Q4 2024 Host Hotels & Resorts Inc Earnings Call
[music].
Good morning, and welcome to the host hotels <unk> resorts fourth quarter 2024 earnings Conference call. Today's conference is being recorded at.
Speaker Change: At this time I would like to turn the call over to Jamie Margaret Senior Vice President of Investor Relations. Please go ahead.
Speaker Change: 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 laws.
Speaker Change: As described in our filings with the SEC.
Speaker Change: Statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed.
Speaker Change: And we are not obligated to publicly update or revise these forward looking statements.
Speaker Change: In addition on today's call, we will discuss certain non-GAAP financial information such as our peso.
Speaker Change: Adjusted EBITDA R E and comparable hotel level results.
Speaker Change: You can find this information together with reconciliations to the most directly comparable GAAP information in Yesterdays earnings press release, and our 8-K filed with the SEC.
Speaker Change: And in the supplemental financial information on our website at host hotels Dot com.
Jim: With me on today's call are Jim <unk>, President and Chief Executive Officer.
Jim: <unk> Executive Vice President and Chief Financial Officer.
Speaker Change: 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.
Speaker Change: 2024 was a busy year for host.
Speaker Change: We delivered operational improvements driven by continued great growth in out of room spending.
We acquired one $5 billion of iconic and irreplaceable real estate across four properties.
Speaker Change: Three of which are in new markets for host.
Speaker Change: We continued to reinvest in our portfolio through capital expenditures and resiliency investments.
Speaker Change: We made progress on the Hyatt transformational capital program and the condo development at the four seasons resort Orlando at Walt Disney World Resort.
Speaker Change: We returned significant capital to stockholders in the form of dividends and share repurchases.
Speaker Change: And we maintained an investment grade balance sheet and continue to position house to take advantage of potential opportunities in the future.
Speaker Change: Turning to our results.
Speaker Change: 2024.
Speaker Change: Above our most recent guidance estimates for.
Speaker Change: For the full year, we delivered adjusted EBITDA of $1 billion $656 million.
Speaker Change: One 7% increase over 2023 and.
Speaker Change: And adjusted <unk> per share of $1 97.
Speaker Change: A two 6% increase year over year.
Speaker Change: Comparable hotel total Revpar grew two 1% while comparable hotel Revpar grew 90 basis points compared to 2023.
Speaker Change: Comparable hotel EBITDA margin of 29, 2% was down 60 basis points versus 2023.
Speaker Change: Primarily due to increased wages fixed expense pressures and performance in Maui following the wildfires in 2023.
Speaker Change: During the fourth quarter, we delivered adjusted EBITDA of $373 million and adjusted <unk> per share of <unk> 44.
Speaker Change: Comparable hotel total Revpar improved three 3% compared to the fourth quarter of 2023.
Speaker Change: And comparable hotel Revpar was up 3% driven by strong transient demand, including improving leisure transient demand in Maui and increased ancillary revenues.
Speaker Change: Comparable hotel EBITDA margin improved by 30 basis points year over year to 28, 1% driven.
Speaker Change: Driven by improvements in rate increases in the ancillary spending the same productivity improvements and certain one time items.
Speaker Change: As a reminder, the operational results discussed today refer to our 78 hotel comparable portfolio in 2024, which excludes the Ritz Carlton Naples, Leila Ventana Big sur and the Don Cesar.
Speaker Change: In 2025, or <unk> 79 hotel comparable portfolio only excludes a legal ventana Big sur ended RSA as our as the Ritz Carlton Naples is comparable in 2025.
Speaker Change: Turning to business mix Revpar growth in the fourth quarter was better than expected driven by over 3% rate growth.
Speaker Change: Transient revenue drove the outperformance in the quarter growing 8%, which is the highest improvement in the last six quarters.
Speaker Change: Revenue growth was led by leisure and Molly New York in Oahu, which all had strong passive seasons.
Speaker Change: Notably our three Maui resorts accounted for nearly half of the transient room revenue growth in the fourth quarter.
Speaker Change: Transient rates that are comparable resorts remained robust at 44% above 2019 levels, even as our Maui resort strategically offered leisure incentives to drive demand.
Speaker Change: <unk> Maui transient rate at our comparable results were in line with recent quarters.
Speaker Change: Business transient revenue grew approximately 6% driven by strong rate growth as we saw a favorable market mix and a continued shift from government to the corporate negotiated segment.
Speaker Change: As expected group room revenue for the quarter was down approximately 5% year over year due to tough comparisons in San Francisco in Mali.
Speaker Change: As Maui benefited from recovery and relief group room nights in 2023.
Speaker Change: Our property sold at 960000 group room nights in the fourth quarter, bringing our total group room nights sold for 2024 to $4 3 million or 101% of comparable 2023 group room nights.
Speaker Change: Digging deeper into Mali.
Speaker Change: The leisure recovery is underway.
Speaker Change: Total revpar at our three Maui resort was up six 4% in the fourth quarter.
Speaker Change: As leisure guests total spend exceeded recovery and relief group business last year.
Transient rooms sold were up approximately 50% year over year at our two wailea resorts and transient rooms sold at our Hyatt Regency, Maui and kind of Polly we're up 325%.
Speaker Change: The leisure guests continues to spend at our F&B outlets Spa and golf courses, leaving us encouraged by the leisure recovery that is beginning to take shape in Mali.
Speaker Change: For the full year, we estimate the Maui impacted our comparable hotel total revpar by 110 basis points Revpar by 160 basis points and EBITDA margin by 20 basis points, including the business interruption proceeds received during the year.
Speaker Change: Turning to ancillary spend we continue to see an improvement in food and beverage revenues in out of room spending.
Speaker Change: F&B revenue grew nearly 3% in the quarter driven by outlets at our resorts.
Speaker Change: Notably banquet revenue increased despite a decrease in group room nights.
Speaker Change: By growth in banquet revenue per group room night.
Speaker Change: Other revenue grew 8% despite an unexpected moderation of attrition in cancellation revenue.
Speaker Change: For the full year F&B revenue grew three 6% driven by an increase in banquet contribution and an improvement in group room night volume.
Speaker Change: Taken together, we continue to see the strength of the affluent customer across properties in our portfolio.
Speaker Change: Moving to our reconstruction efforts at the advances are.
Speaker Change: We have substantially completed our remediation efforts and our focus has shifted to rebuilding compromised infrastructure to increase resilience include.
Speaker Change: Including elevating critical equipment and systems as we did at the Ritz Carlton Naples.
Speaker Change: We expect a phase III opening of the property beginning late in the first quarter.
Speaker Change: We currently estimate our total property damage and remediation costs at the Don <unk> will be between 101 hundred $10 million.
Speaker Change: And our total insurance deductible is $20 million.
Speaker Change: Additionally, we expect to collect business interruption proceeds.
Speaker Change: We have included approximately $9 million of business interruption proceeds in our 2025 adjusted EBITDAR guidance.
Speaker Change: Which we expect to receive in the first half of the year.
Speaker Change: But it is still too early to estimate the timing or amounts of additional payments.
Speaker Change: In total we estimate that hurricane Helene and Milton negatively impacted our adjusted EBITDAR by $15 million in 2024.
Turning to capital allocation in.
Speaker Change: In 2024, we completed one 5 billion of acquisitions across four hotels, including the one hotel Nashville, and embassy suites by Hilton Nashville downtown the one hotel Central Park, and the Ritz Carlton Oahu Turtle Bay.
Speaker Change: Thus far our new acquisitions are performing in line with our underwriting expectations.
Speaker Change: In addition to successfully allocating capital through acquisitions, we also returned capital to stockholders through share repurchases and dividends.
Speaker Change: In 2024, we repurchased six 3 million shares at an average price of $16 99 per share for a total of $107 million.
Speaker Change: Since 2022, we have repurchased $315 million of stock at an average repurchase price of $16 27 per share and.
Speaker Change: And we have $685 million of remaining capacity under our share repurchase program.
Speaker Change: In the fourth quarter, we declared a quarterly cash dividend of <unk> 20 per share and announced a special dividend of <unk> 10 per share.
The total dividends declared for the year to <unk> 90 per share.
Speaker Change: In total we returned over $844 million of capital to stockholders in 2024.
Speaker Change: Turning to portfolio reinvestment in 2024, we invested nearly $550 million and capital expenditures and resiliency investments.
Speaker Change: We completed renovations to approximately 2100 guest rooms.
Speaker Change: <unk> hundred 13000 square feet of meeting space.
Speaker Change: Approximately 93000 square feet of public space.
Speaker Change: In addition, we completed the repositioning renovation at the finger oceanfront resort as.
Speaker Change: As well as made progress on the Hyatt transformational capital program.
Speaker Change: We also completed vertical construction on the mid rise condominium building at the four seasons resort Orlando at Walt Disney World Resort.
Speaker Change: Marking a significant milestone in the development.
Speaker Change: Sales efforts for the condos started in November of 2024, and we have deposits and purchase agreements for 14 of the 40 units.
Speaker Change: In 2025, our capital expenditure guidance range is $580 million to $670 million.
Speaker Change: Which includes between 70 and $80 million for property damage reconstruction majority of which we expect to be covered by insurance.
Speaker Change: Our Capex guidance also reflects approximately $270 million to $315 million of investment for redevelopment repositioning and ROI projects.
Speaker Change: Within the Hyatt transformational capital program, we expect to start renovations at the Hyatt Regency, Washington on Capitol Hill.
Speaker Change: The Manchester Grand Hyatt, San Diego, and the Hyatt Regency Austin.
Speaker Change: As a reminder, we expect to benefit from approximately $27 million of operating profit guarantees in 2025 related to the highest transformational capital program.
Speaker Change: Which we expect will offset the majority of the EBITDA disruption at those properties.
Speaker Change: Other major ROI projects for 2025 include the construction of the Phoenician Canyon suites Villa expansion and advances our ballroom expansion, which we expect to complete in the fourth quarter of 2025.
Speaker Change: In addition to our capital expenditure investment, we expect to spend $75 million to $85 million on the condo development at the four seasons resort Orlando at Walt Disney World Resort this year.
Speaker Change: More broadly we have completed 24 transformational renovations since 2018, which we believe will continue to provide meaningful tailwind for our portfolio.
Speaker Change: Of the 16 hotels that have stabilized post renovation operations to date.
Speaker Change: The average Revpar index share gain is over seven five points, which is well in excess of our targeted gain of 3% to five points.
Speaker Change: We continue to be recognized as a global leader in corporate responsibility over the course of 2024.
Speaker Change: Last month post was named to Newsweek's list of America's most responsible companies for the sixth year in a row.
Speaker Change: The annual ranking analyzes data from more than 2000 of the largest public companies in the United States before selecting the most responsible.
Speaker Change: The final list for 2024 recognizes the top 600, most responsible companies Fannie dozens of industries.
Speaker Change: <unk> landed at spot number 88 and is ranked number four in the real estate and housing industry.
Speaker Change: We also continue to make progress on our sustainability goals with four properties achieving LEED certification during the year.
Speaker Change: Bringing the total to 20.
Speaker Change: Importantly, we achieved a new milestone in our sustainability efforts for renewable energy use and green building certifications, resulting in the maximum pricing benefit under our credit facility.
Speaker Change: Which reduced the interest rate for the outstanding term loans by five basis points.
Speaker Change: Wrapping up we are proud of our accomplishments in 2024.
Speaker Change: Including the iconic portfolio, we have assembled and the investment grade balance sheet, we have maintained.
Speaker Change: We are encouraged by the state of travel as affluent consumers continue to prioritize experience and the supply picture for our markets and chain scales remains below historical levels.
Speaker Change: We continue to believe that host is well positioned due to our geographically diversified portfolio. Our continued reinvestment in our assets and our fortress balance sheet and we are confident in the opportunities for continued shareholder value creation in 2025.
Rob: With that I will now turn the call over to Rob.
Rob: Thank you Jim and good morning, everyone.
Rob: Building on Jim's comments I will go into detail on our fourth quarter operations full year, 2025 guidance and our balance sheet.
Rob: Starting with total revenue trends total revpar growth continued to outpace revpar growth as both group and transient guests maintained elevated levels of out of home spending.
Rob: <unk> hotel food and beverage revenue grew approximately 3% in the quarter driven by 5% growth in resort outlet revenue per occupied room.
Rob: Approximately half of the resort outlet revenue per occupied room growth came from Maui.
Rob: It is worth noting that our newly repositioned singer resort achieved a 50% increase in outlet revenue per occupied room compared to the pandemic highs, which were achieved in the fourth quarter of 2022.
Rob: Banquet and catering revenue grew 2% in the fourth quarter as banquet contribution per group room night growth of 7% more than offset fewer group rooms sold year over year.
Rob: Notable strength at the Manchester Grand Hyatt, San Diego, Orlando World Center, our Phoenix resorts and the four seasons Orlando bolstered banquet revenue growth.
Rob: Other revenues grew 8% despite the expected moderation of attrition and cancellation revenues.
Rob: Spot revenue was up 18% driven by the newly expanded spa at the Ritz Carlton Amelia Island.
Rob: Golf revenue was up 6% when adjusting for the operational change at the Ritz Carlton in Oahu total base.
Rob: To put golf lasting popularity into perspective full year 2024 golf revenue was 70% above pre pandemic levels.
Rob: Shifting to rooms revenues.
Rob: Overall transient revenue was up by 8% compared to the fourth quarter of 2023, driven by improving leisure transient demand in Maui as well as strong rate growth across the portfolio.
Rob: Looking at holidays in the fourth quarter Thanksgiving Revpar grew 8% and festive season, Revpar grew 12% driven by Maui and the New York Marriott Marquis in both cases.
Rob: Maui Revpar for the festive season actualized, 42% ahead of last year, which is further evidence of the meaningful leisure recovery that is beginning to take shape.
Rob: Looking ahead two holidays in 2025, the Easter shift from late March to late April make spring break comparisons difficult.
Rob: Using the months of March and April combined as an indication transient revenue pace is up approximately 4% compared to the same time last year.
Rob: Business transient revenue grew 6% versus the fourth quarter of 2023, driven primarily by rate growth, which is consistent with the trends we saw for the full year.
Rob: In 2025, we expect further business transient demand growth driven by large corporate accounts.
Rob: Group room revenue in the fourth quarter was down 5% year over year due to expected tough comparisons, including APEC in San Francisco and the recovery in the leaf group rooms in Maui last year.
Rob: Outside of Maui hotels in San Diego, New Orleans, San Antonio and Phoenix had the largest revenue increases.
Rob: Corporate groups continued to show strength with revenue up 6% driven fairly evenly by room nights and rate.
Rob: Looking ahead to 2025, we have $3 2 million definite group.
Rob: Room nights on the books, representing a 16% increase since the third quarter.
Rob: US nearly 3% ahead of where we were this time last year.
Rob: Total group revenue pace is up five 6% over the same time last year, driven by widespread rate growth across the portfolio coupled with the demand growth.
Rob: More specifically, we are seeing growth in San Francisco, San Antonio and New York.
Rob: Notably, our San Francisco hotels booked over 70% more group rooms for 2025 in the fourth quarter versus the same time last year.
Rob: We continue to be encouraged by the ongoing strength of group business as evidenced by strong portfolio pace as well as citywide room nights pace in key markets, such as San Francisco, San Antonio Norland and Denver.
Rob: Shifting gears to margins full year 2024 comparable hotel EBITDA margin of 29, 2% was 60 basis points below 2023.
Rob: The decrease was driven primarily by wages and benefits fixed expense pressures as well as the impacts from Maui.
Rob: Turning to our outlook for 2025, the midpoint of our guidance contemplates a stable operating environment with a continued improvement in group business.
Rob: <unk> gradual recovery in business transient and steady leisure demand.
Rob: We have assumed a gradual improvement at our Maui properties this year and the continuation of the international demand imbalance.
Rob: At the low end of our guidance, we have assumed a slower recovery in Maui and the deterioration of the international demand imbalance.
Rob: And at the high end, we have assumed a faster recovery at our Maui resorts and an improvement in the international demand imbalance.
Rob: For full year 2025, we anticipate comparable hotel revpar growth of between 50 basis points and two 5% over 2024.
Rob: We expect comparable hotel EBITDA margins to be down 210 basis points year over year at the low end of our guidance to down 150 basis points at the high end.
Rob: In terms of Revpar growth cadence for the year, we anticipate mid single digit growth in the first quarter with January comparable hotel Revpar growth up nine 5%.
Rob: For the remaining three quarters, we anticipate growth in the low single digits.
Rob: As a reminder, the second quarter faces difficult comparisons to 2024 as a result of the Easter holiday shift into April.
Rob: And we have a lack of visibility into how the international travel imbalance will trend this summer.
Rob: At the midpoint of our guidance.
Rob: We anticipate comparable hotels up for growth of one 5% compared to 2024, and our comparable hotel EBITDA margin of 27, 5%, which is 180 basis points below 2024.
Rob: As we think about bridging our 2024 results to 2025, we estimate a 110 basis point impact to full year comparable hotel EBITDA margin from wage and benefit rate increases.
Rob: A 40 basis point impact from lower business interruption proceeds and a 30 basis point impact from Maui operations, given the onetime benefits in 2024.
Rob: In 2025, we expect overall wage and benefit expenses to increase over 6% for context in 2024 overall wages and benefits grew five 4% and comprised approximately 57% of our total hotel operating expenses.
Rob: Our 2025 full year adjusted EBITDA midpoint is $1 billion $620 million.
Rob: On a year over year basis. This reflects an expected $140 million to $160 million headwind from wages and benefits the dances, our Maui lower business interruption proceeds and lower interest income.
Rob: It includes approximately $9 million of business interruption proceeds related to hurricanes to lean and Milton, which we expect to receive in the first half of the year.
Rob: It is important to note that we expect to receive additional business interruption proceeds for the <unk>, but it is still too early to estimate the timing and the amounts of any additional payments.
Rob: Our 2025 full year adjusted EBITDA midpoint.
Rob: Also includes $25 million of estimated EBITDA from the four seasons condo development, which we expect to recognize some current with condo sale closings in the fourth quarter.
Rob: And $24 million of restricted stock based compensation, which we are adding back to adjusted EBITDA beginning in 2025 consistent with industry practice.
Rob: Lastly, our midpoint includes an estimated $3 million loss at the <unk> and an estimated $12 million.
Rob: Contribution from operations at ALLETE Love and ton of Big sur.
Rob: Both of which are excluded from our comparable hotel set in 2025.
Rob: Turning to our balance sheet and liquidity position.
Rob: Our weighted average maturity is five two years at a weighted average interest rate of four 7%.
Rob: We have a balanced maturity schedule with our next maturity of $500 million.
Rob: Coming due in June of this year.
We are closely monitoring the debt capital markets and we believe our balance sheet provides us with ample optionality and flexibility.
Rob: We ended 2024 at a leverage ratio of two seven times and we have $2 3 billion in total available liquidity, which includes $242 million of <unk> reserves and $1 $5 billion of avail.
Rob: Availability on our credit facility.
Rob: Wrapping up in January we paid a quarterly cash dividend of <unk> 20 per share and a special dividend of <unk> bring.
Rob: Bringing the total dividends declared in 2024 to <unk> 90 per share.
Rob: The board of directors authorized a quarterly cash dividend of <unk> 20.
Rob: On our common stock to be paid on April 15th 2025 to stockholders of record on March 31 2025.
Rob: As always future dividends are subject to approval by the Companys board of directors.
Rob: To conclude we are pleased with our achievements in 2024, and we believe our diversified portfolio and strong balance sheet leaves us uniquely positioned to capitalize on opportunities in the future.
Rob: With that we would be happy to take your questions to ensure we have time to address as many questions as possible. Please limit yourself to one question.
Rob: Thank you we will now begin the question and answer session.
Speaker Change: David would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question simply press Star one again.
Michael: We'll go first to Michael.
Speaker Change: Bellisario Baird.
Michael: Thanks, Good morning, everyone.
Michael: Just on your guidance I know you mentioned Maui in cross border travel, where kind of a high low sensitivities, but what else have you assumed at the high end low end just from a macro backdrop perspective, and then maybe what have you derisked and where might we see upside materialize as the year progresses.
Michael: Okay.
Michael: Sure so from a macro perspective.
Michael: We have effectively worked on the best knowledge, we have as of today in terms of GDP growth in nonresidential fixed investment obviously.
Michael: Can change throughout the year, but it's just based on information best information available as of today.
Michael: In terms of where there could be upside.
Michael: Group is certainly strong group pace is very strong for the for the year.
Michael: Our group rate is at 4%.
Michael: Year over year, we already have $3 2 million group room nights, which is two 7%.
Michael: Better than last year from a pay standpoint.
Michael: And our total group revenue pace of five 6% versus last year. So we do expect that there could be.
Michael: Further strengthening of group right now the way, it's pacing our fourth quarter and the fourth quarter group pace of extremely strong there certainly is room in the second and third quarter four in the year for the year bookings.
Michael: And I would say tied to the group pace. There is certainly potential in terms of driving more banquet and catering business. That's I think where the upside is on the group side on the business transient side.
Michael: Depending on.
Michael: Sentiment remaining strong for the remainder of the year, there certainly could be tailwind that we see from the large corporations really traveling again, an increase in BT volume.
Smedes Rose: We'll go next to Smedes Rose Citigroup.
Smedes Rose: Hi, Thank you.
Speaker Change: Wanted to maybe ask you a little bit more about Maui.
Speaker Change: You take out the business interruption insurance for 'twenty four it looks like you came in around $95 million.
Speaker Change: Could you just maybe kind of level set what you think the range is at the high and the low end could be for 95, and maybe other factors that might have.
Speaker Change: Positively impacted 24 that perhaps won't be repeated in 2000.
Speaker Change: Yes.
Speaker Change: I think thats a great question, because there are a lot of moving pieces with respect to Maui and.
Speaker Change: I think <unk> has a bridge that.
Speaker Change: Here to talk through right now.
Smedes Rose: So going through the bridge Smedes Youre right its about $97 million of EBIT that we achieved in 2024 net of BR.
Speaker Change: Use that as a starting point.
Speaker Change: Would deduct.
Speaker Change: About $17 million for nonrecurring relief and recovery rooms.
Speaker Change: That we saw in 2024, I'll also deduct about $8 million for onetime attrition in cancellation revenue that we received.
Speaker Change: That brings your restated 2024.
Speaker Change: Maui EBITDA to $72 million does that effectively excludes your one time items now from that $72 million, you should deduct about $7 million.
Speaker Change: For about a 7% increase in wages and benefits that we're seeing in 2025 versus 2024.
Speaker Change: And then I would add about $15 million to $30 million estimate of improvement in operations.
Speaker Change: That's where we are seeing actually improvement in operations that would get you effectively to $80 million to $95 million for 2025, if you do the math, that's sort of the low to high.
Speaker Change: Thank you.
Chris: We will go next to Chris <unk> at Deutsche Bank.
Speaker Change: Hey, good morning, guys. Thanks for thanks for taking our questions.
Chris: Jim.
Speaker Change: We look back to 'twenty, four obviously leisure and valleys were kind of what caused you to be off versus initial but if we think about groot and BP a year ago and how they actualize.
Speaker Change: Fair to say both of those were better than you or youre, starting from a fairly conservative point on those and so just thinking about.
Speaker Change: Which parts of the business get better in 'twenty, five and leisure Maui, especially getting better is really not something you're contemplating in guidance, but just kind of how 'twenty four shook out versus initial group.
Speaker Change: Group in BT.
Chris: Yes, Chris.
Chris: He is continuing a slow steady climb.
Chris: We saw a 6% increase MBT revenues last year, we anticipate that there could be some tailwind.
Chris: On the business transient side of the business we have.
Chris: The big consulting consulting companies and tech companies are getting back on the road.
Chris: And I think that's very positive.
Chris: It's obviously not something that you can forecast with any degree of certainty.
Chris: Given the short term nature of it but.
Chris: Businesses are back travelling businesses are back in the office at in many instances so.
Chris: We feel good about how <unk> performed in 'twenty four and are optimistic with respect to how BT will perform in 'twenty five.
Speaker Change: I'm on the group side of the business.
Chris: The piece of group that continues to.
Chris: Perform exceptionally well is out of room spend.
Chris: Banquet and catering revenues continue to climb to new highs.
Chris: Hey.
Chris: A testament to the.
Speaker Change: Affluent consumer who is that who is booking group business, particularly for incentive groups.
That they're not holding back on F&B offerings.
Speaker Change: Offerings, and the like and and spend actually.
Speaker Change: At.
Speaker Change: The spa and golf courses so we.
Speaker Change: We feel good about how group has set up this year. We're ahead of where we were at the same time last year.
Speaker Change: We have some room in a couple of quarters as Rob said too early.
Speaker Change: Really pick up some additional rooms.
Speaker Change: In the year for the year in the quarter for the quarter. So all in all I think we feel good about.
Speaker Change: And group and.
Speaker Change: The the Maui situation.
Speaker Change: Obviously, it's a little too soon to really.
Speaker Change: Drill down on how it is going to perform this year, but I will tell you we had an incredible festive season.
Speaker Change: At.
Speaker Change: At our Maui resorts.
Speaker Change: And as you know Chris from your visit to the island our properties are in terrific shape.
Speaker Change: <unk>.
Speaker Change: We're optimistic going forward that we're going to continue to see.
Speaker Change: Business come back to Mali, it's going to take a little bit of time for incentive group to come back.
Speaker Change: Only because.
Speaker Change: There is a.
Speaker Change: Fixed plus month booking window.
Speaker Change: To get that type of business on the books and.
Speaker Change: As you know.
Speaker Change: Charlie just quote recently reopened for business.
And the last quarter or so and we're starting to see meeting planners visit.
Speaker Change: Visit the island and.
Speaker Change: And and come away very optimistically.
Speaker Change: Okay very good thanks, Tim.
Speaker Change: Sure.
Speaker Change: We will take our next question from David Katz with Jefferies.
David Katz: Good morning, everybody.
David Katz: Thanks, Thanks for taking my question.
David Katz: I wanted to go back to a release, a while back regarding showing some selling some non core assets.
Speaker Change: I think we've had a little more debate around how fertile.
David Katz: The Astro trading market.
David Katz: Is going to be right now.
David Katz: Should we think about that.
David Katz: I know there isn't a specific timing on it.
David Katz: But just a commitment to do so and whatever updated thoughts. Thanks.
David Katz: Well, David the release with a rumor that one of the online services published.
Speaker Change: I think that that article indicated that we had hired an advisor to assist us in the sale.
David Katz: Have a portfolio of hotels.
Speaker Change: In fact, we did not hire an advisor.
David Katz:
David Katz: Yeah.
David Katz: We always test the market.
David Katz: Different groups of assets to see what sort of pricing might be available to us.
David Katz: Let me level set and say that we're very very comfortable with the portfolio that we have today.
David Katz: Great great.
David Katz: Great physical condition, we continue to invest in our assets.
David Katz: We're continuing to pick up significant share gains on the <unk>.
David Katz: 24, transformational renovations that we completed or almost eight points ahead in yield index.
David Katz: Relative to underwriting of three to five point so.
Hosted in a unique position where it is.
David Katz: We.
David Katz: Have an opportunity to sell something.
David Katz: We feel as good value for our shareholders, we will but were certainly under no compulsion to do so.
David Katz: And that's how we will continue to approach the market with respect to the transaction market generally.
David Katz: There is.
David Katz: It did.
David Katz: It hasn't it hasn't opened up as much as I think a lot of us thought that it would.
David Katz: I think we're still seeing a bit of a damper given where the tenure.
David Katz:
David Katz: The Treasury is trading right now and there is still a.
David Katz: Fairly wide bid ask spread between.
David Katz: Sellers and buyers, particularly with respect to sellers, who don't have to sell so.
David Katz: That is actually good for us.
David Katz: Given our balance sheet and the liquidity that we have.
David Katz: If we were to see an opportunity in the marketplace.
David Katz: That made sense for us, we certainly could transact.
Lane Anymore: We'll move next to lane anymore at Evercore ISI.
Speaker Change: Hey, Thanks, good morning.
Speaker Change: And sorry, I missed Hawaii was in the middle of.
Speaker Change: Our other earning season, but.
Speaker Change: So look <unk> surprise positive.
Speaker Change: And Duane that's alright, great you want to go great.
Speaker Change: Let's talk about that offline I might I might take you up on that.
Speaker Change: So look <unk> you surprised positively.
Speaker Change: <unk> is surprising positively from a topline perspective at least relative to our estimates.
Speaker Change: And it looks like your guidance assumes meaningful DSL.
Speaker Change: That you don't actually see so maybe you could just comment on that do you actually see this DSL or or you don't see it yet it might happen it might not happen it might happen.
Speaker Change: Then.
Speaker Change: If revpar growth does play out better can you can you just help us think about how we should think about flow through to the bottom line. How are you positioned your portfolio for flow through to the bottom line.
Speaker Change: The top line actually does play out better.
Speaker Change: Yes.
Speaker Change: Take the first part of the question and then I'll, let <unk> address that.
Speaker Change: Flow through yes.
Speaker Change: It's early in the year from a guidance perspective, and I think we really wanted to sit back and see how Maui recovers.
Speaker Change: And also see if there is a shift either way and the international outbound and inbound demand imbalance. So.
Speaker Change: Our midpoint.
Speaker Change: Assumes the Maui bridge that that this rob laid out.
Speaker Change: <unk> to $30 million improvement in operations.
Speaker Change: Over over last year after you wash out the one time events.
Speaker Change: And our App.
Speaker Change: Yes.
Speaker Change: Our assumptions regarding international inbound at midpoint assume that it remains static.
Speaker Change: It is today, which is basically a 125%.
Speaker Change: International outbound flights over.
Speaker Change: 94% of international inbound and that actually that statistic actually.
Speaker Change: Weakened a bit from the last quarter, we were at 120% in the last quarter. So we're still seeing.
Speaker Change: The affluent American consumers.
Speaker Change: Wanting to travel to Europe and elsewhere.
And elsewhere.
Speaker Change: We felt that it was prudent to just be thoughtful about those two drivers.
Speaker Change: Of our forecast and as we see.
Speaker Change: The year evolve we will address it accordingly, so yeah.
Speaker Change: Yeah, I don't want to beat a dead horse on.
Speaker Change: Our comfort level with how group is set up and how BT is setup, but you'll note that I don't talk we don't talk about those and when it comes to the drivers of our.
Speaker Change: Range of Revpar guidance in comp and total revpar guidance for the year.
Speaker Change: And to that I would also add.
Speaker Change: January.
Speaker Change: We achieved revpar of nine 5% remember, we do have a meaningful presence in D C.
Speaker Change: And the inauguration really helped January and D. C was up 77%. So when you actually take.
Speaker Change: D C out January was up 6%, so obviously, a meaningful delta and then as I spoke to earlier.
Speaker Change: Pace was set up really well group pace was very much about.
Speaker Change: Q1 loaded.
Speaker Change: And also think about sort of the Easter shift that's taking place so Q1 will perform better.
Speaker Change: Q2 is going to be challenged with the with Easter being in late April in addition to all the things that Jim mentioned.
Speaker Change: Total standpoint, the way to think about it is at the mid point of our guidance at a one 5% Revpar growth. Our total expense hotel expense growth is four 3%.
Speaker Change: And that accounts for the <unk>.
Speaker Change: <unk> Delta between the two years, so the $31 million.
Speaker Change: Delta between 2024, and 25, because remember we had about $40 million of business interruption proceeds in 'twenty four and we are in our current guidance at $9 million for 2025. So that's obviously.
Speaker Change: Getting impacted because that shows up as a contra.
Speaker Change: Contract expense.
Speaker Change: In our income statement. So if you adjust for the eye than the total hotel expense growth is only three 7% despite the wage and benefit growth that we talked about being just over 6% for the portfolio.
Speaker Change: In other words, if you do the math, if you are including the Vips, if we get to a four 3% revpar growth than you would effectively.
Speaker Change: Breakeven on the margin front and if you want to exclude the B item. All you need is three 7% of revpar growth to breakeven hopefully that helps.
Chris: Well move next to Chris <unk> at Green Street.
Chris: Thanks, Good morning, everyone.
Chris:
Speaker Change: Jim how are you thinking about labor availability today, given some of the rhetoric coming out of the current administration and then maybe more broadly can you speak to some of the tools that your operators have available to mitigate labor related challenges going forward from here.
Chris: Sure Chris.
Chris: Think we're.
Chris: Positioned very well on the labor front given that.
Chris: We have two of the best in class managers.
Chris: Running most of our hotels.
Chris: In Marriott and Hyatt.
Chris: And we have not heard of any concerns.
Chris: Across the portfolio with respect to availability of labor.
Chris: The.
Chris: Both Marriott and Hyatt.
Chris: Companies were.
Chris: People want to go to work if they want a career in hospitality and.
Chris: And we.
We.
Chris: Always want to make certain that we have the best and the most capable people.
Chris: At each of our properties and.
Chris: And we've worked closely with our managers over the years to make certain that that is the case. So no concern on the labor front.
Chris: With respect to productivity.
Chris: <unk> I'll, let Rob talk a little bit about how.
Chris: We view our productivity, but one of the really interesting things that has that is starting to evolve.
Chris: And I think it can be exciting.
Chris: Going forward is.
Chris: As the use of artificial intelligence to.
Chris: Assist customers at the hotels.
Chris: To book out of room spend.
Chris: Whether it's outlet revenue whether it's spa.
Chris: Whether it's golf, whether it's experiences property.
Chris: And that just that just further leverages the labor force that we have in place.
I think there are a lot of good things to come.
Chris: We continue to talk about.
Chris: Total revpar.
Chris: Total revpar is very important to the whole portfolio, we have about 40% of our revenues.
Chris: This year that are going to be non rooms revenues.
Chris: While we don't necessarily make the same margin on non non room revenues a dollar of EBIT as a dollar of EBITDA. So we will we will push hard to continues to make that happen.
Chris: On the productivity side I would just say that obviously the major managers have.
Chris: Really strong tools Marriott for example use of Atlas and.
Chris: The focus really is making sure that they are utilizing best in class our labor standards as they figure out scheduling.
Speaker Change: And tying that appropriately with the forecast that we have for the property and that's how we can drive productivity and I would say that use multi dealer tools to also attract and retain talent, which has never really been a challenge as Jim said four major managers.
Speaker Change: We will take our next question from Robin Farley at UBS.
Robin Farley: Great. Thanks.
Speaker Change: To clarify it.
Robin Farley: The $5 million and condo sales proceeds are.
Speaker Change: Are you, including in guidance, just the condos for which you have deposits or in other words could there be upside to that.
Robin Farley: And.
Robin Farley: So I apologize if you said this already we ask Tony.
Speaker Change: Thanks for joining today.
Speaker Change: Could you say, what you are expecting the corporate negotiated rate increase.
Speaker Change: Slide 25.
Robyn Farley: Sure on the condo sales Robyn.
Speaker Change: We are assuming more right now than the 14 deposits that we have already received.
Speaker Change: And that's an assumption that you are making as we go through the year, we expect to close alright.
Speaker Change: Alright, so if they get deposits on more condos, but it is right now the guidance include more than the 14 condos that we have received deposits on the other thing I will say is.
Speaker Change: I would not expect.
Speaker Change: Any EBITDA from the condo until the fourth quarter of this year just to keep that in mind, because you actually have to hand over the keys to the owners before we can recognize the revenue from the sales.
Speaker Change: And then the next question in terms of sort of negotiated rates.
Speaker Change: I'm sure you heard sort of marriott's call.
Speaker Change: Effectively close to the mid single digit number.
Ari Klein: We'll go next to Ari Klein of BMO capital markets.
Ari Klein: You previously noted that group will take longer to recover and Maui just curious what what your expectations are around that for 2025.
Ari Klein: We're starting to see that pick up for 2020, and then maybe just on bridging standpoint as it relates to Maui.
Ari Klein: Do some of the wage headwinds that you're seeing an impact at $175 million or some number or does that come down a little bit.
Ari Klein: Sorry, let's say the last part of your <unk>.
Ari Klein: And again are we.
Ari Klein: <unk> number came down.
Ari Klein: Just in terms of the ultimate recovery number getting back to where it was I think it was around 100.
Ari Klein: $75 million at around $80 million.
Ari Klein: Gap to make up does that does that come down a little bit.
Ari Klein: Think about that.
Ari Klein: Potential opportunities given higher wage.
Ari Klein: Wage costs.
Ari Klein: Now over time I think there is still.
Ari Klein: Potential to get back to the $172 million for sure.
Ari Klein: It's.
Ari Klein: Right before the fires and Maui was doing extremely well and given what we have invested in the assets and Maui. We certainly feel there is potential to grab more share.
Ari Klein: And we are pretty confident we can still get back to that the 172 million that we had spoken about on earlier calls.
Ari Klein: So it's a matter of sort of when we get to that point.
Ari Klein: Well move on that in terms of.
Speaker Change: I'm sorry, you did.
Speaker Change: Maui roofs, and I did want to mention quickly.
Speaker Change: We are definitely seeing grouping group picking up for Maui and it is encouraging to see.
Speaker Change: Not only in the year for the year, our groups group pickup, but also 26 and beyond and certainly seeing more activity.
Speaker Change: That earlier as a matter of fact, we picked up a meaningful amount of group room nights in the fourth quarter for 2025 and encouraging signs in January as well.
Speaker Change: Well move to our next question from Jay Kornreich at Wedbush Securities.
Jay Kornreich: Alright. Thank you just curious about how youre thinking about deploying capital at this point.
Speaker Change: In 2024.
Speaker Change: The amount in acquisitions buying back stock kernel RLI projects. So just curious about how you're thinking about capital deployment in 2025.
Speaker Change: Sure Jay.
Speaker Change: I would say think about it from an opportunistic perspective.
Speaker Change: And the fact that we are.
Speaker Change: Sitting here with an investment grade balance sheet of two seven times leverage gives us a lot of flexibility.
Speaker Change: To deploy capital across a number of different areas.
Speaker Change: Including buying back stock.
Speaker Change: <unk> additional acquisitions if something.
Presented that it made sense to us.
Speaker Change: And continuing to invest in our portfolio.
Speaker Change: We have seen very very good results from both the Marriott transformational capital program.
Speaker Change: And the other.
Speaker Change: Eight assets that we repositioned it with transformational renovations and we're focused this year on.
Speaker Change: The Hyatt transformational capital program.
Speaker Change: We're excited about that.
Speaker Change: Yeah.
Speaker Change: We have a number of projects that we're going to start.
Speaker Change: And 25.
Speaker Change: Uh huh.
Including GAAP.
Speaker Change: Manchester Grand Hyatt.
Speaker Change: At the Hyatt Regency in Austin, and the Hyatt Regency on Capitol Hill.
Speaker Change: The Grand Hyatt in Washington, D C will be completing this year.
Speaker Change: So as we think about deploying capital into our assets.
Speaker Change: No.
Speaker Change: There are there other properties that.
Speaker Change: We think we picked up meaningful market share.
Speaker Change: If we were to reposition them. So we continue to have conversations with our brand partners along those lines and.
Speaker Change: We think that's a good place to put it.
Speaker Change: Put some money to work.
Speaker Change: Well go next to fourth with Antigua at Compass point.
Speaker Change: Good morning, guys.
Speaker Change: Just a quick question could you remind us.
Speaker Change: You ended the year I think your your full year occupancy was 67, 5% for your domestic portfolio what was it.
Speaker Change: Four at the peak.
For for a year and could you.
Speaker Change: Distinguish between resorts and.
Speaker Change: And urban hotels in particular, and what the deltas are potentially for that to get back to peak occupancy.
I can tell you what it is in terms of the portfolio will have to get back to you specifically on the delta for resorts versus urban.
Speaker Change: There is still an eight point occupancy gap to peak, Florida right now.
Speaker Change: And expectation for this year in terms of occupancy is pretty similar to.
Speaker Change: 2024.
Speaker Change: And we'll go next to Smedes rose with Citigroup.
Smedes Rose: Hi, Thanks, I just wanted to follow up maybe on capital deployment.
Smedes Rose: And obviously forecasts are going to go down for 25 based on your updated guidance versus what was out there on consensus.
Speaker Change: Even lowering those forecasts it I mean, it looks at least to US I mean, the stock is trading at like you know I don't know 10, 10 five times EBITDA.
Speaker Change: Cap rate is pretty high relative to certainly what we see in the private market for those transactions that are available would you <unk> seen.
Speaker Change: What is the argument for not having a more sort of a holistic approach to buying back your own stock here and you've talked about being opportunistic, but I mean, it's very difficult to predict your own share price so why not.
Speaker Change: Just sort of assign a certain amount of capital on a quarterly basis to bring down your share count here and be buying at what looked like a fairly compelling valuations.
Speaker Change: Smedes I agree with you that the stock is underpriced and it's a good value and.
Speaker Change: As we look at.
Speaker Change: Our capital allocation opportunities across the board.
Speaker Change: Stock buybacks, we will certainly be one of them.
Speaker Change: In terms of lab.
Speaker Change: If youre, suggesting some sort of programmatic plan.
Speaker Change: To buyback.
Speaker Change: Buy back stock.
Speaker Change: Not something we're in favor of doing I mean, we have to keep one eye on operations and what's happening.
Speaker Change: At our properties and one eye on the balance sheet as well so the investment grade balance sheet is sacrosanct to us.
Speaker Change: Yes.
Speaker Change: At the time that we can.
Speaker Change: Buy back shares.
Speaker Change: We proved to them to you into the street that we will buy back shares.
Speaker Change: The fourth quarter, we would have bought back our stock given where it traded but unfortunately, we went into blackout and.
Speaker Change: We're in blackout today as a good example, because we haven't filed our 10-K so.
Speaker Change: There are there are moments in time will where you will see us buy back stock. It there are other points in time, where for whatever reason we.
Speaker Change: We won't be able to.
Speaker Change: And that concludes our Q&A session I will now turn the conference back over to Jim <unk> for closing remarks.
Jim: Well thank you.
Speaker Change: Joining us today, we really appreciate the opportunity to discuss our quarterly results and our 2025 outlook with you and I'm sure I'll see many of you at conferences in the in the coming weeks and months have a good day.
Jim: Yes.
Jim: And this concludes today's conference call. Thank you for your participation you may now disconnect.
Jim: Please wait the conference will begin shortly.
Jim: Yes.
Jim: [music].
Jim: Okay.
Jim: Yes.
Jim: [music].
Jim: Yes.
Jim: Yes.
Jim: Yes.
Jim: Yes.
Jim: Sure.
Jim: [music].