Q3 2024 Summit Hotel Properties Inc Earnings Call
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Good day and thank you for standing by.
Speaker Change: Welcome to the Summit Hotel Properties Q3 2024 earnings conference goal.
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Speaker Change: I would now like to hand the conference over to your speaker today, Adam Wudel, EVP of Corporate Development. Please go ahead.
Adam Wudel: Thank you and good morning. I am joined today by Summit Hotel Properties President and Chief Executive Officer John Stanner and Executive Vice President and Chief Financial Officer Trey Conkling.
Please note that many of our comments today are considered forward-looking statements as defined by federal securities laws.
Speaker Change: These statements are subject to risks and uncertainties, both known and unknown, as described in our SEC filings.
Speaker Change: Forward-looking statements that we make today are effective only as of today, November 5th, 2024, and we undertake no duty to update them later.
Speaker Change: You can find copies of our SEC filings and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call, on our website at www.shpread.com.
Speaker Change: Please welcome Summit Hotel Properties President and Chief Executive Officer, Jon Stanner.
Jon Stanner: Thanks, Adam, and thank you all for joining us today for our third quarter 2024 earnings conference call.
Jon Stanner: We are proud of our third quarter financial results, highlighted by our third consecutive quarter of adjusted FFO growth, despite what was a challenging quarter for industry fundamentals broadly and several of our markets more specifically.
Speaker Change: Today, Trey and I will provide additional commentary on the current operating environment, including the effects of the recent hurricanes.
Speaker Change: Our outlook for the balance of the year and into next year, our recently announced sale of the Fort Floyd San Francisco Airport Hotel, and an updated review of the significant progress we have made strengthening our balance sheet.
Speaker Change: Our third quarter operating results reflect the continuation of many of the industry trends we've experienced over the past several quarters.
Speaker Change: Specifically, the continued strength of group demand, the ongoing recovery of business travel, which is driving better relative midweek performance in urban and suburban markets.
Speaker Change: and the ongoing normalization of leisure travel demand patterns, which is offsetting some of the gains realized in other segments.
Speaker Change: Overall, RevPAR for our same store portfolio increased 0.2% in the quarter.
Speaker Change: driven by a 1.2% increase in average rate that was partially offset by a 1% decline in occupancy.
Speaker Change: Third-quarter ref bar in our urban and 3.9% respectively, with those two location types representing nearly 75% of our total room mix.
Speaker Change: Weekday rev power grew 1.6% as Tuesday and Wednesday nights continue to exhibit the strongest growth.
Speaker Change: particularly in our urban and suburban hotels, which experienced rev-par growth of nearly 5% during the quarter, reflecting strong group and improving business transient trends.
Speaker Change: As hybrid work schedules have remained in place, we've seen increased opportunities to drive higher rates on compressed midweek nights when larger urban markets are once again often fully occupied.
Speaker Change: On a monthly basis, July and August REVPAR grew 1.5% and 2.2% respectively, which was generally in line with our expectations going into the quarter, as moderating leisure demand in peak summer travel months was expected to pressure top-line growth rates.
Speaker Change: September REV PAR declined 3% year-over-year, driven entirely by a reduction in occupancy.
Speaker Change: A softness around the Labor Day holiday at the beginning of the month was compounded by disruption from Hurricanes Francine and Helene later in the month.
Speaker Change: We own 14 hotels that were in the path of these storms, all of which remained open and operating and fortunately did not sustain any material physical damage.
Speaker Change: We estimate the storms displaced nearly $400,000 of revenue, reducing REV PAR growth by 20 basis points, and approximately $300,000 of EBITDA in the third quarter.
Speaker Change: Hurricane Milton also created some short-term disruption in early October, particularly in the Tampa and Orlando markets, though we remain optimistic that at least a portion of the lost revenue will be recovered over the remainder of the fourth quarter and into early next year.
Speaker Change: Our preliminary October results reflect a modest re-acceleration in top-line growth, with October REVPAR expected to increase approximately 2% year-over-year.
William Conkling: William Conkling
Speaker Change: At the beginning of the year, we identified several slower-to-recover markets that we believe have better growth profiles in 2024 and beyond.
Speaker Change: As expected, our hotels in these markets have continued to significantly outperform industry metrics.
Speaker Change: Specifically, our hotels in San Jose, New Orleans, Louisville, Baltimore, and Minneapolis had combined RevPAR and EBITDA growth in the third quarter of 8% and 12% respectively.
Speaker Change: These metrics are even more compelling on a year-to-date basis as RevPAR has increased 13% and EBITDA 37% in those five markets year-over-year.
Speaker Change: Broadly, the outlook for continued outsized growth in these markets, which represent approximately 15% of total guest rooms in our portfolio, remains favorable into next year.
Speaker Change: San Francisco remains the notable negative outlier as the market continues to deal with a weaker convention calendar, a lack of inbound international travel, and limited office attendance.
Speaker Change: In our press release yesterday, we announced the closing of the sale of the 101-guestroom, four points by Sheridan, San Francisco Airport Hotel for $17.7 million. The hotel was forecasted to essentially break even in Hotel Ibiza this year.
Speaker Change: With the completion of this sale, we have now sold 10 hotels over the last 18 months, generating nearly $150 million in gross proceeds.
Speaker Change: The average trailing 12-month REV PAR at the time of sale for these hotels was $85.
Speaker Change: Nearly a 30% discount to the remainder of our portfolio.
Speaker Change: The sales prices reflect a blended capitalization rate of less than 5% when accounting for nearly 50 million dollars of near-term capital needs that will be avoided as a result of the sale.
Speaker Change: The totality of our disposition activity has facilitated nearly a full-term reduction in our net debt to EBITDA ratio, enhanced the quality and growth profile of our portfolio.
Speaker Change: significantly reduced near-term capital requirements and increased our capacity for external growth.
Speaker Change: Before I turn the call over to Trey, let me provide a few thoughts on our outlook for the remainder of the year and into 2025.
Speaker Change: We are currently operating in a slightly positive top-line growth environment that is broadly expected to persist through the end of the year.
Speaker Change: We continue to see meaningful in-the-month and in-the-quarter swings in demand trends.
Speaker Change: And our results have been more dependent on special event demand and holiday timing than in previous cycles.
Speaker Change: There are some reasons for optimism in the fourth quarter, namely the return of Taylor Swift concerts in three of our markets and potential longer-term demand driven by recovery efforts from the fall storm season in the southeast.
Speaker Change: October contributes approximately 40% of our total revenue in EBITDA in the fourth quarter and we were pleased to see the resumption of some of the positive trends that drove top-line growth in our portfolio in the first eight months of the year, specifically growth in urban, suburban, and airport locations.
Speaker Change: Industry-wide expectations for next year broadly reflect a more of the same fundamental narrative. Moderate top-line growth driven by continued strength and group demand, positive trends and business transient, and a more subdued outlook for leisure travel.
Speaker Change: We believe there's potential for better leisure trends as comparisons of this year ease and a weaker US dollar could start to facilitate the normalization of inbound-outbound international travel that became a meaningful headwind the past two years.
Speaker Change: As we mentioned before, Tuesday and Wednesday nights are largely fully occupied again in key urban markets, and we have strong pricing power on those nights.
Speaker Change: The potential exists for some of that demand to expand into the Monday and Thursday shoulder nights as room availability becomes more constrained.
Speaker Change: The expense outlook is more favorable in 2025, as wage pressures have broadly moderated.
Speaker Change: In summary, we remain optimistic about the longer-term outlook for the industry.
Speaker Change: particularly in what is likely to be an elongated period with very little supply growth and the prospects for summit more specifically.
Speaker Change: With that, I'll turn the call over to our CFO, Trey Conkling.
William Conkling: Thanks, John, and good morning, everyone.
William Conkling: Our third quarter 2024 performance represented a continuation of prior quarter operating trends as growth within our portfolio was once again driven by the company's urban and suburban hotels, which generated REVPAR increases of 1.3% and 3.9% respectively.
Speaker Change: Strength in our urban portfolio was driven by continued outsized growth in notable Sunbelt markets, such as Houston and New Orleans, but even more so by markets outside of the Sunbelt, such as San Jose, Chicago, Louisville, and Cleveland.
Speaker Change: In particular, our urban hotels benefited from robust group demand, for which RevPAR increased 10% versus the third quarter of 2023.
Speaker Change: It should be noted that our urban portfolio faced a difficult year-over-year comparison as three cities within our portfolio hosted Taylor Swift concerts in the third quarter of last year, compared to none this year.
Speaker Change: Growth within our suburban portfolio was also driven by strength and group demand, for which RevPAR increased 10% in the third quarter.
Speaker Change: This was led by our hotels in the Frisco Submarket of Dallas, Suburban Denver, Hillsboro Portland, and Houston Energy Corridor, which had a combined REV part increase of over 9% for the third quarter.
Speaker Change: Stepping back, Summit's urban and suburban portfolios have generated red part growth of 3% and 4.2% through the first three quarters of the year, respectively.
Speaker Change: which have outpaced the total industry by 180 basis points and 300 basis points year-to-date.
Speaker Change: with nearly 50% of our portfolio guest rooms located in urban markets.
Speaker Change: and nearly 75% of our portfolio guest rooms located in urban and suburban markets combined. We believe our portfolio is well positioned for continued outperformance as growth in group and business transient serve as the primary demand catalyst for the industry moving forward.
Speaker Change: While third-quarter REVPAR for our resort and small-town metro assets declined year over year due to continued normalization of leisure-related demand patterns, the company's third-quarter results were also impacted by revenue displacement from Hurricane Helene in markets such as Asheville.
Speaker Change: as well as from transformative ongoing renovations at hotels such as the courtyard Fort Lauderdale Beach.
Speaker Change: Moderating expense growth continued in the third quarter as expenses increased approximately 3% year-over-year when adjusted for one-time items incurred in the quarter.
Speaker Change: This represents the fifth consecutive quarter that expenses have exhibited a more normalized cadence, representative of a stabilized cost structure.
Speaker Change: Given modest revenue growth, our asset management team and hotel managers have successfully focused on reducing hotel reliance on contract labor and improving employee retention.
Speaker Change: Third quarter contract labor declined 13% on a nominal basis and 12% on a per-occupied room basis.
Speaker Change: versus the prior year period.
Speaker Change: Contract labor now represents 12% of our total labor costs, which is 700 basis points below peak COVID-era levels, but 400 basis points above 2019 levels, suggesting the opportunity for further improvement.
Speaker Change: We also continue to see improvement in employee retention.
Speaker Change: Third quarter wages increased a modest 2.2% versus prior year as the right sizing of labor force wages have mostly been absorbed.
Speaker Change: Year-to-date, pro forma operating expenses have increased 2.9 percent, or only 1.4 percent on a per-occupied-room basis.
Speaker Change: We continue to be encouraged by expense trends in our portfolio and how the current baseline cost structure positions the company for future bottom line growth.
Speaker Change: Proforma Hotel Ibida for the third quarter was $59.7 million, a 3% decrease from the third quarter of last year.
Speaker Change: As occupancy contracted 80 basis points due in part to disruption from hurricane activity.
Speaker Change: Year-to-date pro forma hotel EBITDA has increased over 3% on REVPAR growth of 1.6%.
Speaker Change: Despite this modest revenue growth, our hotel EBITDA margin has expanded over 30 basis points in the first nine months of the year, highlighting the benefits of our hotel's efficient operating models.
Speaker Change: Adjusted EBITDA for the quarter was $45.3 million, a 2% decrease compared to the third quarter of 2023, which is primarily driven by the net disposition activity compared to a year ago.
Speaker Change: Year-to-date adjusted EBITDA has increased 4.5% versus 2023.
Speaker Change: The success of recent capital allocation decisions.
Speaker Change: In particular, the $150 million of accretive asset sales.
Speaker Change: has reduced corporate leverage by approximately one turn and benefited AFFO.
Speaker Change: In the third quarter, adjusted FFO increased 4% to $27.6 million, or $0.22 per share.
Speaker Change: This represents the third consecutive quarter of year-over-year growth in adjusted FFO.
Speaker Change: Year-to-date adjusted FFO has increased over 9% versus 2023.
Speaker Change: From a capital expenditure standpoint, in the third quarter we invested $22.5 million in our portfolio on a consolidated basis.
Speaker Change: Year to date, we have invested $61.5 million on a consolidated basis and $52.3 million on a pro rata basis.
Speaker Change: CapEx spend for the third quarter was primarily driven by comprehensive renovations at our Courtyard Fort Lauderdale Beach, Courtyard Grapevine, Spring Hill Suites Dallas Downtown, and Hyatt House Denver Tech Center.
Speaker Change: The company's continued investment in our portfolio has resulted in a REVPAR Index of 115 for the trailing 12 months ending September 2024.
Speaker Change: and an average effective age of less than six years.
Speaker Change: This ensures the quality of our portfolio and positions the company to drive profitability in the future.
Speaker Change: The balance sheet continues to be well-positioned, with total liquidity of over $400 million, an average length of maturity of nearly three years.
Speaker Change: an average interest rate of approximately 4.7% and a leverage ratio that is nearly a full turn lower than it was a year ago.
Speaker Change: As a result of our interest rate management efforts, our interest rate exposure continues to be effectively managed with a swap portfolio that has an average SOFR rate of approximately 3%.
Speaker Change: and 77% of our pro rata share of debt is fixed after consideration of interest rate swaps.
Speaker Change: When accounting for the company's Series E, F, and Z preferred equity within our capital structure, we were over 80% fixed at quarter end.
Speaker Change: with no significant maturities until 2026.
Speaker Change: a staggered maturity schedule, and a strong liquidity profile, we believe the company is well positioned to achieve its growth objectives.
Speaker Change: On October 24th, our Board of Directors declared a quarterly common dividend of $0.08 per share, which represents a dividend yield of approximately 5.2%, based on the annualized dividend of $0.32 per share.
Speaker Change: The current dividend rate continues to represent a modest AFFO payout ratio of approximately 35% at the midpoint of our guidance, leaving ample room for potential increases over time, assuming no material changes to the current operating environment.
Speaker Change: The company continues to prioritize striking an appropriate balance between returning capital to shareholders, investing in our portfolio, reducing corporate leverage, and maintaining liquidity for future growth opportunities.
Speaker Change: Included in our press release last evening, we revised our full year guidance for 2024 operational metrics, as well as certain non-operational items.
Speaker Change: This outlook is based on management's current view and does not account for any unexpected changes to the current operating environment.
Speaker Change: Nor does it include any future transaction or capital markets activity, other than the sale announced last evening.
Speaker Change: Based on the company's year-to-date operating results as well as our future outlook, we are providing an updated REVPAR growth range of 1% to 2% for the full year to reflect the continued normalization of leisure demand and the recent impacts from hurricane activity.
Speaker Change: Although we have tempered our outlook for REVPAR growth in 2024, we have made a very modest revision to our adjusted EBITDA midpoint, and we are maintaining our adjusted FFO midpoint.
Speaker Change: Our revised adjusted EBITDA range of $188 million to $194 million represents a 0.5% decline at the midpoint.
Speaker Change: Since providing our initial 2024 guidance that included an adjusted even a midpoint of $194 million, we have sold over $100 million of assets.
Speaker Change: which effectively results in an adjusted EBITDA guide that is unchanged at the midpoint since the beginning of 2024 on a same property basis.
Speaker Change: Importantly, we are maintaining our adjusted FFO midpoint at $0.95 per share and narrowing the range to $0.92 per share to $0.98 per share as the company continues to benefit from recent accretive dispositions and continued deleveraging.
Speaker Change: which implies contraction in the fourth quarter of 200 basis points.
Speaker Change: primarily related to difficult year-over-year property tax comparisons given the significant appeal success realized in the fourth quarter of 2023.
Speaker Change: Our current full year outlook for hotel even a margin contraction of 25 basis points.
Speaker Change: represents a meaningful improvement compared to our initial full year guidance in February 2024, which estimated hotel even a margin contraction of 75 basis points.
Speaker Change: We expect pro rata interest expense excluding the amortization of deferred financing costs to be approximately fifty five million dollars
Speaker Change: Series E and Series F preferred dividends to be $15.9 million, Series Z preferred distributions to be $2.6 million, and pro rata capital expenditures to range from $75 million to $85 million.
Speaker Change: As previously mentioned, given the increased size of the GIT joint venture, the fee income payable to Summit now covers nearly 15% of annual cash corporate G&A expense, excluding any promote distributions Summit may earn during the year.
Speaker Change: And with that, I'll turn the call back over to Jon for closing remarks.
Jon Stanner: Thanks, Trey. Before we open the call for questions, I want to take a brief moment to publicly thank the members of our team and those of our management companies.
Speaker Change: for their efforts in navigating a few very difficult weeks during the recent hurricanes.
Speaker Change: Several of our management company associates were personally affected by the storms.
Speaker Change: And I'm proud that through our Summit Foundation, we've been able to provide valuable financial support to many of those who are affected.
Speaker Change: We wish them all the best as they work through the long and difficult recovery. We'll now open the call to your questions.
Speaker Change: As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced.
Speaker Change: To withdraw your question, please press star 1 1 again.
Speaker Change: Our first question comes from Austin Werschmidt with KeyBank Capital Markets.
Speaker Change: Your line is open.
Austin Werschmidt: Hey, good morning everybody.
Austin Werschmidt: John, really appreciate kind of the early thoughts on next year but wanted to focus specifically on the 13 or 16 hotels in those
Speaker Change: 4-5 markets that have kind of lagged meaningfully in the recovery.
Speaker Change: and just get a sense, you know, specific to those markets again, you know, what really gives you the confidence that they could continue to deliver above average growth.
Speaker Change: if we do remain in sort of a slow growth economic and RevPAR growth backdrop.
Speaker Change: um... you-know-what what what specific
Speaker Change: I guess, from a demand perspective.
Speaker Change: has changed for these markets that you think that they're going to continue on.
Speaker Change: on the trajectory you've seen this year. Yeah, good morning, Austin, and appreciate the question. Look, it's a little bit of a different story for each one of those markets, but we do believe we're going to continue to see outsized growth in those markets through the balance of this year and very likely into next year. New Orleans, for example, had a Taylor Swift concert in October, so we'll have a huge fourth quarter there. They host the Super Bowl next year, which will be a big lift to that market, and just broadly speaking, the convention center calendar is better in 25 in New Orleans than it was in 24. In San Jose, Silicon Valley, you're starting to see the return of some of the tech-driven midweek business transient demand. So we're largely full again on Tuesday.
Speaker Change: acher at CDCAC.com. END
Speaker Change: The demand trends are better off of a very low base, and I don't think this was kind of a 12-month recovery where we got everything back in 24. All of those markets are still performing. While they're performing much better, there's still a pretty significant gap to where they performed pre-pandemic. Again, we don't expect to get all of that back in a 12- to 24-month period, but we do think that the bar is effectively low enough that there's additional room for growth in those markets as we turn the calendar to next year.
Speaker Change: That's very helpful. And then, Trey, I recognize you have the tough expense comp you called out in the fourth quarter. Is there anything else in 25 that you'd call out, I guess, ahead of providing formal guidance that we should be aware of from a comp perspective? Or do you think it's a relatively stable year as you see it today?
Speaker Change: Yeah, look, we've obviously focused on the fourth quarter, given some of the property tax headwinds that we're going to face, given the positives that we saw in 2023 from a rebate perspective.
Speaker Change: As we look to 2025, we hope that that, I think, will be a more traditional kind of year-over-year, cleaner comp year. We've talked a lot about the labor dynamics that have been in play through this year. You know, the expenses that we've, the expense growth that we've incurred so far this year has been kind of in that two and a half to three percent zip code, and I think it sets up well.
Speaker Change: for next year from a kind of comparable standpoint from an expense, you know, perspective.
Speaker Change: Yeah, you know, I might add, and again, we're, you know, we're working through budgets for next year right now, and we're not in a position to provide guidance. But I do think if you look at the way that the expense environment normalized throughout 2025, you know, kind of the implied midpoints of our full year guidance range imply a one and a half percent REF PAR growth on the top and, you know, 25 basis points of margin contraction on the bottom. I think when we gave guidance initially at the beginning of the year, we talked about needing, you know, three to three and a half percent REF PAR growth to break even on margins. Clearly, we were able to manage expenses much more efficiently than that. And part of that is a reflection on the great work that the team did to manage expenses in a lower REF PAR growth environment, but also.
Speaker Change: what you're seeing, this kind of continued normalization in the wage and the labor environment, which has moderated expense growth for us. Yeah, I think that's kind of most evident is when we gave initial guidance at the beginning of this year, we thought expense growth would be 4 to 5 percent, to John's point, and, you know, it's going to, we think now it's probably 2.5 to 3 percent in wage growth now.
Speaker Change: sits in the low twos, and so that gives us some conviction as we kind of think about the cost structure for next year.
Speaker Change: That's all very helpful. Thanks, everybody.
Speaker Change: Thanks Austin.
Speaker Change: Thank you. And our next question comes from Michael Bellisario with Baird. Your line is open.
Michael Bellisario: Good morning, guys.
Speaker Change: Good morning, Mike.
Michael Bellisario: John, I just want to go to transactions. You sounded more optimistic about the potential for capital redeployment acquisitions.
Speaker Change: What are those going in yields today? How much have they moved versus a quarter or two ago? And then how would you differentiate a kind of leisure resort potential acquisitions versus urban acquisitions? Thanks.
John Stanner: Yes, appreciate the question, Mike. Well, look, you know, let me kind of take a step back. And, you know, we talked about, you know, for 18 months now, and we've gone through, you know, a very methodical, targeted process where we've sold 10 assets, we've generated $150 million of proceeds, and we did it in an environment that, you know, as everybody's well aware, has been a very slow transaction environment, generally. And I think that we took the approach that we did because we felt like the execution would get us to a better result. So we sold $150 million of assets, we eliminated about $50 million of capital needs in those assets, you know, on a blended basis that equates to less than a 5% cap rate, including capital, and less than a 6%
John Stanner: I think we were very thoughtful in how we went about targeting assets for sale. Lower REVPAR, lower margin hotels and lower growth markets with significant capital needs. That did a couple of things for us. One, it de-levered the balance sheet and our net debt to EBITDA as we said in the prepared remarks is a full turn lower than it was when we started the process. It has improved the quality of the overall quality of the portfolio and as you've alluded to it has given us some capacity for external growth. We do think that while the transaction market hasn't maybe thawed completely, we do think we're beginning to see the signs of a market that's more conducive to transactions. The capital markets have improved dramatically.
John Stanner: and I do think that seller expectations, broadly speaking, have adjusted for the condition where rates are today and some of the fundamental uncertainty that we've seen in the business even in the last 60 to 90 days. And so we are, again, we're always, we try to always be active in the market. We try to always make sure we have an active pipeline, but we feel good about the transactions that we've executed to date.
Speaker Change: and then anything specific on leisure resorts versus urban on the transaction side
Speaker Change: No, look, you know, we've always talked about being kind of market agnostic. I think if you go back and you look at where we've acquired since the pandemic, we've acquired since the end of the pandemic, we've acquired about a billion dollars of assets. All of that has either been in the Sunbelt or in mountain markets. And those assets have performed very, very well. I think where we've seen kind of near term, better fundamental growth, and I think the outlook is potentially better in the kind of the near to medium term is in some of these urban markets where we're seeing better growth on Tuesday and Wednesday nights. It's really being helped by the strength of group business and kind of this grind higher in business, transient demand, as we've described. We do think that those those.
Speaker Change: Those trends will continue to play out over the near to medium term and I think that creates some interesting opportunities in some of those markets.
Speaker Change: https://www.kenhub.com
Speaker Change: Got it, that's helpful. And then on a related point.
Speaker Change: I understand you've sold wholly owned assets, sort of a balance sheet motivation there, but maybe on the flip side, where are you in the life cycle of some of the joint venture assets?
Speaker Change: eventually or potentially selling those, realizing some of the promotes on some of those deals. And that's all for me, thanks.
Speaker Change: Yeah, we have sold two assets out of the joint venture to date, you know, and particularly related to the NCI You know portfolio we identified, you know, I'll call it a handful of assets that were not going to be long-term holds For us very often the trigger point for those sales was when we got to a point where we needed to put material capital into the assets
Speaker Change: I think that thesis is still very much in place. You shouldn't be surprised for us to continue to sell some of the lower rev par, lower margin assets in the joint venture portfolio that will ultimately need capital over the next 12 to 24 months.
Speaker Change: Thank you. Our next question comes from Chris Wolronka with Deutsche Bank. Your line is open.
Chris Wolronka: Thank you. Thank you.
Chris Wolronka: Good morning, guys. Thanks for taking questions.
Chris Wolronka: I guess, Jon, I know your exposure to union markets is very small, but as you kind of read about more of these deals getting done...
Speaker Change: Do you have any concerns that, you know, that labor costs come back again in the opposite direction and that some of that, you know, some of the outcomes of the negotiations spill over into, you know, maybe some of your urban markets, that concern at all?
Speaker Change: are pretty insulated from some of that activity. And it's something that we're just very mindful of continuing to make sure that we have the right programs and Employer Relation Programs in place to manage that.
Speaker Change: Okay, thanks Sean. And then I think we heard Mary yesterday talk about some expense.
Speaker Change: production targets at their company and then they kind of said that some of that was going to...
Speaker Change: also filters through to, you know, to owners. I don't know if that may have been a little bit more...
Speaker Change: reference to full service or not, but is there anything you are looking for or hoping or expecting from brand companies with respect to some relief on costs from things they can control or mandate?
Speaker Change: Yeah, we kind of read the same thing that you did, Chris. I don't have any insight into that. It certainly would be welcomed, but nothing that anything that I could share that's tangible on how it would affect us. So we'd certainly welcome a lower cost program.
Speaker Change: Sure, yeah, gotcha. One more if I can. You know, I think you guys still have about 11 Hyatt places, if I did the math correct, and I think...
Speaker Change: probably more of them are kind of newer purpose-built, but I think some might be legacy, you know, Hyatt has kind of said that they're
Speaker Change: going through a process of, you know, looking at those. Can you just give us an overview of where you're...
Speaker Change: you know, how do places stand kind of relative to any, is there going to be any outside capital need or is there any, you know, thought to selling any of them or anything like that? Thanks.
Speaker Change: Yeah, you know, look, we've had outsized exposure to Hyatt Place historically. It's been a good brand for us, and in fact, if you go back and look at, you know, the acquisitions the company's made historically, it's been one of the best acquisitions that the company has ever completed. And so, I think the brand can really work in the right markets with the right RevPars. We have sold, you know, four Hyatt Places as part of the ten assets that we've sold over the last 18 months, and again, I think the common thread there has been these have been lower RevPars, lower margin hotels that needed significant capital, and we had a hard time kind of making that math pencil. There's no kind of strategic initiative internally to
Speaker Change: to say we're going to sell all our Hyatt places. In fact, we've renovated a fair number of them. I think, you know, broadly speaking, we're happy with the remaining Hyatt places that we have. We'll always continue to be opportunistic around selling assets, and that really isn't a brand-driven discussion. We try to be objective around what the ROI looks like when we go to renovate a hotel. Again, there's been a number of them that we've decided to sell, but the remainder of our Hyatt place portfolio is generally in good condition, and we like the way they sit in their respective markets.
Speaker Change: Okay, very helpful. Thanks, John.
Chris Wolronka: Thanks, Chris.