Q1 2024 Sunstone Hotel Investors Inc Earnings Call

Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Sunstone Hotel Investors' first quarter 2024 earnings call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. I would like to remind everyone that this conference is being recorded today, May 6, 2024, at 12 p.m. Eastern Time. I will now turn the presentation over to Mr. Aaron Reyes, Chief Financial Officer. Please go ahead, sir.

Good morning, and ladies and gentlemen, and thank you for standing by welcome to the Sunstone Hotel investors first quarter 2024 earnings call. At this time all participants are in listen only mode. Later, we will conduct a question and answer session and instructions will be keeping at that time I would like to remind everyone that the.

This conference is being recorded today may six 2024 at 12 P. M. Eastern time, I will now turn the presentation over to Mr. Aaron Reyes Chief Financial Officer. Please go ahead Sir.

Aaron R. Reyes: Thank you operator before we begin I would like to remind everyone that this call contains forward looking statements that are subject to risks and uncertainties, including those described in our filings with the SEC, which could cause actual results to differ materially from those projected.

Aaron R. Reyes: Before we begin, I would like to remind everyone that this call contains forward-looking statements that are subject to risks and uncertainties, including those described in our filings with the SEC, which could cause actual results to differ materially from those projected. We caution you to consider these factors in evaluating our forward-looking statements.

Aaron R. Reyes: We caution you to consider these factors in evaluating our forward looking statements.

Aaron R. Reyes: We also note that the commentary on this call will contain non-GAAP financial information, adjusted FFO, and property level adjusted EBITDA RE. We are providing this information as a supplement to information prepared in accordance with generally accepted accounting principles. Additional details on our quarterly results have been provided in our Earnings Release and Supplemental Materials, which are available in the Investor Relations section of our website. With us on the call today are Bryan Giglia, Chief Executive Officer; Robert Springer, President and Chief Investment Officer; and Chris Ostapovich, Chief Operating Officer.

Aaron R. Reyes: We also note that the commentary on this call will contain non-GAAP financial information, including adjusted EBITDA Archie.

Aaron R. Reyes: <unk> and property level adjusted EBITDA.

We are providing this information as a supplement to information prepared in accordance with generally accepted accounting principles.

Additional details on our quarterly results have been provided in our earnings release and supplemental which are available in the Investor Relations section of our website.

Aaron R. Reyes: With us on the call today are Bryan Giglia, Chief Executive Officer, Robert Springer, President and Chief Investment Officer, and Chris After coverage Chief operating officer.

Aaron R. Reyes: Bryan will start us off with some highlights from our first quarter, including commentary on operations and recent trends. Afterwards, Robert will discuss our Capital Investment Act. And finally, I will provide a summary of our first quarter earnings results and share the details of our updated outlook for 2024. After our remarks, the team will be available to answer your questions. With that, I would like to turn the call over to Bryan. Please go ahead.

Bryan Albert Giglia: Brian I'll start us off with some highlights from our first quarter, including commentary on operations and recent trends.

Afterwards, Robert will discuss our capital investment activity.

Robert C. Springer: And finally, I will provide a summary of our first quarter earnings results and further details of our updated outlook for 2024.

Robert C. Springer: After our remarks, the team will be available to answer your questions.

Robert C. Springer: With that I would like to turn the call over to Brian. Please go ahead.

Bryan Albert Giglia: Thank you, Aaron, and good morning, everyone. We knew coming into the year that Q1 was going to be the industry's most difficult year-over-year comparison. Despite this, our portfolio performed in line with expectations, driven by solid out-of-room spend and strong cost controls both at our hotels and at the corporate level. As the year progressed, We expect the quarterly comparisons to become more favorable, and combined with our strong group pace for the remainder of the year, the first quarter headwinds should shift into a tailwind, especially in the second half of the year.

Brian: Thank you Aaron and good morning, everyone.

Brian: We knew coming into the year that Q1 was going to be the industry's most difficult year over year comparison. Despite this our portfolio performed in line with expectations driven by solid out of room spend and strong cost controls both at our hotels and at the corporate level.

Brian: As the year progresses, we expect the quarterly comparisons to become more favorable.

Brian: And combined with our strong group pace for the remainder of the year, the first quarter headwinds should shift into a tailwind, especially the second half of the year.

Bryan Albert Giglia: During the quarter, we executed our strategy of recycling capital and announced the acquisition of the 630-room Hyatt Regency San Antonio Riverwalk, redeploying a portion of the proceeds from the sale of Boston Park Plaza into a more productive investment that will provide superior near-term growth without the disruption or capital costs we would have incurred with continued ownership of Park Plaza. The Hyatt Regency is one of the best-located hotels in the city, situated in the heart of the Riverwalk, at the front door of the Alamo, and steps away from the Convention Center.

Brian: During the quarter, we executed our strategy of recycling capital and announced the acquisition of the 630 room Hyatt Regency, San Antonio Riverwalk.

Brian: Redeploying a portion of the proceeds from the sale of Boston Park Plaza into a more productive investments that will provide superior near term growth without the disruption or capital cost. We would have incurred with continued ownership of park Plaza.

Brian: The Hyatt Regency is one of the best located hotels in the city situated in the heart of the Riverwalk at the front door, the Alamo and steps away from the Convention Center.

Bryan Albert Giglia: Our premier location allows the hotel to benefit from an attractive combination of group and transient demand in a market that continues to experience positive demographic shifts, increasing hotel demand, and a business-friendly backdrop. The acquisition fits squarely within the investment parameters we had previously identified and will immediately contribute to our earnings, diversify our cash flow, and provide additional growth opportunities in the future. The acquisition will add to the growth generated by the second component of our strategy, which is the internal investment we have made and continue to make in the portfolio during the first quarter.

Premier location allows the hotel to benefit from an attractive combination of group and transient demand in a market that continues to experience positive demographic shifts increasing hotel demand and a business friendly backdrop.

Brian: The acquisition fits squarely within the investment parameters, we had previously identified and will immediately contribute to our earnings diversify our cash flow and provide additional growth opportunities in the future.

Brian: The acquisition will add to the growth generated by the second component of our strategy, which is the internal investment we have made and continue to make in the portfolio.

Brian: During the first quarter.

Bryan Albert Giglia: We benefited from the ongoing ramp-up at the newly converted Westin Washington, D.C. downtown. First quarter EBITDA at the hotel was over $4 million higher than the same period in 2023, and we expect to see continued outsized growth for the remainder of the year, albeit at a more moderate pace, especially when the hotel comps over its conversion during the fourth quarter. We are very pleased with our initial performance in D.C. Our investment thesis was that the incremental spend to convert our former Renaissance to a Westin would generate positive returns by capturing a better share of transient customers and attracting higher quality groups.

Brian: We benefited from the ongoing ramp up at the newly converted Westin, Washington D C downtown.

First quarter EBITDA at that hotel with over $4 million higher than the same period in 2023, and we expect to see continued outsized growth for the remainder of the year.

Brian: Albeit at a more moderate pace, especially when the hotel comps over its conversion during the fourth quarter.

Brian: We are very pleased with our initial performance in D. C. R.

Brian: Our investment thesis was that the incremental spend to convert our former Renaissance to our western will generate positive returns by capturing a better share of transient customers and attracting higher quality groups.

Bryan Albert Giglia: And this is exactly what we are seeing in the initial quarters and in our forward booking pattern. We are looking to replicate this same performance on the other coast, where our latest conversion officially became the Marriott Long Beach Downtown at the end of March. Because of permitting and other delays, we incurred some incremental displacement, but this is behind us now, and the project should be wrapped up next month.

Brian: And this is exactly what we are seeing in the initial quarters and in our forward booking patterns.

Brian: We are looking to replicate the same performance on the other coast, where our latest conversion officially became the Marriott long beach downtown at the end of March.

Brian: Because of permitting and other delays, we incurred some incremental displacement, but this is behind US now and the project should be wrapped up next month.

Bryan Albert Giglia: The hotel is receiving a positive response from travelers and meeting planners, which has added to our confidence that the Marriott flag will deliver superior returns by allowing the hotel to better compete in the market. Looking to our next phase of internal growth, the transformation of Onda's Miami Beach remains on schedule to be delivered at the end of the year. As planned, we temporarily suspended operations at the resort in late March to facilitate the fastest construction schedule possible, even at this accelerated pace.

The hotel is receiving a positive response from travelers and meeting planners, which has added to our confidence that the Marriott flag will deliver superior returns by allowing the hotel to better compete in the market.

Brian: Looking to our next phase of internal growth the transformation of Andaz Miami Beach remains on schedule to be delivered at the end of the year.

Brian: As planned we temporarily suspended operations at the resort in late March to facilitate the fastest construction schedule possible.

Brian: Even at this accelerated pace comprehensive value, creating projects like these result in short term earnings disruption.

Bryan Albert Giglia: Comprehensive value creation projects like these result in short-term earnings disruption. We are looking forward to having the disruption in our rearview mirror, which is now only a few short months away. As we look forward, we believe the On Dawes Miami Beach will provide a significant layer of incremental growth on top of the contribution from the recently acquired Higher Regency San Antonio and the embedded earnings potential of our newly converted Weston in Washington, D.C. and our new Marriott in Long Beach.

Brian: We are looking forward to having the disruption in our rearview mirror, which is now only a few short months away.

Brian: As we look forward, we believe the Andaz Miami Beach, who will provide a significant layer of incremental growth on top of the contribution from the recently acquired Hyatt Regency, San Antonio and the embedded earnings potential of our newly converted Westin in Washington, DC and our new Mary.

Brian: In long Beach.

Bryan Albert Giglia: The combination of internal and external investment will provide additional layers of growth as we move into 2025 and beyond. The last component of our strategy is the return of capital to our shareholders. Our Board of Directors declared a 29% increase in our quarterly dividend to $0.09 per share.

Brian: The combination of internal and external investment will provide additional layers of growth as we move into 2025 and beyond.

Brian: The last component of our strategy is the return of capital to our shareholders.

Brian: Our board of directors declared a 29% increase in our quarterly dividend to <unk> <unk> per share.

Bryan Albert Giglia: The increase reflects the incremental income generated by the acquisition of the Hyatt Regency San Antonio and the anticipated contribution from our repositioned hotels that should generate incremental funds for distribution over the coming quarter. Now, shifting to our quarterly results, as I noted at the top of the call, we were pleased with how the portfolio performed in the first quarter relative to our expectations, especially given the challenging industry-wide comparison. Similar to what we saw in the last few quarters, group business performed well, corporate travel continued to recover, and leisure demand further moderated, although our comparable resorts still generated profitability well ahead of pre-pandemic levels.

The increase reflects the incremental income generated by the acquisition of the Hyatt Regency, San Antonio and the anticipated contribution from our repositioned hotels that should generate incremental funds for distribution over the coming quarters.

Bryan Albert Giglia: Our convention hotels led the portfolio with over 7% RevPAR growth in the quarter, driven by our newly converted Westin Washington, D.C., downtown, which grew rooms RevPAR by 52% and total RevPAR by more than 77%. We continue to be encouraged by the trends at our urban hotels, which, excluding Long Beach due to its renovation, grew RevPAR by nearly 4% and benefited from occupancy gains as business travel continues to move Marriott Boston Long Wharf turned in another solid quarter, growing total rent power by nearly 15%, driven by strong corporate demand and a solid mix of group business.

Now shifting to our quarterly results as I noted at the top of the call. We were pleased with how the portfolio performed in the first quarter relative to our expectations, especially given the challenging industrywide comparison.

Brian: Similar to what we saw in the last few quarters group business performed well.

Brian: Corporate travel continued to recover and leisure demand further moderated although our comparable resorts still generated profitability well ahead of pre pandemic levels.

Brian: Our convention hotels led the portfolio with over 7% Revpar growth in the quarter driven by our newly converted Westin, Washington D C downtown which grew rooms, revpar by 52% and total revpar by more than 77%.

Brian: We continue to be encouraged by the trends at our urban hotels, which excluding long beach due to its renovation grew revpar by nearly 4% and benefited from occupancy gains as business travel continues to move higher.

Brian: Marriott Boston long wharf turned in another solid quarter growing total revpar by nearly 15% driven by strong corporate demand and a solid mix of group business.

Bryan Albert Giglia: Leisure trends continue to moderate in the quarter, with comparable occupancy up marginally, but with rates down from the very robust levels seen in recent years. Our performance at YLA also reflects the rotation of a large group event that was out of the market this year but will be returning in 2025. Wine Country was also impacted by a particularly cold and wet first quarter, which contributed to further market-wide softening.

Brian: Leisure trends continue to moderate in the quarter with comparable occupancy up marginally, but with rates down from the very robust levels seen in recent years.

Our performance in <unk> also reflects the rotation of a large group event that was out of the market. This year, but will be returning in 2025.

Brian: Wine country was also impacted by a particularly cold and wet first quarter, which contributed to further market wide softness.

Bryan Albert Giglia: We are focused on driving group business and generating ancillary revenues at both montage and four seasons, which is reflected in their total REVPAR performance in the quarter and that partially offsets their lower room revenue resulting from weaker leisure demand in the market. However, we cannot control when leisure demand will accelerate. We can continue to work with the resorts to build a base of group business and control costs so that we can maximize profitability when it does.

Brian: We are focused on driving group business and generating ancillary revenues at both montage and four seasons, which is reflected in their total revpar performance in the quarter and that partially offsets there lower rooms revenue, resulting from weaker leisure demand in the market.

Brian: While we cannot control when leisure demand will accelerate we can continue to work with the resorts to build a base of group business and control costs. So that we can maximize profitability when it does.

Bryan Albert Giglia: Our efforts are showing in stronger bookings at these resorts, with group room nights pacing nearly 13% higher for the remaining quarters of 2024. We knew coming into the year that the first few months would challenge top-line growth, and so we have been working with our managers to mitigate costs and offset inflationary pressure. Improved labor productivity in the first quarter relative to the prior year helped to offset the lower group mix and decline in average rate.

Brian: Our efforts are showing in stronger bookings at these resorts with group room nights pacing nearly 13% higher for the remaining quarters of 2024.

We knew coming into the year that the first few months would have challenged top line growth and so we have been working with our managers to mitigate costs and offset inflationary pressures.

Brian: Improved labor productivity in the first quarter relative to the prior year helped to offset the lower group mix and decline in average rates.

Bryan Albert Giglia: Our margin performance during the quarter was impacted by our renovation activity in Miami and Long Beach. However, excluding these two hotels, our margin was down only 170 basis points, even with minimal top-line growth and the impact of our higher property insurance costs, which speaks to the efforts of our operators to be disciplined in their cost management efforts and to drive efficiencies where possible.

Our margin performance during the quarter was impacted by a renovation activity in Miami and long Beach.

Brian: Excluding these two hotels, our margin was down only 170 basis points, even with minimal top line growth and the impact of our higher property insurance costs, which speaks to the efforts of our operators to be disciplined in their cost management efforts and to drive efficiencies where possible.

Bryan Albert Giglia: As we look ahead into 2024, we are encouraged about the outlook for the year, which benefits from our recent investment and begins to pave the way for the next layer of growth in the portfolio. Comparable Portfolio Group Room Revenue for the rest of the year is up approximately 9% with broad-based strength across Boston, D.C., Orlando, Long Beach, and Wailea. Transient booking patterns remain short-term, but the recent week-over-week pickup for May and June is exceeding that of last year, although it remains early.

As we look ahead into 2024, we are encouraged about the outlook for the year, which benefits from our recent investments and begins to pave the way for the next layer of growth in the portfolio.

Brian: Comparable portfolio group room revenue pace for the rest of the year is up approximately 9% with broad based strength across Boston D C Orlando long Beach and <unk>.

Transient booking patterns remained short term, but the recent week over week pickup for May and June is exceeding that of last year.

Brian: While it remains early we are encouraged by what we're seeing in our group booking activity for 2025 with improving convention and citywide calendars in many of our markets.

Bryan Albert Giglia: We are encouraged by what we are seeing in our group booking activity for 2025, with improving convention and citywide calendars in many of our markets. As Robert will elaborate shortly, we were very pleased to close our acquisition in San Antonio last week. We continue to evaluate opportunities for the remaining proceeds from the sale of Boston Park Plaza, and we maintain significant additional investment capacity that we can use to create value through a combination of additional hotel acquisitions and the repurchase of our own stock on an opportunistic basis.

Brian: As Robert will elaborate on shortly we were very pleased to close our acquisition in San Antonio last month, we.

Brian: We continue to evaluate opportunities for the remaining proceeds from the sale of Boston Park Plaza, and we maintained significant additional investment capacity that we can use to create value through a combination of additional hotel acquisitions and the repurchase of our own stock on an opportunistic.

Brian: Basis.

Bryan Albert Giglia: To sum things up, we continue to execute on our three strategic objectives: recycling capital, investing in our portfolio, and returning capital to shareholders, which has and should continue to result in multiple layers of embedded growth to drive incremental earnings and value over the next several years. To put a finer point on this, as we move further into the year, we are putting the pieces in place to drive significant earnings growth into 2025 from a combination of our recent conversions in Washington, D.C., and Long Beach.

Robert C. Springer: To sum things up we continue to execute on our three strategic objectives recycling capital investing in our portfolio and returning capital to shareholders, which has and should continue to result in multiple layers of embedded growth.

Robert C. Springer: To drive incremental earnings and value over the next several years.

Robert C. Springer: To put a finer point on this as we move further into the year, we are putting the pieces in place to drive significant earnings growth into 2025 from a combination of our recent conversions and Washington DC in long Beach, the full year contribution from the highest.

Bryan Albert Giglia: The full year contribution from the Hyatt San Antonio and the debut of Onda's Miami Beach, the combined impact of which, assuming a relatively steady macro backdrop, should drive double-digit EBITDA growth for the portfolio next year. And with that, I'll turn the call over to Robert to give some additional thoughts on our recent acquisition activity and renovation progress. Robert, please go ahead.

And Antonio.

Robert C. Springer: And the debut of the on Miami Beach, the combined impact of which assuming a relatively steady macro backdrop should drive double digit EBITDA growth for the portfolio next year.

Robert C. Springer: And with that I will turn the call over to Robert to give some additional thoughts on our recent acquisition activity and renovation progress.

Robert C. Springer: Robert Please go ahead.

Robert C. Springer: Thanks, Brian on April 20, <unk>, we closed on our previously announced acquisition of the Hyatt Regency, San Antonio Riverwalk for gross purchase price of $230 million before $8 million of incentives offered by our operator.

Robert C. Springer: We closed on our previously announced acquisition of the Hyatt Regency San Antonio Riverwalk for a gross purchase price of $230 million before $8 million of incentives offered by our operators. The transaction implies a current year yield of 8%, which we believe is very attractive for such a well-located, recently renovated hotel. In addition, this yield is greater than what we were previously achieving at Boston Park Plaza and allows us to avoid significant defensive capital investments that would have led to further degradation in return.

Robert C. Springer: The transaction implies a current year yield of 8%, which we believe is very attractive for such a well located recently renovated hotel.

Robert C. Springer: Further this yield is greater than what we were previously achieving at Boston Park Plaza and allows us to avoid significant defensive capital investments that would have led to further degradation in returns instead, we now have the opportunity to grow this yield over time in San Antonio through near term asset management initiatives.

Robert C. Springer: Instead, we now have the opportunity to grow this yield over time in San Antonio through near-term asset management initiatives and longer-term ROI projects. As it relates to investments in our existing portfolio, construction is in full swing in Miami, with all parts of the hotel now under renovation. While this transformative renovation took some time to fully design and plan for, we are now just a couple

Robert C. Springer: Longer term ROI projects.

Robert C. Springer: As it relates to investments in our existing portfolio construction is in full swing in Miami with all parts of the hotel now under renovation.

Robert C. Springer: While this transformative renovation took some time to fully design and planned for we are now just a couple of quarters away from the debut of the Andaz Miami Beach and from the benefit it will provide to earnings.

Robert C. Springer: 34 away from the debut of the Andaz Miami Beach.

Robert C. Springer: and from the benefit it will provide to earnings. The project remains on schedule and in line with budget. In Long Beach, we converted our former Renaissance to the Marriott Long Beach Downtown in late March.

Robert C. Springer: The project remains on schedule and in line with budget.

Robert C. Springer: In long Beach, we converted our former Renaissance to the Marriott long Beach downtown in late March.

While we experienced some delays and a longer than expected permitting process to work should be wrapping up in the next month and the renovated product is being very well received.

Robert C. Springer: Thank you. Elsewhere across the portfolio, we will be completing a few other projects, including a meeting space renovation at our JW New Orleans, which is underway.

Robert C. Springer: Elsewhere across the portfolio, we will be completing a few other projects, including a meeting space renovation at our J W. New Orleans, which is underway now and a soft goods renovation and why layer that will start later this year.

Robert C. Springer: is underway now, and a soft goods renovation in Wailea will start later this year.

Robert C. Springer: While we expect these projects to add to earnings...

Robert C. Springer: We expect these projects to add to the earnings potential of the assets. They should not result in any meaningful disruption this year.

Robert C. Springer: As we have shared with you before, capital recycling is a primary component of our strategy, and we are actively evaluating additional acquisition opportunities and remaining focused on assets where we believe we can create value by redeploying capital at higher yields. We look forward to sharing additional information on our progress.

Robert C. Springer: As we have shared with you before capital recycling as a primary component of our strategy and we are actively evaluating additional acquisition opportunities and remain focused on assets, where we believe we can create value by redeploying capital at higher yields.

Robert C. Springer: We look forward to sharing additional information on our progress in the near term with that I'll turn it over to Aaron. Please go ahead.

Robert C. Springer: For additional information on our progress in the near term, with that, I'll turn it over to Aaron. Please go ahead.

Aaron R. Reyes: Thanks, Robert. Our earnings results for the first quarter came in generally in line with expectations, as better-than-expected operating margins and savings at the corporate level offset slightly lower REVPAR performance. Adjusted EVA.RE for the first quarter was $55 million, and adjusted FFO was $0.18 per diluted share. We estimate that we incurred $3 million of earnings displacement at the Marriott Long Beach Downtown in the first quarter in connection with its conversion from a renaissance. While the project should wrap up next month, our 2024 displacement will be approximately $2 million higher than our initial expectation, largely due to construction and permitting delays that were out of our control.

Aaron R. Reyes: Thanks, Robert our earnings results for the first quarter came in generally in line with expectations as better than expected operating margin and savings at the corporate level offset slightly lower revpar performance.

Aaron R. Reyes: Adjusted EBITDA for the first quarter was $55 million.

Aaron R. Reyes: And adjusted <unk> was <unk> 18 per diluted share.

Aaron R. Reyes: We estimate that we incurred $3 million of earnings as placement at the Marriott long Leach downtown in the first quarter in connection with its conversion from a Renaissance.

Aaron R. Reyes: While the project should wrap up next month or 2020 for displacement will be approximately $2 million higher than our initial expectation largely due to construction and permitting delays that were out of our control.

Aaron R. Reyes: Together with the $10 million of year-over-year decrease in earnings at the confidant as it undergoes its transformation to Ondas Miami, we now estimate that we will incur $13 million to $15 million of total earnings disruption this year. We would expect to recoup all of this plus additional earnings at these hotels next year. Included in our earnings release this morning was our revised outlook for the year. The midpoint of our guidance ranges remains unchanged, except to incorporate the impact of the Hyatt Regency San Antonio Riverwalk acquisition.

Aaron R. Reyes: Together with a $10 million of year over year decrease in earnings at the comp at all as it undergoes a transformation to Andre Miami Beach, We now estimate that we will incur at 13 million to $15 million of total earnings disruption this year.

Aaron R. Reyes: We would expect to recoup all of this plus additional earnings at these hotels next year.

Aaron R. Reyes: Included in our earnings release, this morning, with our revised outlook for the year.

Aaron R. Reyes: The midpoint of our guidance ranges remain unchanged, except to incorporate the impacts of the Hyatt Regency, San Antonio Riverwalk acquisition.

Aaron R. Reyes: As we noted in the transaction announcement last month, we expect the hotel to generate $12 million to $13 million of EBITDA during our ownership period in 2024. These incremental hotel earnings will be partially offset by lower projected interest income as a result of deploying the excess cash.

As we noted in the transaction announcement last month, we expect our hotel to generate 12 million to $13 million of EBITDA during our ownership period in 2024.

Aaron R. Reyes: These incremental hotel earnings will be partially offset by lower projected interest income as a result of deploying the excess cash.

Aaron R. Reyes: Taken together, at the midpoint, these would net to an expected adjusted EBIT.RE increase of $10 million and 5 cents of additional FFO per diluted share. Based on our performance in the first quarter and what we see today for the balance of the year, we expect that our total portfolio full-year REB PAR growth will range from 2.25% to 5.25%, as compared to 2023. This range includes all hotels in the portfolio. If we exclude the confidant Miami Beach, which has suspended operations and will be under construction for most of the year, our full-year REV PART growth is projected to range from 4.75% to 7.75%. Both of these ranges represent a 25-basis point adjustment to incorporate the impact of the Hyatt Regency San Antonio acquisition.

Aaron R. Reyes: Taken together at the midpoint. This would net to an expected adjusted EBITDA increase of $10 million and five additional <unk> <unk> per diluted share.

Based on our performance in the first quarter and what we see today for the balance of the year, we expect that our total portfolio full year revpar growth range from two in a quarter to 5.25%.

Aaron R. Reyes: As compared to 2023.

Aaron R. Reyes: This range includes all hotels in our portfolio.

Aaron R. Reyes: If we exclude the confidante, Miami Beach, which had suspended operations and we will be under construction for most of the year. Our full year Revpar growth is projected to range from $4 seven 5% to 775%.

Aaron R. Reyes: Both of these ranges represent a 25 basis point adjustment to incorporate the impact at the Hyatt Regency, San Antonio acquisition.

Aaron R. Reyes: We now estimate that full-year Adjusted EBITDA RE will range from $242 million to $263 million, and our Adjusted FFO per diluted share will range from $0.84 to $0.94. As I noted earlier, the midpoint of our guidance range remains unchanged from the outlook we provided in February, except to incorporate the partial year contribution from San Antonio. As is typical for our portfolio, the second quarter will be the largest contributor to our full-year earnings.

Aaron R. Reyes: We now estimate that full year, adjusted EBITDA will range from $242 million to $263 million and our adjusted <unk> per diluted share will range from 84 to 94.

Aaron R. Reyes: As I noted earlier, the midpoint of our guidance range remains unchanged from the outlook, we provided in February except.

Aaron R. Reyes: To incorporate the partial year contribution from San Antonio.

Aaron R. Reyes: As is typical for our portfolio the second quarter will be the largest contributor to our full year earnings.

Aaron R. Reyes: And based on the midpoint of a revised guidance range, we expect approximately 28% to 29% of our total full-year earnings to be generated in the current quarter. Our balance sheet remained strong, and as of the end of the year, on a pro forma basis adjusted for the San Antonio acquisition, we had over $240 million of total cash and cash equivalents, including our restricted cash. We retain full capacity on our credit facility, which, together with cash on hand, equates to nearly $740 million of total liquidity.

And based on the midpoint of our revised guidance range, we expect approximately 28% to 29% of our total full year earnings to be generated in the current quarter.

Aaron R. Reyes: Our balance sheet remains strong and as of the end of the year on a pro forma basis adjusted for the San Antonio acquisition, we had over $240 million of total cash and cash equivalents, including restricted cash.

Aaron R. Reyes: We retain full capacity on our credit facility, which together with cash on hand, equate to nearly $740 million of total liquidity.

Aaron R. Reyes: Following the partial redeployment of the Boston Park Plaza sale proceeds, our proforma leverage has normalized, but it is still one of the lowest in the sector at 3.8 times net debt and corporate equity to trailing EBITDA and only 2.6 times net debt to trailing EBITDA. We have one piece of secured debt coming due at the end of the year, and we expect that the modest principal balance of the maturing loan, combined with our low overall leverage and strong liquidity position, will give us sufficient optionality to address the refinancing before year-end.

Aaron R. Reyes: Following the partial redeployment at the Boston Park Plaza sale proceeds our pro forma leverage has normalized.

Aaron R. Reyes: It is still one of the lowest in the sector at three eight times net debt and preferred equity to trailing EBITDA and only two six times net debt to trailing EBITDA.

Aaron R. Reyes: We have one piece of secured debt coming due at the end of the year and we expect that the modest principal balance of the maturing loan combined with our low overall leverage and strong liquidity position will give us sufficient optionality to address the refinancing before year end.

Aaron R. Reyes: Now, shifting to our return of capital, our Board of Directors has increased our base quarterly common dividend to $0.09 per share, representing an increase of 29% and consistent with our strategy of returning incremental capital to shareholders. The board has also declared the routine distributions for our Series G, H, and I preferred security. And with that, we can now open the call to questions. So that we are able to speak with as many participants as possible, we ask that you please limit yourself to one question. Operator, please go ahead.

Aaron R. Reyes: Now shifting to our return of capital our board of Directors has increased our base quarterly common dividend to <unk> <unk> per share representing an increase of 29% and consistent with our strategy of returning incremental capital to shareholders.

Aaron R. Reyes: The board has also declared the routine distributions for our series G H Ni preferred security.

And with that we can now open the call to questions.

Aaron R. Reyes: That we were able to speak with as many participants as possible.

We ask that you please limit yourself to one question.

Speaker Change: Operator, Please go ahead.

Speaker Change: Yeah.

Speaker Change: Thank you we will now begin the question and answer session. If you have dialed Ian would like to ask a question. Please press star one on your telephone keypad duration and join the queue. If you would like to withdraw your question simply press Star one again.

Operator: We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Speaker Change: The plan to ask your question I listening via loud speaker on your device. Please speak apprehensive and ensure that your phone is not the niche when asking your question. We do request for today's session that you. Please limit to one question and one follow up.

Operator: We do request for today's session that you please limit to one question and one follow-up. Again, press star one to join the queue. And your first question comes from the line of Duane Pfennigwerth from Evercore ISI. Please go ahead.

Press Star one to join the queue and your first question comes from the line of Blayne banning Lewis from Evercore ISI. Please go ahead.

Duane Thomas Pfennigwerth: Hey, good morning. Thank you. Sorry if I missed it in your prepared remarks, but I wonder if you could comment on April REV PAR trends and maybe any prospects for acceleration on top line that you see here in 2Q, specifically as we get beyond some of the tougher weather.

Blayne Lewis: Hey, good morning, Thank you.

Blayne Lewis: Sorry, if I missed it in your prepared remarks, but I wonder.

Blayne Lewis: If you could comment on April Revpar trends.

And maybe any prospects.

Blayne Lewis: For acceleration.

Blayne Lewis: On top line that you see here in <unk>, specifically as we get beyond.

Blayne Lewis: Some of the tougher weather.

Aaron R. Reyes: Sure, Duane, this is Aaron. I'll start there. So, you know, Q2 is expected to be a transition quarter for us. You know, I think what you've heard broadly is that the comps do get easier as the year progresses, and that's certainly going to be the case for our portfolio.

Blayne Lewis: Sure Joanne this is Eric I'll start there. So Q2 is expected to be a transition quarter for us I think what you've heard broadly is that the comps do get easier as the year progresses, and thats certainly going to be the case for our portfolio, but what youll see for April is that that is largely really that the.

Aaron R. Reyes: But what you'll see for April is that that is, you know, largely really the end of the period of the tougher comp from the highly compressed demand that we saw at the beginning of 2023. And so our expectation, if you set on the other side, is that we would be down slightly for April on the REV PAR line. And that's so far what we've seen. And then April kind of ends up looking a little bit like Q1, where if you isolate both on the dots and Long Beach, we're slightly positive, but largely coming in line with expectations. And then we'd expect, you know, the quarter to get easier as we as we move into May and June, and then you know, into the back half of the year, even greater growth.

Blayne Lewis: End of the period of the tougher comp from the kind of highly compressed demand that we saw at the beginning of 2023 and so our expectation wise if you set.

Aaron R. Reyes: So you're

Eric: On the other side is that we would have we're going to be down slightly for for April on the Revpar line and that so far what we've seen and then April kind of ends up looking a little bit like Q1, where if you isolate both on das and long beach were slightly positive, but largely coming in line with expectations and then wed expect the.

Eric: Quarter, two to get easier as we as we as we move into May and June and then into the back half of the year, even greater growth.

Bryan Albert Giglia: Good morning, Duane. Just to add to that a little bit, when we look into Q3 and Q4, unlike last year when you look at where the group business and the pace was heavy, which was in Q1 and then moving into April a little bit too, as we look into Q3 and Q4, our pace is up double-digit, and looking at strength in the portfolio in DC, Orlando, Long Beach ramping will be significant growth, Boston, and then New Orleans has a very strong second half.

Speaker Change: Good morning, Duane just to add to that a little bit when we look into Q3 and Q4. Unlike last year. When you look at where where the group business and the pace with heavy which was in Q1 and then moving into April a little bit too as we look into Q3 and Q4, our paces up double digit.

<unk>.

And looking at strength in the portfolio.

Eric: In D C Orlando long Beach ramping.

Eric: Will be will be significant growth.

Eric: Boston and in New Orleans has a very strong second half.

Duane Thomas Pfennigwerth: Appreciate that commentary, and then maybe just a pretty straightforward follow-up on longer-term CapEx beyond 2024. Can you just tell us what is on deck beyond this year relative to the CapEx level you're taking on this year? Thanks for taking the question.

Speaker Change: I appreciate it I appreciate that commentary and then maybe just a pretty straightforward follow up on longer term capex.

Speaker Change: Beyond 2024 can you just tell us what is on deck.

Speaker Change: Beyond this year relative to the Capex level Youre, taking on this year. Thanks, thanks for taking the questions.

Aaron R. Reyes: And looking forward, we're going to, we'll move more to a much more normalized level of capital, which would include probably one or so Cyclical Rooms renovation on an annual basis. I mean, when you look at the back half of this year, Aaron or Robert mentioned that we'll be doing a soft goods renovation in Wailea, which, given the transitioning from and impact of the fire in the market, www.florisdijkum.com Thank you. Our next question comes from the line of Smedes Rose from Citi. Please go ahead. Hi.

Speaker Change: And looking forward, we're going to we'll move more to a much more normalized level.

Speaker Change: Capital.

Speaker Change: Which would include probably one or so.

Speaker Change: Cyclical rooms renovation on an annual basis I mean, when you look at the back half of this year here in <unk>.

Speaker Change: Robert had mentioned.

Speaker Change: We'll be doing a soft goods renovation and wild layer, which given the transitioning from.

The impact of the fire in the market.

It has proven to be a good time to do that that something like that which causes.

Speaker Change: <unk> million dollars or two overall displacement is just sort of the run rate that the portfolio would have on annual basis.

Speaker Change: Thank you.

Operator: Our next question comes from the line of Smedes Rose from Citi. Please go ahead. Hi, thanks.

Speaker Change: Our next question comes from the line of Smedes Rose from Citi. Please go ahead.

Smedes Rose: Hi, Thanks.

Smedes Rose: I was just hoping you could talk a little bit about what you saw in the transactions market as you were assessing opportunities.

Smedes Rose: Obviously, you went back to high for a second acquisition directly from them, but I was just kind of curious kind of what what you saw out there where there was it competitive or they're interesting they're interesting product, maybe what what kind of lead you back into the.

Smedes Rose: The Hyatt Arena.

Smedes Rose: Sure. Good morning, Smedes.

Speaker Change: Sure Good morning Smedes.

Smedes Rose: So when we were <unk>.

Speaker Change: Looking to potentially deploy.

Speaker Change: Recycle capital from the Boston Park Plaza sale, we were in the.

Bryan Albert Giglia: So when we were looking to potentially deploy recycled capital in the Boston Park Plaza sale, we were in the third or fourth quarter of last year. The fourth quarter, I guess, is when we had a higher level of confidence that Boston was going to close. And so at that moment in time, there were not a lot of transactions happening. The debt markets were much more restrictive and difficult than they are today, even though we have had treasury movements that have made things a little bit choppier. And so, at that point, there wasn't a lot on the market.

Third into fourth quarter of last year fourth quarter. I guess is when we have a higher level of confidence that Boston is going to close.

Speaker Change: And so at that moment in time, there were not a lot of transactions happening the debt markets, where we're much more restrictive and difficult than they are today, even though we have had treasury movements that have made things a little bit choppy here.

Speaker Change: And so at that point, there wasn't a lot on the market and we.

Bryan Albert Giglia: And we were going to relationships, people we've done deals with before, to see if there were any deals possible, and being a cash buyer at that time made us a much more attractive and reliable counterparty. The off-market process, the direct deal process, tends to take a longer time than a marketed process, and so we had the advantage of really being one of the only acquirers or looking to acquire at that time. So we spent the third and fourth quarter of last year really starting to build out that pipeline.

Speaker Change: We were going to relationships people, we've done deals with before to see if there was.

Speaker Change: There were deals possible and being a cash buyer at that time made us a much more.

Speaker Change: Tractive and reliable counterparty.

Speaker Change: The off market process direct deal process tends to take a longer time than than a marketed process and so we had the advantage of really being one of the only acquirers who are looking to acquire at that time. So we spent.

Speaker Change: Third and fourth quarter of last year really starting to build out those that pipeline and so as we get into our guidance for this year.

Bryan Albert Giglia: And so as we get into or got into this year, you know, the debt markets, availability improves, the MBS market was much more conducive to transactions. And so as things, more things became marketed, we were able to supplement what we're looking at with marketed deals also. Doing the deal with Hyatt was more of a necessity at the time we started that process. I think where we're looking now is that there are more opportunities on the market.

Speaker Change: The debt markets availability improves the MBS market was was much more conducive to transactions and so as things more things became marketed we were able to supplement what we're looking at with with marketed deals also so I think.

Doing the deal with Hyatt was more of a necessity at the time, we start that started that process I think where we're looking now is there is more on the market I think our direct deals.

Bryan Albert Giglia: I think our direct deal pipeline that we developed is serving us well now and may continue to source our future deals. But we're also seeing additional, You know, assets out there being marketed, and new opportunities are coming up every day.

Speaker Change: Pipeline that we developed is serving us well now and May continue to source our future deals.

Speaker Change: But we're also seeing additional.

Speaker Change: Assets out there.

Speaker Change: Being marketed.

Speaker Change: New opportunities are coming up every day.

Speaker Change: Okay. Thank you I appreciate it.

Operator: Our next question comes from the line of David Cots from Jefferies. Please go ahead.

Our next question comes from the line of David Katz.

David Katz: From Jefferies. Please go ahead.

David Cots: Hi, good morning. I wanted to actually follow that up, Bryan, in particular the very last part about, you know, marketed transactions coming back. We've certainly heard a mixed range of views about how quiet or active the marketed transaction market is. Has it, has it started to reaccelerate, and, you know, What, what? What's driving that, and do we expect another quarter or two from now that it'll continue to do so?

Hi, Good morning, I wanted to actually follow that up.

David Katz: Brian in particular, the very last part about.

David Katz: <unk>.

David Katz: Marketed transactions coming back or we've certainly heard a mixed range of views about how quiet or active.

David Katz: A marketed transaction market is.

David Katz: Has it started to reaccelerate.

Speaker Change: You know what.

Speaker Change: Whats driving that.

Speaker Change: Do we expect.

Speaker Change: Another quarter or two from now that it will continue to do that.

Bryan Albert Giglia: Good morning, David. It absolutely picked up at the beginning of the year, but to your point about Treasury movements recently, it has slowed down a bit. This is why I think it was so vital that when we were out last year building this pipeline to help, solely on the debt market, and that gets us a look at some other deals and maybe even some deals that, you know, might be looking, or we're looking to refinance, and now the debt's a little bit more expensive, maybe a little bit more restrictive. So I think it puts us in a pretty good position.

Speaker Change: Good morning, David.

David Katz: Good morning.

David Cots: I understand. Thank you for that.

David Katz: It absolutely picked up at the beginning of the year, but to your point.

David Katz: With Treasury movements recently, it has slowed down a bit.

David Katz: This is why I think it was so vital that when we were out last year and building. These this.

David Katz: Pipeline to health.

David Katz: Supplement whether or not the <unk>.

David Katz: Marketed deals, we're going to be coming or not has served us really well I think the other thing too right now as well, while maybe the near term deal flow has slowed down a bit.

David Katz: At the end of the day, we're still a cash buyer, which makes us a very attractive and reliable counterparty at this point because.

David Katz: <unk>.

David Katz: We're not going to rely solely on the debt market.

David Katz: That gets us a look at some other deals and maybe even some deals that might be looking or we're looking to refinance and now the debt a little bit more expensive, maybe a little bit more restrictive. So I think it puts us in a pretty good position.

Speaker Change: Understood. Thank you for that.

Operator: Our next question comes from the line of Michael Bellisario from Baird. Please go ahead.

Speaker Change: Our next question comes from the line of Mitel Bellisario from Baird. Please go ahead.

Michael Joseph Bellisario: Thanks. Good morning, everyone.

Thanks, Good morning, everyone.

Michael Joseph Bellisario: I have a two-parter for you on San Antonio. First, it's not a market that a lot of us are really familiar with. So maybe help us understand the supply and demand dynamics there and then how have the hotel and the convention center both performed historically and what the outlook looks like for the next couple of years. And then the second part, just on return expectations, what's what sort of longer-term growth rate did you assume in your underwriting for the hotel and any levered or unlevered targets that you could share with us?

Michael Joseph Bellisario: Sorry, Mike.

Michael Joseph Bellisario: Two parter for you on San Antonio just first it's not a market that a lot of us are really familiar with so maybe help us understand the supply demand dynamics there.

Michael Joseph Bellisario: And then how is the hotel and Convention center, both performed historically and what the outlook looks like for the next couple of years.

Michael Joseph Bellisario: Then the second part just on return expectation sort of longer term growth rates did.

Michael Joseph Bellisario: Did you assume in your underwriting for the hotel and any levered or unlevered targets that you could share with us. Thank you.

Bryan Albert Giglia: Sure, let me start and then I'll turn it over to Robert. When looking at the market, one, you know, our overall view of when we're going to deploy capital, we want to make sure we're finding the best piece of real estate within that market. The location of the hotel is as good as you can get in that market. You know, when you look at the demand drivers, you've got the combination of leisure and convention, the two biggest, and then you have a, you know, a growing business transient demand, also.

Speaker Change: Sure, Let me start and then I'll turn it over to Robert.

Robert C. Springer: When looking at the market.

Robert C. Springer: Juan.

Robert C. Springer: Our overall view with with when we're going to deploy capital we want to make sure. We're finding the best piece of real estate within that market. The location of the hotel is is as good as you can get in that market.

Robert C. Springer: When you look at the demand drivers you've got you have the combination of leisure.

And and convention are the two biggest and then you have a.

Robert C. Springer: A growing business transient.

Robert C. Springer: Demand.

Robert C. Springer: Also.

<unk>.

Bryan Albert Giglia: Our location, when you look at the Leisure Demand Drivers, you have the Riverwalk, you have the Alamo, and we are situated right in the middle of the Riverwalk and at the entrance to the Alamo, the Alamo obviously having a massive redevelopment and expansion, which will open right up to our front door. We think that, longer term, that's going to provide additional investment opportunities for us. We have a fair amount of retail, and we have a relatively large parking structure that is right next to the Alamo Education and Information Center that they are developing right now. From the convention standpoint, the convention center has 1.6 million square feet.

Our location is when you look at the leisure demand drivers you have you have the Riverwalk you have the Alamo and we are situated right in the middle of the Riverwalk and at the entrance to the Alamo the Alamo, obviously, having a.

Robert C. Springer: A massive redevelopment and expansion.

Robert C. Springer: Which which will open right up to our front door, we think that longer term that's going to provide additional investment.

Investment opportunity for us, we have a fair amount of retail.

Robert C. Springer: Relatively large parking structure that is right next to.

Robert C. Springer: The Alamo.

Education and information center that they are developing right now.

Robert C. Springer: From the convention standpoint.

Robert C. Springer: Convention Center.

Robert C. Springer: One 6 million square feet that recently had a multi $100 million upgrade.

Bryan Albert Giglia: They recently had a multi-hundred million dollar upgrade. When you look at the pace for the upcoming couple years, it's positive and should also benefit from other regional convention centers or partially down or restricting some of their availability Austin and Dallas. Citywide Pace is positive for 2025 and 2026. And then when you look at, the market also has a fair amount of government and military in it. The military tends to be more cyber-focused, so a much more dynamic and growing piece of business there.

Robert C. Springer: When you look at.

Robert C. Springer: Pes for the for the upcoming couple of years.

Robert C. Springer: It's positive and should also benefit from other regional.

Robert C. Springer: Uh huh.

Robert C. Springer: Convention centers.

But going down or partially down or restricting some of their availability because of renovation mainly in.

Robert C. Springer: Austin.

In Dallas.

Citywide pace is positive for 25 and 26 and then when you look at the market also has a fair amount of.

<unk>.

Robert C. Springer: Of government and military in there the military tends to be.

Robert C. Springer: More cyber focused so a much more dynamic and growing piece of business there.

Robert C. Springer: Overall, we are very pleased with our investment. You know, we believe that going in, we're investing, you know, around an eight cap on 2024. We think that there is some good near-term and medium-term growth here for us. And I will say we've been very, very pleasantly surprised with the performance in our very short ownership period, but the hotel is performing very well, and the market is performing well. And while there is some supply, and Robert can talk about that a little bit more, coming into the market, our location, I think, is pretty insulated from that.

Robert C. Springer: Overall, we are very pleased with with our investment.

Robert C. Springer: We believe that going in.

We are investing.

Robert C. Springer: Around an eight cap on 2024, we think that there is some good near term and medium term growth year for us.

Robert C. Springer: I will say, we've been very very pleasantly surprised with the.

The performance in our very short ownership period, but the hotel is performing very well the market is performing well and while there is some supply and Robert can talk to that a little bit more coming into the market.

Robert C. Springer: Our location I think is pretty insulated.

Robert C. Springer: From that we are we are absolutely what you want to be in that market. Robert Yes, I mean, just a couple of add ons. So I think Brian mostly covered all of your question but.

Robert C. Springer: We are absolutely where you want to be in that market. Robert? Yeah, I mean, just a couple of add-ons. I think Bryan mostly covered all of your questions, but there are a couple of details to add to that.

Robert C. Springer: A couple of details to add to that so Brian mentioned, the Alamo redevelopment, that's a $5 billion state funded project to if anybody has actually been to the Alamo before it is a.

Robert C. Springer: development. That's a half a billion dollar state funded project to see if anybody's actually been to the Alamo.

Robert C. Springer: I have actually been to the Alamo before. It is a state park that, no disrespect intended, is a little bit underwhelming for the visitor experience, and the state has allocated a significant amount of capital to build a proper museum and a significant visitor experience there, which we think will be very positive for what is already one of the most popular attractions in San Antonio. The airport is kicking off a multi-billion dollar expansion, which should help drive additional visitation.

Speaker Change: A state park.

That is no disrespect intended it's a little bit underwhelmed mean for the visitor experience and the state has allocated a significant amount of capital to build a proper museum and a significant visitation experience there, which we think will be very positive for what is <unk>.

Speaker Change: Already one of the most popular attractions in San Antonio.

The airport is.

Kicking off on a multibillion dollar expansion, which should help drive additional visitation Brian mentioned.

Robert C. Springer: Bryan mentioned or alluded to regional convention center impact; both Dallas and Austin are going through different meaningful convention center renovations that ultimately should benefit a city like San Antonio as those convention centers come down for different state regional business that is looking to be in the Texas area but can't go to those markets. There is, you mentioned the outlook, so I think we covered everything.

Speaker Change: Or alluded to regional Convention center impact, both Dallas, and Austin are going under different meaningful Convention center renovations dead.

Speaker Change: Ultimately should benefit a city like San Antonio as those convention centers come down for different state regional business that is looking to be in the Texas area, but can't go to those markets.

Speaker Change: There is.

Speaker Change: <unk>.

Speaker Change: You mentioned on the.

Speaker Change: Our outlook so.

Speaker Change: So I think we covered I think we covered everything there.

Speaker Change: Okay.

Robert C. Springer: And anything on return expectations from your underwriting? You know, going into it, as I said, it was with an ACAP.

Okay and anything on return.

Speaker Change: Patients from your underwriting.

Robert C. Springer: You know, going into it, as I said, we, it was, with an ACAP, we, you know, hope to stabilize somewhere around, you know, kind of a ten or so.

Speaker Change: Going into it as I said we.

Speaker Change: With an eight cap.

Speaker Change: Hope to stabilize somewhere around.

Speaker Change: How about a turn or so.

Speaker Change: Yes.

Speaker Change: Yes.

Operator: Operator, we'll take the next question. Our next question comes from the line of Danny Asad from Bank of America. Please go ahead. Hi, good morning, everybody. Bryan, in your prepared remarks, you called out the...

Speaker Change: Operator, we'll take the next question.

Danny Asad: Our next question comes from the line of Danny Asad from Bank of America. Please go ahead. Hi. Good morning, everybody.

Speaker Change: Our next question comes from the line of Daniel Zhang from Bank of America. Please go ahead.

Daniel Zhang: Hi, good morning, everybody.

Daniel Zhang: Brian in your prepared remarks, you called out the first quarter headwinds shift a tailwind, especially when you look to the second half of the year.

Daniel Zhang: Are you guys able to quantify or bucket.

Daniel Zhang: Easy comps, especially when you look at Q3 and Q4, so outside of the confidante, how many points maybe you could do we of tailwind should we expect that while a long beach and so on if you could.

Bryan Albert Giglia: Okay, morning, Danny. When we look into, so looking at Q1, Q1, when compared to 2023, had the compression of the pent-up demand for Omicron, going into a lot of the markets, especially, you know, some of the resort markets like Hualea, which then go and compress the transient rate. So when we look at the performance in Q1, we actually saw some very positive factors at play. One of them was our Q1 forward group production for the current year and future years was basically second to 18. It was a great year of production, both in room nights and in rate, although in transient, given that the comp of group was difficult.

Daniel Zhang: Okay.

Daniel Zhang: Danny.

Speaker Change: When we look into so so looking at a Q1 Q1, when comparing to 2023 had.

Speaker Change: The compression in 'twenty three had the compression of.

The pent up demand of omicron going into a lot of the market, especially some of the resort markets like while Ao, which then go and compressed the transient rate.

Speaker Change: We look at the performance in Q1, we actually saw some some very positive.

Speaker Change: Factors at play.

Speaker Change: One of them was our Q1.

Speaker Change: Forward group production for our current year in future years was.

Speaker Change: Basically second.

218.

Speaker Change: It was it was a great year production, both in room nights and in rate in.

Transient given that.

Speaker Change: The comp.

Of of group was was difficult we were actually able to backfill with a lot of transient.

Bryan Albert Giglia: We were actually able to backfill with a lot of transient across the portfolio. And so that was definitely a positive. And then on the group side, the group contribution was up year over year. So there, you know, so we're able to continue to get more out of room spend and our transient demand was backfilling. When we look into the second half of the year, where you look at where the pace is the strongest and where you expect the most, DC for Q2, Q3 will continue to grow revenue for the full year is up almost 20% driven by the benefits that we're seeing on not only on the group side in demand from the renovation, but also where DC has been the strongest is really or has been the most refreshing to see is the expectation that changing to the western flag we would receive more transient demand and in the first quarter in DC we saw all transient segments up both in occupancy and rate and so we're seeing and then when we look forward we see additional, you know, the transient, rate.

Across across the portfolio.

Speaker Change: And so that was that was definitely a positive and then on the on the group side.

Speaker Change: The group contribution.

Speaker Change: Up year over year. So there so we're able to continue to get more out of room spend and our transient demand was was backfill I think when we look into the <unk>.

Speaker Change: Second half of the year.

Speaker Change: Where you look at where the pace is the strongest and where you expect the most DC for.

Speaker Change: Q2 Q3 Q.

Speaker Change: Continue to grow revenue.

For the full years.

Speaker Change: Almost 20%.

Driven by the benefits that we're seeing on not only on the group side and demand from the renovation, but also where <unk> has been the strongest is really or has been the most.

Speaker Change: Refreshing to see is the expectation that changing to the Westin flag, we received more transient demand and in the first quarter in D. C. We saw all transient segments up both in occupancy and rate.

Speaker Change: And so we're seeing and then when we look forward we see additional.

Speaker Change: Transient.

Bryan Albert Giglia: The pace looking forward is up double digits. So not only are we getting more transient guests, but they are also paying a higher rate of spending more. Orlando has a better second half of the year, and then Long Beach will start the ramp up in Q2 and through the rest of the year. New Orleans, which had a very strong first half of last year, has a very strong second half this year.

Speaker Change: The pace looking forward is up double digits. So not only are we getting more.

Speaker Change: More transient guests, but they are also paying a higher rate of spending more.

Speaker Change: Orlando has a better second half of the year and then long beach will start to ramp up in Q2 going through the rest of the year New Orleans.

Speaker Change: Which had a very strong first half of last year has a very strong.

Speaker Change: First our second half of this year.

Got it thank you very much.

Operator: Our next question comes from the line of Floris Van Dijkum from PubBus Point. Please go ahead.

Speaker Change: Our next question comes from the line.

Speaker Change: Alright, thank you.

Speaker Change: Please go ahead.

Floris van Dijkum: Thanks, guys, for taking my question. Obviously, it's always good to deploy excess capital. As you guys look at the, you know, basically the $240 million of cash that you have on the balance sheet today, how do you think about which segment you would like to target most?

Speaker Change: Alright, Thanks, guys for taking my question.

Speaker Change: Obviously.

Speaker Change: Yeah.

It's always good to deploy excess capital.

Speaker Change: As you guys look at the basically the $240 million of cash that you have on the balance sheet today, how do you think about.

Speaker Change: Which segment would you like to target. Most is it group is at resort or is it urban hotels and maybe if you could give your thoughts on those bids so that would be helpful.

Bryan Albert Giglia: Is it a group? Is it resorts? Or is it urban hotels? And maybe if you could give your thoughts on those bits, that would be helpful.

Bryan Albert Giglia: Great. Good morning, Floris.

Great good morning for us.

Bryan Albert Giglia: The answer is, you know... Kind of a mix of a little bit of everything you said. I mean, when we look at what we recently purchased, our focus for San Antonio was on a hotel that provides good immediate growth and immediate earnings to the portfolio to keep it healthy, balance the diversification of the portfolio after the Boston sale without having any of the needs of immediate capital going into it. So I think we achieved that and provided the balance to the portfolio that we were looking for.

Speaker Change: The answer is no.

Speaker Change: Okay.

Speaker Change: Kind of a mix of a little bit of everything you said I mean, when we look at what we what we recently purchased our focus for San Antonio was on.

Speaker Change: A more.

Speaker Change: A hotel that provided good.

Speaker Change: Immediate growth immediate.

Speaker Change: Earnings through the portfolio to help.

Speaker Change: Balance the diversification of the portfolio after the Boston sale without having any of the the needs of immediate capital going into it. So I think we achieved that and and provided the balance in the balance of the portfolio that we were looking for.

Bryan Albert Giglia: You know, as we go forward, when you look at the types of hotels that we tend to do very well with, they have a group, you know, a significant group component, and then another component, whether it be leisure, or whether it be business transient, or whether, if you're something like Long Wharf, you've got all of that. So, you know, I think that that is the group-based piece of it, whether it's... 25% of the business, like some of our hotels, or in the 60s, like in Orlando or DC or San Diego, that that's something that we feel is important to add a good base of business, a piece of business that we know how to asset manage very well, and then allows you to then compress the other segment, whether it be business transient You know, when you look at the portfolio and you look at what we've done over the last couple of years, we've really been focused on providing layered growth. And it's not always like that, you know.

Speaker Change: As we go forward when you look at the types of hotels that we tend to do very well with is that they have a group.

Speaker Change: A significant group component and then another component whether it be leisure or whether it be business transient or whether if you're something like long wharf <unk> got all of that.

Speaker Change: So I.

Speaker Change: I think that that is the group base piece of it whether it's 25% of the business like some of our hotels or in the <unk> like <unk> like.

Speaker Change: Like in Orlando or D C or San Diego that Thats something that we feel is important to add a good good base of business.

Speaker Change: A piece of business that we know how to asset manage very well and then allows you to then compress.

Speaker Change: Other segment, whether it be business transient or leisure.

Speaker Change: When you look at the portfolio and you look at what we've done over the last couple of years, we've really we've really been focused on providing layer growth.

Speaker Change: And it's not always.

Bryan Albert Giglia: It's not always painless to do that, but we're just at the stage now where some of these big repositionings, rebrandings are starting to really pay off, as we saw with DC and in Q1, which will help the portfolio for the remainder of the year and into next year. We have Long Beach now coming online. Now, yes, was there a little additional displacement? Yes, but that's in the rear view mirror now

It's not always painless to do that but we're just at the stage now where some of these big.

Speaker Change: <unk>.

Speaker Change: Repositioning rebranding are starting to really pay off as we saw with <unk> in Q1, which will we will.

Speaker Change: Help the portfolio for the remainder of the year and into next year, we have long Beach now coming online now yes was there a little addition was there additional displacement, yes, but that's in the rearview mirror now.

Bryan Albert Giglia: And we can focus on growth. And we're very excited about Long Beach because what we've seen with DC is that, you know, in DC, the Weston flag really resonates with the transient customer, as we know that the Marriott flag does too. And we believe that that, like we're seeing in DC, will give us additional lift. We then added San Antonio by recycling proceeds from Boston Park Plaza, providing a much better yield and less capital needed, and less displacement that Boston would have had to go through in the future. Now that's on top of D.C. and Long Beach.

Speaker Change: And we can focus on the growth and we're very excited with long beach, because what we've seen with with.

Speaker Change: With D. C is that in D. C. The Westin flagged really resonates with the with the transient customer as we know that the Marriott flagged us too and we believe that they will.

Speaker Change: Like we're seeing in DC will give us additional lift we then added San Antonio by.

Speaker Change: By recycling proceeds from Boston Park Plaza, providing a much better yield and and.

Speaker Change: Yes.

Speaker Change: Capital needed and less displacement that Boston would have would have had to go through in the future.

Bryan Albert Giglia: And then at the end of this year, the next leg of that growth will be Dawes. And so we've built a great foundation. Our internal investments are delivering. Our external investments are now adding. And so, you know, when we look forward, do we need something like, you know, like San Antonio that has, you know, that doesn't need any capital, that is more plug and play?

Speaker Change: And <unk>.

Speaker Change: On top of of DC in long Beach, and then at the end of this year. The next leg of that growth will be well beyond us.

And so we have we've built a great foundation, our internal investments are delivering our external investments are now adding and so.

Speaker Change: So when we look forward.

Speaker Change: Do we need something as as.

Yes.

Speaker Change: San Antonio that has that doesn't need any capital that.

Speaker Change: As more plug and play.

Bryan Albert Giglia: You know, once we get Onda's done, could we do some more value add? I think that's where we add the most value. I think that's where we create. And so it opens that door. But right now, the focus is, you know, Ramping San Antonio up and getting that to where we need it to be, and it's doing great so far. We've added it. Asset managers are all over it, and they see a lot of opportunities, so we're very excited about that. And then watching DC perform, watching Long Beach perform, and then at the end of this year being able to turn Onda on and seeing how that can contribute to the portfolio.

Speaker Change: Once we get on Das done could we do some more.

You add I think that's where we add the most value I think that's where we create.

And so it opens that door, but right now the focus is is.

Speaker Change: Ramping San Antonio up and getting that to where we needed to be and it's doing great. So far we've added it.

Asset managers are all over it and they see a lot of opportunity. So we're very excited about that and then watching DC perform watching long beach perform and then at the end of this year.

Speaker Change: Being able to turn on doors on and seeing how that can contribute to the portfolio.

Speaker Change: Thanks, I appreciate that.

Operator: Our next question comes from the line of Chris Darling from Green Street. Please go ahead.

Speaker Change: Our next question comes from the line of Chris Darling from Green Street. Please go ahead.

Chris Darling: Thanks. Good morning, everybody.

Thanks, Good morning, everybody.

Bryan Albert Giglia: Bryan, I'd like to go back to the Hyatt Regency transaction for a minute. Can you help me understand how you thought about recycling capital in that fashion relative to more meaningful share repurchases? And I just, you know, from my perspective anyway, your stock's been trading really at or below the multiple at which you bought the Hyatt, and presumably your existing portfolio also benefits from, you know, a stronger growth profile for the next couple of years.

Chris Darling: Okay, Brian I'd like to go back to the Hyatt Regency transaction for a minute can you help me understand how you thought about recycling capital in that fashion relative to more meaningful share repurchases and I ask just from my perspective anyway. Your stock's been trading really at or below the multiple at which you bought the Hyatt.

Chris Darling: And presumably your existing portfolio also benefits from a stronger growth profile for the next couple of years I suppose to be fair, though you mentioned on the call earlier.

Bryan Albert Giglia: I suppose to be fair, though, you mentioned on the call earlier where you expect the Hyatt to stabilize at. So, some fairly meaningful growth, but I would be curious about your perspective kind of putting all that together.

Where you expect to hire to stabilize that so some fairly meaningful growth, but would be curious your perspective kind of putting all that together.

Bryan Albert Giglia: Yeah, I mean, and, and... San Antonio was a, Great yield going into it, you know. There are there are factors in that market and, hotel specific factors that we think that there's quite a bit of growth that we'll be able to mine out of that. There is when the Alamo redevelopment is done, we have a good amount of retail that leads right into it that will be able to be upgraded to match the, you know, what they've done with the Alamo. And that should result in, in.

Chris Darling: Yes.

Chris Darling: And.

Chris Darling: While San Antonio was a.

Chris Darling: A.

Chris Darling: Great yields going into it.

Chris Darling: Yes.

Chris Darling: There are there are factors in that market and.

Chris Darling: Hotel specific factors that we think that theres quite a bit of growth that will be able to mine out of that.

Chris Darling: There is when the Alamo.

Chris Darling: Redevelopment is done we have a good amount of retail that leads right into it that we'll be able to be.

Chris Darling: Upgraded.

Chris Darling: Match.

Chris Darling: What they've done with the Alamo and that should result in significantly.

Bryan Albert Giglia: Significantly higher rents, you know; our asset management team is very good at working with Hyatt, as we've seen, and in San Francisco to be able to really get the performance and optimize the hotel. So we're pretty excited about, you know, not only is it an attractive immediate yield, but there's near-term upside, medium-term upside without having to go in and do a full room renovation, full bathroom renovation, because that work's already done, and we get a benefit from that.

Chris Darling: Significantly more rents.

Chris Darling: Our asset management team is.

Very good at working with high Ed as we've seen in it.

Chris Darling: In.

Chris Darling: In San Francisco to be able to really.

Chris Darling: Get the performance and optimize the hotel.

Chris Darling: So we're pretty excited about not only is that.

Chris Darling: Immediate.

Chris Darling: Attractive yield, but there's there's near term upside medium term upside.

Chris Darling: Without having to go in and do.

Chris Darling: Full rooms renovation for bathroom renovation because that works already done and we get a benefit from that.

Chris Darling: To your bigger question on thought process of deploying capital.

Bryan Albert Giglia: To your bigger question on the thought process of deploying capital, yeah, I'll give it a try, maybe it's a bit boring. It's the answer we normally give, but it's a balanced approach, Chris, and so we took an asset in Boston that had done really well for us and was coming up to its next cyclical renovation, which would require significant guest room and bathroom work, which would result in a hotel that runs in the high 80s and low 90s occupancy, a lot of displacement, and a lot of capital in a 100-year-old building.

Speaker Change: I'll give maybe a bit.

Speaker Change: A bit boring answer we normally give but.

It's a balanced approach, Chris and so we took an asset.

In Boston that has done really well for us and was coming up to its next cyclical renovation which room.

Speaker Change: Wire significant guestroom and bathroom work.

Speaker Change: Which would result in a hotel that runs in the high eighties.

Low ninety's occupancy a lot of displacement.

And a lot of capital and a 100 year old building and so we.

Bryan Albert Giglia: And so it's our job to go through our portfolio, find instances where we can get a very attractive price and redeploy it into an opportunity that's going to have a better return on our invested capital than that. And that's exactly what I think we did here with San Antonio. Should, you know, you always have the opportunity to buy back shares. And quite frankly, I think that we have been, you know, very aggressive over the years with redeploying capital.

Speaker Change: Our job too.

Speaker Change: Find and come through our portfolio find instances, where we can get a very attractive price and redeploy it into a.

Speaker Change: Into an opportunity it's going to have a better return on our invested capital then than that and that's that's exactly what I think we've done here with San Antonio.

Speaker Change: Sure.

Speaker Change: And.

Speaker Change: Sure.

Speaker Change: You always have the opportunity to buy back shares and and quite frankly, I think we got we have been.

Speaker Change: Very aggressive over the years with with redeploying capital when you look at our strategy one of the.

Bryan Albert Giglia: When you look at our strategy, one of the tenants of our strategy is returning capital to shareholders, and we have done that through share repurchase. We continue to do that through right-sizing our dividend as we, you know, as our cash flow and earnings normalize. And that's something that We also didn't deploy all of the proceeds from Boston Park Plaza. We still have some remaining, which may go into hotel acquisition. If we find something attractive, it could go into share repurchase also, and so on.

Speaker Change: One of the tenants of our strategy is returning capital to shareholders and we have done that through share repurchase.

We continue to do that through right sizing our dividend as we.

Speaker Change: As our cash flow and earnings normalize.

And thats something that we.

Speaker Change: We also didn't deploy all of the proceeds from Boston Park Plaza, we still have some remaining which may go into hotel acquisition, if we find something attractive it could go into share repurchase also.

Speaker Change: And so.

Bryan Albert Giglia: You know, again, it's keeping that balance and, at the same time. Selling Boston was a large asset. And so we want to make sure that we also provide the right ballast and balance to the portfolio to make sure that we don't have any concentrations in any markets that could affect us. So, at the end of the day, it's taking all of those things into account, it's being balanced in how we deploy as we have done over the last several years, and it should be what you would continue to expect from us going forward.

Again, it's keeping that balance and at the same time.

Speaker Change: Selling Boston was a large asset and so we wanted to make sure that we also provide the right.

Speaker Change: And balance to the portfolio to make sure that we don't have any concentrations in any markets.

Speaker Change: It could impact things so at the end of the day, it's taking all of those things into account, it's being balanced in how we deploy as we have done over the last several years.

Speaker Change: And it should be what you would continue to expect from us going forward.

Chris Darling: All right, all helpful comments. I appreciate it.

Alright, all helpful comments I appreciate it.

Speaker Change: Thanks, Chris.

Bryan Albert Giglia: That concludes our Q&A session. I will now turn the conference back over to Bryan Giglia for closing remarks.

Speaker Change: This concludes our Q&A session I will now turn the conference back over to Brian Julian for closing remarks.

Bryan Albert Giglia: I want to thank everyone for their interest in the company. We look forward to meeting with many of you over the coming months at conferences and meetings and look forward to providing you with updates and views on how our investment and especially how the progress on ONDAZ is coming and how we look forward to having that displacement headwind, like our other investments, turned into a tailwind in the coming months. Thank you.

Bryan Albert Giglia: I want to thank everyone for their interest in the company. We look forward meeting with many of you over the.

Bryan Albert Giglia: The coming months Com.

Bryan Albert Giglia: Conferences and meetings and look forward to.

Bryan Albert Giglia: Providing you with updates and views on how.

Our investment and especially how the.

Bryan Albert Giglia: The progress in <unk> is coming and how we look forward to having that displacement headwind like our other investments turn into a tailwind in the coming months. Thank you.

Bryan Albert Giglia: Okay.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining us. You may now disconnect.

Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

Bryan Albert Giglia: Okay.

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Bryan Albert Giglia: Yes.

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Yes.

Bryan Albert Giglia: Okay.

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