless otherwise stated all reported results discussed in this call compare the first quarter ended March 31, 2024 with the first quarter ended March 31, 2023, I will now turn the call over to Richard Stockton. Please go ahead Mr.

Richard J. Stockton: Good morning, and welcome to our 2024 First Quarter Earnings Conference Call. I'll begin today's call by providing an overview of our business, an update on our portfolio, and our recently announced plans to create additional shareholder value. Then Deric will provide a review of our financial results, and Chris will provide an update on our asset management activity. Afterwards, we'll open the call for Q&A.

Richard J. Stockton: Good morning, and welcome to our 2024 first quarter earnings Conference call I'll begin today's call by providing an overview of our business and update on our portfolio and our recently announced plans to create additional shareholder value.

Richard J. Stockton: Then Derek will provide a review of our financial results and Chris will provide an update on our asset management activity.

Richard J. Stockton: Afterwards, we will open the call for Q&A.

Richard J. Stockton: We have several key themes for today's call. First, we're pleased to report that while our overall RevPAR performance for the quarter was essentially equivalent to last year, our luxury resort portfolio had positive RevPAR growth in the first quarter. Second, our last two acquisitions, the Ritz-Carlton Reserve in Dorado Beach and the Four Seasons Resort Scottsdale at Troon North, are each performing well and continue to exceed our original underwriting. Third, as we continue to diligently work through our refinancing program, we have refinanced, extended or paid down almost all of our 2024 debt maturities.

Richard J. Stockton: We have several key themes for today's call first we're pleased to report that while our overall revpar performance for the quarter was essentially equivalent to last year, our luxury resort portfolio had positive revpar growth in the first quarter.

Richard J. Stockton: Second our last two acquisitions, the Ritz Carlton reserved or out of each of the four seasons resort Scottsdale, a true north are each performing well continue to exceed our original underwriting.

Richard J. Stockton: Third as we continue to diligently work through our refinancing program, we have refinanced extended or paid down almost all of our 2024 debt maturities.

Richard J. Stockton: And fourth, we are excited to have announced a shareholder value creation plan that comprises selling select assets in order to repurchase common and preferred shares to improve our capital structure and opportunistically bridge the gap between our share price and net asset value per share. Now, let me first turn to our results.

Richard J. Stockton: And fourth we're.

Richard J. Stockton: I need to have announced a shareholder value creation plan.

Richard J. Stockton: Which comprises selling select assets in order to repurchase common and preferred shares to improve our capital structure and opportunistically arbitrage the gap between our share price and net asset value per share.

Richard J. Stockton: Let me first turn to our results.

Richard J. Stockton: We're pleased with our portfolio's first quarter performance. In light of challenging year-over-year comparisons at our Four Seasons Resort Scottsdale, which benefited from demand related to the Super Bowl and the Phoenix Open occurring in the same week last year, we reported comparable REV PAR of $368, which was essentially equivalent to the prior year quarter, and hotel EBITDA of $71 million.

Richard J. Stockton: We're pleased with our portfolio's first quarter performance in light of challenging year over year comparisons at our four seasons resort Scottsdale, which benefited from demand related to the Super Bowl and the Phoenix open occurring in the same week last year.

Richard J. Stockton: We reported comparable revpar of $368, which was essentially equivalent to the prior year quarter and hotel EBITDA of $71 million.

Richard J. Stockton: We are very encouraged by the overall performance of our Luxury Resort Portfolio, which posted positive year-over-year growth in both Threat Par and Hotel Ibida. Taking a closer look at our luxury portfolio, many of our hotels are well-located in attractive high-barrier-to-entry leisure markets. Ten of our sixteen hotels are considered resort destinations.

Richard J. Stockton: We're very encouraged by the overall performance of our luxury resort portfolio, which posted positive year over year growth in both Revpar and hotel EBITDA.

Richard J. Stockton: Taking a closer look at our luxury portfolio. Many of our hotels are well located in attractive high barrier to entry leisure markets 10 of our 16 hotels are considered resort destinations.

Richard J. Stockton: And this luxury resort portfolio continues to deliver strong performance with combined hotel revenue of $65 million during the quarter. Regarding our urban assets, Red Power for the quarter was down slightly, and Hotel Libidab was significantly impacted by a $2.2 million property tax refund in the prior year quarter at the Sofitel Chicago, which made for a challenging comparison. Looking ahead, we remain very encouraged by the continued momentum for this segment of our portfolio.

Richard J. Stockton: And this luxury resort portfolio continues to deliver strong performance with combined hotel EBITDA of $65 million during the quarter.

Richard J. Stockton: Regarding our urban assets Revpar for the quarter was down slightly in hotel EBITDA was significantly impacted by a $2 $2 million property tax refund in the prior year quarter at the Sofitel, Chicago, which made for a challenging comparison.

Richard J. Stockton: Looking ahead, we remain very encouraged by the continued momentum for this segment of our portfolio.

Richard J. Stockton: Next, our last acquisition, the Four Seasons Resort Scottsdale True North, continues to exceed our expectations and is a great addition to our portfolio. It was acquired in December 2022 and fits perfectly with our strategy of owning high-reputation luxury hotels and resorts. It delivered a strong first quarter performance, with hotel EBITDA up almost $800,000, despite rep part being down 1.4% due to difficult same-quarter comps from last year. The property team did a fantastic job of securing group business with significant food and beverage revenue for the property during the quarter.

Richard J. Stockton: Next our last acquisition the four seasons resort Scottsdale at true North continues to exceed our expectations.

Richard J. Stockton: In addition to our portfolio. It was acquired in December 2022, and fits perfectly with our strategy of owning high revpar luxury hotels and resorts.

Richard J. Stockton: They delivered a strong first quarter performance with hotel EBITDA up almost $800000, despite revpar being down one 4% due to difficult same quarter comps from last year.

Richard J. Stockton: The team did a fantastic job of securing group business with significant food and beverage revenue for the property during the quarter.

Richard J. Stockton: We continue to be very excited about the prospects for this hotel. Braemar's other 2022 acquisition, the Ritz Carlton Reserve Dorado Beach, also continues to perform very well. For the first quarter, REVPAR for this iconic luxury asset was $2,162 based on 65% occupancy and an ADR of $3,302. This red bar result reflected growth of 23.4% over the prior year quarter.

Richard J. Stockton: We continue to be very excited about the prospects for this hotel.

Richard J. Stockton: Braemar as other 2022 acquisition the Ritz Carlton Reserve Dorado Beach also continues to perform very well for the first quarter Revpar for this iconic luxury asset was $2162 based on 65% occupancy and an ADR of $3302. This rep.

Richard J. Stockton: A result reflected growth of 23, 4% over the prior year quarter.

Richard J. Stockton: Over the trailing 12 months, the Ritz-Carlton Reserve Dorado Beach achieved a 10.7% yield on cost, while the Four Seasons Scottsdale achieved a 7.6% yield on cost. These luxury assets both outpaced our underwriting, and looking ahead to the next several quarters, we remain very encouraged about the prospects for these well-positioned properties. Looking at Braemar's capital position,

Richard J. Stockton: Over the trailing 12 months, the Ritz Carlton Reserve Dorado Beach achieved a 10, 7% yield on cost while unfortunate and Scottsdale achieved a seven 6% yield on cost these luxury assets at both outpaced our underwriting and looking ahead to the next several quarters. We remain very encouraged about the prospects for these well positioned properties.

Richard J. Stockton: Looking at frameworks capital position.

Richard J. Stockton: We continue to emphasize balance sheet flexibility. During the first quarter and subsequent to quarter end, we refinanced, extended, or paid off almost all of our 2024 debt maturity. Deric will discuss these in more detail momentarily, but taking a quick look, we recently paid off the loan secured by the Cameo Beverly Hills. We extended the loan secured by the Pier House Resort and Spa. And we also extended the loan secured by the Ritz-Carlton St. Thomas.

Richard J. Stockton: And we continue to emphasize balance sheet flexibility.

Richard J. Stockton: During the first quarter and subsequent to year end to.

Richard J. Stockton: At quarter end, we refinanced extended or paid off almost all of our 2024 debt maturities Derek.

Richard J. Stockton: Eric will discuss these in more detail momentarily, but taking a quick look we recently paid off the loan secured by the cameo Beverly Hills, we extended the loan secured by the Pier House resort and Spa.

Richard J. Stockton: And we also extended the loan secured by the Ritz Carlton St. Thomas <unk>.

Richard J. Stockton: Additionally, after refinancing the Capital Hilton, the Hilton La Jolla Torrey Pines remains encumbered by the original mortgage loan, which has now been paid down to a remaining balance of $66.6 million. With the recently announced sale of the property, which we will discuss in greater detail, we will extinguish the last of our 2024 debt maturity. During the quarter, we also closed on a property-level mortgage financing for the 96-room Ritz-Carlton Reserve Dorado Beach in Puerto Rico.

Richard J. Stockton: Additionally, after refinancing the capital Hilton the Hilton La Jolla, Torrey Pines remains encumbered by the original mortgage loan, which now has been paid down to a remaining balance of $66 $6 million with the recently announced sale of the property, which we will discuss in greater detail, we will extinguish the last of our 2024 debt maturities.

Richard J. Stockton: During the quarter. We also closed on a property level mortgage financing for the 96 room Ritz Carlton reserved Dorado Beach in Puerto Rico.

Richard J. Stockton: Earlier this week, we announced a shareholder value creation plan that has four components. They are one, the plant sale of the Hilton La Jolla Torrey Pines and possibly two other hotels between this year and next. Two, the repayment of our remaining 2024 debt maturities, and three, a $50 million Preferred Share Redemption Program. And four, a $50 million Common Share Buyback Authorization. Regarding the sale of the Hilton La Jolla Torrey Pines, the company has entered into a definitive agreement to sell the hotel for $165 million.

Richard J. Stockton: Earlier this week, we announced the shareholder value creation plan, which has four components. They are one the planned sale of the Hilton La Jolla, Torrey Pines, and possibly two other hotels between this year and next to the repayment of our remaining 2024 debt maturities three a $50 million preferred share redemption.

Richard J. Stockton: Program and for a $50 million common share buyback authorization.

Richard J. Stockton: Regarding the sale of the Hilton La Jolla, Torrey Pines. The company has entered into a definitive agreement to sell the hotel for $165 million. We have received a $6 million of hard deposit, which is nonrefundable other than being subject to a ground lessor consent that has to be provided by the city of San Diego within the next several weeks.

Richard J. Stockton: We have received a $6 million hard deposit, which is not refundable other than being subject to a groundless or a consent that is to be provided by the City of San Diego within the next several weeks. Inclusive of planned capital expenditures, the sales price equates to a trailing 12-month NOI capitalization rate of 7.2%. We expect the sale to be completed by the end of August at the latest. We believe these announcements reflect our commitment to maximize value for our shareholders and look forward to providing more updates in the coming weeks and months as we work through our plan.

Richard J. Stockton: Inclusive of planned capital expenditures the sales price equates to a trailing 12 month NOI capitalization rate of seven 2%.

Richard J. Stockton: We expect the sale to be completed by the end of August at the latest.

Richard J. Stockton: We believe these announcements reflect our commitment to maximize value for our shareholders and look forward to providing more updates in the coming weeks and months as we work through our plan.

Richard J. Stockton: In summary, Braemar has a unique, well-positioned portfolio and a solid liquidity position. As we look ahead to the remainder of 2024, we believe Braemar is on firm footing to perform well in both the near and long term.

Richard J. Stockton: In summary framework has a unique well positioned portfolio and our solid liquidity position as we look ahead to the remainder of 2024, we believe braemar is on firm footing performed well in both the near and long term.

Richard J. Stockton: I'll now turn the call over to Derek to take you through our financials in more detail.

Deric S. Eubanks: Thanks Richard. For the quarter, we reported net income attributable to common stockholders of $3.5 million, or $0.05 per diluted share, and AFFO per diluted share of $0.42. Adjusted EBITDA R.E. for the quarter was $66.2 million. At quarter end, we had total assets of $2.3 billion. We had $1.2 billion of loans, of which $44 million related to our joint venture partner's share of the loans on the capital of Hilton and Hilton La Jolla Torrey Pines.

Speaker Change: Thanks, Richard for the quarter, we reported net income attributable to common stockholders of $3 5 million or <unk> <unk> per diluted share and <unk> per diluted share of <unk> 42.

Deric S. Eubanks: Adjusted EBITDA for the quarter was $66 2 million.

Deric S. Eubanks: At quarter end, we had total assets of $2 $3 billion, we had $1 2 billion of loans of which $44 million related to our joint venture partner share of the loans on the capital Hilton and Hilton La Jolla, Torrey Pines, our total combined.

Deric S. Eubanks: Our total combined loans are at a blended average interest rate of 7.8%, taking into account in-the-money interest rate caps. Based on the current level of SOFR and our corresponding interest rate caps, approximately 77% of our debt is effectively fixed, and approximately 23% is effectively floating. As of the end of the first quarter, we had approximately 39.6% net debt to gross assets. We ended the quarter with cash and cash equivalents of $137.1 million, and restricted cash of $82.4 million. The vast majority of that restricted cash is comprised of lender and manager-held reserve accounts.

Deric S. Eubanks: Buying loans had a blended average interest rate of seven 8% taking into account in the money interest rate caps.

Deric S. Eubanks: Based on the current level of sulfur and our first bonding interest rate caps approximately 77% of our debt is effectively fixed at approximately 23% is effectively floating.

Deric S. Eubanks: As of the end of the first quarter, we had approximately 39, 6% net debt to gross assets.

Deric S. Eubanks: We ended the quarter with cash and cash equivalents of $137 1 million and restricted cash of $82 $4 million.

Deric S. Eubanks: The vast majority of that restricted cash is comprised of lender and manager held reserve accounts.

Deric S. Eubanks: At the end of the quarter, we also had $23.8 million due from third-party hotel managers. This primarily represents cash held by one of our brand managers, which is also available to fund hotel operating costs. With regard to dividends, we again announced a quarterly common stock dividend of $0.05 per share, or $0.20 per diluted share on an annualized basis. This equates to an annual yield of approximately 7.7% based on yesterday's stock price.

Deric S. Eubanks: At the end of the quarter, we also had $23 $8 million due from third party hotel managers. This primarily represents cash held by one of our brand managers, which is also available to fund hotel operating costs.

Deric S. Eubanks: With regards to dividends, we again announced a quarterly common stock dividend of <unk> <unk> per share or <unk> 20 per diluted share on an annualized basis. This equates to an annual yield of approximately seven 7% based on yesterday's stock price. Our board of Directors will review the company's dividend policy on a quarter to quarter basis with a view to increasing.

Deric S. Eubanks: Our board of directors will review the company's dividend policy on a quarterly basis with a view to increasing it as financial performance improves. During the quarter, we extended the loan secured by the Pierhouse Resort and Spa in Key West, Florida. The loan now has an initial maturity date of September 2025 with one one-year extension option, subject to the satisfaction of certain conditions, and continues to have a balance of $80 million and bears interest at a floating interest rate of SOFR plus 3.6%.

Deric S. Eubanks: It add financial performance improves.

Deric S. Eubanks: During the quarter, we extended the loan secured by the Pier House resort and Spa in key West Florida below now has an initial maturity date of September 2025, with one one year extension option subject to the satisfaction of certain conditions.

Deric S. Eubanks: To have a balance of $80 million and bears interest at a floating interest rate of silver plus three 6%.

Deric S. Eubanks: Additionally, during the quarter, we extended the loan secured by the Ritz Carlton St. Thomas.

Deric S. Eubanks: Saint Thomas USPI.

Deric S. Eubanks: Additionally, during the quarter, we extended the loan secured by Rich Carlton St. Thomas and St. Thomas USBI. The loan now has an initial maturity date of August 2025, with one one-year extension option, subject to the satisfaction of certain conditions, continues to have a balance of $42.5 million, and bears interest at a floating interest rate of SOFR plus 4.35%. In mid-March, we closed on a property-level mortgage financing for the 96-room Ritz-Carlton Reserve Dorado Beach in Dorado, Puerto Rico. The $62 million non-recoursed loan has a two-year term.

Deric S. Eubanks: Hello, now has an initial maturity date of August 2025, with one one year extension option subject to the satisfaction of certain conditions continues to have a balance of $42 $5 million and bears interest at a floating interest rate of silver plus 435%.

Deric S. Eubanks: In mid March we closed on a property level mortgage financing for the 96 room Ritz Carlton Reserve Dorado Beach, and Dorado, Puerto Rico, the $62 million non recourse loan has a two year term. The loan is interest only and provides for a floating interest rate of <unk> plus 475%.

Deric S. Eubanks: The loan is interest-only and provides for a floating interest rate of SOFR plus 4.75%. Finally, subsequent to quarter end, we paid off the $30 million loan secured by the Cameo Beverly Hills in Beverly Hills, California. That property is now unencumbered.

Deric S. Eubanks: Finally, subsequent to quarter end, we paid off the $30 million loan secured by the cameo Beverly Hills in Beverly Hills, California that property is now unencumbered as of March 31, 2024, our portfolio consisted of 16 hotels with 3963 net rooms, and our share count currently stands at <unk>.

Deric S. Eubanks: As of March 31, 2024, our portfolio consisted of 16 hotels with 3,963 net rooms. Our share count currently stands at 73.8 million fully diluted shares outstanding, which is comprised of 66.5 million shares of common stock and 7.3 million OP units. This concludes our financial review. I'd now like to turn it over to Chris to discuss our asset management activities for the quarter. Thank you, Deric.

Chris: $73 8 million fully diluted shares outstanding which is comprised of $66 5 million shares of common stock at $7 3 million op units.

Deric S. Eubanks: This concludes our financial review I would now like to turn it over to Chris to discuss our asset management activities for the quarter. Thank.

Christopher Nixon: For the quarter, Comparable Hotel Rev Par for our portfolio is nearly flat with the prior year quarter at $368. However, comparable hotel total revenue increased by 2% over the prior year quarter. First quarter comparable hotel total revenue was 28% higher than the same quarter in 2019, which represents a 5% compounded annual growth rate over the last five years. This growth has primarily been driven by room and food and beverage revenue, which have grown by 35% and 22%, respectively, compared to the same time period in 2019.

Chris: Thank you Derrick for the quarter comparable hotel Revpar for our portfolio was nearly flat with the prior year quarter and $368.

Christopher Nixon: Comparable hotel total revenue increased by 2% over the prior year quarter.

Christopher Nixon: First quarter comparable hotel total revenue was 28% higher than the same quarter in 2019, which represents a 5% compounded annual growth rate over the last five years.

Christopher Nixon: This growth has primarily been driven by rooms, and food and beverage revenue, which have grown by 35% and 22% respectively compared to the same time period in 2019.

Christopher Nixon: While the top line has increased, we are also controlling expense growth, which has led to margin improvements in several areas on our hotel P&Ls relative to 2019. This focus on cost controls resulted in a hotel EBITDA margin expansion of 95 basis points in the first quarter compared to 2019. I would like to spend some more time highlighting how our team has actively increased our group position across our portfolio, generated margin expansion, and capitalized on ancillary revenue initiatives.

Christopher Nixon: While the top line has increased we are also controlling expense growth, which has led to margin improvements in several areas in our hotel P&L relative to 2019.

Christopher Nixon: This focus on cost controls resulted in hotel EBITDA margin expansion of 95 basis points in the first quarter compared to 2019.

Christopher Nixon: I would like to spend some more time highlighting how our team is actively increased our group position across our portfolio generated margin expansion and capitalize on ancillary revenue initiatives.

Christopher Nixon: Group Pays continues to accelerate across the portfolio. Group Rooms revenue for the full year is pacing ahead of last year by 3%, with the second quarter through the balance of the year pacing ahead by 7%. We are seeing the group booking window continue to expand as meetings are being secured further out. This helps us effectively layer in groups and optimize our business. Our 2025 group room revenue pace is currently ahead by 10%.

Christopher Nixon: Group pace continues to accelerate across the portfolio group rooms revenue for the full year is pacing ahead of last year by 3% with a second quarter through the balance of year pacing ahead by 7%.

Christopher Nixon: We are seeing the group booking window continued to expand as meetings are being secured further out this helps us effectively layer in groups and optimize our business mix. Our 2025 group room revenue pace is currently ahead by 10%.

Christopher Nixon: While year-over-year group lead volume has started to normalize, conversion rates remain strong, and the average group booking size continues to increase. This has resulted in increased sales efficiency across many of our hotels. We are also seeing strength from the incentive market, which represents corporations rewarding their highest performing employees and partners.

Christopher Nixon: While year over year group lead volume has started to normalize conversion rates remained strong and the average group booking size continues to increase.

Christopher Nixon: This has resulted in increased sales efficiency across many of our hotels.

Christopher Nixon: We're seeing strength from the incentive market, which represents corporations rewarding their highest performing employees and partners.

Christopher Nixon: One hotel in particular that has benefited from this segment is the Ritz-Carlton St. Thomas, which is pacing ahead in 2024 group room revenue by 50% compared to the prior year. We've been pleased with the strong performance of our Caribbean hotels. These assets expanded their hotel EBITDA margin by 215 basis points relative to the prior year quarter. The Ritz-Carlton Reserve Dorado Beach saw a 199 basis point expansion in hotel EBITDA margin over the prior year quarter.

Christopher Nixon: <unk> Hotel in particular has benefited from this segment as the Ritz Carlton St. Thomas which is pacing ahead in 2024 group rooms revenue by 50% compared to the prior year.

Christopher Nixon: We have been pleased with the strong performance of our Caribbean hotels. These assets expanded their hotel EBITDA margin by 215 basis points relative to the prior year quarter.

Christopher Nixon: The Ritz Carlton Reserve Dorado Beach saw a 199 basis point expansion in hotel EBIT margin over the prior year quarter, our asset management team is focused on implementing several initiatives to drive higher revenue from the hotels residential rental program.

Christopher Nixon: Our asset management team is focused on implementing several initiatives to drive higher revenue from the hotel's residential rental program. These have included restructuring the program's rental options, hosting receptions for owners in the community, and implementing an incentive for the sales team. These efforts and more resulted in a 44% increase in rental program revenue, which generated a high margin for the hotel. The Ritz-Carlton St. Thomas also drove a $258 basis point hotel EBITDA margin expansion over the prior year quarter.

Christopher Nixon: These have included restructuring the program's rental options hosting receptions for owners in the community and implementing an incentive for the sales team.

Christopher Nixon: These efforts and more resulted in a 44% increase in rental program revenue, which produces a high margin for the hotel.

Christopher Nixon: The Ritz Carlton St. Thomas also drove a 258 basis point hotel EBITDA margin expansion over the prior year quarter.

Christopher Nixon: This was a result of our team identifying an opportunity to shift our segmentation to a more optimal business mix focused on groups and anticipation of the new supply coming into the market. During the quarter, the hotel was up 40% in group room nights over the prior year quarter. Typically, this business generates additional profit due to the incidental business that accompanies it, including banquet and catering. During the quarter, ancillary revenue increased by more than 5% across our entire portfolio.

Christopher Nixon: This was a result of our team identifying an opportunity to shift our segmentation to a more optimal business mix focused on group in anticipation of the new supply coming into the market.

Christopher Nixon: During the quarter the hotel was up 40% in group room nights over the prior year quarter.

Christopher Nixon: Typically this business generates additional profit due to the incidental business that accompanies it including banquet and catering.

Christopher Nixon: During the quarter ancillary revenue increased by more than 5% across our entire portfolio. This performance was largely driven by our urban assets, which generated a 37% increase on a per occupied room basis.

Christopher Nixon: This performance was largely driven by our urban assets, which generated a 37% increase on a per-occupied room basis. These revenue streams consist of parking, leases, spas, retail outlets, membership dues, and various guest amenities. One of the strategic initiatives our teams conducted was a services and amenity audit, which compared the subject hotel to the rest of our portfolio, as well as its competitive set. This resulted in the rollout of several new guest experiences and revenue streams for the portfolio.

Christopher Nixon: These revenue streams consists of parking leases spas retail outlets membership dues and various guest amenities.

Christopher Nixon: One of the strategic initiatives. Our teams conducted was a services and amid the audit, which compared to subject hotel to the rest of our portfolio as well as its competitive set this.

Christopher Nixon: This resulted in the rollout of several new guest experiences and revenue streams for the portfolio.

Christopher Nixon: Moving on to capital expenditures, during the first quarter, we completed several major renovations. These included a guest room and suite renovation at the Capitol Hilton, adding nine new rooms. Additionally, we completed the guest room renovation at the Bartosano Hotel and Spa in Napa Valley. And at the Ritz-Carlton Lake Tahoe, we transformed an underutilized arcade and a kid's club into a prominent event space with a top golf swing suite. Lastly, we completed a comprehensive spa renovation at the Ritz-Carlton, Sarasota, enhancing treatment rooms, wet areas, healing water pools, and a relaxation terrace overlooking the bay.

Christopher Nixon: Moving on to capital expenditures during the first quarter, we completed several major renovations.

Christopher Nixon: These included a guestroom suite renovation at the capital Hilton, adding nine new rooms.

Christopher Nixon: Additionally, we completed the guest room renovation at the <unk> Hotel and Spa in Napa Valley, and the Ritz Carlton Lake Tahoe, we transformed on underutilized arcade and the kids club into a prominent event space, where the top golf swing suite.

Christopher Nixon: Lastly, we completed a comprehensive spa renovation at the Ritz Carlton Sarasota, enhancing treatment rooms, wet areas healing water pools, and a relaxation terrace overlooking the bay.

Christopher Nixon: We also recently initiated the renovation of a previously abandoned outdoor bar at the Ritz-Carlton, Sarasota. Looking ahead to the second quarter, we plan to start several major renovations at the Ritz-Carlton Lake Tahoe, which include relocating and expanding the living room bar, renovating the meeting space restaurant and fitness center, as well as adding outdoor cabanas overlooking the pool. Additionally, we will begin construction of a retail outlet at the Four Seasons Resort Scottsdale to offer guests access to curated food and beverage options. For 2024, we anticipate spending between $85 million and $105 million on capital expenditures.

Christopher Nixon: We also recently initiated the renovation of our previously abandoned outdoor bar at the Ritz Carlton Sarasota.

Christopher Nixon: Looking ahead to the second quarter, we plan to start several major renovations at the Ritz Carlton Lake Tahoe, which include relocating and expanding the living room bar renovating the meeting space restaurants, and fitness center as well as adding outdoor cabanas overlooking the pool.

Christopher Nixon: Additionally, we will begin construction of a retail outlet at the four seasons resort Scottsdale to offer guests access to curated food and beverage options.

Christopher Nixon: For 2024, we anticipate spending between $85 million and $105 million on capital expenditures.

Christopher Nixon: This quarter, our team implemented aggressive actions to drive operational improvements, and we are starting to see the fruit of that labor in our March performance, which produced a 57% hotel EBITDA float. In addition, we are seeing positive signs in the group segment for the remainder of the year. With these initiatives underway and the market outlook showing positive signs, we are optimistic about our portfolio's ability to perform.

Christopher Nixon: This quarter, our team implemented aggressive actions to drive operational improvements we are starting to see the fruit of that labor in our March performance, which produced a 57% hotel EBITDA flow through in.

Christopher Nixon: In addition, we are seeing positive signs in the group segment for the remainder of the year.

Christopher Nixon: With these initiatives underway and the market outlook showing positive signs we are optimistic about our portfolios ability to perform.

Speaker Change: Thank you Chris.

Christopher Nixon: In summary, I'd like to reiterate that we continue to be pleased with the performance of our hotels. We also remain very well positioned with a solid balance sheet and promising outlook.

Christopher Nixon: In summary, I would like to reiterate that we continue to be pleased with the performance of our hotels. We also remain very well positioned with a solid balance sheet and promising outlook.

Christopher Nixon: We look forward to updating you on our progress in the quarters ahead.

Operator: We look forward to updating you on our progress in the quarters ahead. This concludes our prepared remarks, and we will now open the call for Q&A. Please note that due to the ongoing litigation resulting from an activist campaign, we will not be able to respond to questions on that specific matter. Please limit your questions to those concerning the company's assets, operations, management's industry outlook and capital allocation priorities, as well as our recently announced shareholder value creation plan. Thank you.

Christopher Nixon: This concludes our prepared remarks, and we will now open the call for Q&A. Please note that due to the ongoing litigation, resulting from an activist campaign, we will not be able to respond to questions on that specific matter. Please limit your questions to those concerning the companys assets operations managements industry outlook and capital allocation priorities as well as our recently.

Operator: <unk> shareholder value creation plan. Thank you.

Operator: At this time, I'd like to remind everyone, in order to ask a question, press star 1 on your telephone keypad, and our first question will come from the line of Bryan Maher with B. Reilly Securities. Please go ahead.

Operator: At this time I would like to remind everyone in order to ask a question press star one on your telephone keypad and our first question will come from the line of Bryan Maher with B Riley Securities. Please go ahead.

Bryan Anthony Maher: Thank you and good morning. Just a couple for me today, sticking with your criteria. On the La Jolla property, how is that property being marketed, and are there any backup buyers if that deal were to fall apart?

Bryan Anthony Maher: Thank you and good morning.

Bryan Anthony Maher: Just a couple from me today.

Bryan Anthony Maher: Sticking with you are.

Bryan Anthony Maher: Criteria are no mcgwire property, how is that property marketed and are there any backup buyers if that deal were to fall apart.

Unnamed Speaker: Yeah, hey Bryan, thank you. Yeah, so... We hired a broker to market the property, which was East Hill. And they went out to a very broad set of potential buyers. In fact, we signed over 80 confidentiality agreements with prospective buyers, which were a mix of private equity companies, and then some other kind of privately financed buyers, and some REITs. And in the end, we received about half a dozen offers. There were a dozen or so tours conducted.

Speaker Change: Yeah, Hey, Brian. Thank you, yes so.

Unnamed Speaker: <unk>.

Unnamed Speaker: <unk> hired.

Unnamed Speaker: A broker to market the property.

Unnamed Speaker: Which was Easter.

Unnamed Speaker: And they went out to a very broad.

Unnamed Speaker: Set of potential buyers in fact, we signed over 80 confidentiality agreements with prospective buyers, which were a mix of.

Unnamed Speaker: Private equity companies and then some other just kind of privately financed buyers.

Unnamed Speaker: And some in some of the rates.

Unnamed Speaker: And then we received about half a dozen offers that were there were a dozen or so tourists conducted.

Unnamed Speaker: And then we ran a second round and ultimately ended up with JRK being the highest bidder. They do have a non-refundable deposit down. It's, like I said, only subject to a groundless word of consent. So, there is no real need for a backup bidder, but that said, as I said, we had a half a dozen bids come in, so there is certainly broader interest in the asset than just J

Unnamed Speaker: And then we.

Unnamed Speaker: <unk> second round and ultimately ended up with Cherokee Cherokee being the highest bidder.

Unnamed Speaker: They do have a nonrefundable deposit down it's like I said only.

Unnamed Speaker: Subject to a ground lessor consent.

Unnamed Speaker: So the needs there is no real need for a backup bidder.

Unnamed Speaker: But that said as I said, we had half a dozen bids come in.

Unnamed Speaker: There is certainly broader interest in the asset and then just Erica.

Unnamed Speaker: And what inning are you in with the marketing of the other two properties that you've got?

Unnamed Speaker: And what inning are you in with the marketing of the other two properties that you've mentioned.

Unnamed Speaker: On one, we have already selected a broker who is drafting an offering memorandum as we speak. And then on the second one that we are looking at for next year, we haven't yet started the process.

Unnamed Speaker: On one we have selected.

Unnamed Speaker: Broker already who is drafting an offering memorandum as we speak.

Unnamed Speaker: And then the second one that we are looking at for next year, we haven't yet started the process.

Unnamed Speaker: Okay, and then maybe just shifting to some property fundamentals. Can you give us a little color on what's going on with Cameo? You know, the red part there was pretty light. I didn't know if there was anything one-off going on in the quarter or if there was something a little bit more systemic. And also, in the last couple of quarters, we've noticed weakness in Napa. Can you give us some color on that market as well? And that's all for me. Yeah, thanks, Bryan. I can take it.

Speaker Change: Okay, and then maybe just shifting to <unk>.

Speaker Change: Property fundamentals.

Speaker Change: Can you give us a little color on what's going on with EMEA. The Revpar there was pretty light I didn't know if there was anything one off going there in the quarter or if there is something a little bit more systemic and also the last couple of quarters. We've noticed weakness in Napa can you give us some color on that market as well and Thats all for me.

Unnamed Speaker: Yeah, thanks, Bryan. I can take that. So, in Cameo, we saw for the first quarter that the LA market as a whole was soft. I think occupancy, ADR, and REVPAR were all down. The hotel had a lot of production last year from Amex's Fine Hotels and Resorts program. The hotel's no longer in the program as we transition to the Hilton platform, but we are very optimistic that once the conversion is done, we'll be able to benefit from that program again.

Speaker Change: Yes, Thanks, Brian I can take that so <unk>, we saw for the first quarter daily market as a whole was soft I think occupancy ADR and Revpar were all down.

Unnamed Speaker: The hotel had a lot of production last year from Amex is fine hotels and resorts program.

Unnamed Speaker: The hotels no longer in the program as we transition to the Hilton platform, but we are very optimistic that once the conversion is done we.

Unnamed Speaker: We will be able to benefit from that program again.

Unnamed Speaker: The white label with Hilton, obviously, we're not recognizing all of the upside to associating with LXR until the conversion is complete. You know, the direct contribution from the HiltonSpring.com channel is improving, but obviously, we'd like that to happen much quicker.

Unnamed Speaker: The white label with Hilton, obviously, we're not recognizing all of the upside.

Unnamed Speaker: With associating with Alex are until the conversion is complete.

Unnamed Speaker: The.

Unnamed Speaker: Direct contribution from from Hilton's brand Dot Com channel is improving but obviously, we'd like that to happen much quicker and so those have been some of the challenges there with that hotel in terms of Yount, Bill and kind of what we're seeing there it's still broad market softness we're seeing some of the some of the high end luxury hotels doing very.

Unnamed Speaker: And so those have been some of the challenges there with that hotel. In terms of Yachtville and kind of what we're seeing there, there's still broad market softness. We're seeing some of the high-end luxury hotels doing very aggressive things in terms of race to try to capture production. We're still feeling some of the softness from travelers coming out of San Francisco associated with the tech layoffs. And where we're seeing that there, they're just, you know, with fewer employed, they're not taking those weekend trips to Napa.

Unnamed Speaker: Some things in terms of rates to try to capture production.

Unnamed Speaker: We're still feeling some of the softness from travelers coming out of San Francisco associated with the tech layoffs, and where we're seeing that there.

Unnamed Speaker: Theyre just with fewer employed they are not taken those weekend trips to Napa.

Unnamed Speaker: And so ADR in that market has been challenged. But we also underwent a room renovation at Partosono in Q1 that further kind of, you know, challenged the results there. The renovation is complete, and we're optimistic about the outlook and the additional ADR premium we'll get now with the new rooms product there.

Unnamed Speaker: So ADR in that market has been challenged.

Unnamed Speaker: But we also underwent a room renovation at <unk> in Q1 that further kind of.

Unnamed Speaker: Challenge the results there.

Unnamed Speaker: The renovation is complete we are optimistic about the outlook and the.

Unnamed Speaker: The additional ADR premium will get now with with the new rooms product there.

Speaker Change: Okay. Thank you.

Operator: Again, for any questions, press star 1, and our next question will come from the line of Tyler Batory with Oppenheimer. Please go ahead.

Unnamed Speaker: Again, Brian a question press Star one and our next question will come from the line of Tyler <unk> with Oppenheimer. Please go ahead.

Jonathan David Jenkins: Good morning, Jonathan on behalf of Tyler. Thanks for taking our questions. First one for me, helpful commentary so far. But can you just talk about what's driving the strength in the Caribbean and the strength of the leisure customer in your Caribbean markets compared to, maybe, what you're seeing in the domestic markets?

Operator: Hi, Good morning. This is Jonathan on for Tyler. Thanks for taking our questions first one for me helpful commentary, so far but can you just talk about what's driving the strength in the Caribbean.

Jonathan David Jenkins: The leisure customer.

Jonathan David Jenkins: Caribbean markets compared to maybe what youre seeing in the domestic markets.

Unnamed Speaker: Yeah, great question. The major benefit was the festive season extended further into January, which helped very, very strongly there. In Dorado, you heard us reference in our prepared remarks the impact of the residential program there and the residences. Those come at a very, very high rate.

Speaker Change: Yes, great question.

Unnamed Speaker: The major benefit was the festive season extended further into January.

Unnamed Speaker: Helps very very strong there.

Unnamed Speaker: In Dorado, you heard us reference in our prepared remarks kind of the impact of the residential program there and the residences is coming very very high rates.

Unnamed Speaker: We've been successful in kind of increasing the distribution platforms that those are sold through, and so we're getting a lot more demand for kind of that high-end room product. Out in St. Thomas, we benefited from an early spring break. You know, we thought there would be a pretty significant impact from some of the recent hotel openings there, and really, there was kind of an initial pop in terms of impact on Transient, but that subsided in Q1. We didn't really feel any impact from Bonvoy. We started kind of proactively grouping up at that hotel to try to, you know, insulate ourselves from any impact, but we were very, very pleased with the results.

Unnamed Speaker: We've been successful in kind of increasing the distribution platforms that those are sold through and.

Unnamed Speaker: And so we're getting a lot more demand for kind of that high end room product.

Unnamed Speaker: Out in St. Thomas.

Unnamed Speaker: Benefited from an early spring break.

Unnamed Speaker: We thought there would be pretty significant impact from some of the recent hotel openings there and really there was there was kind of an initial pop in terms of impact of transient but that subsided and.

Unnamed Speaker: In Q1, we didn't really feel any impact from bond void, we started kind of proactively grouping up at that hotel to try to insulate ourselves from any impact, but we were very very pleased with the results.

Unnamed Speaker: And I would add on Dorado Beach specifically, you know, this is a hotel that sits within a almost 2,000 acre master plan development that is experiencing a lot of activity, a lot of demand for residential, just as a result of really demographic shifts of U.S. citizens on the mainland moving to Puerto Rico, and they're realizing, you know, all-time high selling prices for their homes and generating therefore a lot of ancillary activity related to hospitality demand.

Unnamed Speaker: And I would add on <unk>, specifically this is a hotel that sits within.

Unnamed Speaker: A.

Unnamed Speaker: Almost 2000 acre master planned development that is experiencing a lot of activity a lot of demand for residential.

Unnamed Speaker: As a result of really demographic shifts.

Unnamed Speaker: U S citizens on the mainland moving in Puerto Rico.

Unnamed Speaker: And they are realizing all time high.

Unnamed Speaker: Selling prices for the homes and generate therefore, a lot of ancillary activity related to hospitality demand too.

Jonathan David Jenkins: Okay, great. I appreciate the color there.

Speaker Change: Okay, Great I appreciate the color there and then maybe just a clarification question.

Jonathan David Jenkins: And then maybe just a clarification question or... a question on the La Jolla disposition. Did that disposition change, kind of, I know it's been a while, but change how you think about the joint venture partnerships and did that... And can you just walk us through it? Did that have any impact on the disposition?

Jonathan David Jenkins: Question on the Ohio disposition.

Jonathan David Jenkins: Does that does that disposition changed kind of I know, it's been a while but change how you think about the joint venture partnerships and ended that.

Jonathan David Jenkins: Can you just walk us through that without having any impact on the disposition.

Unnamed Speaker: Yeah, well, I will say this, you know, Park has been a great partner for us on these two hotels, and we've been joined at the hip for several years. There certainly was no any sort of discord or anything else as a result of our relationship with them that caused the sale.

Jonathan David Jenkins: Yes, well I will say this park has been a great partner for us.

Unnamed Speaker: These two hotels and we've been.

Unnamed Speaker: Joined at the hip for several years.

Unnamed Speaker: There certainly was no.

Unnamed Speaker: During this quarter anything else as a result of.

Unnamed Speaker: Our relationship with them that caused the sale.

Unnamed Speaker: But we jointly agreed that it would be a good time to monetize this asset, particularly in light of the upcoming capital expenditures that were necessary. As we look to our remaining joint venture asset, Capital Hilton, that one, we've just, in fact, completed a major renovation. We're very excited about the election season coming up. As you probably know, hotels such as this, Washington, D.C., tend to perform very well during election seasons. And we'll have a brand new product to offer the market. So we'll assess whether or not we want to do something with that hotel next year after we get through this. I think otherwise Park and us are quite happy bedfellows.

Unnamed Speaker: But we jointly agree that it would be a good time to monetize this asset, particularly in light of the upcoming capital expenditures that were necessary.

Unnamed Speaker: As we look to our remaining joint venture asset capital Hilton.

Unnamed Speaker: One we've just in fact completed a major renovation.

Unnamed Speaker: We're very excited about the election season coming up as you probably know.

Unnamed Speaker: <unk> such as this Washington, DC tend to perform very well during the election season, and we will have brand new product to offer the market. So.

Unnamed Speaker: And we will assess.

Unnamed Speaker: Whether or not.

Unnamed Speaker: We want to do something with that hotel next year after we get through that.

Unnamed Speaker: And then.

Unnamed Speaker: Yes, I think otherwise parking and us are quite.

Unnamed Speaker: Happy Bedfellows.

Unnamed Speaker: I'll add one note on the Capitol Hilton renovation. The hotel was under a massive renovation for Q1, finishing up the work there. We added nine keys, and we still grew total revenue year over year by 5%. The renovation finished on March 9th, and when you look at the kind of performance of just March as a whole, that hotel was up 20% year on year in transient revenue. And so we're very excited and optimistic about the outlook of that hotel with the new rooms.

Unnamed Speaker: I'll add one note on the capital Hilton renovation.

Unnamed Speaker: The hotel was under massive renovation for Q1, finishing up the work there we added nine keys and we still grew total revenue year over year by 5%. The renovation finished on March 9th and when you look at kind of the performance of just March as a whole that hotel was up 20% year on year and transient revenue.

Unnamed Speaker: And so we're very excited and optimistic about the outlook at that hotel with the new rooms product and what its going to do there.

Jonathan David Jenkins: Okay, excellent. Very helpful. Thank you for all the color. That's all for me.

Speaker Change: Okay excellent very helpful. Thank you for all the color that's all for me.

Speaker Change: Thanks, Jonathan.

Operator: This concludes our question and answer session. I'll hand the call back to management for closing remarks.

Speaker Change: This concludes our question and answer session I will hand, the call back to management for closing remarks.

Operator: Well, thank you for joining us on our first quarter earnings call, and we look forward to speaking with you again next quarter.

Speaker Change: Well, thank you for joining us on our first quarter earnings call and we look forward to speaking with you again next quarter.

Operator: That will conclude our call for today. Thank you all for joining. You may now disconnect. Outro Music

Speaker Change: That will conclude our call for today. Thank you all for joining you may now disconnect.

Bryan Anthony Maher: and more. Thanks for watching. I'm Bryan Maher.

Operator: [music].

Unnamed Speaker: and more

Unnamed Speaker: Okay.

Unnamed Speaker: Okay.

Unnamed Speaker: [music].

Unnamed Speaker: Yes.

Unnamed Speaker: Okay.

Unnamed Speaker: [music].