Q3 2024 Host Hotels & Resorts Inc Earnings Call
Good morning, and welcome to the host hotels <unk> resorts third quarter 2024 earnings Conference call Today's conference is being recorded.
At this time I would like to turn the call over to Jamie Marcus Senior Vice President of Investor Relations.
Jamie Marcus: Thank you and good morning, everyone.
Speaker Change: Before we begin please note that many of the comments made today are considered to be forward looking statements under federal Securities law.
Jamie Marcus: As described in our filings with the SEC. These statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed.
Jamie Marcus: And we are not obligated to publicly update or revise these forward looking statements.
Jamie Marcus: In addition on today's call, we will discuss certain non-GAAP financial information such as F O adjust.
Jamie Marcus: Adjusted EBITDA Ari and.
Jamie Marcus: Comparable hotel level results.
Jamie Marcus: You can find this information together with reconciliations to the most directly comparable GAAP information.
Jamie Marcus: Yesterdays earnings press release.
Jamie Marcus: In our 8-K filed with the SEC.
Jamie Marcus: And in the supplemental financial information on our website at host hotels Dot com.
Jamie Marcus: With me on today's call are Jim <unk>, President and Chief Executive Officer.
Jamie Marcus: Oh, Gosh, executive Vice President and Chief Financial Officer.
Jamie Marcus: With that I would like to turn the call over to Jim.
Jim: Thank you, Jamie and thanks to everyone for joining us this morning.
Jim: Before we turn to the quarter I want to take a moment to acknowledge the devastating effects of hurricane a lenient, which made landfall in late September early October.
Jim: We were deeply sad to see the loss of life and damage the hurricanes right.
Jim: And while many of our hotels were impacted we are very fortunate.
Jim: The employees at our properties remained high throughout the storms.
Jim: In response to the urgent needs of those impacted we partnered with the American Red Cross World Central Kitchen team Rubicon Community Foundation, Tampa Bay, and feeding Tampa Bay to deliver vital disaster relief support.
Jim: Due to evacuation mandates and the loss of commercial power from Hurricane choline inbound.
Jim: One of our properties are temporarily closed three of which reopened within 10 days.
Jim: The most significant damage occurred at the Dawn CCAR, which remains close to guests.
Jim: We're still evaluating the remediation and disruption impacts of the storms and we currently expect a phased reopening of the dog is our beginning towards the end of the first quarter of 2025.
Jim: Please note that the dog is our is still included in our comparable hotel results in a third order, but it has been removed from our comparable hotel set and our full year guidance.
Jim: It is worth noting that our resilience investments at the Ritz Carlton Naples paid off during birth both hurricanes.
Jim: As a reminder, during the remediation following hurricane Ian we opportunistically enhance the resiliency of the property.
Jim: Elevating the critical equipment, improving drive flood proofing measures.
Jim: Salary and future building envelope waterproofing replacements.
Jim: As a result of these investments we saw minimal water intrusion inside the resort despite a storm surge comparable to that of hurricane Ian.
Jim: We reopened the resort seven days after commercial power was restored.
Jim: Following the success of the enhanced resiliency measures, we will continue to prioritize these types of investments across our portfolio over the near term.
Jim: For additional details on our resiliency investments. Please see our 2020 for corporate responsibility report, which details our CRM program and strategy, our ESG initiatives and our industry leading accomplishments.
Jim: Can be found on our corporate responsibility section of our website at most hotels dot com.
Jim: Turning to our results in the third quarter, we delivered adjusted EBITDA of $324 million and adjusted <unk> per share up 36 cents.
Jim: As a reminder, in the third quarter of last year, our adjusted EBITDA benefited from $54 million of business interruption insurance proceeds.
Jim: Led to a 10% decrease in our adjusted EBIT already this quarter.
Jim: Excluding the business interruption proceeds our adjusted EBIT would have been up over 5%.
Jim: Adjusted <unk> per share would have been up 9%.
Jim: We delivered a year over year comparable hotel total revpar improvement of three 1%.
Jim: Underscoring the continued strength of auto room revenue, while comparable hotel Revpar was up 80 basis points.
Jim: As a reminder, the operational results discussed today refer to our comparable hotel portfolio for the third quarter, which excludes the Ritz Carlton Naples, and Elisa Ventana Big sur.
Jim: Our third quarter comparable hotel Revpar came in slightly better than we expected despite weather impacts from the Hurricanes in Florida during the last week of the quarter.
Jim: While Maui is recovering the year over year decline in Revpar for Maui had an actual drag of 170 basis points in the third quarter.
Jim: As we have discussed over the past few quarters.
Jim: Understates the true impact of the wildfires as we would have expected in Maui to contribute 20 basis points to a portfolio revpar growth in the third quarter.
Jim: Given the transformational renovation at Fairmont Kea Lani in 2023, and the expected lift through 2024 as a result, the total estimated impact of the wildfires on third quarter Revpar is approximately 190 basis points.
Jim: Following the anniversary of the tragic wildfires, we supported our managers local tourism authorities.
Jim: And government officials and promoting the return of visitors to Maui.
Jim: Our three hotels once they co op marketing.
Speaker Change: Marketing campaign.
Speaker Change: Well keep up means the spirit of hospitality and Hawaiian.
Speaker Change: The marketing efforts included social media and TV ads digital displays and email campaigns.
Speaker Change: And videos from each of our resorts that aired in southern California during the month of September.
Speaker Change: Additionally, the governor of Hawaii, the mayor Maui, and the head of the Hawaii lodging and Tourism Association.
Speaker Change: Met with long time supporters of Hawaii, the Los Angeles Rams and key travel partners across the greater Los Angeles market and communicate the importance of tourism for Maui economic recovery.
Speaker Change: The ramps have supported in Hawaii over the years and part of the Governor's trip was aimed at formalizing the relationship between the two going forward.
Speaker Change: Thus far the sales and marketing efforts are paying off.
Speaker Change: Thanks, giving and festive revenue pace for our three Maui resort is up over 35% and over 65% respectively compared to the same time last year. We are encouraged in Maui is beginning to show improvements on its road to recovery.
Speaker Change: Moving on to the business mix.
Speaker Change: Group room night revenue was up 1% in the third quarter.
Speaker Change: Driven by rate as group room nights were flat due to recovery and relief rooms in Maui that were booked in the third quarter of 2023.
Speaker Change: Our properties for 212000 group room nights in the year for the year, bringing our definite group room nights on the books for 2024 to $4 2 million rooms, with total group revenue pace up approximately 5% compared to the same time last year.
Speaker Change: Business transient revenues grew 5% in the third quarter as strong rate growth was driven by market and customer mix shifts.
Speaker Change: Turning to leisure.
Speaker Change: The unfavorable international demand imbalance held steady in the third quarter.
Speaker Change: There isn't room nights sold at our comparable resorts were up 4% in the third quarter driven by Maui.
Speaker Change: In addition, leisure rates remain resilient during the third quarter.
Speaker Change: Transient rates at our comparable resorts were up approximately 50% compared to 2019.
Speaker Change: Which is in line with recent quarters, continuing to underscore the financial health of the affluent consumer.
Speaker Change: Auto room spending trends. This quarter also continued to demonstrate the strength of group and affluent consumers.
Speaker Change: Comparable hotel total Revpar grew over 3% in the third quarter.
Speaker Change: Which represents the largest spread to revpar growth in six quarters as.
Speaker Change: As a reminder, in 2023 nearly 40% of our total revenue came from food and beverage and other revenue in our 2024 guidance assumes a similar proportion.
Speaker Change: We continue to believe that total revpar represents a more holistic picture of our underlying business as our portfolio continues to benefit from substantial out of room spend.
Speaker Change: Turning to capital allocation during.
Speaker Change: During the quarter, we repurchased three 5 million shares of stock at an average price of $16 33 per share for our common share repurchase program.
Speaker Change: Bringing our total repurchases for the quarter to $57 million.
Speaker Change: Since 2022, we have repurchased $315 million of stock at an average repurchase price of $16 and 27 per share.
Speaker Change: And we have $685 million of remaining capacity under our share repurchase program.
Speaker Change: Looking back on our transaction activity. This year, we acquired $1 $5 billion of iconic and irreplaceable real estate and a blended 13 six times EBITDA multiple based on estimated 2020 for our results.
Speaker Change: Thus far.
Speaker Change: The one hotel in Nashville, and the embassy suites by Hilton Nashville downtown the one hotel Central Park, and the Ritz Carlton Oahu Turtle Bay are performing in line with our underwriting expectations.
Speaker Change: The brand and management transition at the Ritz Carlton Oahu Turtle Bay is going well and we expect continued growth as awareness of the rebranded resort spreads.
Speaker Change: Turning to portfolio reinvestment, our updated 2020 for our capital expenditure guidance range is $485 million to $580 million, which includes approximately $225 million to $255 million of.
Speaker Change: The investment for redevelopment repositioning and ROI projects.
Speaker Change: $125 million to $275 million for renewal and replacement projects and $35 million to $15 million for property damage reconstruction.
Speaker Change: Included in the ROI projects is the highest transformational capital program.
Speaker Change: Which is on track and slightly under budget so far.
Speaker Change: We received $2 million of operating guarantees in the third quarter to offset business disruptions related to the Hyatt transformational capital program.
Speaker Change: And we expect to receive an additional $3 million this year.
Speaker Change: Bringing the total operating guarantees to $9 million in 2024.
Speaker Change: In addition to the capital expenditure range. This year, we expect to spend $50 million to $60 million on the 40 unit residential condo development at our four seasons resort Orlando at Walt Disney World Resort.
Speaker Change: The development is well underway and marketing efforts began in July we anticipate the formal sales launch to begin later this month with closings to begin in the fourth quarter of 2025.
Speaker Change: More broadly we have completed 24 transformational renovations since 2018, which we believe provide meaningful tailwind for our portfolio.
Speaker Change: The 15 hotels that have stabilized post renovation operations to date. The average Revpar index share gain is over seven points, which is well in excess of our targeted gain of 3% to five points.
Speaker Change: Wrapping up we continue to believe that host is well positioned due to our investment grade balance sheet are geographically diverse diversified portfolio and our continued reinvestment in our assets as we have shown we are able to access many capital allocation levers to create shareholder.
Speaker Change: Value and we will remain opportunistic going forward.
Sarath: With that I will now turn the call over to Sarath to discuss additional operational detail and our revised 2020 for outlook.
Sarath: Thank you Jim and good morning, everyone.
Sarath: Building on Jim's comments I will go into detail on our third quarter operations.
Sarath: Updated 2020 guidance and our balance sheet.
Sarath: Starting with total revenue trends.
Sarath: Thus far growth continues to meaningfully outpace revpar growth as both group and transient guests maintain elevated levels of out of home spending.
Sarath: Comparable hotel food and beverage revenue grew 6% in the third quarter, driven by banquet and catering.
Sarath: In fact banquet and catering revenue achieved the strongest third quarter in history with contribution per group room night up 13% year over year.
Sarath: Transient guests showed continued willingness to spend as well with spot revenues up 5% and resort outlet revenue per occupied room up 3%.
Sarath: Overall transient room revenue was up slightly compared to the third quarter of 2023, driven by the recovery in Maui.
Sarath: As well as strong rate and occupancy growth in San Diego, New Orleans and Houston.
Sarath: From a visa perspective, we are encouraged that Maui is beginning to show improvements.
Sarath: While revpar in Maui were down 19% in the third quarter totaled.
Sarath: Total revpar was down only 10% as out of home spending trends with tons with the traditional group and leisure guests coming back to the island.
Sarath: Looking at holiday progression Maui is expected to shift from lagging to leading our portfolio.
Sarath: In the third quarter Maui represented a drag to portfolio results for both the July 4th and Labor day weekend.
Sarath: Looking forward and as Tim alluded to earlier Maui is driving holiday performance in the fourth quarter.
Sarath: Transient revenue pace for the total portfolio is up 2% for Thanksgiving week compared to the same time last year and festive period is up 20%.
Sarath: Business transient revenue was 5% above the third quarter of 2023 driven by rates.
Sarath: Overall business transient demand was down 2% driven by fewer government room nights.
Sarath: Encouragingly demand from consulting firms increased this quarter narrowing the gap to pre pandemic levels.
Sarath: Turning to group revenue grew 1% in the third quarter driven by rate growth and strong pick up in Northern New York and Boston.
Sarath: As a reminder group business faced tough comparisons this quarter due to the recovery and relief rooms booked in Maui last year.
Sarath: We estimate that Maui negatively impacted third quarter group revenue growth by 570 basis points.
Sarath: For full year 2024, we have approximately $4 2 million definite group room nights on the books.
Sarath: Keeping us ahead of same time last year.
Sarath: Group rate on the books is up 3% and total group revenue pace is up 5% over the same time last year bolstered by banquet and catering spend.
Sarath: Looking ahead, our 2025 total group revenue pace is nearly 5% ahead of the same time last year, driven by both rate and room nights.
Sarath: We continue to be encouraged by the citywide booking pace in San Francisco San Antonio.
Sarath: That'll Nashville, and New Orleans, all of which have citywide group room night up meaningfully compared to the same time last year.
Sarath: It is also worth noting that San Francisco citywide room nights are pacing up 40%.
Sarath: Shifting gears to margin.
Sarath: Third quarter comparable hotel EBITDA margin of 25, 3% was 130 basis points below last year.
Sarath: The decline was driven by increases in wages and benefits.
Sarath: Additionally, we estimate a 110 basis points impact from Maui, and the hurricane and business interruption proceeds we received.
Sarath: Our comparable hotels last year.
Sarath: Turning to our revised outlook for 2024, despite the impact of Hurricanes Helene and Milton we maintained our previous full year comparable hotel guidance growth mid points.
Sarath: As a result, we anticipate comparable hotel total revpar growth of approximately 1% and comparable hotels, thus far to be approximately flat compared to 2023.
Sarath: Our guidance assumes a continued recovery in Maui and steady demand trends in the fourth quarter.
Sarath: We estimate the Maui wildfires will impact full year comparable hotel total revpar by 180 basis points and Revpar by 220 basis points.
Sarath: Excluding business interruption proceeds received earlier this year, we expect full year adjusted EBITDA.
Sarath: To be impacted by approximately $75 million relative to our pre fire estimate.
Sarath: We expect our comparable hotel EBITDA margin of approximately 29%, which is 90 basis points below 2023.
Sarath: We estimate a 30 basis point impact to full year comparable hotel EBITDA margin from Maui relative to our pre fire estimate.
Sarath: A 40 basis point impact from insurance and property taxes, and a 110 basis point impact from wages and benefit rate increases, which is partially offset by a 90 basis point benefit from operational improvements.
Sarath: Our revised 2020 for full year adjusted EBITDA guidance is expected to be $1.630 billion.
Sarath: $10 million or approximately 1% decrease over the prior midpoint as a result of the Hurricanes in Florida.
Sarath: Also our $15 million, we estimate that $2 million occurred in the third quarter and $13 million will occur in the fourth quarter.
Sarath: Our adjusted EBITDA estimate includes approximately $57 million from.
Sarath: From operations at the Ritz Carlton Naples.
Sarath: A decline of $5 million compared to our prior guidance.
Sarath: And $24 million for operations at the doctors are a decline of $9 million compared to our prior guidance.
Sarath: In addition, it includes $11 million from operation as well, he loves and panel et cetera.
Sarath: As a reminder, the Ritz Carlton Naples 11 candidates.
Sarath: And the balances are excluded from our comparable hotel guidance for full year 2024.
Sarath: Turning to our balance sheet and liquidity position in the third quarter, we completed the issuance of $700 million of series L. Senior notes at five 5%.
Sarath: <unk> were used in part to repay the outstanding revolver portion of our credit facility.
Sarath: Weighted average Mitch <unk>.
Sarath: Five five years at a weighted average interest rate of four 8%.
Sarath: Our quarter end leverage ratio was two seven times and we currently have $2 3 billion in total available liquidity, which includes $240 million SSAT reserves and $1 $5 billion of availability on our credit facility.
Sarath: In October we paid a quarterly cash dividend of <unk> 20 per share demonstrating our commitment to returning capital to stockholders.
Sarath: As always future dividends are subject to approval by the Companys board of directors.
Sarath: To conclude we are pleased with the performance of our portfolio and we are encouraged by steady business mix trends heading into 2025.
Sarath: We will continue to opportunistically allocate capital as we seek to elevate the EBITDA growth profile of our portfolio and increase shareholder value.
Sarath: With that we would be happy to take your questions.
Sarath: Ensure we have time to address as many questions as possible. Please limit yourself to one question.
Speaker Change: If you would like to ask a question at this time. Please press star one on your telephone keypad. If you would like to withdraw your question simply press Star one again.
Speaker Change: One moment. Please for your first question.
Speaker Change: Your first question comes from the line of Stephen Grambling with Morgan Stanley. Your line is open.
Stephen Grambling: Hey, Thanks for taking the question.
Sarath: I guess I'd like to touch base on the transaction market you obviously were.
Speaker Change: Active this year with acquisitions I'm curious, how you're thinking about how the market might be evolving now and whether you'd be more likely to be a buyer or seller.
Speaker Change: At this point, if youre seeing any change in terms of who's actually enacted participant either from people putting up assets for sale or.
Speaker Change: People coming to you looking for assets yourself. Thanks.
Speaker Change: Sure Steven.
Sarath: I would say that.
Sarath: Until the last 90 days or so.
Speaker Change: Really both buyers and sellers have been on the sidelines the bid ask spread.
Speaker Change: Has just been too great and everyone was saying.
Speaker Change: A wait and see mode.
Speaker Change: Wait and see mode for a couple of different reasons I think the you know the fact that we're past the election now.
Speaker Change: We'll clear one hurdle for a lot of people there'll be able to wrap their arms around what.
Sarath: What the economic policies of the new administration are likely to look like.
Sarath: Over the near term.
Sarath: <unk>.
Sarath: And the debt capital markets have become much more conducive to.
Sarath: Transacting rates have come down spreads have come in.
Sarath: SaaS refinancing is available.
Sarath: And I think that as.
Sarath: As we get into next year.
Sarath: When you see private equity get.
Sarath: Back into the game and come off the bench.
Sarath: There have been.
Sarath: Additional mark additional transactions out there that we have evaluated nothing has risen.
Sarath: As beat the bar for us.
Sarath: We're absolutely delighted that we were able to complete the three deals for hotels and three transactions that we did earlier this year in our balance sheet as a differentiator and it will continue to be a differentiator for us.
Sarath: I think that we would have more competition today, if those assets were brought to the market clearly there would be because they are all attractive properties, they're all unique and they're all in great locations and one of a kind asset so.
Sarath: That said relationships and reputation matter.
Sarath: <unk>.
Sarath: It will always I think continue to differentiate host as we go forward.
Sarath: So our ability to move quickly with no need for any refinancing as always.
Sarath: A differentiator for us.
Sarath: I expect that over the course of the not the balance of this year. So much but next year, probably I know you'll hold me to this if it doesn't come through but I'm willing to go out on a limb and say that at Atlas we're likely to.
Sarath: To hear about additional transactions coming to market because I do think that people.
Sarath: We have waited a long time.
Sarath: And the good news is that the pressure to sell it wasn't there and thats because fundamentally the business is very sound.
Sarath: Yes, we have our little bumps in the road along the way.
Sarath: It's not like folks are rushing.
Sarath: To exit.
Sarath: At any at any price. So I think we'll see an active transaction market next year.
Speaker Change: From <unk> perspective.
Sarath: We're likely to test the market ourselves with some of our non core assets to.
Sarath: To really understand pricing at.
Sarath: Is it likely will need heavy capex investments that we just don't see great. Good hotels, but not a long term fit for the portfolio given the direction that we have.
Sarath: <unk> moved in over the last seven or eight years in terms of the types of assets we own.
Sarath: Really with our focus being on free cash flow generation.
Sarath: As a differentiator going forward. So we're likely to test the market, we'll see with pricing comes back assets.
Sarath: Pricing is attractive we'll sell.
Sarath: If it's not we'll pull back and invest in the assets ourselves.
Sarath: Well, we'll be hopeful to be able to be a continued net acquirer going forward I mean, we sit here at two seven times leverage today, we have a lot of dry powder.
Sarath: And.
Sarath: It'll either be well it will always be continuing to invest in our portfolio.
Speaker Change: So Rob I think mentioned in his comments that we've seen a seven point yield index gain on average from the investments. We've made we bought back $57 million of stock last quarter.
Speaker Change: And we bought 1 billion and a half hours of assets this year. So.
Speaker Change: Sure.
Speaker Change: We'll look forward to continuing to grow the portfolio.
Speaker Change: And.
Speaker Change: We prefer to do it.
Speaker Change: On a one off basis and not be in a competitive situation, but if we have to be in a competitive situation, we will and.
Speaker Change: We'll just see what happens.
Speaker Change: Great and maybe one unrelated follow up for <unk>.
Speaker Change: We've talked about this on prior calls and maybe I missed this in your remarks, but I guess are.
Speaker Change: Are we still thinking about the underlying EBITDA, there's a lot of moving parts with the different acquisitions. There is the <unk> issues.
Speaker Change: Insurance proceeds.
Speaker Change: Is the underlying EBITA to build off of still kind of at 1.75 billion and I guess within that.
Speaker Change: Does that have to include what what level of recovery in Maui and how would you generally think about Maui kind of building back. Thanks.
Speaker Change: Sure, yes, even if so the $1 750, and I'll build it from the $1 600, if you have all of the different moving pieces.
Speaker Change: Starting off with the midpoint of our current guidance of $1 630, you would take out $40 million of Ti.
Speaker Change: Yeah. So 19, I'll say Ian that was 10 in Q1 nine in Q2, and then 'twenty one.
Speaker Change: We received Florida Maui wildfires. So that's the 40 that you would deduct then you would add about $49 million or so for total day and one hotel central parks add another 13.
Speaker Change: For Nashville, and then the 75 to 80 million, Maui, which I'll get into a little bit more in terms of how we're thinking about recovery.
Speaker Change: And then you would add <unk> 5 million for Alibaba in China, and then the 15, we talked about in terms of hurricane impact.
Speaker Change: You would add to that to get to a grand total of one.
Speaker Change: $1 750, that's what we really consider it to be the two run rates only think about adjusted EBITDA.
Speaker Change: It relates to Maui.
Speaker Change: Jim and I sort of got into my prepared remarks, we are certainly encouraged by the transient trends in the pickup you're seeing statistic.
Speaker Change: Statistically for Thanksgiving as well as for effective effectively.
Speaker Change: Secondly, around the week of Christmas and new year's.
Speaker Change: The piece that is going to be a little bit challenging and I will take a little bit longer to recover is going to be the group piece because if you recall at beginning of this year. There is suddenly wasn't be clear clear message on Maui in terms of being open for.
Speaker Change: For business.
Speaker Change: Once we lapped over the one year anniversary of the fire.
Speaker Change: Definitely much more clear direction in terms of the island being open for tourism and welcoming guests back the meeting planners didn't really have much of a chance in the beginning of the year to really.
Speaker Change: Book forward.
Speaker Change: We didn't see much group group booking activity into 2025 and into the future. We expect to see that really pick up beginning next year. So the group piece of the business and group for Maui across our hotels on a room night basis works out to be about 30% or so from a revenue perspective.
Speaker Change: It's about 20% of revenue that group.
Speaker Change: But it does build a meaningful base for the hotels, particularly with the Hyatt that's going to take a little bit of while to come back.
Speaker Change: So that $75 million to $80 million and we don't have any budgets get Andy to give you a number but what I would say the trends are encouraging from a transient pickup perspective and group.
Speaker Change: It's going to come back certainly it'll just take a little more time, probably towards the end of next year into 2026.
Speaker Change: That's helpful. Thanks, so much.
Speaker Change: Sure.
Speaker Change: Next question is from Michael Bellisario with Baird. Your line is open.
Michael Bellisario: Thanks, Good morning.
Speaker Change: Just sort of along the same lines.
Speaker Change: The moving pieces in all your numbers in the models can you maybe just take a step back what's the clean run rate for the portfolio of both top and bottom line that that you think.
Speaker Change: Everything's performing at today ex all the one timers and then Tom.
Speaker Change: How might that be different or the same as you start thinking about looking out to 2025. Thanks.
Speaker Change: Just so I understand the question.
Speaker Change: Clean run rate once you do all the puts and takes including the acquisition taking us to be I use the $1 750, I just walk through a.
Speaker Change: A big component of the 1 billion 750 is obviously the $75 million to $80 million.
Speaker Change: Of Maui EBITA that we are missing the question really is for 2025, how much of that EBITDA comes back.
Speaker Change: 225 without getting into too.
Speaker Change: Too much details because we obviously don't have budgets right now I don't really have a good sense in terms of where top line and expenses will come in but what we do know is that group booking pace is looking strong for 2025, we already have $2 8 million group room nights on the books, we picked up about 400000 total.
Speaker Change: Group revenue is up.
Speaker Change: <unk>, 5%.
Speaker Change: Right group rate is up by three 5%, but we're feeling pretty good about 2025 from group perspective in terms of what visibility you have.
Speaker Change: Pacific to Maui, and like I said, I think group is going to take a little bit of time to get back and unclear at this point in time.
Speaker Change: How much of that $75 million to $80 million will really be able to see in Maui.
Speaker Change: Yes, sorry, I should've been clearer I was sort of referring to the current topline and Bottomline growth rates are you seeing do you think the underlying performance of the portfolio is 3% on the top line, 4% expenses all the.
Speaker Change: X all the onetime items not really thinking about the absolute number is more about the growth rates ex all the onetime items.
Speaker Change: Or youre, saying for 2024 oriented 2025.
Speaker Change: Just today.
Speaker Change: I think as everyone thinks about is this a 2% revpar growth environment is at three 4% expenses, what's kind of your view on where the portfolio is performing today and looking out into 'twenty five X. All these one time items.
Speaker Change: In terms of growth rates.
Speaker Change: Yeah, if you think of in terms of growth rates.
Speaker Change: I mean, this year would have definitely revpar perspective, given how much drag we're seeing from Maui would have been closer to a 3% revpar.
Speaker Change: Our revpar growth rate and in that case, we would have actually seen margin expansion.
Speaker Change: <unk> expenses.
Speaker Change: The up to 8% so.
Speaker Change: Net net for this year, we would have meaningfully outperformed relative to the industry just given.
Speaker Change: The benefit we saw from all the capital investments, we put in to our into our hotels on the maritime single tablet program and as Jim spoke to the index share gains that we saw so it's sort of unfortunate that you've had the drag in terms of the Maui wildfire, otherwise certainly at a 3% growth rate of Revpar for this.
Speaker Change: Here.
Speaker Change: And we would have actually seen about a 10 to 15 basis points of margin expansion.
Speaker Change: Helpful. Thank you.
Speaker Change: Your next.
Speaker Change: Next question comes from Smedes Rose with Citi. Your line is open.
Smedes Rose: Hi, Thank you.
Smedes Rose: So I wanted to just clarify something on Maui could you just talk about.
Smedes Rose: What you're expecting there this year in terms of EBITDA I guess, excluding the business interruption proceeds.
Speaker Change: So we just get a sense of like what the.
Speaker Change: The gap is to contribute $5 million to $80 million, you're talking about potentially for next year.
Speaker Change: I am sure its 90000, excluding 97 million excluding the proceeds.
Speaker Change: Okay. Thanks.
Speaker Change: And then I guess one of the thing one thing you mentioned next year for the group outlook group calendars look good across the convention calendars look good.
Speaker Change: Thoughts around sort of grouping up I guess into 2025 to help sort of lock in.
Speaker Change: Demand now and in revenues or would you expect to keep more in line with what you said historically in terms of the percent of overall group pregnant.
Speaker Change: Presentation.
Speaker Change: Yeah, I mean honestly it is really an asset by asset.
Speaker Change: Exercise that we go through them.
Speaker Change: Now for this years whats the optimal group room night in and so that we can maximize the building of the transient rates. So it really depends but overall I would say the mix is not going to shift meaningfully.
Speaker Change: The portfolio, we certainly focus on grouping up on.
Speaker Change: Across the board wherever it does make sense and wherever we do have holes. We also like to fill in with contract business that youll see shifts in contract business over the years the yield management is really asset by asset.
Speaker Change: Encouraging seniors.
Speaker Change: Citywide that ours, certainly pacing very well for next year.
Speaker Change: Quickly for the whole market I would say you know San Francisco being up.
Speaker Change: 40% of his standpoint.
Speaker Change: New York, San Antonio Orlando, <unk> really makes up more than 40% right now of the group room night that you already have on the books for 2025, so overall feel.
Speaker Change: Really good and yeah.
Speaker Change: As we see the need for each of these assets and where the holes are we going to fill accordingly.
Speaker Change: Certainly hope that the strength in corporate group continues in the banquet and catering contribution that comes along with it to really drive towards EBITDA.
Speaker Change: Okay. Thank you appreciate it.
Speaker Change: The next question is from David Katz with Jefferies. Your line is open.
David Katz: Alright, Thanks for taking my question.
David Katz: Some initial.
Speaker Change: Commentary around.
Speaker Change: The labor market and I think theres a lot of.
Speaker Change: <unk> puts and takes on opportunities that may or may not occur.
Speaker Change: Given the election outcomes.
Speaker Change: I know it's early.
Speaker Change: You've gone out on a limb elsewhere, so I'm not asking that but any prospect to absorb or thoughts you can share.
Speaker Change: With respect to that and whether it's plus would be growth.
David Katz: Sure David.
Speaker Change: Generally speaking.
Speaker Change: We are very pleased with.
Speaker Change: The labor picture at our assets.
Speaker Change: We're not we're not the manager we're.
Speaker Change: We're not the employer.
Speaker Change: But we have to have the very best in the business.
Speaker Change: And Marriott and Hyatt.
Speaker Change: Particularly.
Speaker Change: That manage the bulk of our portfolio.
Speaker Change: And there are an employer of choice.
Speaker Change: They are that the.
Speaker Change: Opportunity that people search out if they want to make hospitality a career.
Speaker Change: We are very encouraged going forward.
Speaker Change: Coming out of the pandemic, we got back to optimal staffing levels fairly quickly.
Speaker Change: After we redefined and reinvented the operating model.
Speaker Change: So.
Speaker Change: Going looking forward.
Speaker Change: Yeah.
Speaker Change: We're nothing but optimistic on the labor front I don't see any issues that are going to present a problem for us.
Speaker Change: As we get into 2025 and beyond.
Speaker Change: And then thank you and if I may I, just wanted to follow up on kind of leisure transient and maybe Jeff one layer further down or is some of the softness that we are discussing more a decision to go or no go.
Speaker Change: Or would you classify more as a pushback on.
Speaker Change: On the level of rates and rate growth that were out there how would be on parkdale.
Speaker Change: Well I think there are a couple of different components to the leisure picture.
Speaker Change: Sure.
Speaker Change: No no go I'm not sure that that is.
David: That's really the bottom line David.
David: And I say that because if you look at <unk>.
Speaker Change: International outbound.
Speaker Change: Air capacity.
Speaker Change: Versus inbound.
Speaker Change: We have seen that.
Speaker Change: 120% number is held steady now for the last several quarters. So people are still traveling they're spending money.
Speaker Change: They're just not spending it at our properties generally speaking.
Speaker Change: We're not seeing any pushback on ADR.
Speaker Change: Yeah.
Speaker Change: Leisure transient ADR and our portfolio.
Speaker Change: We finished the third quarter with leisure transient ADR is up 50% over the third quarter of 2019.
Speaker Change: And that is held for 10 quarters in a row now so people are still spending money when they get to our properties.
Speaker Change: Theyre spending money out of the room as well we continue to see records on a quarterly basis in terms of per occupied room spend at our outlets.
Speaker Change: We've seen small revenues continue to increase golf revenues continue to increase so clearly the affluent consumer consumer is still spending money.
Speaker Change: We believe that over time.
Speaker Change: The pendulum will swing back and.
Speaker Change: We will see a more normalized balance of international and.
Speaker Change: And bound.
Speaker Change: Versus international outbound I think international inbound.
Speaker Change: He has held somewhere around 90% of two.
Speaker Change: 2019 levels, maybe even a little less than that.
Speaker Change: A lot of that has to do with the strong dollar.
Speaker Change: So we keep our eye on a lot of different things.
Speaker Change: Assessing the health of the leisure consumer.
Speaker Change: Thank you very much.
Speaker Change: The next question comes from Chris Sterling of Green Street. Your line is open.
Chris Sterling: Thanks, Good morning.
Speaker Change: Going back to the Orlando condo development can you walk through underwritten sales proceeds relative to your development budget. There and then are there any similar densification opportunities that you might pursue in the near term and other places within the portfolio.
Speaker Change: Sure.
Speaker Change: Are you talking about in terms of.
Speaker Change: What assumptions, we made with respect to.
Speaker Change: Top line sales.
Speaker Change: Yes that would be helpful. At all relative to your overall kind of construction budget there.
Speaker Change: So I think the construction budget with a $150 million to $170 million.
Speaker Change: And that really Hasnt changed.
Speaker Change: We.
Speaker Change: We started in mid July.
Speaker Change: The construction of the project and we.
Speaker Change: We anticipate starting sales and.
Speaker Change: Later in the year.
Speaker Change: This quarter mid November mid to the end of November.
Speaker Change: We're targeting completion of the mid rise that's 31 of the 40 condos I think in the fourth quarter to 25 2025, and then there are nine villas that will be completed in the first half of 2026. So it's 40 units in total.
Speaker Change: <unk>.
Speaker Change: We anticipated.
Speaker Change: Returns are going to be in the mid to high teens cash on cash so we.
Speaker Change: We will not provide our assumptions with respect to sales per square foot, but we underwrote it to a mid to high teens cash on cash return.
Speaker Change: And the construction budget is proceeding.
Speaker Change: On time and within budget.
Speaker Change: Fairly confident that we're going to hit those numbers.
Speaker Change: Okay, that's fair enough and I guess.
Speaker Change: The second half of my question any any similar opportunities that you might pursue in the near term.
Speaker Change: Elsewhere in the portfolio.
Speaker Change: Well.
Speaker Change: One of the really attractive.
Speaker Change: Attribute of the Ritz Carlton Oahu Turtle Bay was a 49 acre parcel of entitled land for residential development.
Speaker Change: Immediately adjacent to the resort.
Speaker Change: A significant portion of which is oceanfront property and.
Speaker Change: You just don't find that type of opportunity in Hawaii.
Speaker Change: And that's one of the things that really drove us.
Speaker Change: To complete the acquisition of Turtle Bay.
Speaker Change: We are still in the planning stages and.
Speaker Change: We have not.
Speaker Change: Taken into consideration.
Speaker Change: Any EBIT upside for the resort, but we believe there is going to be over time, meaning.
Speaker Change: Meaningful EBITDA upside.
Speaker Change: The risk itself as well as a development profit.
Speaker Change: That is whether or not we sell the land or we joint venture the development of those 49 unit, those 49 acres, which probably going to be somewhere plus or minus 250 units and it's likely going to be risks residential units.
Speaker Change: At least 50% of which will participate in the rental pool, because that's just how things.
Speaker Change: As a matter of law that something has happened in Hawaii. So.
Speaker Change: It's an exciting exciting project.
Speaker Change: It's a fairly large project, that's why we're considering joint venturing, it or or selling the property outright but.
Speaker Change: <unk> to say that we.
Speaker Change: We'd expect to make a profit on the sale of our development of the land and see meaningful upside.
Speaker Change: To the resort both from units being in the rental pool and a share of revenues with the owner as well as ancillary spend at the restaurants golf and Spa, that's the most exciting.
Speaker Change: Project, we have we are looking at.
Speaker Change: Potential development, which I can't get into any details.
Speaker Change: At this point in time with you potential residential development.
Speaker Change: At another one of our resort properties.
Speaker Change: That's in the very early stages and is it.
Speaker Change: Is it manifest itself, we'll certainly share more details with you down the road.
Speaker Change: Okay I appreciate the time thank you.
Speaker Change: The next question comes from Ari Klein with BMO capital markets. Your line is open.
Ari Klein: Thanks, and good morning.
Speaker Change: Just going back to Matt now it looks like you are.
Speaker Change: Slightly narrowed the expected revpar headwind.
Ari Klein: For the year in that market I'm, just curious if that that was based on what youre seeing in Q4, and then so Rob you mentioned, who have taken longer to recover and now it can you just provide us with a trend yet.
Speaker Change: Currently stand from a delta perspective relative to pre wildfire.
Speaker Change: Yeah sure so.
Speaker Change: Yes, if you recall last quarter, we had said that the total Maui impact was about 250 basis points drag to the overall revpar.
Speaker Change: We have revised Q2 hundred 20 basis points. So in other words, it's actually improved by 30 bps and yes. You are correct. It really is based on what we're seeing in terms of transient.
Speaker Change: For Thanksgiving and for the.
Speaker Change: That's a period.
Speaker Change: So if you feel encouraged in terms of where things are heading from a change in perspective.
Speaker Change: I will say like where we are off.
Speaker Change: Overall is about call it 20% or so.
Speaker Change: And in terms of sort of club room night.
Speaker Change: The piece that is going to take longer to come back is like I mentioned earlier is going to be more of the group side versus.
Speaker Change: The transient and for Maui.
Speaker Change: Correctly philosophy hotels.
Speaker Change: Pre fire, we did about 100 thousands of room nights.
Speaker Change: And while we are painting, Okay for 2025, we were still up pretty.
Speaker Change: Pretty behind double digits in terms of group pace and that's the piece that you're keeping a close eye on it and hopefully the beginning of next year, we start seeing group activity pick up the transient pace is actually pretty similar to where we.
Speaker Change: <unk> pre fire.
Speaker Change: At least for the fourth quarter, which is very encouraging.
Speaker Change: Relative to sort of where we go back in.
Speaker Change: Before the fires the correct. So group is a piece, we're keeping an eye on and hopefully we can see that group activity pick up as we get into next year.
Speaker Change: Got it. Thanks, Thanks for that color and then Jim I'm wondering if maybe you can provide us.
Speaker Change: With a little bit more color on the Ritz Carlton, while outperformance and how that's trended up post conversion.
Speaker Change: But it's.
Speaker Change: It's trending in line with our pro forma expectations are the transition is.
Speaker Change: It's going well.
Speaker Change: At the present time.
Speaker Change: It's the top of the list when anyone's searching for Ritz Carlton.
Speaker Change: It's a it's a very important asset to the Ritz Carlton brand, it's getting all the attention that.
Speaker Change: Is that is certainly yes.
Speaker Change: Warranted going forward. So we're excited about it I mean, we're we're working with our developers who bought an adjacent parcel from Blackstone.
Speaker Change: On.
Speaker Change: They.
Speaker Change: Our realignment of the golf courses.
Speaker Change: There are two golf courses, there theyre going to.
Speaker Change: At least one and manage the other one on our behalf.
Speaker Change: Everything is going according to plan the asset was in terrific shape. When we bought it so no near term capex needs and.
Speaker Change: We're seeing good pace over.
Speaker Change: Festive season.
Speaker Change: And and beyond into next year.
Speaker Change: Instead of color.
Speaker Change: The next question comes from Chris <unk> with Deutsche Bank. Your line is open.
Speaker Change: Hey, good morning, guys. Thanks for taking the question.
Speaker Change: Jim I wanted to kind of ask.
Speaker Change: Year to date, I think you're running at about 72% comparable occupancy.
Speaker Change: I look back to 19, and I think he was over 79 and I'm curious and I know there's nuances in the portfolio is a little different but.
Speaker Change: Do you guys see any impact from whether you want to call Shadow supply Airbnb or Conversely, maybe some of these soft brands or even kind of these new affiliation brands tactically arent part of your major brands, just any thought as to whether because it seems like group and corporate Occupancies and certainly leisure.
Speaker Change: Yeah pretty much as far back so it's going to get so is there any thought on kind of where those lost occupancy points are coming from.
Speaker Change: Yes, Chris.
Chris Sterling: The short answer is it's not as a result of shadow supply.
Speaker Change: And it's not as a result of new supply because the new supply picture has never looked better.
Speaker Change: Relative relative to what's being developed today as to other times in the cycle.
Speaker Change: Think what has happened and we have about I think we think it's eight to nine points of occupancy that we can still pick up.
Speaker Change: We actually view that as a tailwind to the portfolio.
Speaker Change: Not as a negative bias.
Speaker Change: Return to office is so.
Speaker Change: So to evolve in several markets, but it is coming back and I think that is probably one of the biggest diner.
Speaker Change: Dynamic things that changed coming out of the pandemic. The good news is that sale.
Speaker Change: Salesforce in San Francisco, they are going back to work at Amazon is going back to work. So a number of other big corporates are putting are mandating that there.
Speaker Change: Please.
Speaker Change: Get back to the office.
Speaker Change: We believe that over time.
Speaker Change: Yes.
Speaker Change: Transient travel continues to evolve and it has been evolving on a quarter over quarter basis.
Speaker Change: Should pick up.
Speaker Change: Some of that occupancy gap relative to where we were in 2019.
Speaker Change: Okay.
Speaker Change: I appreciate the thoughts thanks, Jim.
Speaker Change: The next question comes from the line of Robin Farley with UBS. Your line is open.
Robin Farley: Great. Thank you can you give a little more clarity around leisure rates in the quarter on a year over year basis and then.
Speaker Change: Claim expectation for 2025 in terms of what the leisure traveler.
Speaker Change: Now is it just sort of broadly.
Speaker Change: Leisure rate May look like next year, and then also what it was in Q3 year over year. Thanks.
Robin Farley: On a year over year basis Robyn.
Speaker Change: The plot.
Speaker Change: And a lot of the market to slightly down.
Speaker Change: You may recall that there were certain quarters last year, where it was meaningfully above the 50% to 2019.
Speaker Change: It seems to have pretty much normalized around the approximate 50% over 19, so for the most part pretty flat from a demand perspective.
Speaker Change: That's been the case as well pretty much flat throughout the Europe every single quarter that we looked at actually I believe it was down 3% year over year from a demand perspective in Q1, but then actually that that demand improved as we went through so again close to flat, but not very far from lapping boards perspective year over year standpoint.
Speaker Change: Going into 2025, given the consumer strength, we have seen and given that there is.
Speaker Change: Hopefully more clarity around sort of <unk>.
Speaker Change: Macro.
Speaker Change: The overall macroeconomics.
Speaker Change: Outlook.
Speaker Change: We believe that there is.
Speaker Change: That the leisure and just have formed a new baseline so effectively that's where we have settled down and given.
Speaker Change: The growth expectations for next year from a GDP standpoint from business investment standpoint, and just overall macro outlook.
Speaker Change: As Jim mentioned earlier, we expect that imbalance that currently does exist with international inbound outbound tusa at some point revert to mean.
Speaker Change: That should definitely help leisure overall stabilized and we don't expect any degradation in terms of.
Speaker Change: <unk> or demand.
Speaker Change: Okay, great. Thank you and then just a quick clarification. When you were talking about the $1 75 billion dollar run rate.
Speaker Change: Are you, including and I know that was like excluding business interruption from Maui.
Speaker Change: Are you, including this theoretical like if you recovered $75 million to $80 million in Maui and that 1.75, I'm, sorry, I just didnt catch what you were.
Speaker Change: We're giving a lot of puts and takes of what.
Speaker Change: At one point, Kevin 5 billion that includes what kind of recovery in Maui. Thanks, Yes that did assume the 75 to 80 that was effectively the long term run rate. So it wasn't necessarily 125.
Speaker Change: Okay, Great. That's all I wanted to clarify in other words based on your other comments it would seem like Youre, saying Thats now being 25, So I guess, that's all I want to correct. Thank you. Thanks, that's correct yep.
Speaker Change: Thanks. The next question sorry. The next question comes from Duane sending right work with Evercore ISI. Your line is open.
Speaker Change: Hey, good morning.
Speaker Change: Just on San Francisco, if I heard you correctly any any times of year or specific citywide events that stick out I think you said.
Speaker Change: Broom night pacing is up 40% and I wonder if theres any more underlying detail you have on that.
Speaker Change: Sure that that's effectively for overall citywide.
Speaker Change: Anything over here specifically in terms of group room nights for US we already for San Francisco will have approximately 220000 group room nights on the books, which is about close to 30% up year over year from a pace perspective.
Speaker Change: It's still obviously far from where we were back in 2019, but nonetheless, a good progress and we're really encouraged by the way. It's the pacing was 25.
Speaker Change: You'll recall 2026.
Speaker Change: World Cup and Super Bowl in San Francisco, So again, good things to come presents them.
Speaker Change: Okay, Great and then just to you you you touched on this in prior questions, but on capital allocation, if we think about.
Speaker Change: ROI projects additional acquisitions or buyback.
Speaker Change: Just given your experience. This year are you leaning in any more of a direction any of those three buckets going forward just given your experience this year.
Speaker Change: Well I think that.
Speaker Change: It goes without saying that the.
Speaker Change: The easiest opportunities to underwrite.
Speaker Change: With the greatest degree of certainty or those that are in our existing portfolio. So we are well into the Hyatt transformational capital program.
Speaker Change: And we look forward to.
Speaker Change: Continuing to invest in those assets.
Speaker Change: And complete that program in the near term next year.
Speaker Change: ROI projects, we're always looking for places to particular to continue to put money in our existing portfolio as well our stock buybacks.
Speaker Change: $3 5 million shares $57 million. This last quarter, we will continue to be optimistic opportunistic on buying.
Speaker Change: Buying back stock and.
Speaker Change: Acquisitions of course, if they make sense for us and we're sitting here at two seven times leverage today.
Speaker Change: We can we can take our leverage up to somewhere 233, and a quarter times comfortably. So we have a lot of significant amount of dry powder.
Speaker Change: Allocate capital across all of those various.
Speaker Change: Opportunities.
Speaker Change: Thanks, Jim.
Speaker Change: This concludes the question and answer session I will turn the call to Jim for closing remarks.
Jim: Well, thank you again for joining us today.
Speaker Change: Always appreciate the opportunity to discuss our quarterly results with you and we look forward to seeing many of you are in Las Vegas in the coming weeks and at other conferences over the course of the year.
Speaker Change: Have a great day.
Speaker Change: This concludes today's conference call. Thank you for joining you may now disconnect.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change:
Speaker Change: [noise].