Q2 2024 Summit Hotel Properties Inc Earnings Call

Welcome to the Summit Hotel Properties 2024 second quarter earnings conference call. I will now be passing the line to Adam Wudel, Senior Vice President of Finance, Capital Markets, and Treasurer.

Operator: on its call.

Operator: I will now be passing the line to Adam Wudel, Senior Vice President of Finance, Capital Markets, and Treasury.

Adam Wudel: I will now be passing the line to Adam Wudel, Senior Vice President of Finance, Capital Markets, and Treasurer.

Adam Wudel: Thank you, Daniel, and good morning. I am joined today by Summit Hotel Properties President and Chief Executive Officer John Stanner and Executive Vice President and Chief Financial Officer Trey Conkling. Please note that many of our comments today are considered forward-looking statements as defined by federal securities laws. Such statements are subject to risks and uncertainties, both known and unknown, as described in our SEC filing. Forward-looking statements that we make today are effective only as of today, July 30th, 2024, and we undertake no duty to update them later.

Adam Wudel: Thank you, Daniel, and good morning. I am joined today by Summit Hotel Properties President and Chief Executive Officer John Stanner, and Executive Vice President and Chief Financial Officer Trade Conkling. Please know that many of our comments today are considered forward-looking statements as defined by federal securities laws. These statements are subject to risks and uncertainties, both known and unknown, as described in our SEC filings. Forward-looking statements that we make today are effective only as of today, July 30, 2024, and we undertake no duty to update them later.

Speaker Change: Thank you, Daniel, and good morning. I am joined today by Summit Hotel Properties President and Chief Executive Officer John Stanner and Executive Vice President and Chief Financial Officer Trey Conkling.

Speaker Change: Please note that many of our comments today are considered forward-looking statements as defined by federal securities laws. These statements are subject to risks and uncertainties, both known and unknown, as described in our SEC filings.

Speaker Change: Forward-looking statements that we make today are effective only as of today, July 30, 2024, and we undertake no duty to update them later.

Adam Wudel: You can find copies of our SEC filings and earnings release, which contain reconciliation to non-GAAP financial measures referenced on its call, on our website at www.shpread.com.

Speaker Change: You can find copies of our SEC filings and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call, on our website at www.shpreet.com.

John Stanner: Please welcome Summit Hotel Properties president and chief executive officer John Stanner.

Adam Wudel: You can find copies of our SEC filings and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call, on our website at www.shpreet.com. Please welcome Summit Hotel Properties President and Chief Executive Officer John Stanner.

Speaker Change: Please welcome Summit Hotel Properties President and Chief Executive Officer John Stanner.

John Stanner: Thanks, Adam, and thank you all for joining us today for our second quarter, 2024, earnings conference call. We were once again extremely pleased with our second quarter operating performance and financial results. Is the adjusted EVA-DRE increased 6% to nearly $56 million, which represented a new quarterly record high for the company. An adjusted FFO increased 10%, compared to the second quarter of last year, which was our second consecutive quarter of double-digit growth in AFFO. Performer ReffR increased 3.4% year-over-year, as our portfolio continued to consistently outperform the total U.S. lodging industry and upscale chain scale. The second quarter marked a 13th consecutive quarter that our pro forma portfolio has exceeded the total U.S.

Jonathan P. Stanner: Thanks, Adam. And thank you all for joining us today for our second quarter 2024 earnings conference call. We were once again extremely pleased with our second quarter operating performance and financial results, as adjusted EBITDA RE increased 6% to nearly $56 million, which represented a new quarterly record high for the company. And adjusted FFO increased 10% compared to the second quarter of last year, which was our second consecutive quarter of double-digit growth in AFFO.

Jonathan P. Stanner: Thanks, Adam, and thank you all for joining us today for our second quarter 2024 Earnings Conference Call.

Jonathan P. Stanner: We were once again extremely pleased with our second quarter operating performance and financial results as adjusted EBITDA RE increased 6% to nearly $56 million, which represented a new quarterly record high for the company.

Jonathan P. Stanner: And adjusted FFO increased 10% compared to the second quarter of last year, which was our second consecutive quarter of double-digit growth in AFFO.

Jonathan P. Stanner: Pro forma ref bar increased 3.4% year over year, as our portfolio continued to consistently outperform the total U.S. lodging industry at upscale chain scale. The second quarter marked the 13th consecutive quarter that our pro forma portfolio has exceeded the total U.S. average REV PAR growth Our asset management team and operating partners also continued to do a terrific job managing expenses during the quarter, resulting in hotel EBITDA growth of 6% on flow through of more than 70%, which drove hotel EBITDA margin expansion of 120 basis points compared to the second quarter of last year.

Jonathan P. Stanner: Pro Forma RevPAR increased 3.4% year-over-year as our portfolio continued to consistently outperform the total U.S. lodging industry in upscale chain scale. The second quarter marked the 13th consecutive quarter that our Pro Forma portfolio has exceeded the total U.S. average RevPAR growth.

John Stanner: average rev part growth. Our asset management team and operating partners also continue to do a terrific job managing expenses during the quarter, resulting in hotel EVA-DRE have 6% on flow-through of more than 70%, which drove hotel EVA-DRE on margin expansion of 120 basis points compared to the second quarter of last year. Fundamentals continued to improve across the company's portfolio in the second quarter, particularly in April and May, which had rev part growth of 4.5% and 6.5%, respectively. Rev part growth for the quarter was predominantly driven by a 2.4% increase in occupancy, which was concentrated in urban and suburban markets.

Jonathan P. Stanner: Our asset management team and operating partners also continue to do a terrific job managing expenses during the quarter.

Jonathan P. Stanner: resulting in hotel EBITDA growth of 6% on a flow-through of more than 70%, which drove hotel EBITDA margin expansion of 120 basis points compared to the second quarter of last year.

Jonathan P. Stanner: Fundamentals continued to improve across the company's portfolio in the second quarter, particularly in April and May, which had REVPAR growth of 4.5% and 6.5%, respectively. Grand Park growth for the quarter was predominantly driven by a 2.4% increase in occupancy, which was concentrated in urban and suburban markets. Our portfolio also continues to benefit from the strong group demand the industry is experiencing, as second quarter group REV-R increased 7.5% compared to the prior year, an increase of nearly 20% in our urban portfolio specifically. Our groups are often smaller, self-contained events, which have been robust.

Jonathan P. Stanner: Fundamentals continue to improve across the company's portfolio in the second quarter, particularly in April and May, which had RevPAR growth of 4.5% and 6.5% respectively.

Jonathan P. Stanner: Grass part growth for the quarter was predominantly driven by a 2.4% increase in occupancy, which was concentrated in urban and suburban markets.

John Stanner: Our portfolio also continues to benefit from the strong group demand the industry is experiencing, as second quarter group rev part increased 7.5% compared to the prior year, and increased nearly 20% in our urban portfolio specifically. Our groups are often smaller, self-contained events, which have been robust, and we also continue to benefit from overflow of larger city-wide demand in the local marketplace. Our rev part growth continues to be driven by strong weekday in urban demand, which increased by approximately 4% in 5% respectively in the second quarter. Total portfolio rev part on Mondays, Tuesdays, and Wednesdays improved throughout the second quarter, increasing by 4% year over year and 8% when isolating those days of the week to the company's urban portfolio, supported by strong group business and the continuing recovery of corporate transient demand.

Jonathan P. Stanner: Our portfolio also continues to benefit from the strong group demand the industry is experiencing, as second quarter group REVPAR increased 7.5% compared to the prior year, an increase nearly 20% in our urban portfolio specifically.

Jonathan P. Stanner: And we also continue to benefit from the overflow of larger citywide demand in the local marketplace. Our railcar growth continues to be driven by strong weekday and urban demand, which increased by approximately 4% and 5%, respectively, in the second quarter. Total portfolio REVPAR on Mondays, Tuesdays, and Wednesdays improved throughout the second quarter, increasing by 4% year over year and 8% when isolating those days of the week to the company's urban portfolio, supported by Strong Group Business and the continuing recovery of corporate transient demand.

Jonathan P. Stanner: Our groups are often smaller, self-contained events, which have been robust, and we also continue to benefit from overflow of larger citywide demand in the local marketplace.

Jonathan P. Stanner: Our real part growth continues to be driven by strong weekday and urban demand, which increased by approximately 4% and 5% respectively in the second quarter.

Jonathan P. Stanner: Total portfolio REVPAR on Mondays, Tuesdays, and Wednesdays improved throughout the second quarter, increasing by 4% year-over-year and 8% when isolating those days of the week to the company's urban portfolio, supported by strong group business and the continuing recovery of corporate transient demand.

John Stanner: Weekend Rep are increased 1.3% during the quarter, as we are seeing moderating leisure demand and a return to more typical travel patterns. As we've discussed on previous calls, we believe our portfolio is well positioned for relative outperformance, given our exposure to several urban markets that have been slower to recover. Five of those markets in particular, New Orleans, Baltimore, Minneapolis, Louisville, and the greater San Francisco Bay and Silicon Valley area represented 17 of our own hotels in the second quarter. That finished 2023 approximately $22 million below 2019 hotel EBITL levels on rail park that was less than 75% recovered.

Jonathan P. Stanner: Weekend ref par increased 1.3% during the quarter, as we are seeing moderating leisure demand and a return to more typical travel patterns. As we've discussed on previous calls, we believe our portfolio is well positioned for relative outperformance, given our exposure to several urban markets that have been slower to recover. Five of those markets, in particular, New Orleans, Baltimore, Minneapolis, Louisville, and the greater San Francisco Bay and Silicon Valley area, represented 17 of our owned hotels in the second quarter.

Jonathan P. Stanner: Weekend ref par increased 1.3% during the quarter as we are seeing moderating leisure demand and a return to more typical travel patterns.

Jonathan P. Stanner: As we've discussed on previous calls, we believe our portfolio is well-positioned for relative outperformance, given our exposure to several urban markets that have been slower to recover.

Jonathan P. Stanner: Five of those markets in particular, New Orleans, Baltimore, Minneapolis, Louisville, and the greater San Francisco Bay and Silicon Valley area, represented 17 of our owned hotels in the second quarter.

Jonathan P. Stanner: That finished 2023 approximately $22 million below 2019 hotel EBITDA levels. On RevPAR, that was less than 75% recovered. In the second quarter, these 17 hotels produced rep par growth of over 6% and hotel EBITDA growth of 22%, highlighted by 23% railcar growth in Louisville and 17% railcar growth in Minneapolis. The recovery of technology-related business travel in our Silicon Valley hotel is accelerating, which grew RevPAR by nearly 20% and EBITDA by nearly 60% during the quarter. San Francisco remains the one notable and well-publicized pocket of weakness among our recovering markets, as RevPAR declined year-over-year for the quarter.

Jonathan P. Stanner: that finished 2023 approximately $22 million below 2019 hotel EBITDA levels. On RevPAR, that was less than 75% recovered.

John Stanner: In the second quarter, these 17 hotels produced rail part growth of over 6% and hotel EBITL growth of 22%, highlighted by 23% rail part growth in Louisville and 17% rail part growth in Minneapolis. The recovery of technology-related business travel in our Silicon Valley hotel is accelerating, which grew rail part by nearly 20%, and EBITL by nearly 60% during the quarter. San Francisco remains the one notable and well-publicized pocket of weakness among our recovering markets, as rail part declined year-over-year for the quarter. Excluding our three San Francisco assets, Rev part increased 11% in the remaining 14 hotels, and EBITL died increasingly 40% year-over-year in the second quarter.

Jonathan P. Stanner: In the second quarter, these 17 hotels produced railcar growth of over 6% and hotel EBITDA growth of 22%, highlighted by 23% railcar growth in Louisville and 17% railcar growth in Minneapolis.

Jonathan P. Stanner: The recovery of technology-related business travel in our Silicon Valley Hotel is accelerating, which grew Rev-Bar by nearly 20% and EBITDA by nearly 60% during the quarter.

Jonathan P. Stanner: San Francisco remains the one notable and well-publicized pocket of weakness among our recovery markets as REVPAR declined year over year for the quarter.

Jonathan P. Stanner: Excluding our three San Francisco assets, RevPAR increased 11% in the remaining 14 hotels, and EVADA increased nearly 40% year-over-year in the second quarter.

Jonathan P. Stanner: Excluding our three San Francisco assets, REVPAR increased 11% in the remaining 14 hotels, and EBITDA increased nearly 40% year-over-year in the second quarter. Year-to-date, this portfolio has grown RevPAR by 8% and EBITDA by over 30% as we continue to close the gap relative to pre-pandemic performance. We expect these five lagging markets to continue to drive outsized REVPAR and EBITDA growth for our portfolio for the remainder of the year. Additionally, while our lagging markets have been the primary drivers of our year-to-date REVPAR growth, we've experienced broad-based demand growth in our urban portfolio, highlighted by Indianapolis, Cleveland, and Charlotte, which all experienced double-digit REVPAR growth during the second quarter.

John Stanner: Year-to-date, this portfolio has grown rev part by 8%, and EBITL died by over 30%, as we continue to close the gap relative to pre-pandemic performance. We expect these five lagging markets to continue to drive outside Rev part and EBITL die growth for our portfolio for the remainder of the year. All our lagging markets have been the primary drivers of our year-to-date Rev part growth. We've experienced broad-based man growth in our urban portfolio, highlighted by Indianapolis, Cleveland, and Charlotte, which all experienced double-digit Rev part growth during the second quarter.

Jonathan P. Stanner: Year-to-date, this portfolio has grown RevPAR by 8% and EBITDA by over 30% as we continue to close the gap relative to pre-pandemic performance.

Jonathan P. Stanner: We expect these five lagging markets to continue to drive Outsize RevPAR and EBITDA growth for our portfolio for the remainder of the year.

Jonathan P. Stanner: While our lagging markets have been the primary drivers of our year-to-date RevPAR growth, we've experienced broad-based demand growth in our urban portfolio, highlighted by Indianapolis, Cleveland, and Charlotte, which all experienced double-digit RevPAR growth during the second quarter.

John Stanner: From a capital allocation standpoint, we continue to improve the overall quality of our portfolio and health of our balance sheet during the quarter. Since 2023, we sold nine hotels for a combined $131 million, including the three hotels sold during the quarter, at a blended capitalization rate of approximately 5%, inclusive of $44 million of foregone capital needs, based on the estimated trailing 12-month net operating income at the time of each sale. The combined Rev part of these hotels was approximately $87, which is nearly a 30% discount to the pro-forma portfolio. Our disposition efforts have facilitated nearly a full-term reduction in our net debt to EBITL die ratio, enhance the quality and growth profile of our portfolio, and significantly reduce near-term CAPX requirements.

Jonathan P. Stanner: From a capital allocation standpoint, we continue to improve the overall quality of our portfolio and the health of our balance sheet during the quarter. Since 2023, we've sold nine hotels for a combined $131 million, including the three hotels sold during the quarter at a blended capitalization rate of approximately 5%, inclusive of $44 million of foregone capital needs based on the estimated trailing 12-month net operating income at the time of each sale. The combined rev part of these hotels was approximately $87, which is nearly a 30% discount to the pro forma portfolio. Our disposition efforts have facilitated nearly a full turn reduction in our net debt to EBITDA ratio, enhanced the quality and growth profile of our portfolio, and significantly reduced near-term CapEx requirements.

Jonathan P. Stanner: From a capital allocation standpoint, we continue to improve the overall quality of our portfolio and health of our balance sheet during the quarter.

Jonathan P. Stanner: Since 2023, we've sold nine hotels for a combined $131 million.

Jonathan P. Stanner: including the three hotels sold during the quarter, at a blended capitalization rate of approximately 5%, inclusive of $44 million of foregone capital needs, based on the estimated trailing 12-month net operating income at the time of each sale.

Jonathan P. Stanner: The combined rev par of these hotels was approximately $87, which is nearly a 30% discount to the pro forma portfolio.

Jonathan P. Stanner: Our disposition efforts have facilitated nearly a full-term reduction in our net debt to EBITDA ratio, enhanced the quality and growth profile of our portfolio, and significantly reduced near-term CapEx requirements.

John Stanner: In our earnings press release yesterday, we provided updated guidance ranges that reflect actual first and second quarter results in our revised outlook for the remainder of the year. We reduced our full-year Rev part growth range to 1% to 2.5%, which was predominantly driven by softer demand and a tempered outlook over peak summer-leisure travel months. June was a particularly uneven month, as strength in the first half of the month was offset by a slow travel week around the Juneteenth holiday. The easier demand broadly across our industry has continued to normalize this summer, particularly in certain resort markets that experienced tremendous rate growth in 2021 and 2022 coming out of the pandemic, which is offsetting some of the growth we are experiencing in urban and suburban markets, which represent approximately 75% of Summit portfolio.

Jonathan P. Stanner: In our earnings press release yesterday, we provided updated guidance ranges that reflect actual first and second quarter results and our revised outlook for the remainder of the year. We reduced our full-year REVPAR growth range to 1% to 2.5%, which was predominantly driven by softer demand and a tempered outlook over peak summer leisure travel months. June was a particularly uneven month, as strength in the first half of the month was offset by a slow travel week around the Juneteenth holiday, which resulted in a REF PAR decline of 1% for the month.

Jonathan P. Stanner: In our earnings press release yesterday, we provided updated guidance ranges that reflect actual first and second quarter results and our revised outlook for the remainder of the year.

Jonathan P. Stanner: We reduced our full-year REVPAR growth range to 1% to 2.5%, which was predominantly driven by softer demand and a tempered outlook over peak summer leisure travel months.

Jonathan P. Stanner: June was a particularly uneven month as strength in the first half of the month was offset by a slow travel week around the Juneteenth holiday, which resulted in a REV PAR decline of 1% for the month.

Jonathan P. Stanner: July has followed a similar pattern, as REVPAR in the first half of the month declined 2%, driven by a slow post-4th of July holiday week before rebounding in the back half of the month. We expect full month July rep part to be modestly positive year over year. Leisure demand broadly across our industry has continued to normalize this summer, particularly in certain resort markets that experienced tremendous rate growth in 2021 and 2022 coming out of the pandemic, which is offsetting some of the growth we are experiencing in urban and suburban markets, which represent approximately 75% of Summit's portfolio. Last summer's trends toward greater international travel and cruises have largely continued into this year, creating some additional headwinds to domestic leisure travel.

Jonathan P. Stanner: July has followed a similar pattern as RevPAR in the first half of the month declined 2% driven by a slow post-4th of July holiday week before rebounding in the back half of the month. We expect full month of July RevPAR to be modestly positive year over year.

Jonathan P. Stanner: Leisure demand broadly across our industry has continued to normalize this summer, particularly in certain resort markets that experienced tremendous rate growth in 2021 and 2022 coming out of the pandemic.

Jonathan P. Stanner: which is offsetting some of the growth we are experiencing in urban and suburban markets which represent approximately 75% of Summit's portfolio.

John Stanner: Last summer's trends towards greater international travel and cruises have largely continued into this year, creating some additional headwinds to domestic leisure travel. All our top line assumptions have moderated for the second half of the year. We made only a minor adjustment to our adjusted EBITDA RE range, which highlights the strength of our efficient operating model and our ability to drive hotel EBITDA growth and margin expansion despite lower revenue growth expectations. We modestly lowered the top end of our adjusted EBITDA RE range, which reduced the midpoint of the range by just 1%. It's worth noting that the initial midpoint of our initial full year adjusted EBITDA guidance range has remained relatively constant despite the sale of three hotels for $84 million in the second quarter.

Jonathan P. Stanner: Last summer's trends towards greater international travel and cruises have largely continued into this year, creating some additional headwinds to domestic leisure travel.

Jonathan P. Stanner: All our top-line assumptions have moderated for the second half of the year. We made only a minor adjustment to our adjusted EBITDA RE range, which highlights the strength of our efficient operating model and our ability to drive hotel EBITDA growth and margin expansion despite lower revenue growth expectations. We modestly lowered the top end of our adjusted EBITDA RE range, which reduced the midpoint of the range by just one percent. It's worth noting that the midpoint of our initial full year adjusted EBITDA guidance range has remained relatively constant despite the sale of three hotels for $84 million in the second quarter.

Jonathan P. Stanner: All our top-line assumptions have moderated for the second half of the year. We made only a minor adjustment to our adjusted EBITDA RE range.

Jonathan P. Stanner: which highlights the strength of our efficient operating model and our ability to drive hotel EBITDA growth and margin expansion despite lower revenue growth expectations.

Jonathan P. Stanner: We modestly lowered the top end of our adjusted EBITDA RE range, which reduced the midpoint of the range by just 1%.

Jonathan P. Stanner: It's worth noting that the midpoint of our initial full year adjusted EBITDA guidance range has remained relatively constant despite the sale of three hotels for $84 million in the second quarter.

John Stanner: Important, we are maintaining the midpoint of our AFFO and AFFO per share ranges, which further highlights these accretive dispositions and our commitment to leveraging the balance sheet, as well as our ability to effectively recycle capital.

Jonathan P. Stanner: Importantly, we are maintaining the midpoint of our AFFO and AFFO per share range, which further highlights these accretive dispositions and our commitment to leveraging the balance sheet as well as our ability to effectively recycle capital. With that, I'll turn the call over to our CFO, Trey Conkling.

Jonathan P. Stanner: Importantly, we are maintaining the midpoint of our AFFO and AFFO per share ranges, which further highlights these accretive dispositions and our commitment to deleveraging the balance sheet, as well as our ability to effectively recycle capital.

Trey Conkling: With that, I'll turn the call over to our CFO, Trey Conquan.

Trey Conkling: Thanks, John, and good morning, everyone. Our strong second quarter, 2024 performance, represented a continuation of recent operating trends as growth within our portfolio was once again driven by the company's urban and suburban hotels, which generated part increases of 5.4% and 5.8%, respectively, both of which exceeded the national averages compared to their respective location types. Together, these two location types comprise approximately 75% of our portfolio. Strength in our urban portfolio was driven by continued outside growth in notable sunbelt markets, such as Dallas and Charlotte, but even more so by markets outside of the sunbelt, such as Indianapolis, Cleveland, Louisville, Minneapolis, and Baltimore.

William H. Conkling: Thanks, John, and good morning, everyone. Our strong second quarter 2024 performance represented a continuation of recent operating trends, as growth within our portfolio was once again driven by the company's urban and suburban hotels, which generated REVPAR increases of 5.4% and 5.8%, respectively, both of which exceeded the national averages compared to their respective location types. Together, these two location types comprise approximately 75% of our pro forma portfolio. Strength in our urban portfolio was driven by continued outsized growth in notable sunbelt markets such as Dallas and Charlotte, but even more so by markets outside of the Sun Belt such as Indianapolis, Cleveland, Louisville, Minneapolis, and Baltimore.

Jonathan P. Stanner: With that, I'll turn the call over to our CFO , Trey Conkling.

William H. Conkling: Thanks, John , and good morning, everyone. Our strong second quarter 2024 performance represented a continuation of recent operating trends, as growth within our portfolio was once again driven by the company's urban and suburban hotels.

William H. Conkling: which generated REVPAR increases of 5.4% and 5.8% respectively, both of which exceeded the national averages compared to their respective location types.

William H. Conkling: Together, these two location types comprise approximately 75% of our Proforma portfolio.

William H. Conkling: Strength in our urban portfolio was driven by continued outsized growth in notable Sunbelt markets such as Dallas and Charlotte, but even more so by markets outside of the Sunbelt such as Indianapolis, Cleveland, Louisville, Minneapolis, and Baltimore.

Trey Conkling: All of which posted double-digit RevPAR growth and benefited from numerous special events and more favorable seasonal travel demand patterns. In particular, our urban hotels benefited from robust group demand, for which RevPAR increased approximately 18% versus the second quarter of 2023, despite a difficult year-over-year comparison, as eight cities within our portfolio hosted Taylor Swift concerts in the second quarter of last year. Fundamentals within our suburban portfolio remained strong as both corporate negotiated and group RevPAR increased 6% compared to prior year. This was led by our four hotels in Denver, three of which were recently renovated and had a combined rev-part increase of 24% for the second quarter.

William H. Conkling: All of which posted double-digit REVPAR growth and benefited from numerous special events and more favorable seasonal travel demand. In particular, our urban hotels benefited from robust group demand, for which RevPAR increased approximately 18% versus the second quarter of 2023. This is despite a difficult year-over-year comparison, as eight cities within our portfolio hosted Taylor Swift concerts in the second quarter of last year.

William H. Conkling: All of which posted double-digit REVPAR growth and benefited from numerous special events and more favorable seasonal travel demand patterns.

William H. Conkling: In particular, our urban hotels benefited from robust group demand, for which RevPAR increased approximately 18% versus the second quarter of 2023.

William H. Conkling: Despite a difficult year-over-year comparison, as eight cities within our portfolio hosted Taylor Swift concerts in the second quarter of last year.

William H. Conkling: Fundamentals within our suburban portfolio remain strong, as both Corporate Negotiated and Group REVPAR increased 6% compared to the prior year. This was led by our four hotels in Denver, three of which were recently renovated and had a combined REVPAR increase of 24% for the second quarter. REVFAR for our resort and small town metro assets declined modestly year over year, primarily due to the transformative ongoing renovation at assets such as the Hotel Indigo Asheville and Courtyard Fort Lauderdale Beach.

William H. Conkling: Fundamentals within our Suburban portfolio remain strong as both Corporate Negotiated and Group REVPAR increased 6% compared to prior year.

William H. Conkling: This was led by our four hotels in Denver, three of which were recently renovated and had a combined REVPAR increase of 24% for the second quarter.

Trey Conkling: Rev-part for our resort and small town metro assets declined modestly year-over-year, primarily due to the transformative ongoing renovation at assets such as the Hotel Indigo Asheville and Courtyard Fort Lauderdale Beach. Rev-part for these segments remained meaningfully above 2019 levels. Growth in non-rooms revenue increased over 5.5% for the quarter. This trend continues to be driven by the identification of paid parking opportunities, the implementation of resort fees, and other ancillary revenue capture, given increased occupancy during the quarter. Moderating expense growth was a key driver of strong second quarter results and represents the fourth consecutive quarter that expenses have exhibited in a more normalized cadence representative of a stabilized cost structure.

William H. Conkling: REVFAR for our resort and small-town metro assets declined modestly year over year, primarily due to the transformative ongoing renovation at assets such as the Hotel Indigo Asheville and Courtyard Fort Lauderdale Beach.

William H. Conkling: RevPAR for these segments remains meaningfully above 2019 levels, and growth in non-room revenue increased over 5.5% for the quarter. This trend continues to be driven by the identification of paid parking opportunities, the implementation of resort fees, and other ancillary revenue capture given increased occupancy during the quarter. Additionally, moderating expense growth was a key driver of strong second quarter results and represents the fourth consecutive quarter that expenses have exhibited a more normalized cadence representative of a stabilized cost structure.

William H. Conkling: RevPAR for these segments remains meaningfully above 2019 levels.

William H. Conkling: Growth in non-rooms revenue increased over 5.5% for the quarter.

William H. Conkling: This trend continues to be driven by the identification of paid parking opportunities, the implementation of resort fees, and other ancillary revenue capture, given increased occupancy during the quarter.

William H. Conkling: Moderating expense growth was a key driver of strong second quarter results and represents the fourth consecutive quarter that expenses have exhibited a more normalized cadence representative of a stabilized cost structure.

Trey Conkling: For the quarter, operating expenses increased by a modest 2.8%, and increased only 0.4% on a per-occupied room basis for the pro-former portfolio. Productivity improved across the portfolio, resulting from a concerted focus on retention initiatives and less reliance on contract labor. The success of our retention initiatives is evident as our average FTE count has increased to 29 FTEs per hotel, which remains 15% below pre-pandemic levels, but represents an incrementally more cost-efficient labor structure. During the quarter, turnover declined by 15% compared to the same period last year, and contract labor declined by 10% on a per-occupied room basis, approaching levels in line with the onset of the pandemic.

William H. Conkling: For the quarter, operating expenses increased by a modest 2.8% and increased only 0.4% on a per-occupied room basis for the pro forma portfolio. Productivity improved across the portfolio, resulting from a concerted focus on retention initiatives and less reliance on contract labor. The success of our retention initiatives is evident as our average FTE count has increased to 29 FTEs per hotel, which remains 15% below pre-pandemic levels but represents an incrementally more cost-efficient labor structure. During the quarter, turnover declined by 15% compared to the same period last year, and contract labor declined by 10% on a per-occupied room basis, approaching levels in line with the onset of the pandemic.

William H. Conkling: For the quarter, operating expenses increased by a modest 2.8%, and increased only 0.4% on a per-occupied room basis for the pro forma portfolio.

William H. Conkling: Productivity improved across the portfolio, resulting from a concerted focus on retention initiatives and less reliance on contract labor.

William H. Conkling: The success of our retention initiatives is evident as our average FTE count has increased to 29 FTEs per hotel, which remains 15% below pre-pandemic levels, but represents an incrementally more cost-efficient labor structure.

William H. Conkling: During the quarter, turnover declined by 15% compared to the same period last year, and contract labor declined by 10% on a per occupied room basis. Approaching levels in line with the onset of the pandemic.

Trey Conkling: Year-to-date operating expenses have increased 2.6% on an absolute basis, and have declined to 0.3% on a per-occupied room basis. The new Crest image portfolio continued to meet expectations in the second quarter, generating rev-part growth of 3.3%, which resulted in a 111% rev-part index, and an impressive 7% in hotel EBITDA growth, on revenue that was primarily occupancy-driven. Operating expenses increased a modest 1% on an absolute basis, and declined by over 1% on a per-occupied room basis. The portfolio's ongoing market share gains and thoughtful expense management continued to validate our team's ability to identify value-enhancing cluster opportunities and unique revenue management strategies, as well as an ability to leverage an already flexible operating model that drives strong bottom-line results.

William H. Conkling: Year-to-date operating expenses have increased 2.6% on an absolute basis and have declined to 0.3% on a per-occupied room basis. The Newcrest Image Portfolio continued to meet expectations in the second quarter, generating REVPAR growth of 3.3%, which resulted in a 111% REVPAR index, and an impressive 7% in hotel EBITDA growth on revenue that was primarily occupancy driven. Operating expenses increased by a modest 1% on an absolute basis and declined by over 1% on a per-occupied room basis.

William H. Conkling: Year-to-date operating expenses have increased 2.6 percent on an absolute basis and have declined to 0.3 percent on a per occupied room basis.

Speaker Change: The new Crest image portfolio continued to meet expectations in the second quarter, generating RevPAR growth of 3.3%, which resulted in a 111% RevPAR index and an impressive 7% in hotel EBITDA growth on revenue that was primarily occupancy driven.

William H. Conkling: Portfolio's ongoing market share gains and Thoughtful Expense Management continue to validate our team's ability to identify value-enhancing cluster opportunities and Unique Revenue Management Strategies, as well as an ability to leverage an already flexible operating model to achieve strong bottom-line results. Pro forma hotel EBITDA for the second quarter was $73.1 million, a 7% increase from the second quarter of last year, driven by over 70% flow-through that resulted in 120 basis points of margin expansion. Despite REVPAR growth that was primarily occupancy-driven, combined labor efficiencies alongside other rooms and food and beverage expense management initiatives resulted in gross operating profit margin expanding over 40 basis points during the quarter. Further expense reductions in property taxes and management fee expense drove the majority of the remaining margin expansion. Notably, Hotel Evita increased in both the company's wholly owned and GIC joint venture portfolio.

Speaker Change: and unique revenue management strategies as well as an ability to leverage an already flexible operating model to try strong bottom-line results.

Trey Conkling: Perform a hotel EBITDA for the second quarter was $73.1 million, a 7% increase from the second quarter of last year, driven by over 70% flow through that resulted in 120 basis points of margin expansion, despite RevPAR growth that was primarily occupancy-driven. Combined labor efficiencies alongside other rooms and food and beverage expense management initiatives resulted in gross operating profit margin expanding over 40 basis points during the further expense reductions in property taxes and management fee expense drove the majority of the remaining margin expansion. Notably, hotel EBITDA increased in both the company's wholly owned and GIC joint venture portfolios.

Speaker Change: Perform a hotel EBITDA for the second quarter was $73.1 million, a 7% increase from the second quarter of last year.

Speaker Change: driven by over 70% flow-through that resulted in 120 basis points of margin expansion despite REVPAR growth that was primarily occupancy driven.

Speaker Change: resulted in gross operating profit margin expanding over 40 basis points during the quarter.

Speaker Change: Notably, Hotel Evita increased in both the company's wholly owned and GIC joint venture portfolios.

Trey Conkling: Adjusted EBITDA for the quarter was $55.9 million, a 6% increase compared to the second quarter of 2023, and adjusted FFO was $36.4 million, or 29 cents per share, a 10% increase versus the same time period last year. From a capital expenditure standpoint, in the second quarter we invested approximately $21 million in our portfolio on a consolidated basis, and approximately $18 million on a pro-rata basis. Year to date, we have invested $39 million on a consolidated basis, and $33 million on a pro-rata basis. CAPEX spend for the second quarter was primarily driven by comprehensive renovations at our Hilton Garden in Milpitas, Residence in Hillsboro, and the C-Sweets Tucson, Courtyard New Haven, Hotel Indigo Asheville, and our Courtyard Grapevine.

William H. Conkling: Adjusted EBITDA for the quarter was $55.9 million, a 6% increase compared to the second quarter of 2023. Adjusted FFO was $36.4 million, or $0.29 per share, a 10% increase versus the same time period last year. From a capital expenditure standpoint, in the second quarter, we invested approximately $21 million in our portfolio on a consolidated basis and approximately $18 million on a pro rata basis. Year-to-date, we have invested $39 million on a consolidated basis and $33 million on a pro rata basis. CapEx spend for the second quarter was primarily driven by comprehensive renovations at our Hilton Garden Inn, Milpitas; Hilton Residence in Hillsboro, Embassy Suites Tucson, Courtyard New Haven, Hotel Indigo Asheville, and our courtyard grapevine.

Speaker Change: Adjusted EBITDA for the quarter was $55.9 million, a 6% increase compared to the second quarter of 2023.

Speaker Change: An adjusted FFO was $36.4 million, or $0.29 per share, a 10% increase versus the same time period last year.

Speaker Change: From a capital expenditure standpoint, in the second quarter we invested approximately $21 million in our portfolio on a consolidated basis.

Speaker Change: and approximately $18 million on a pro-rata basis.

Speaker Change: Year-to-date, we have invested $39 million on a consolidated basis and $33 million on a pro-rata basis.

Speaker Change: CapEx spend for the second quarter was primarily driven by comprehensive renovations at our Hilton Garden Inn Milpitas, Residence Inn Hillsboro, Embassy Suites Tucson, Courtyard New Haven,

Trey Conkling: Since the beginning of 2022, we have invested over $200 million into our portfolio, which has an average effective age of five years and ensures the quality of our portfolio positions the company to drive profitability and market share in the future. Additionally, during the second quarter, we commence a significant renovation and repositioning of our Courtyard Fort Lauderdale Beach Hotel. To complement its irreplaceable ocean front location in a high barrier to entry market, the project scope will include a customized guest room and corridor renovation, reconfiguration, and modernization of the public spaces, and a high ROI re-imaging of the pool deck and restaurant space to offer a unique outdoor experience.

William H. Conkling: Since the beginning of 2022, we have invested over $200 million in our portfolio, which has an average effective age of five years and ensures the quality of our portfolio positions the company to drive profitability and market share in the future. Additionally, during the second quarter, we commenced a significant renovation and repositioning of our Courtyard Fort Lauderdale Beach Hotel. To complement its irreplaceable oceanfront location in a high barrier-to-entry market, the project scope will include a customized guest room and corridor renovation, reconfiguration and modernization of the public spaces, and a high ROI re-imaging of the pool deck and restaurant space to offer a unique outdoor experience.

Speaker Change: Hotel Indigo Asheville, and our courtyard Grapevine.

Speaker Change: Since the beginning of 2022, we have invested over $200 million into our portfolio, which has an average effective age of five years and ensures the quality of our portfolio positions the company to drive profitability and market share in the future.

Speaker Change: Additionally, during the second quarter, we commenced a significant renovation and repositioning of our Courtyard Fort Lauderdale Beach Hotel.

Speaker Change: To complement its irreplaceable oceanfront location in a high barrier-to-entry market, the project scope will include a customized guest room and corridor renovation.

Speaker Change: Reconfiguration and Modernization of the Public Spaces

Speaker Change: and a high ROI re-imaging of the pool deck and restaurant space to offer a unique outdoor experience.

Trey Conkling: The project is expected to be completed by the first quarter 2025.

William H. Conkling: The project is expected to be completed by the first quarter 2025. The balance sheet continues to be well positioned, with total liquidity of over $325 million and an average length of maturity of over three years. An average interest rate of approximately 4.7%, that is nearly 80% hedging, and a leverage ratio that is nearly a full turn lower than it was a year ago. Throughout the second quarter, we completed various financing activities that further improved the balance sheet, including reducing overall pro rata indebtedness by over $100 million, utilizing proceeds from asset sales and cash on hand, inclusive of the repayment of our last remaining debt maturity for 2024.

Speaker Change: The project is expected to be completed by first quarter 2025.

Trey Conkling: The balance sheet continues to be well positioned with total liquidity of over $325 million, an average length of maturity of over three years, an average interest rate of approximately 4.7 percent that is nearly 80 percent hedged, and a leverage ratio that is nearly a full turn lower than it was a year ago. Throughout the second quarter, we completed various financing activities that further improve the balance sheet, including reducing overall pro-rata indebtedness by over $100 million, utilizing proceeds from asset sales and cash on hand, inclusive of the repayment of our last remaining debt maturity for 2024.

Speaker Change: The balance sheet continues to be well-positioned, with total liquidity of over $325 million, an average length of maturity of over three years,

Speaker Change: an average interest rate of approximately 4.7% that is nearly 80% hedged, and a leverage ratio that is nearly a full turn lower than it was a year ago.

Speaker Change: Throughout the second quarter, we completed various financing activities that further improved the balance sheet, including reducing overall pro rata indebtedness by over $100 million.

Speaker Change: Utilizing proceeds from asset sales and cash on hand. Inclusive of the repayment of our last remaining debt maturity for 2024.

Trey Conkling: During the quarter, we also repaid a property-level mortgage loan for $39 million prior to its scheduled maturity date, which represented an 8 percent discount on the $42 million outstanding loan balance and an accretive outcome for the company. Two of the three assets that collateralized the loan were added to our corporate credit facility borrowing base, providing increased strategic flexibility and feature borrowing capacity. As a result of our interest rate management efforts, our interest rate exposure continues to be effectively managed with a swap portfolio that has an average SOFA rate of less than 3 percent, and in net assets is net asset position of approximately $20 million.

William H. Conkling: During the quarter, we also repaid a property-level mortgage loan for $39 million prior to its scheduled maturity date, which represented an 8% discount on the $42 million outstanding loan balance and an accretive outcome for the company.

Speaker Change: During the quarter, we also repaid a property-level mortgage loan for $39 million prior to its scheduled maturity date.

Speaker Change: which represented an 8% discount on the $42 million outstanding loan balance and an accretive outcome for the company.

William H. Conkling: Two of the three assets that collateralized the loan were added to our corporate credit facility borrowing, providing increased strategic flexibility and future borrowing capacity as a result of our interest rate management efforts. Our interest rate exposure continues to be effectively managed with a swap portfolio that has an average SOFR rate of less than 3% and a net asset position of approximately $20 million. And approximately 76% of our pro rata share of debt is fixed after consideration of interest rate swaps.

Speaker Change: Two of the three assets that collateralized the loan were added to our corporate credit facility borrowing base, providing increased strategic flexibility and future borrowing capacity.

Speaker Change: as a result of our interest rate management efforts.

Speaker Change: Our interest rate exposure continues to be effectively managed with a swap portfolio that has an average SOFR rate of less than 3% and a net asset position of approximately $20 million.

Trey Conkling: and approximately 76% of our pro-rata share of debt is fixed after consideration of interest rate swap. When accounting for the company's Series E, F, and Z preferred equity within our capital structure, we are approximately 80% fixed. With no significant maturities until 2026, a staggered maturity schedule, and a strong liquidity profile, we believe the company is well positioned to achieve its growth objectives.

Speaker Change: And approximately 76% of our pro rata share of debt is fixed after consideration of interest rate swaps.

William H. Conkling: When accounting for the company's Series E, F, and Z preferred equity within our capital structure, we are approximately 80% fit, with no significant maturities until 2026. With a staggered maturity schedule and a strong liquidity profile, we believe the company is well-positioned to achieve its growth objectives. On July 25th, our Board of Directors declared a quarterly common dividend of $0.08 per share, which, as a reminder, was increased 33% last quarter and represents a dividend yield of approximately 5.2% based on the annualized dividend of $0.32 per share.

Speaker Change: When accounting for the company's Series E, F, and Z preferred equity, within our capital structure, we are approximately 80% fixed.

Speaker Change: With no significant maturities until 2026, a staggered maturity schedule, and a strong liquidity profile, we believe the company is well positioned to achieve its growth objectives.

Trey Conkling: On July 25, our board of directors declared a quarterly common dividend of 8 cents per share, which, as a reminder, was increased 33% last quarter, and represents a dividend yield of approximately 5.2% based on the annualized dividend of 32 cents per share. The current dividend rate continues to represent a modest AFFO payout ratio of approximately 35% at the midpoint of our guidance, leaving ample room for potential increases over time, assuming no material changes to the current operating environment. The company continues to prioritize striking an appropriate balance between returning capital to shareholders, investing in our portfolio, reducing corporate leverage, and maintaining liquidity for future growth opportunities.

Speaker Change: On July 25th, our Board of Directors declared a quarterly common dividend of $0.08 per share.

Speaker Change: which, as a reminder, was increased 33% last quarter.

Speaker Change: and represents a dividend yield of approximately 5.2% based on the annualized dividend of $0.32 per share.

William H. Conkling: The current dividend rate continues to represent a modest AFFO payout ratio of approximately 35% at the midpoint of our guidance, leaving ample room for potential increases over time, assuming no material changes to the current operating environment. The company continues to prioritize striking an appropriate balance between returning capital to shareholders, investing in our portfolio, reducing corporate leverage, and maintaining liquidity for future growth opportunities. As John previously discussed, included in our press release last evening, we revised our full-year guidance for 2024 operational metrics, as well as certain non-operating items. This outlook is based on management's current view and does not account for any unexpected changes to the current operating environment, nor does it include any future transaction or capital markets activity.

Speaker Change: The current dividend rate continues to represent a modest AFFO payout ratio of approximately 35% at the midpoint of our guidance, leaving ample room for potential increases over time, assuming no material changes to the current operating environment.

Speaker Change: The company continues to prioritize striking an appropriate balance between returning capital to shareholders, investing in our portfolio, reducing corporate leverage, and maintaining liquidity for future growth opportunities.

Trey Conkling: As John previously discussed, included in our press release last evening, we revised our full-year guidance for 2024 operational metrics, as well as certain non-operational items. This outlook is based on management's current view and does not account for any unexpected changes to the current operating environment. Nor does it include any future transaction or capital markets activity. Based on the company's year-to-date operating results, as well as our future outlook, we are providing an updated rev-part growth range of 1% to 2.5% for the year. Although we have tempered our outlook for rev-part growth in 2024, we have made a very modest revision to our adjusted even a midpoint, and we are maintaining our adjusted FFO midpoint.

Speaker Change: As John previously discussed, included in our press release last evening, we revised our full year guidance for 2024 operational metrics.

Jonathan P. Stanner: as well as certain non-operational items.

Jonathan P. Stanner: This outlook is based on management's current view and does not account for any unexpected changes to the current operating environment.

William H. Conkling: Based on the company's year-to-date operating results, as well as our future outlook, we are providing an updated REVPAR growth range of 1% to 2.5% for the year. Although we have tempered our outlook for RevPAR growth in 2024, we have made a very modest revision to our adjusted EBIT and MIDT, and we are maintaining our adjusted FFO. Our revised adjusted EBITDA range of $188 million to $196 million represents a 1% decline at the mid-terms and reflects a more stabilized cost structure and the continued success of asset management initiatives.

Jonathan P. Stanner: Nor does it include any future transaction or capital markets activity.

Jonathan P. Stanner: Based on the company's year-to-date operating results, as well as our future outlook, we are providing an updated REVPAR growth range of 1% to 2.5% for the year.

Jonathan P. Stanner: Although we have tempered our outlook for REVPAR growth in 2024, we have made a very modest revision to our adjusted EBITDA midpoint, and we are maintaining our adjusted FFO midpoint.

Trey Conkling: Our revised adjusted even a range of 188 million to 196 million represents a 1% decline at the midpoint, and reflects a more stabilized cost structure and the continued success of asset management initiatives. Importantly, we are maintaining our adjusted FFO midpoint at 95 cents per share and narrowing the range to 91 cents per share to 99 cents per share, as the company continues to benefit from recent accretive dispositions and continued de-leveraging. At the midpoint of our rev-part guidance range, we would expect hotel EBITDA margins to contract approximately 25 basis points year-over-year, which implies contraction in the second half of 2024 of 100 to 150 basis points, primarily related to difficult year-over-year property tax comparisons, given the significant appeal success realized in the second half of 2023.

Jonathan P. Stanner: Our revised adjusted EBITDA range of $188 million to $196 million represents a 1% decline at the midpoint and reflects a more stabilized cost structure and the continued success of asset management initiatives.

William H. Conkling: Importantly, we are maintaining our adjusted FFO midpoint at $0.95 per share and narrowing the range to $0.91 per share to $0.99 per share as the company continues to benefit from recent accretive dispositions and continued deleveraging. At the midpoint of our REVPAR guidance range, we would expect hotel EBITDA margins to contract approximately 25 basis points year over year, which implies contraction in the second half of 2024 of 100 to 150 basis, primarily related to difficult year-over-year property tax comparisons, given the significant appeal success realized in the second half of 2023, a revised full year outlook for hotel even a margin contraction of 25 bases per night, represents a meaningful improvement compared to our initial full year guidance in February 2024, which estimated hotel even a margin contraction of approximately 75%.

Jonathan P. Stanner: Importantly, we are maintaining our adjusted FFO midpoint at $0.95 per share and narrowing the range to $0.91 per share to $0.99 per share as the company continues to benefit from recent accretive dispositions and continued deleveraging.

Jonathan P. Stanner: At the midpoint of our REVPAR guidance range, we would expect hotel EBITDA margins to contract approximately 25 basis points year-over-year.

Jonathan P. Stanner: which implies contraction in the second half of 2024 of 100 to 150 basis points.

Jonathan P. Stanner: primarily related to difficult year-over-year property tax comparisons.

Speaker Change: given the significant appeal success realized in the second half of 2023.

Trey Conkling: Our revised full-year outlook for hotel EBITDA margin contraction of 25 basis points, representing meaningful improvement compared to our initial full-year guidance in February 2024, which estimated hotel EBITDA margin contraction of approximately 75 basis. We respect pro-rata interest expense, excluding the amortization of deferred financing costs, to be approximately $55 million. Series E and Series F preferred dividends to be $15.9 million. Series E preferred distributions to be $2.6 million, and pro-rata capital expenditures to range from $65 to $85 million. As previously mentioned, given the increased size of the GIC joint venture, the fee income payable to Summit now covers nearly 15% of annual cash corporate GNA expense, excluding any promote distributions Summit may earn during the year.

Jonathan P. Stanner: A revised full-year outlook for hotel even-of-margin contraction of 25 basis points.

Jonathan P. Stanner: representing meaningful improvement compared to our initial full year guidance in February 2024, which estimated hotel even a margin contraction of approximately 75 basis points.

William H. Conkling: We expect pro rata interest expense, excluding the amortization of deferred financing costs, to be approximately $55 million, and Series E and Series F preferred dividends to be $15.9 million. Series Z preferred distributions to be $2.6 million, and pro rata capital expenditures to range from $65 to $85 million. As previously mentioned, given the increased size of the GIC joint venture, the fee income payable to Summit now covers nearly 15% of annual cash corporate G&A, excluding any promote distributions Summit may earn during the year. And with that, we'll open the call to your questions.

Jonathan P. Stanner: We expect pro rata interest expense, excluding the amortization of deferred financing costs, to be approximately $55 million.

Jonathan P. Stanner: Series E and Series F preferred dividends to be $15.9 million.

Jonathan P. Stanner: Series E preferred distributions to be 2.6 million dollars and pro rata capital expenditures to range from 65 to 85 million dollars.

Jonathan P. Stanner: As previously mentioned, given the increased size of the GIC joint venture, the fee income payable to Summit now covers nearly 15% of annual cash corporate G&A expense.

Operator: And with that, we'll open the call to your questions. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.

Jonathan P. Stanner: excluding any promote distributions Summit may earn during the year.

Operator: To ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster. Our first question comes from Dany Asad with Bank of America. Your line is open.

Speaker Change: And with that, we'll open the call to your questions.

Speaker Change: To ask a question, please press star 1 1 on your telephone and wait for your name to be announced.

Speaker Change: To withdraw your question, please press star 1 1 again.

Speaker Change: Please stand by while we compile the Q&A roster.

Dany Asad: Our first question comes from Dany Asad, with Bank of America; your line is open.

Speaker Change: Our first question comes from Dany Asad with Bank of America. Your line is open.

John Stanner: Hi, good morning, everybody. John, in your prepared remarks, you called out normalization over the peak summer leisure travel months as the primary driver of the rep part reduction.

Dany Asad: Hi, good morning, everybody. John, in your prepared remarks, you called out normalization over the peak summer leisure travel months as the primary driver of the REF PAR reduction. So if we just think about, you know, days of the week or markets, can we just elaborate on where and when we would expect to see this normalization?

Dany Asad: Hi, good morning, everybody.

Dany Asad: John , in your prepared remarks, you called out normalization over the peak summer leisure travel months as the primary driver of the REF PAR reduction. So if we just think about, you know, days of week or markets, can we just elaborate on where and when we would expect to see this normalization?

John Stanner: So if we just think about days of week or markets, can we just elaborate on where and when we would expect to see this normalization in Q3? Yeah, I think it's we're mostly seeing it around the weekends, and we're mostly seeing it in our more leisure-oriented markets.

Jonathan P. Stanner: Yeah, you know, I think it's, it's, we're mostly seeing it around the weekends, and we're mostly seeing it in our more leisure-oriented markets. You know, as we kind of said in the prepared remarks, urban markets continue to perform very well. The lagging, our lagging markets, in particular, have continued to perform very well. It has been softness in these markets that have, frankly, performed, you know, significantly above where they performed in the pre-pandemic environment.

Speaker Change: Thank you. Thank you.

Jonathan P. Stanner: Yeah, you know, I think it's, we're mostly seeing it around the weekends, and we're mostly seeing it in our more leisure-oriented markets. You know, as we kind of said on the prepared remarks, urban markets continue to perform very well. The lagging, our lagging markets in particular, have continued to perform very well. It has been softness in these markets that have frankly performed, you know, significantly above where they performed in the pre-pandemic environment. We have less of that pure resort type of exposure, and 75% of our portfolio is in urban and suburban markets. So I think we're a little more insulated that. Nonetheless, we have seen some pressure on pricing in these peak summer travel months, June and July specifically.

John Stanner: As we kind of sit on the prepared remarks, urban markets continue to perform very well. Our lagging markets, in particular, have continued to perform very well. It has been softness in these markets that have frankly performed significantly above where they performed in the pre-pandemic environment. We have less of that pure resort type of exposure, and 75% of our portfolios in urban and suburban markets. So I think we're a little more inflated than.

Jonathan P. Stanner: We have less of that pure resort type of exposure, and 75% of our portfolio is in urban and suburban markets, so I think we're a little more insulated at that. Nonetheless, we have seen some pressure on pricing in these peak summer travel months, June and July specifically. If I break it down a little bit by quarter, I'd say of the 125 basis point reduction in rough part growth at the midpoint, 25 to 50 basis points of it in the second quarter, specifically related to June, the balance of it in the third quarter, sorry, in the back half of the year. Got it.

John Stanner: Nonetheless, we have seen some pressure on pricing in these peak summer travel months, June and July, specifically. If I break it down a little bit by quarter, I'd say of the 125 basis point reduction, rough part growth at the midpoint 25 to 50 basis points of it's in the second quarter specifically related to June. The balance of it's in the third quarter and sorry in the back half of the year. Got it.

Speaker Change: If I break it down a little bit by quarter, I'd say of the 125 basis point reduction in REF PAR growth at the midpoint, 25 to 50 basis points of it in the second quarter, specifically related to June , the balance of it in the third quarter, sorry, in the back half of the year.

Operator: Got it. Okay, thank you very much. Thanks, Dan.

Operator: Thank you very much. Thanks, Dan. Thank you. One moment for our next question.

Speaker Change: Got it. OK. Thank you very much.

Operator: Thank you. One moment for our next question. Our next question comes from Michael Bellisario on Bayer. Your line is open.

Dan: Thanks, Dan.

Michael Bellisario: Our next question comes from Michael Bellisario. With Bear, your line is open.

Speaker Change: Thank you. One moment for our next question.

Speaker Change: Our next question comes from Michael Bellisario with Bayard. Your line is open.

Trey Conkling: Thanks.

Michael Joseph Bellisario: Thanks. Good morning, everyone.

Trey Conkling: Good morning, everyone. Morning.

Jonathan P. Stanner: Jon, first question for you, maybe just a bigger picture on growth and how you're thinking about the near-term outlook. Are we just operating broadly in the hotel industry, sort of 1 to 2 percent top line growth? Is expense growth at 3 percent? Is that the right run rate in that scenario? And then how do you guys think about same-store profitability in that growth backdrop?

Trey Conkling: Young first question for you may just have bigger picture picture on growth and higher thinking about the near term outlook. Are we just operating broadly in the. The industry sort of one to two percent top line is expense growth at 3%. Is that the right run rate in that scenario, and then how do you guys think about same sort of. Same sort of profitability in that growth backdrop.

Michael: Thanks. Good morning, everyone.

Michael: Good morning.

Speaker Change: John , first question for you, maybe just a bigger picture on growth and how you're thinking about the near-term outlook.

Jonathan P. Stanner: Are we just operating broadly in the...

Speaker Change: hotel industry sort of one to two percent top line is expense growth at three percent. Is that the right run rate in that scenario? And then kind of how do you guys think about same-store profitability in that growth backdrop?

John Stanner: Yeah, the board of Mic, thanks for the question. I think we are; I think it would be. I use caution and drawing conclusions just from the months of June and July. We've obviously seen some seen some softnesses, I elaborated on. A lot of that softness is concentrated around these holiday weeks. If I look at our performance in June, we were down 1% for the month. If I backed out the week of June, we were actually up 3% for the month. And I could tell a similar story in the month of July. And so I think you're seeing. I think what has changed post-pandemic is we've continued to see real softness in and around holiday weeks and following holiday weeks that's really affected business travel in a way that it hasn't necessarily in the past.

Jonathan P. Stanner: Yeah, good morning, Mike. Thanks for the question. I think we are, I think it would be, I use caution in drawing conclusions just from the month of June and July. We've obviously seen some softnesses I elaborated on. A lot of that softness is concentrated around these holiday weeks.

Speaker Change: Yeah, good morning Mike, thanks for the question. I think we are, I think it would be, I use caution in drawing conclusions just from the month of June and July . We've obviously seen some softness as I elaborated on. A lot of that softness is concentrated around these holiday weeks. If I look at our performance in June , we were down 1% for the month. If I backed out the week of Juneteenth, we were actually up 3% for the month. And I could tell a similar story in the month of July . And so I think you're seeing, I think what has changed post-pandemic is we've continued to see real softness in and around holiday weeks and following holiday weeks that's really affected business travel in a way that it hasn't necessarily.

Jonathan P. Stanner: If I look at our performance in June, we were down one percent for the month. But if I backed out the week of Juneteenth, we were actually up three percent for the month. And I could tell a similar story in the month of July.

Jonathan P. Stanner: And so I think you're seeing, I think what has changed post-pandemic is we've continued to see real softness in and around holiday weeks and following holiday weeks that's really affected business travel in a way that it hasn't necessarily affected it in the past. You know, April and May were up five and a half percent on a combined basis. And I do think we remain optimistic that as we get through the peak summer travel season and back into the fall, when we see more group and BT demand, you will see some reacceleration in top line growth.

Trey Conkling: April and May were up 5.5% on a combined basis. And I do think we remain optimistic that as we get through the peak summer travel season and back into the fall when we see more group and BT demand, you will see some re-acceleration in top lying growth.

Andrew Holt: You know, April and May were up 5.5% on a combined basis, and I do think we remain optimistic that as we get through the peak summer travel season and back into the fall when we see more group and BT demand, you will see some reacceleration in top-line growth. And I'll let Trey expand a little bit on what we're seeing on the expense side, but I do think that while our top-line growth expectations have moderated, our expectations on the expense side have changed pretty meaningfully as well. The team has done a terrific job managing expenses. The opportunity set that we identified early in the year around reductions in contract labor and reductions in turnover have taken hold, and I think that's why you've seen us be able to

Jonathan P. Stanner: And I'll let Trey expand a little bit on what we're seeing on the expense side, but I do think that while our top-line growth expectations have moderated, our expectations on the expense side have changed pretty meaningfully as well. The team has done a terrific job managing expenses. The opportunity set that we identified early in the year around reductions in contract labor and reductions in turnover has taken hold. And I think that's why you've seen us be able to expand our EBITDA margins by 90 basis points in the first half of the year.

Trey Conkling: And I'll let Tray expand a little bit on what we're seeing on the expense side. But I do think that while our top lying growth expectations have moderated, our expectations on the expense side have changed pretty meaningfully as well. The team has done a terrific job managing expenses. The opportunity set that we identified early in the year around reductions in contract labor and reductions in turnover have taken hold. I think that's why you've seen us be able to expand or even down margins by 90 basis points in the first half of the year. Yeah, I'm like just that to that.

William H. Conkling: Yeah, Mike, just to add to that, I think when we gave initial guidance at the beginning of the year, we talked about operating expenses increasing 4% to 5% for the year. I would say today that's probably 150 to 200 basis points lower. So when you kind of reference that 3% number, that feels in the right ballpark, that's obviously driven a lot by these labor efficiencies that John referred to, the improvement in productivity, the contract labor, you know, wage growth through the first six months of the year is up about 2%.

Trey Conkling: I think when we gave initial guidance at the beginning of the year, we talked about operating expenses increasing 4% to 5% per year. I would say today that's probably 150 to 200 basis points lower. When you kind of reference that 3% number that feels in the right fall park, that's obviously driven a lot by these labor efficiencies that John referred to, the improvement in productivity. The contract labor wage growth through the first six months of the year is up about 2%. We're seeing a real benefit from that perspective. I think some of the property tax stuff that we've talked about is certainly a benefit to this quarter.

Speaker Change: William Stanner, Adam Wudel, William Conkling

William H. Conkling: When you kind of reference that 3% number, that feels in the right ballpark. That's obviously driven a lot by these labor efficiencies that John referred to, the improvement in productivity.

William H. Conkling: So we're seeing a real benefit from that perspective. I think, you know, some of the property tax stuff that we've talked about is certainly a benefit for this quarter. It's a headwind in the fourth quarter. And so when you kind of look at the full year, we said, you know, margin contraction of about 25 basis points for the full year. I would say GOP is probably a little bit better than that based on the fact that, you know, a lot of these labor efficiencies and this reduced operating expense growth have moderated versus where we thought we would start this year.

William H. Conkling: The contract labor, you know, wage growth through the first six months of the year is up about 2%. So we're seeing a real benefit from that perspective. I think, you know, some of the property tax stuff that we've talked about is certainly a benefit to this quarter. It's a headwind in the fourth quarter. And so when you kind of look at the full year, we said, you know, margin contraction of about 25 basis points for the full year. I would say GOP is probably a little bit better than that based on the fact that, you know, a lot of these labor efficiencies and this reduced operating expense growth has

Trey Conkling: It's a headwind in the fourth quarter. When you look at the full year, we said margin contraction of about 25 basis points for the full year. I would say GOP is probably a little bit better than that based on the fact that a lot of these labor efficiencies and this reduced operating expense growth has moderated versus where we thought we would start the year.

Jonathan P. Stanner: Yeah, maybe just one more point on the same theme here. Again, when we gave full-year guidance, you know, we kind of said our expectation relative to historical levels was that we needed more than three, maybe three and a half to four percent REVPAR growth to kind of break even from a margin perspective. You know, as Trey just said, we obviously expect that to be much lower today. The midpoint of our revised REVPAR range is 1.75 percent.

John Stanner: Yeah, maybe just one more point on the same theme here. Again, when we gave full year guidance, we kind of said our expectation relative to historical levels was that we needed more than three, maybe three and a half to 4% rate of power growth to kind of break even from a margin perspective. As Tray just said, we obviously expect that to be much lower today. The midpoint of our revised REFR range is 1.75%. We're plus or minus break even at GOP levels at that level. So, we've obviously seen a reset lower in expenses and the ability to generate GOP and EBITDA growth on much lower growth rates than we thought in the beginning of the year.

William H. Conkling: has moderated versus where we thought we would start the year.

Mike: Yeah, Mike, maybe just one more point on the same theme here. Again, when we gave full year guidance, you know, we kind of said our expectation relative to historical levels was that we needed, you know, more than three, maybe three and a half to four percent REVPAR growth to kind of break even from a margin perspective. You know, as Trey just said, we obviously expect that to be much lower today. The midpoint of our revised REVPAR range is 1.75 percent. More plus or minus break even at GOP levels at that level. So we've obviously seen a reset lower in expenses and the ability to generate GOP and EBITDA growth on much lower REVPAR growth rates than we thought at the beginning of the year.

Jonathan P. Stanner: We're plus or minus break even at GOP levels at that level, so we've obviously seen a reset in expenses and the ability to generate GOP and EBITDA growth on much lower REVPAR growth rates than we thought at the beginning of the year.

William H. Conkling: That's helpful context. And then, just sort of a follow-up there for Trey, just on the second half outlook, can you maybe walk through some of the puts and takes between 3Q and 4Q for both REVPAR and margins? I know you mentioned the property tax impact will be 4Q, but anything else top line and on the expense side of 22 quarters? No, I think when we look at the second half from a margin perspective...

Trey Conkling: That's a couple of contacts, and then just sort of follow up there for Tray, just on the second half out. Can you maybe walk through some of the puts and TAY? between 3Q and 4Q for both red part and margins. I know you mentioned the property tax impact of the 4Q, but anything else, pop line and on the expense of the 22 quarters. No, I think when we look at the second half from a margin perspective, if you think about last year, our cost per occupied room in the first half of 2023 was about, you know, 8.5%, and then the second half of the year was about, you know, 1.5%.

Speaker Change: That's helpful context. And then just sort of a follow-up there for Trey, just on the second half outlook, can you maybe walk through some of the puts and takes?

Speaker Change: between 3Q and 4Q for both REVPAR and margins. I know you mentioned the property tax impact will be 4Q, but anything else, top line and on the expense side, it's 22 quarters.

William H. Conkling: No, I think when we look at the second half from a margin perspective, if you think about last year, our cost per occupied room in the first half of 2023 was up, you know, eight and a half percent. And then in the second half of the year, it was up, you know, one and a half percent. So we saw we're kind of in the fourth consecutive quarter of seeing this kind of really improved expense dynamic.

William H. Conkling: No, I think when we look at the second half from a margin perspective, if you think about last year, our cost per occupied room in the first half of 2023 was up, you know, 8.5%, and then the second half of the year, it was up, you know, 1.5%. So we saw, we've kind of in the fourth consecutive quarter of seeing this kind of really improved expense dynamic. And I think when we look at the second half.

Trey Conkling: So we saw, we've kind of the fourth consecutive quarter of the year seeing this kind of really improved expense dynamic. And I think when we look at the second half, it's a little bit more of a difficult comp related to GOP. And so I think when we guide to that 150, probably 50 basis points of that, you know, that down 150 and the second half is coming from GOP. And then the remainder of it is below GOP. It's property taxes, and it's related to a one-time insurance rebate from that perspective.

William H. Conkling: And I think when we look at the second half, it's a little bit more of a difficult comp related to GOP. And so I think when we got to that 150, probably 50 basis points of that, you know, that down 150 in the second half is coming from GOP. And then the remainder of it is below GOP. It's property taxes, and it's related to a one-time insurance rebate from that perspective. So, you know, on the whole, I think if you look at the year, as we said, it looks a lot better than where we started.

William H. Conkling: It's a little bit more of a difficult comp related to GOP, and so I think when we guide to that 150, probably 50 basis points.

William H. Conkling: of that, you know, that down $150,000 in the second half is coming from GOP and then the remainder of it is below GOP. It's property taxes and it's related to a one-time insurance rebate from that perspective. So, you know, on the whole, I think if you look at the year, as we said, it looks a lot more improved than where we started the year.

Trey Conkling: So, you know, on the whole, I think if you look at the year, as we said, it looks a lot more improved than where we started the year.

Operator: That's all from me. Thank you. Bye. Thank you.

Operator: Thank you. Our next question comes from Chris Woronka with Deutsche Bank. Your line is open.

William H. Conkling: That's all for me. Thank you.

Chris Luronka: Our next question comes from Chris Luronka with Deutsche Bank.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question comes from Chris Woronka with Deutsche Bank. Your line is open.

John Stanner: Your line is open.

John Stanner: Hey, good morning, guys. Thanks for all the details so far. So I guess my question kind of, this has been related to kind of back pass for our expectations. Are you guys seeing a chain, any changes in the booking behavior between, guess I would parse between leisure and B.T. or the windows shrinking? Are you seeing more cancellations, or is it, and if you can maybe remind us, if you have kind of a high-level view of average lead times for, you know, say more of the B.T. stuff in Q4 versus the more leisure-oriented stuff in Q3.

Chris Jon Woronka: Hey, good morning, guys. Thanks for all the details so far. So I guess my question kind of is, this is related to kind of back half REVPAR expectations. Have you guys seen any changes in booking behavior between, I guess I would parse it, between Leisure and BT? Are the windows shrinking? Are you seeing more cancellations? And if you can maybe remind us if you have kind of a high-level view of, you know, average lead times for, you know, more of the BT stuff in Q4 versus the more leisure-oriented stuff in Q3. Thanks.

Chris Jon Woronka: Hey, good morning, guys.

Chris Jon Woronka: Thanks for all the details so far.

Speaker Change: So I guess my question kind of is related to kind of that back half.

Chris Jon Woronka: Rev Par Expectations. Have you guys seen any changes in booking behavior between, I guess I would parse it between leisure and...

Speaker Change: and DT. Are the windows shrinking? Are you seeing more cancellations? And if you can maybe remind us, if you have kind of a high-level view of, you know, average lead times for...

Speaker Change: you know, say more of the BT stuff in Q4 versus the more leisure-oriented stuff in Q3. Thanks.

John Stanner: Thanks.

Jonathan P. Stanner: Yeah, good morning, Kristen, and thanks for the questions, John. You know, look, our expectations for the back half of the year, kind of the implied REVPAR outlook for the back half of the year, call it flat at the low end and up about 2.5 percent at the high end of our range, you know, a midpoint between 1 and 1.5 percent at the midpoint of our full year range. What I would say is we've just seen more volatility in booking pace than we have historically. You know, our August pace is up 4 percent. We remain encouraged by that.

John Stanner: Yeah, good morning, Chris. And thanks for the questions, John. You know, look, our expectations for the back half of the year, kind of the implied rev-par outlook for the back half of the year is call it flat at the low end and up about two and a half percent at the high end of our range. You know, a midpoint between one and one and a half percent at the midpoint of our full-year range. What I would say is we've just seen more volatility in booking pace than we have historically. You know, our August pace is up 4%; we remain encouraged by that.

Kristen: Yeah, good morning, Kristen, and thanks for the questions, John . You know, look, our expectations for the back half of the year, kind of the implied REVPAR outlook for the back half of the year is

Kristen: Call it flat at the low end and up about two and a half percent at the high end of our range. You know, a midpoint between one and one and a half percent at the midpoint of our full year.

Kristen: range. What I would say is we've just seen more volatility in booking pace than we have historically. You know, our August pace is up four percent. We remain encouraged by that. But it has been more volatile than I think we would have otherwise seen. Again, I think it's a reflection of being, you know, still in more of a leisure travel period. Our pace for September is is flattish as we sit here today. The booking window remains incredibly short. I don't think we've seen significant changes to that. We certainly haven't seen it lengthen at all. As I said earlier, I do think we remain optimistic that as we get out of the leisure season and into the fall where we see more BT and more group, that has been more predictable business.

John Stanner: But it has been more volatile than I think we would have otherwise seen. And again, I think it's a reflection of being, you know, still in more of a leisure travel period. Our pace for September is flatish as we sit here today. The booking window remains incredibly short. I don't think we've seen significant changes; that we certainly haven't seen it lengthened. As I lengthened it all, as I said earlier, I do think we remain optimistic that as we get out of the leisure season and into the fall where we see more BT and more group, that has been more predictable business.

Jonathan P. Stanner: But it has been more volatile than I think we would have otherwise seen, and again, I think it's a reflection of being, you know, still in more of a leisure travel period. Our pace for September is flattish as we sit here today. The booking window remains incredibly short. I don't think we've seen significant changes to that. We certainly haven't seen it lengthen at all.

Jonathan P. Stanner: As I said earlier, I do think we remain optimistic that as we get out of the leisure season and into the fall, when we see more BT and more group, that has been more predictable business. We have had better pricing power. We felt less pricing pressure in that business, and I am hopeful that that translates into better rate growth than we saw in the first half of the year and the second.

John Stanner: We have had better pricing power. We felt less pricing pressure in that business and hopeful that that translates into better rate growth than we saw in the first half of the year in the second.

Speaker Change: Adam Stanner, Adam Wudel, William Conkling

John Stanner: Okay. Thanks, Sean. And then the next question is kind of it may be a little too early to tell, but as we think about some of these newer brands that are starting to pop up more in some of your markets, whether it's a true or a spark. And I don't think you're going to necessarily be owning any of those hotels, but is there any evidence or concern that they drop down into the rates and impact your Hampton or Hilton Garden or even some of the other non-Elton stuff? Is there any early sense on that yet?

Jonathan P. Stanner: Okay. Thanks, Sean. And then the next question is kind of, and it may be a little too early to tell, but as we think about some of these newer brands that are starting to pop up more in some of your markets, whether it's a True or a Spark, and I don't think you're going to necessarily be owning any of those hotels, but is there any evidence or concern that they drop down into the rates and impact your Hampton or Hilton Garden or even Do you have any early sense on that yet?

Speaker Change: Okay, thanks Sean. The next question is kind of, it may be a little too early to tell, but as we think about some of these newer brands that are starting to pop up more in some of your markets, whether it's a true or

Speaker Change: a spark, and I don't think you're going to necessarily be owning any of those hotels, but is there any, you know, evidence or concern that they, that they

Speaker Change: Adam Stanner, Adam Wudel, William Conkling

Jonathan P. Stanner: Yeah, you know, I do think it's a little bit too early to tell. You know what I would say, particularly related to, you know, the sparks or these kinds of economic events, the economy conversion brands that have been rolled out are, you know, I think the math pencil is much better in tertiary and secondary markets and, you know, the majority of our portfolio and exposures in urban markets, where I think this is more difficult to roll out.

John Stanner: Yeah, you know, I do think it's a little bit too related to what I would say, you know, particularly related to the sparks or these kind of economy, the economy conversion brands that have been rolled out is, I think the math pencils much better in tertiary and secondary markets, and the majority of our portfolio and exposures in urban markets where I think this is more difficult to roll out. I think broadly speaking, it goes after a different customer. Now it is; it is more supply in those brand families. Those are perspectives we'll have to see, but I do think, again, I think we're still going to be in an environment for several years where we have below average and probably significantly below average supply growth in the industry, you know, sub 1% supply growth for several years.

Speaker Change: Yeah, you know I do think it's a little bit too early to tell you know what I would say You know particularly related to you know the the sparks or these kind of economy occur the economy Conversion brands that have been rolled out is you know I think the math

Speaker Change: pencils much better in tertiary and secondary markets and you know the majority of our portfolio and exposures in urban markets where I think this is more difficult to roll out. I think broadly speaking it goes after a different customer. Now it is more supply in those brand families exposure perspective so we'll have to see but I do think again I think you're we're still going to be an environment for several years where we have below average and probably significantly below average supply growth in the industry you know sub 1% supply growth for several years so I do think we have a good outlook from a supply perspective going forward.

Jonathan P. Stanner: I think, broadly speaking, it goes after a different customer. Now it is, it is more supply in those brand families from an exposure perspective, so we'll have to see, but I do think, again, I think we're still going to be in an environment for several years where we have below average and probably significantly below average supply growth in the industry, sub 1% supply growth for several years, so I do think we have a good outlook from a supply perspective going forward.

John Stanner: So I do think we have a good outlook from a supply perspective going forward. Yeah, that's good to hear.

Jonathan P. Stanner: Yeah, that's, that's good to hear. If I can sneak one more in, when you talk about kind of getting some of the contract labor out and switching over to more FTEs. Are these contract people becoming FTEs, or is it a different group of people, and do you know where they're coming from? Are they in the industry, and they're walking across the street, or are they new entrants? Do you have a sense of that?

John Stanner: If I can speak one more, and when you talk about kind of getting some of the contract labor out and switching over to more FTEs, are these contract people becoming FTEs, or is it a different group of people? And you know where they're coming from, or are they in the industry and they're walking across the street, or is it new, you enter and feel the sense of that? Yeah, look, I think that sometimes you're converting contracts, but I don't think that's the norm. I think what you're seeing is just a broad generally using of the labor market more broadly. You know, whether we're stealing it from other industries or you have, you know, savings that have run out from stimulus over the pandemic and people need to get back to work.

Speaker Change: Yeah, that's good to hear. If I can sneak one more in. When you talk about kind of the, you know, getting some of the contract labor out and switching over to more FTEs.

Speaker Change: Are these contract people becoming FTEs, or is it a different group of people, and do you know where they're coming from? Are they in the industry, and they're walking across the street, or is it new entrants? Do you have a sense of that?

Jonathan P. Stanner: Yeah, look, I think that sometimes you're just converting contract labor, but I don't think that's the norm.

Jonathan P. Stanner: I think what you're seeing is just a broad general easing of the labor market more broadly. You know, whether we're stealing it from other industries or you have, you know, savings that have run out from stimulus over the pandemic, and people need to get back to work. I think any macro indication that you look at suggests that the labor market is easing, and that's translating to less contract labor and lower turnover in our business.

Speaker Change: Yeah, look, I think that sometimes you're converting contracts, but I don't think that's the norm. I think what you're seeing is just a broad general easing of the labor market more broadly. You know, whether we're stealing it from other industries or you have, you know, savings that have run out from stimulus over the pandemic and people need to get back to work. I think any macro indication.

John Stanner: I think any macro indication that you look at suggests that the labor market is easing, and that's translating to less contract labor and lower turnover in our business.

Speaker Change: that you look at suggest that the labor market is easing. And that's translating to less contract labor and lower turnover in our business.

Operator: Okay, very good. Thanks. Thanks, Tom. Thanks, Chris.

Chris Jon Woronka: Okay. Very good. Thanks. Thanks, John.

Speaker Change: Okay. Very good. Thanks. Thanks, Tom.

Operator: Thank you.

Jonathan P. Stanner: Thank you. I'm showing no further questions at this time. I would now like to turn it back to John Stanner for closing remarks.

Operator: I'm showing no further questions at this time.

Chris Jon Woronka: Thanks, Chris.

John Stanner: I would now like to turn it back to John Stanner for closing remarks.

Speaker Change: Thank you. I'm showing no further questions at this time. I would now like to turn it back to John Stanner for closing remarks.

Jonathan P. Stanner: Well, thank you all for joining us today. We look forward to seeing many, many of you on the fall conference circuit. I hope you have a great end to your summer. Thank you very much.

John Stanner: Well, thank you all for joining us today. We look forward to seeing many of you at the fall of the conference circuit. I hope you have a great end of your summer. Thank you very much.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

Jonathan P. Stanner: Well, thank you all for joining us today. We look forward to seeing many of you at the fall, the conference circuit. Hope you have a great end to your summer. Thank you very much.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for participating. You may now disconnect.