Q3 2024 RLJ Lodging Trust Earnings Call
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Leslie: I will now turn the call over to Leslie.
Leslie: Thanks, Nikhil good afternoon, everyone and thank you for joining us today.
Leslie: We were pleased with our third quarter results, which came in ahead of our expectations. Despite the impact of the storms late in the quarter.
Leslie: Our third quarter Revpar growth once again exceeded the industry demonstrating the resiliency of our urban centric portfolio, which is allowing us to outperform.
Leslie: Additionally, our effective expense management enabled us to drive EBITDA growth that exceeded our year over year Revpar growth.
Leslie: Along with achieving solid operating results, we made meaningful progress on our key initiatives during the quarter.
Leslie: Including executing on several objectives, which will position us well going into 2025, including successfully refinancing all of our near term debt maturities and executing attractive interest rate hedges completing two conversions accretively recycling proceeds from noncore asset itself into <unk>.
Leslie: Share repurchases.
Leslie: And increasing our quarterly dividend by 50%.
Leslie: Treatment of these objectives demonstrate our commitment to unlocking value in our portfolio, while recycling capital to enhance total shareholder returns.
Leslie: With respect to our third quarter operating performance are 2% Revpar growth rate was two times the industry.
Leslie: Our growth continues to be balanced between both rate and occupancy.
Leslie: Additionally, our hotels gained 100 basis points of market share, which represents the sixth consecutive quarter of outperformance underscoring the strong positioning of our urban centric portfolio.
Leslie: This quarter, our urban hotels continue to drive our outperformance and achieved 2.5% revpar growth.
Leslie: Our urban markets are benefiting from positive trends in all demand segments with markets, such as Boston, Chicago, and Southern California, achieving mid to high single digit Revpar growth.
Leslie: Our deliberate efforts to reposition our urban footprint allowed our urban lifestyle hotels to achieve three 2% revpar growth during the quarter, our urban lifestyle hotels represent approximately 40% of our portfolio and are well positioned to capture seven day a week demand.
Leslie: Our portfolio has seen a lift from the ongoing improvement in business transient demand, which was once again, our best performing segment this quarter.
Leslie: Keeping nearly 9% revenue growth over the prior year, driven by both ADR and occupancy gains we were especially encouraged to see continuing pricing power, which drove five 3% ADR growth and acceleration of 105 basis points from the second quarter.
Leslie: While Smes remain the dominant driver of corporate demand, we are seeing positive momentum from large corporations, who are increasingly returning to the office. The recent trends and the continuation of company mandate provides us with the confidence that steady growth in business transient revenues will continue.
Leslie: Our group segment also continued to see strong performance during the third quarter, achieving three 4% revenue growth led by one 4% increase in demand and a one 9% increase in ADR.
Leslie: Group revenues benefited from both the increase in corporate meetings as well as strong citywide volume and many of our key markets such as Boston, Chicago, San Diego and New Orleans.
Leslie: A sign of healthy group demand our 'twenty 'twenty four group revenues pace remains ahead of 2023 by mid single digits inclusive of our pace for the fourth quarter. Despite the impact from recent storms the holiday calendar shift and the election.
Leslie: In aggregate the continued strength in both business transient and group production drove a three 1% increase in the third quarter weekday revenues.
Leslie: With respect to leisure we were encouraged to see stable demand trends are leisure revenues grew by 2% during the third quarter, primarily driven by a 4% increase in demand, which was offset by a 2% decline in ADR highlighting continued consumer pricing sensitivity.
Leslie: In addition to achieving solid rooms revenue growth.
Leslie: Our out of room spend in areas, such as parking and F&B allowed us to grow our non room revenue by seven 3%, which drove total revenue growth of 3%.
Leslie: This topline growth combined with our focused approach to managing cost, which has led to the moderation of operating expense growth has allowed us to achieve flat margins in a year over year EBITDA increase of two 6% in the third quarter.
Leslie: Now turning to capital allocation.
Leslie: In the third quarter, we continued to demonstrate our disciplined approach to balance sheet management and the ability to sort of we allocate capital across several fronts.
Leslie: We further strengthen our balance sheet and added incremental flexibility by entering into a new $500 million term loan, which dress our 'twenty 'twenty four and 'twenty 'twenty five maturities.
Leslie: We opportunistically entered into new hedges, allowing us to maintain one of the lowest weighted average cost of debt at 4.5%.
Leslie: We sold a noncore hotel in Denver, and recycled proceeds from recent dispositions towards the repurchase of $2 2 million shares for $27 million and we completed the physical conversion of the Wyndham in Houston to a doubletree and the indigo in New Orleans to the hotel tornado and Marriott tribute Hotel.
Leslie: These hotels are ramping well and achieved strong revpar growth of 17% year over year in the third quarter.
Leslie: Additionally, we remain on track to complete the conversion of the bankers Alley in Nashville to Hilton's tapestry collection and are pacing to complete the conversion of the Wyndham in Pittsburgh to a courtyard earlier than expected.
Leslie: Looking ahead, we are continuing to maintain our cadence of completing two conversions of year with the transition of the Renaissance Pittsburgh to Marriott's autograph collection in 2025.
Leslie: We also made progress towards selecting a new brand for the Wyndham, Boston, which we expect to convert in 2026.
Leslie: Our ability to execute on multiple fronts simultaneously validates our strong balance sheet and free cash flow profile, which not only drove our growth initiatives. This quarter, but also allowed us to return significant capital to shareholders in the form of dividends and share repurchases.
Leslie: Looking ahead in the fourth quarter. There are some unique factors that will impact the final industry results, including the disruption of Hurricane Milton in October and the degree of the slowdown around the elections in November.
Leslie: We estimate we will constrain our fourth quarter revpar by approximately 100 basis points.
Leslie: However, despite these unique headwinds our strong third quarter performance and the resiliency that urban centric portfolio is demonstrating gives us confidence in our outlook.
Leslie: As we look towards 2025, while we expect a comparable industry background of 'twenty 'twenty four.
Leslie: Our portfolio is well positioned and we should benefit from.
Leslie: Our portfolio's concentration in urban markets, which are expected to continue to outperform the industry.
Leslie: The ongoing ramp from our seven conversions.
Leslie: The continued improvement in business transient demand.
Leslie: And our favorable footprint in markets with strong citywide such as New Orleans, which will host the Super Bowl, Washington, D C, which should benefit from the presidential inauguration and favorable citywide in Denver, and San Francisco, which is supported by our strong 2025 group pace currently ahead of 'twenty.
Leslie: For like mid single digits.
Leslie: We believe that all of these positive attributes should continue to allow us to be a top performer.
Leslie: Longer term, we believe that the industry is positioned for multiple years of demand driven growth given the continuation of the secular trends of consumers prioritizing travel, which should be enhanced by moderating inflation and lower borrowing cost.
Leslie: Improving business travel demand from the combination of a continued recovery and the return of office trend.
Leslie: Group demand remaining healthy due to the increasing citywide events in attendance as well as corporate and social groups.
Leslie: And the recovery of international demand, which remains a meaningful growth opportunity.
Leslie: These factors together with historically low new supply projected over the next several years should provide multiple years of revpar tailwind and be especially beneficial for urban hotels, which represent over two thirds of our portfolio.
Sean: I will now I'll turn the call over to Sean Sean.
Sean Sean: Thanks, Leslie to start our comparable numbers include our 95 hotels owned at the end of the third quarter and exclude the Fairfield Inn, Denver, which was sold during the quarter. However.
Sean Sean: Our reported corporate adjusted EBITDA and <unk> include operating results from all sold and acquired hotels during <unk> ownership period.
Sean Sean: As long as we said we are pleased to report solid third quarter operating results, which demonstrated the strength and resiliency of our high quality urban centric portfolio.
Sean Sean: Our third quarter Revpar growth of 2% was driven by a one 4% increase in occupancy and a 0.6% increase in ADR.
Sean Sean: Third quarter occupancy was 75, 1%.
Sean Sean: Average daily rate was $193.39 and Revpar was $145.23.
Sean Sean: As was noted our business transient and midweek outperformed.
Sean Sean: Third quarter business transient Revpar grew eight 7% above 2023.
Sean Sean: Including ADR growth of 5% and occupancy growth of 3%.
Leslie: Revpar growth remained healthy and our urban markets, such as Louisville at 12% Chicago CBD at 15%.
Leslie: New Orleans at 21% Los Angeles at 10%.
Leslie: San Diego at 11%, Miami at 20% and Portland at 33%.
Leslie: Monthly Revpar growth during the third quarter was three 8% in July three 4% in August and down one 2% in September which was constrained by the timing of labor day and impact of hurricane activity.
Leslie: Monthly total revenue growth was five 2% in July four 6% in August and contracted 0.7% in September.
Leslie: Looking ahead, our Revpar growth rose during October which is the most significant month of the quarter.
Leslie: Given the holiday and the weather related headwinds October Revpar is forecasted to only increase approximately one 5% above prior year.
Leslie: <unk> driven by ADR growth.
Leslie: Turning to the current operating cost environment, as we expected operating cost growth rates moderated meaningfully during the third quarter.
Leslie: On a per occupied room basis total hotel operating cost growth was only one 7%.
Leslie: Moderator over 300 basis points from the second quarter and underscoring the benefits of our portfolio construct and our initiatives to manage our operating cost growth.
Leslie: Drilling down further into hotel operating expenses.
Leslie: As expected recent outsized growth in fixed costs, such as insurance and property taxes reversed during the third quarter.
Leslie: With our fixed costs decreasing by nine 4% during the third quarter, which benefited from the expected moderation a fixed expense growth and the success of property tax appeals.
Leslie: We expect fourth quarter fixed cost growth to benefit from the lapping of difficult comps during the first half of the year.
Leslie: And a successful renewal of our property insurance program. This month during the third quarter, our portfolio achieved hotel EBITDA of $107 million, representing two 6% growth above 2023.
Leslie: And hotel EBITDA margins of 29, 2%.
Leslie: We were pleased with our operating margin performance, which was essentially flat to 2023 at only 11 basis points behind the third quarter of 2023.
Leslie: Turning to the bottom line, our third quarter, adjusted EBITDA was $91 $9 million and adjusted <unk> per diluted share was <unk> 40.
Leslie: Yeah.
Leslie: We continue actively managing our balance sheet to create additional flexibility and further lower our cost of capital.
Leslie: So far during 2024, we have addressed all of our 2024 and 2025 debt maturities.
Leslie: As previously announced during the third quarter, we entered into a new $500 million term loan to refinance our 2025 maturing $400 million term loan and repaid $100 million of the outstanding balance on our line of credit.
Leslie: The new $500 million term loan has an initial term of three years and includes two one year extension options to 2029.
Leslie: The new term loan also repaying the pre COVID-19 pricing from the $400 million term loan.
Leslie: The execution of this financing is a testament to our strong lender relationships and favorable credit profiles.
Leslie: We ended the third quarter with a well positioned balance sheet with $500 million available under our corporate revolver.
Leslie: Our current weighted average maturity of approximately $3 seven years.
Leslie: 87 of our 95 hotels unencumbered by debt.
Leslie: An attractive weighted average interest rate of 456%.
Leslie: And 74% of debt either fixed or hedged.
Leslie: As it relates to our liquidity, we ended the third quarter with approximately $885 million of liquidity and $2 $2 billion of debt.
Leslie: With respect to capital allocation.
Leslie: <unk> with what we have demonstrated in the past, we intend to invest in projects to unlock the embedded embedded value within our portfolio. While also remaining committed to returning capital to shareholders through both share repurchases and dividends.
Leslie: During 2024, we have been active under our $250 million share repurchase program.
Leslie: Year to date, we successfully recycled 100% of noncore disposition proceeds towards the repurchase of approximately $2 2 million shares for $27 million at an average price of $9 28 per share.
Leslie: During the third quarter, we repurchased approximately one 6 million shares for $14 $7 million at an average price of $9 21 per share.
Leslie: Additionally, our board recently increased our quarterly dividend to <unk> 15 per share, which is well covered and supported by our free cash flow.
Leslie: We will continue making prudent capital allocation decisions to position our portfolio to drive results during the entire lodging cycle, while monitoring the financing markets to identify additional opportunities to improve the ladder, our maturities reduce our weighted average cost of debt and increase balance sheet flexibility.
Leslie: Turning to our outlook, we are reaffirming our prior guidance, which anticipates the continuation of the current operating and macroeconomic environment.
Leslie: For 2024, we continue to expect comparable revpar growth to range between 1% and two 5%.
Leslie: Comparable hotel EBITDA between $382 $5 million and $402 $5 million.
Leslie: Corporate adjusted EBITDA between $346 $5 million and $366 $5 million and adjusted <unk> per diluted share to be between $1 45, and $1 58, which incorporates shares repurchased to date, but no additional repurchases.
Leslie: Our outlook assumes no additional acquisitions dispositions or refinancings, we still estimate 2024 R. O J capital expenditures will be in the range of $100 million to $120 million and now expect net interest expense will be in the range of $92 million to $94 million.
Leslie: Which reflects a slight decrease in base rates on our variable rate debt compared to our assumptions last quarter.
Speaker Change: Thank you and this concludes our prepared remarks, we will now open the line for Q&A operator.
Speaker Change: Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question. Kim You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star.
Speaker Change: Our first question comes from the line of Austin <unk> with Keybanc capital markets. Please proceed with your question.
Speaker Change: Great and good afternoon, everyone. Leslie you spoke about large corporate account demand improving I was just hoping you could expand on that comment and maybe provide some additional detail around any specific industries or regions, where you're really seeing the most improvement.
Speaker Change: Yeah.
Speaker Change: Yeah, Austin, obviously, we're very pleased in terms of how BT continues to improve and we've been looking at who's traveling a frequency of travel a length of stay and you know our GDS is clearly, indicating that national accounts continue to improve and then.
Speaker Change: When we look at the day of week Monday, Tuesday, Wednesday, we're seeing strength along that because that's got the most opportunity for growth and as I've mentioned on the call you know our midweek.
Speaker Change: Amid weak revenues increased by three 1% Tom's going to give you some color on kind of what industries, we're seeing sure yeah. Good morning Austin.
Speaker Change: Industries that we're seeing start to travel more on the national corporate side or the consultants.
Speaker Change: Accountants, when you look at it.
Speaker Change: When you think about technology, we're starting to see more international travel coming in from India, and China in Silicon Valley. As an example, those are positive steps in areas that we really need that national corporate growth and the good thing is as Leslie mentioned, we're seeing not only demand, but we are seeing average rate growth and thats whats really.
Speaker Change: Left in the tank when you think about the national corporate accounts on that Monday, Tuesday, Wednesday, where we're benefiting from that midweek demand yeah, what Tom's referring to on the rate side. Austin is is that you have your national accounts coming back which is your lease price sensitive.
Speaker Change: And most of you know our most attractive from a from a rate perspective customer and that's helping us on the rate side.
Speaker Change: So rate was increasing rate was better than expected in third quarter for us we were up 5% in the third quarter up 4% in the second quarter.
Speaker Change: Yes, that's actually my my follow up I mean, you mentioned Monday Tuesday, Wednesday, I believe is the most upside opportunity for occupancy I guess, how much movement do you need to see additional occupancy to kind of sustain or even improve the mid single rate growth that you achieved this quarter.
Speaker Change: Yeah, I mean, I don't know if I can sort of quantify that because we're seeing it today right. So room nights looking at special corporate as a proxy room nights are at this past quarter about 95% of 2019 levels.
Speaker Change: Our revenues were up 9% this quarter they were up 13% last quarter. So we're seeing it now Austin.
Speaker Change: You know at the 95 and so as it continues to improve and grind forward for all the points that Tom talked about we are foreseeing a sustain and you know again, it's not a step change. It's just a grind a continuous grind forward and we're very pleased with what we're seeing we believe that that's going to carry into 2025, there's nothing that we're seeing that suggested.
Speaker Change: That won't happen there.
Speaker Change: That's great. Thanks for all the detail.
Speaker Change: Thank you. Our next question comes from the line of Michael Bellisario with Baird. Please proceed with your question.
Michael Bellisario: Thanks, Good afternoon, everyone.
Michael Bellisario: Okay.
Michael Bellisario: Good afternoon, Mike.
Speaker Change: Maybe just a first question for me I, just wanted to dig into expenses more.
Michael Bellisario: Maybe this is for Tom but.
Michael Bellisario: Whereas labour at in terms of the year over year growth rates and then also just any updates on hiring and retention would be helpful. And then how all of that just on the labor side, how does that impact the <unk> growth rate versus the higher expense growth rate that you guys experienced in the first half of the year.
Speaker Change: Hey, Mike Let me just sort of frame just in general I think that when we look across all of our or our operating labor metrics.
Speaker Change: Things are improving and normalizing we see that it's better it's easier to hire today turnover is down all of those things are benefiting them and starting to normalize. So I just want to frame that before Tom hops, I mean, Sean Hodgson with some stats.
Speaker Change: Yes.
Speaker Change: Great question, Michael So I think for wages and benefits, what we're seeing is sort of that 4% to 5% year over year increase in wages and benefits, we've seen that be pretty stable.
Speaker Change: Over over over the last few quarters and get sort of successfully a little better each quarter and we expect that to continue into the fourth quarter.
Speaker Change: When you look at the.
Speaker Change: Is that the wages and benefits in a vacuum when you look at across the other operating expenses, what we've seen.
Speaker Change: As I mentioned.
Speaker Change: My prepared remarks, the fixed costs, which have been a headwind really in the first half of the year have moderated significantly and we expect that to continue at a at an inflationary level.
Speaker Change: Fourth quarter and into next year as well.
Speaker Change: And so really I think we've seen the headwinds that we've seen in the first half of the year as we expected have moderated and we would expect them to continue to moderate and sort of the normal inflationary levels in 2025.
Speaker Change: The last thing to add Mike I think you asked a question about the workforce, we are continuing to see momentum.
Speaker Change: In regards to the reduction of contract labor and we think because of those wage increases the tools and resources the retention.
Speaker Change: The management company employees as a positive step and continue to see each quarter that there is a reduction of around that topic.
Speaker Change: Helpful. Thanks, and then second question for me on conversions, you, obviously have some ramping up.
Speaker Change: Some disruption now from ongoing projects and then you've got a few more that I think you're going to start next year. When you roll that all up what's the year over year lift that you guys expect for this year and next year and then how does that compare to the bridge that you've previously provided I think that was earlier this year and that's all for me. Thank you.
Speaker Change: Yes, Mike we continue to be ahead of.
Speaker Change: Of where we expected and our underwriting for the conversions. When you include all of the conversions inclusive of conversions under there under the knife, even even this year et cetera, we've seen top line growth around 10% and bottom line growth.
Speaker Change: Year over year in that sort of 20% to 25%. So we're seeing the big left even worse.
Speaker Change: Some obviously headwinds in hotels that were actually under under the knife and so net net it's been it's been a great lift for us and really validates.
Speaker Change: With the value that we create through these conversions.
Speaker Change: Thank you. Our next question comes from the line of Jonathan Jenkins with Oppenheimer and company. Please proceed with your question.
Jonathan Jenkins: Hi, good afternoon, Thanks for taking my questions and congrats on the quarter.
Jonathan Jenkins: From me you highlighted the urban straight I'm curious have you seen kind of a shift to an inflection higher in corporate demand post labor day or is it more just a continuation.
Jonathan Jenkins: The steady improvement that you saw earlier in the year.
Speaker Change: I would characterize it as a steady improvement not a step change.
Speaker Change: I think the urban thesis is intact right urban continues to outperform the industry, it's benefiting from all segments.
Speaker Change: This quarter third quarter was really driven by BT and group.
Speaker Change: And and leisure remains stable.
Speaker Change: But in general I would say that BT was steady improvement and urban is benefiting from all of those are all of the demand segments.
Speaker Change: Okay very helpful and then switching gears to the guidance.
Speaker Change: With the third quarter exceeding expectations in the fourth quarter or full year guidance unchanged, maybe implies a softer fourth quarter relative to your prior expectations can you help us think about what's baked in there and how that's changed.
Speaker Change: Yeah, I mean, I think in general you know you've got to look at our second half when we look at our second half it's generally intact.
Speaker Change: All right I think third quarter was slightly stronger and fourth was slightly softer, but even with the storms. As you mentioned, we are maintaining our guy our guidance and the way I was trying to think about it is is that.
Speaker Change: It's it's more segmentation driven than it is you know markets or anything like that as we mentioned in third quarter BT was stronger on the rate side.
Speaker Change: Leisure was stronger in the third quarter as well from a demand perspective, and we were pleased with the overall positive revpar in the third quarter positive a positive rate in third quarter.
Speaker Change: From a fourth quarter perspective October.
Speaker Change: It's obviously impacted by the storms.
Speaker Change: And as we mentioned in our prepared remarks, you know, we think that there is more softness around the election in November.
Speaker Change: And so I think those are the big drivers of the incremental softness that we saw in November I sort of think about the cadence.
Speaker Change: Sean mentioned October is coming in at about one 5% that's going to be the most significant contributing a month of the quarter November is going to be the weakest and we currently expect December to be in line with Ah with October as you sort of think about the you know the midpoint of our guidance.
Speaker Change: Which we think is the most likely outcome.
Speaker Change: You know it assumes at BT maintains the current trends that the group pace actualize, where it's at today leisure demand remained stable urban markets continue to outperform and as I mentioned before November being the weakest month, that's kind of what's built up around the midpoint of our of our guidance.
Speaker Change: Okay, that's really great color there and then last one for me if I could could you talk about the transaction pipeline, what it looks like in terms of volume and pricing out there in the bid ask spread between buyers and sellers.
Speaker Change: Compression there given the recent move in interest rates.
Speaker Change: Yeah, well the overall set setup for transaction has improved acknowledging your point about lower interest rates, although we will see what theyre not how much more they are able to come down and the debt markets are open but still expensive and so despite all of this is the transaction volume remains muted are constrained.
Speaker Change: Even with this environment of a slightly better set of transactions are still choppy they are taking longer to get done.
Speaker Change: And so the transaction market is not fully functional right now is the way I would sort of describe it.
Speaker Change: While we expect that to improve in 2025, given the fact that hopefully rates continued to improve were behind the elections behind us rather supply remains muted and fundamentals remain stable that should improve the environment, but right now it remains constrained and choppy.
Speaker Change: Okay excellent very helpful. That's great. Thank you for all the color that's all for me.
Speaker Change: Thank you. Our next question comes from the line of Dori Kesten with Wells Fargo. Please proceed with your question.
Speaker Change: Hi, Thanks, good morning.
Speaker Change: Sorry, good afternoon.
Speaker Change: So just tying into the last question.
Speaker Change: Would you expect as of right now would you expect external growth prospects in 'twenty five to look pretty comparable to 24.
Speaker Change: Yeah, I mean during what I would say is that you know where we sit today, it's really early in our budget process, but the building blocks for US you know our urban continuing to outperform BT continuing to improve group strong pace.
Speaker Change: Actualizing, we've got markets like Denver, Tampa, San Francisco, Orlando that have strong citywide, we have a favorable footprint to special events like a Super Bowl know NOLA that I've mentioned before inauguration in D C and the U S. Open in Pittsburgh, where we have a number of assets in each of those markets, we still expect leisure to demand.
Speaker Change: And it remains stable and then as we've talked about before we expect our conversions that continue to ramp that's against the backdrop, where you have low supply consumers still favoring travel.
Speaker Change: And then being in a post rate cut environment.
Speaker Change: And you know expenses moving in the right direction. So I mean that I mean, those are the general building blocks that I would say, but it's really early in our process and our.
Speaker Change: And our budget process and.
Speaker Change: Dori on capital allocation, specifically for next year right. I mean, we have the balance sheet, where we could do really any growth opportunities next year. Leslie you mentioned, the organic growth opportunities within our portfolio, but our stock continue to remain attractively value from a share repurchase we've got the balance sheet that are for external growth.
Speaker Change: If the markets improve we have the flexibility and the capacity to do that.
Speaker Change: Through the balance sheet as well and so I think the setup is going to be really predicated on a on a fundamental setup as well as how the capital markets play out.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Chris <unk> with Deutsche Bank. Please proceed with your question.
Chris: Yeah, Hey, good afternoon, everyone. Thanks for taking our questions.
Speaker Change: So on the renovations and the three I guess, you started last year and 23.
Speaker Change: Understanding youre about start to more is there a way to think about.
Speaker Change: Whether it's two to four years.
Speaker Change: Youre going to get us there.
Speaker Change: A year where that levels off.
Speaker Change: I guess the question follow up to that is you have more conversions beyond the next two because I think you've talked about a pacing about two per year and so does that imply that there are more to be identified and.
Speaker Change: Out years beyond 'twenty five.
Speaker Change: Yeah, we we've talked about the fact that we have a number of conversions that are remaining.
Speaker Change: With somewhere between call it call it plus or minus 10 assets not all of those will get done.
Speaker Change: But you know we're still on the cadence for two per year. We've mentioned the fact that we have a Renaissance next year, which has been enjoying the autograph collection. The following year, we have the Boston win them.
Speaker Change: We expect to deliver in 2026, and so the cadence for that goes out several years.
Speaker Change: As it relates to as it relates to our conversions.
Speaker Change: And then Chris with respect to sort of how we think about the ramp I mean generally speaking on the conversions, we underwrite a two to three year ramp.
Speaker Change: From the conversion sort of post post completion I think what we've found and the reason we were tracking so far ahead is that because of our our thesis around around these conversion there's a lot of capturing right. It's already in the market that.
Speaker Change: We've been able to ramp on the shorter end of that range relative to.
Speaker Change: So our initial expectations and so but net net it's a two to three year ramp is sort of what we generally underwrite and we've been delivering on that on the shorter end of that range on the conversions today.
Speaker Change: Okay I appreciate that thanks.
Speaker Change: Thanks, Sean and then as a follow up.
Speaker Change: You know I know battery I talked I guess earlier this week.
Speaker Change: We've seen cost cuts they were targeting that those would flow some of those would flow through to us.
Speaker Change: Franchisees I guess from your perspective or are you are there things that you would like to see your operators or brand companies doing instead of it's been a tough couple of years, there's a lot of expense creep.
Speaker Change: Are there things that are realistically going to come to fruition that can can help you next year on year after or do you think that's just kind of a very high level.
Speaker Change: Doesn't flow through maybe to the to all the franchisees.
Speaker Change: Yeah of course, I mean, we don't have any color on on what marriott's framing our thinking behind that but what I would say anytime that they can lower costs for franchisees, that's always a plus and so we welcome and look forward to the benefits of their actions I think that we're going to continue to collaborate with the brands.
Speaker Change: And they are trying to be thoughtful in this moment and we and we're looking forward to receiving.
Speaker Change: Okay fair enough. Thanks wisely.
Speaker Change: Thank you, ladies and gentlemen, as a reminder, if you'd like to join the question queue. Please press star one on your telephone keypad. Our next question comes from the line of Gregory Miller with <unk> Securities. Please proceed with your question.
Speaker Change: Hi, Thanks, good afternoon I.
Speaker Change: I have a couple of leisure related questions for you.
Speaker Change: Starting in New York I'm curious about your current expectations for the Knickerbocker.
Speaker Change: Demand for packaging into new year's holiday bookings and overall spend compared to prior years and I'm asking in part if theres any read through to changing leisure discretionary spend habits on either rooms for F&B.
Speaker Change: Yes.
Speaker Change: Yeah, I mean, Greg what I would say as I've mentioned before that the man on the leisure side remains stable.
Speaker Change: And that where we sit here today relative to new year's the neck is pacing fine.
Speaker Change: And we're very encouraged by the overall demand trends that we're seeing the reality of it is is that the psychology around traveling remains the consumer wants to travel and just being price sensitive about it and so there are looking more at discount channels of booking at a little bit further because they're shopping but overall, we feel very good about.
Speaker Change: Leisure demand trends and what I would say is is that.
Speaker Change: Our urban leisure rate remains very close to our peak.
Speaker Change: <unk> levels and so we haven't seen a meaningful drop off from that which would obviously benefit the nic in that in that discussion both from a demand and from a rate perspective. So we feel good about how it's pacing.
Speaker Change: Okay, great and shifting challenge of Florida.
Speaker Change: I and my understanding is that there may be AD campaigns from some of the Florida markets to drive demand in our post Hurricanes and I'm curious.
Speaker Change: If you have any concerns about any leisure travel demand impact.
Speaker Change: 10 months after the Hurricanes as we start thinking about the holidays and into <unk> next year.
Speaker Change: Yeah.
Speaker Change: As you know we have a footprint on both the southwest side as well as South Florida side going down towards key West and you are right. There are some adds to really attract continuation in regards to Asia and I think the great thing about our footprint is we have a.
Speaker Change: Alrighty diversity down there in various locations when you think about the West Coast I think Tampa is getting the benefit. Unfortunately after the hurricane in regards to the remnants of folks trying to get back into their houses and everything.
Speaker Change: We have a renovation underway right now prior to season down in Estero. So we feel very good about setup for next year in 2025, and then most importantly in South Florida, when when one co struggled a little bit typically the other coast benefits and so what we find Greg is the leisure demand shifts a little bit because people still want to chase. This.
Speaker Change: And wanted to get to the beaches and Thats a common approach in regards to what's happening in many of those hotels down in South Florida have finished their renovations. So we're getting the benefit of that as well because the product is in great shape.
Speaker Change: Okay. Thanks, Tom.
Speaker Change: All right.
Speaker Change: Thank you ladies and gentlemen, our final question comes from the line of Floris Van <unk> with Compass point. Please proceed with your question.
Speaker Change: Hey, Thanks for taking my question.
Speaker Change: More on the capital allocation front.
Speaker Change: You still have a lot of cash on the balance sheet, you do have some renovations but.
Speaker Change: You sold a couple of assets.
Speaker Change: Are you how much.
Speaker Change: Any more potential assets do you think you could so.
Speaker Change: In your portfolio.
Speaker Change: Over the next 12 months is that dependent on where the financing market.
Speaker Change: If that really loosens up and also how much more you know.
Speaker Change: Do you see interesting opportunities to acquire assets are out there.
Speaker Change: What kind of bid ask spread is there today relative to you about.
Speaker Change: Six to 12 months ago.
Speaker Change: Hey, Floris it a lot back thing that question, let me see if I can hit it look I think at the end of the day, we are have to be back to portfolio managers, we have 95 assets.
Speaker Change: And so as the transaction market improves we will continue to to be opportunistic when it makes sense to sell assets based on our view of where markets are headed and how they're performing et cetera on that front I would generally say that the bid ask spread remains wide today.
Speaker Change: Hey in the face of interest rates coming down as a seller there is no need to to come down and your view of value. When you expect interest rates to come down and so.
Speaker Change: So that remains wide and that goes back to my point about the transaction market continuing to be constrained.
Speaker Change: Over in the near term, we do expect transaction market to improve in 2025 is probably the back half of 2025.
Speaker Change: As we get past the election, as we see where interest rates sort of settle out.
Speaker Change: But that's all TBD in general, but you should expect us to continue to be active portfolio managers, who are being opportunistic based on how we assess and monitor the markets.
Speaker Change: Thanks Elisa.
Speaker Change: Thank you, ladies and gentlemen that concludes our question and answer session I will turn the floor back to Ms. Hille for any final comments.
Speaker Change: Thank you all for joining US today, we look forward to seeing many of you all in May NAREIT and thank.
Speaker Change: Thank you again for joining us.
Speaker Change: Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.