Q4 2024 Braemar Hotels & Resorts Inc Earnings Call
Operator: Hello, and thank you for standing by.
Hello, and thank you for standing by my name is Regina and I will be your conference operator today at this time I would like to welcome everyone to the Braemar hotels, <unk> Resorts, Inc. Fourth quarter 'twenty 'twenty four results conference call all lines have been placed on mute to prevent any background noise.
Regina: My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Braemar Hotels and Resorts, Inc. Fourth Quarter 2024 Results Conference Call.
Operator: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad. To withdraw your question, press star 1 again.
The speaker's remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad to withdraw your question Press Star One again I would now like to turn the conference over to Derek Eubanks Chief Financial Officer. Please go ahead.
Regina: I would now like to turn the conference over to Deric Eubanks, Chief Financial Officer. Please go ahead. Thank you.
Deric Eubanks: Good morning and welcome to today's call to review results for Braemar Hotels and Resorts for the fourth quarter and full year 2024 and to update you on recent developments.
Derek Eubanks: Thank you good morning, and welcome to today's call to review results for Braemar hotels, <unk> resorts for the fourth quarter and full year 2024 and to update you on recent developments.
Deric Eubanks: On the call today will also be Richard Stockton, President and Chief Executive Officer, and Chris Nixon, Executive Vice President and Head of Asset Management. The results, as well as notice of the accessibility of this conference call on a listen-only basis over the Internet, were distributed yesterday in a press release. At this time, let me remind you that certain statements and assumptions in this conference call contain or are based upon forward-looking information and are being made pursuant to the safe harbor provisions of the Federal Securities Regulations. Such forward-looking statements are subject to numerous assumptions, uncertainties, and known or unknown risks which could cause actual results to differ materially from those anticipated.
Richard Stockton: On the call today, we will also be Richard Stockton, President and Chief Executive Officer, and Chris <unk> Executive Vice President and head of asset management.
The results as well as notice of the accessibility of this conference call on a listen only basis over the Internet were distributed yesterday in a press release at.
Richard Stockton: At this time, let me remind you that certain statements and assumptions in this conference call.
Pain or based upon forward looking information and are being made pursuant to the safe Harbor provisions of the federal Securities regulations.
Richard Stockton: Such forward looking statements are subject to numerous assumptions, uncertainties and known or unknown risks, which could cause actual results to differ materially from those anticipated.
Deric Eubanks: These factors are more fully discussed in the company's filings with the Securities and Exchange Commission. The forward-looking statements included in this conference call are only made as of the date of this call, and the company is not obligated to publicly update or revise them.
Richard Stockton: These factors are more fully discussed in the company's filings with the Securities and Exchange Commission.
Richard Stockton: The forward looking statements included in this conference call are only made as of the date of this call and the company is not obligated to publicly update or revise them.
Deric Eubanks: Statements made during this call do not constitute an offer to sell or a solicitation of an offer to buy any securities. Securities will be offered only by means of a registration statement and prospectus, which can be found at www.sec.gov. In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in the company's earnings release and accompanying tables or schedules, which have been filed on Form 8K with the SEC on February 26, 2025, and may also be accessed through the company's website at www.bhrreit.com. Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release.
Richard Stockton: Payments made during this call do not constitute an offer to sell or a solicitation of an offer to buy any securities securities will be offered only by means of a registration statement and prospectus, which can be found at www dot FCC dot Gov.
Richard Stockton: In addition, certain terms used in this call are non-GAAP financial measures reconciliations of which are provided in the company's earnings release and accompanying tables or schedules, which have been filed on form 8-K with the SEC on February 26, 2025, and May also be accessed through the company's website at www Dot B H.
Richard Stockton: Our REIT dot com.
Richard Stockton: Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release.
Deric Eubanks: Also, unless otherwise stated, all reported results discussed in this call compare the fourth quarter and full year ended December 31st, 2024, with the fourth quarter and full year ended December 31st, 2023.
Richard Stockton: Also unless otherwise stated all reported results discussed in this call compare the fourth quarter and full year ended December 31, 2024, with the fourth quarter and full year ended December 31 2023.
Deric Eubanks: I will now turn the call over to Richard Stockton. Please go ahead, Richard. Thank you, Deric.
Richard Stockton: I will now turn the call over to Richard Stockton. Please go ahead Richard.
Richard Stockton: Thank you Derek good morning, and welcome to our fourth quarter earnings Conference call.
Richard Stockton: Good morning and welcome to our fourth quarter earnings conference call. I'll begin today's call by providing an overview of our recent results and our strategic priorities for 2025.
Richard Stockton: I'll begin today's call by providing an overview of our recent results and our strategic priorities for 2025.
Richard Stockton: Then, Deric will provide a review of our financial results, and Chris will provide an update on our asset management activity.
Richard Stockton: Then Derek will provide a review of our financial results and Chris will provide an update on our asset management activity.
Richard Stockton: Afterwards, we'll open the call for Q&A. We have a few key themes for today's call.
Richard Stockton: Afterwards, we will open the call for Q&A.
Richard Stockton: With a few key themes for today's call first I'm pleased to report that after six straight quarters of declining Revpar, our portfolio achieved one 9% comparable revpar growth in the fourth quarter and achieved five 3% comparable total revenue growth.
Richard Stockton: First, please report that after six straight quarters of declining REVPAR, our portfolio achieved 1.9% comparable REVPAR growth in the fourth quarter and achieved 5.3% comparable total revenue. Second, we are in active discussions with a lender on the refinancing of our $293 million loan that matures in June. After completing that refinancing, we will have no remaining final debt maturities in 2025. And third, we continue to make solid progress on our shareholder value creation plan, having redeemed approximately $80 million of our non-traded preferred stock.
Richard Stockton: Second we are in active discussions with the lender on the refinancing of our $293 million loan that matures in June after completing that refinancing we will have no remaining final debt maturities in 2025.
Richard Stockton: And third we continue to make solid progress on our shareholder value creation plan had been redeemed approximately $80 million of our non traded preferred stock.
Richard Stockton: Turning to our fourth quarter results, I'm excited to report that after several quarters of REVPAR decreases, our portfolio delivered solid results with fourth quarter comparable REVPAR of $305, reflecting an increase of 1.9% over the prior year quarter. Additionally, comparable total hotel revenue increased by 5.3% over the prior year period, and comparable hotel EBITDA was $41.1 million, which represents a 0.7% increase over the prior year quarter. This growth was driven in part by a strong 7 percent increase in group revenue, underscoring the continued resurgence of group bookings and events. Our portfolio demonstrated solid growth and improved operating performance despite temporary challenges in certain markets.
Richard Stockton: Turning to our fourth quarter results I'm excited to report that after several quarters of Revpar decreases our portfolio delivered solid results with fourth quarter comparable revpar of $305, reflecting an increase of one 9% over the prior year quarter.
Richard Stockton: Additionally, comparable total hotel revenue increased by five 3% over the prior year period, and comparable hotel EBITDA was $41 $1 million, which represents eight 7% increase over the prior year quarter.
Richard Stockton: This growth was driven in part by a strong 7% increase in group revenue underscoring. The continued resurgence of group bookings and events our portfolio demonstrated solid growth and improved operating performance. Despite temporary challenges in certain markets for instance, unseasonably mild winter weather impacted demand in key.
Richard Stockton: For instance, unseasonably mild winter weather impacted demand in key seasonal destinations, while shifts in the timing of festive events also influenced booking patterns. With New Year's Eve falling on a Wednesday, demand extended into the first weekend of January. Likewise, the shift of Christmas from Monday in 2023 to Wednesday in 2024 compressed the peak festive booking window from 10 days to just six. Despite these calendar-driven challenges, our portfolio remained resilient with a 5% increase in total hotel revenue compared to the prior year period.
Richard Stockton: Seasonal destinations while shifts in the timing of festive events also influenced booking patterns with new year's Eve falling on a Wednesday demand extended into the first weekend of January.
Richard Stockton: Likewise, the shift of Christmas for Monday in 2023 to Wednesday in 2024 compressor peak festive booking window from 10 days to just six.
Despite these calendar driven challenges our portfolio remained resilient with a 5% increase in total hotel revenue compared to the prior year period.
Richard Stockton: Nine of our 15 hotels are considered resort destinations, and this luxury resort portfolio delivered solid fourth quarter performance with comparable REVPAR of $515, a 1.3% increase over the prior year period, and combined comparable hotel EBITDA of $31 million, a 4.1% increase over the prior year period. We also continue to be encouraged by the performance of our urban hotels, which achieved comparable repar growth of 3.3% in the fourth quarter. We are seeing strength across all demand segments at our urban properties and our forward booking pace is strong. January REVPAR for our portfolio was an impressive 13% over the prior year.
Nine of our 15 hotels are considered resort destinations and this luxury resort portfolio delivered solid fourth quarter performance with comparable revpar of $515, a one 3% increase over the prior year period, and combined comparable hotel EBITDA of $31 million a $4 one.
Richard Stockton: <unk> percent increase over the prior year period.
Richard Stockton: We also continue to be encouraged by the performance of our urban hotels, which achieved comparable revpar growth of three 3% in the fourth quarter, we are seeing strength across all demand segments at our properties and our forward booking pace is strong January revpar for our portfolio was an impressive 13% over the prior year.
Richard Stockton: While the Capital Hilton benefited from the inauguration, our portfolio REVPAR growth excluding the Capital Hilton was still over 9%. As we enter 2025, we are seeing strong momentum and solid forward bookings driven by improving industry fundamentals, sustained growth in our urban hotels, and an anticipated rebound in our resort segment. It's also worth noting that the period of decline as a result of unsustainably high resort REVFAR, driven by post-COVID stimulus and international travel restrictions, has ended. However, moving forward, we believe the resort segment is expected to return to steady growth aided by supply constraints stemming from the ongoing restrictive capital markets environment.
Richard Stockton: The capital Hilton benefited from the inauguration our portfolio Revpar growth, excluding the capital Hilton was still over 9%.
Richard Stockton: As we enter 2025, we are seeing strong momentum and solid forward bookings driven by improving industry fundamentals sustained growth in our urban hotels and anticipated rebound in our resort segment. It is also worth noting that the period of decline as a result of <unk>.
Richard Stockton: Sustainably high resort Revpar, driven by post Covid stimulus in international travel restrictions has ended.
Richard Stockton: However, moving forward, we believe the resorts segment is expected to return to steady growth aided by supply constraints stemming from the ongoing restricted capital markets environment.
Richard Stockton: Moving on to capital expenditures. In the fourth quarter of 2024, we successfully delivered several high-impact projects aimed at enhancing the guest experience and driving long-term value across our portfolio. At the Four Seasons Resort Scottsdale, we transformed underutilized back-of-house space into a retail market, providing guests with seamless access to curated gourmet offerings while generating incremental revenue. We also made significant strides in our food and beverage programming in the fourth quarter of 2024, completing the renovation of the fine dining venue at the Ritz-Carlton Reserve Dorado Beach, reinforcing the resort's market positioning and commitment to world-class culinary experience.
Richard Stockton: Moving on to capital expenditures in the fourth quarter of 2024, we successfully delivered several high impact projects aimed at enhancing the guest experience and driving long term value across our portfolio.
At the four seasons resort Scottsdale, we transformed underutilized back of house space into a retail market, providing guests with seamless access to curated gourmet offerings, while generating incremental revenue.
Richard Stockton: We also made significant strides in our food and beverage programming in the fourth quarter of 2024, completing the renovation of the fine dining venue at the Ritz Carlton reserved or on a beach reinforcing the resorts market positioning and commitment to world class culinary experiences.
Richard Stockton: We also refreshed the Oceanside Ballroom and Boardroom at the property, ensuring it remains a premier destination for corporate and social events. Additionally, we successfully completed the renovation of the Beachside Restaurant sales at the Ritz Carlton St. Thomas.
Richard Stockton: We also refreshed the ocean side ballroom and boardroom at the property, ensuring it remains the premier destination for corporate and social events.
Richard Stockton: Italy, we successfully completed the renovation of the beach side restaurant sales at the Ritz Carlton St. Thomas.
Richard Stockton: Overlooking Great Bay, the refreshed venue enhances the resort's elevated dining experience and further solidifies its status as a luxury Caribbean destination.
Richard Stockton: We are looking great Bay, the refreshed menu enhances the resorts elevated dining experience and further solidifies its status as a luxury Caribbean destination.
Richard Stockton: On the capital markets front and subsequent to quarter end, the company successfully extended its mortgage loan secured by the 170-room Ritz Carlton Lake Tahoe. The loan had an initial maturity date of January 2025 and continues to have a final maturity date in January of 2026. The loan has been extended with a pay down of $10 million and the spread on the loan is now, SOFR plus, 3.25%.
Richard Stockton: Our capital markets front and.
Richard Stockton: And subsequent to quarter end the company successfully extended its mortgage loan secured by the 170 room Ritz Carlton Lake Tahoe.
Richard Stockton: <unk> had an initial maturity date of January 2025, and continues to have a final maturity date in January of 2026.
Richard Stockton: The loan has been extended with the paydown of $10 million and the spread on the loan is now so from plus three 5%.
Richard Stockton: I'm also pleased to report that to date we have redeemed approximately $80 million of our non-traded preferred stock, which represents approximately 17% of the original capital rate. We expect to continue to redeem these shares as we seek to deleverage our platform and improve our cash flow per share.
Speaker Change: I'm also pleased to report that to date, we have redeemed approximately $80 million of our non traded preferred stock, which represents approximately 17% of the original capital raise.
Speaker Change: We expect to continue to redeem the shares as we seek to deleverage our platform and improve our cash flow per share.
Richard Stockton: Finally, I want to take a moment to express our heartfelt support for all those affected by the recent South California fires. While our assets were not directly impacted, the event has caused fluctuations in Los Angeles market demand. In response, our company swiftly stepped in to assist, providing accommodations for long-term displaced guests and securing insurance-related stays in corporate groups to support the local recovery effort.
Speaker Change: Finally, I want to take a moment to express our heartfelt support for all those affected by the recent South California fires.
Speaker Change: While our assets were not directly impacted the van has caused fluctuations in Los Angeles market demand <unk>.
Speaker Change: Spots our companies will be stepped in to assist providing accommodations for long term displaced guests and securing the insurance related stays and corporate groups to support the local recovery efforts initially a cameo in Beverly Hills transient demand spike as evacuate saw temporary housing, but it retracted within a few days as residents returned home are secured.
Richard Stockton: Initially, a cameo of Beverly Hills, transient demand spiked as evacuees sought temporary housing. But it retracted within a few days as residents returned home or secured long-term accommodation. Since then, the property has experienced daily volatility with frequent bookings and cancellations. Group business has also been impacted, leading to cancellations, date shifts, and softened sell rates across the market.
Speaker Change: Long term accommodations.
Speaker Change: Since then the property has experienced daily volatility with frequent bookings and cancellations group business has also been impacted leading the cancellations DHS and soft sell rates across the market.
Richard Stockton: More recently, February saw a return to stable group book. We remain committed to supporting local efforts, ensuring that our hotels continue to play a role in the community's rebuilding process.
Speaker Change: More recently February saw a return to stable group bookings, we remain committed to supporting local efforts ensuring that our hotels continue to play a role in the communities rebuilding process.
Deric Eubanks: We'll now turn the call over to Deric to take you through our financials in more detail. Thanks, Richard. For the quarter, we reported a net loss attributable to common stockholders of $31.1 million, or $0.47 per diluted share, and AFFO per diluted share of negative $0.06. For the full year, we reported net loss attributable to common stockholders of $50.9 million, or $0.77 per diluted share, and AFFO per diluted share of $0.21. Adjusted EBIT dollar rate for the quarter was $30.2 million, and adjusted EBIT dollar rate for the full year was $157.6 million. At quarter end, we had total assets of $2.1 billion.
Speaker Change: I will now turn the call over to Derek to take you through our financials in more detail.
Derek Eubanks: Thanks, Richard for the quarter, we reported a net loss attributable to common stockholders of $31 $1 million or <unk> 47 per diluted share and <unk> per diluted share of negative <unk> <unk> for the full year, we reported net loss attributable to common stockholders of $50 9 million or <unk> 77.
Derek Eubanks: <unk> per diluted share and <unk> <unk> per diluted share of <unk> 21.
Derek Eubanks: Adjusted EBITDA for the quarter was $32 million and adjusted EBITDA for the full year was $157 $6 million at.
Derek Eubanks: At quarter end, we had total assets of $2 1 billion.
Deric Eubanks: We had $1.2 billion of loans, of which $27.7 million related to our joint venture partner share of the loan on the capital Hilton. Our total combined loans at a blended average interest rate of 7.2 percent, taking into account in the money interest rate caps. Based on the current level of SOFR and our corresponding interest rate caps, approximately 23 percent of our debt is effectively fixed, and approximately 77 percent is effectively floating. As of the end of the fourth quarter, we had approximately 40.8 percent net debt to gross assets. We ended the quarter with cash and cash equivalents of $135.5 million plus restricted cash of $49.6 million.
Derek Eubanks: We had $1 2 billion of loans of which $27 $7 million related to our joint venture partner share of the loan on the capital Hilton. Our total combined loans had a blended average interest rate of seven 2% taking into account in the money interest rate caps based on the current level of sulfur and our corresponding interest rate caps.
Derek Eubanks: Approximately 23% of our debt is effectively fixed at approximately 77% is effectively floating.
Derek Eubanks: As of the end of the fourth quarter, we had approximately 48% net debt to gross assets we.
Derek Eubanks: We ended the quarter with cash and cash equivalents of $135 $5 million plus restricted cash of $49 $6 million. The vast majority of that restricted cash is comprised of lender and manager held reserve accounts at the end of the quarter. We also had $22 $9 million and due from third party hotel managers.
Deric Eubanks: The vast majority of that restricted cash is comprised of lender and manager-held reserve accounts. At the end of the quarter, we also had $22.9 million in due from third-party hotel managers. This primarily represents cash held by one of our brand managers, which is also available to fund hotel operating costs. With regard to dividends, we again announced a quarterly common stock dividend of $0.05 per share, or $0.20 per diluted share, on an annualized basis. This equates to an annual yield of approximately 7.7 percent based on yesterday's stock price.
Derek Eubanks: This primarily represents cash held by one of our brand managers, which is also available to fund hotel operating costs.
Derek Eubanks: With regard to dividends, we again announced a quarterly common stock dividend of <unk> <unk> per share or <unk> <unk> per diluted share on an annualized basis. This equates to an annual yield of approximately seven 7% based on yesterday's stock price.
Deric Eubanks: Our board of directors will continue to review the company's dividend policy on a quarter-to-quarter basis. We are currently in active discussions with a lender regarding the refinancing of our only remaining final 2025 debt maturity. We hope to have an announcement in the coming weeks regarding that financing. On a positive note, the hotel debt capital markets continue to get more attractive, especially for low-leverage loans on high-quality assets like those in the Braemar portfolio. While SOFR has already decreased approximately 100 basis points from its high, we've also seen credit spreads decrease approximately 100 basis points over the past year, which has resulted in a much more attractive environment for borrowers.
Derek Eubanks: Our board of Directors will continue to review the Companys dividend policy on a quarter to quarter basis.
Derek Eubanks: We are currently in active discussions with our lender regarding the refinancing of our only remaining final 2025 debt maturity, we hope to have an announcement in the coming weeks regarding that financing on.
Derek Eubanks: On a positive note the hotel debt capital markets continue to get more attractive, especially for low leverage loans on high quality assets like those in the Braemar portfolio. While sofa has already decreased approximately 100 basis points from its high. We've also seen credit spreads decreased approximately 100 basis points over the past year, which has resulted.
Derek Eubanks: In a much more attractive environment for borrowers.
Deric Eubanks: As of December 31st, 2024, our portfolio consisted of 15 hotels with 3,667 net rooms. Our share count currently stands at 73.8 million fully diluted shares outstanding, which is comprised of 66.6 million shares of common stock and 7.2 million OP units.
Derek Eubanks: As of December 31, 2024, our portfolio consisted of 15 hotels with 3667 net rooms, our share count currently stands at $73 8 million fully diluted shares outstanding which is comprised of $66 6 million shares of common stock at seven 2 million op units.
Deric Eubanks: Concludes our financial review.
Derek Eubanks: This concludes our financial review I would now like to turn it over to Chris to discuss our asset management activities for the quarter.
Chris Nixon: I'd now like to turn it over to Chris to discuss our asset management activities for the quarter. Thank you, Deric. For the fourth quarter, comparable hotel rep part for our portfolio was $305, reflecting a 2% increase over the prior year period. Group pays continues to accelerate across our portfolio, and I'd like to spend some time discussing our recent group performance. In the fourth quarter, group rooms revenue increased by 7% compared to the prior year period. Additionally, full year 2024 group room revenue was up 4%. The Ritz-Carlton St. Thomas continued its record-breaking group performance, reporting over 100% growth over the prior year period in both October and November.
Chris: Thank you Derrick for the fourth quarter comparable hotel Revpar for our portfolio was $305, reflecting a 2% increase over the prior year period group.
Chris: Group pace continues to accelerate across our portfolio and I'd like to spend some time discussing our recent group performance in.
Chris: In the fourth quarter group rooms revenue increased by 7% compared to the prior year period. Additionally, full year 2020 for group room revenue was up 4%.
Chris: The Ritz Carlton St. Thomas continued its record breaking group performance reporting over 100% growth over the prior year period in both October and November.
Chris Nixon: Fourth quarter group room revenue grew by 65% over the prior year period, driven by more flexible strategies during identified need periods. Notably, weddings accounted for 55% of group room revenue in October and November, up 209% from the prior year period. A short-term corporate booking in November contributed over 20% of total group room revenue for the quarter, booking just two months in advance. Looking ahead, our 2025 group rooms revenue pace remains strong, currently facing ahead 8% to the prior year period. Additionally, in the fourth quarter, group lead volume improved by 11 percent over the prior year period.
Fourth quarter group room revenue grew by 65% over the prior year period, driven by more flexible strategies during identified need periods, notably weddings accounted for 55% of group room revenue in October and November up 209% from the prior year period.
Chris: Short term corporate bookings in November contributed over 20% of total group room revenue for the quarter booking just two months in advance.
Chris: Looking ahead, our 2025 group rooms revenue pace remained strong currently pacing ahead of 8% to the prior year period.
Chris: Additionally, in the fourth quarter group lead volume improved by 11% over the prior year period.
Chris Nixon: The Ritz-Carlton Lake Tahoe experienced an 18% growth in lead volume year-over-year driven by the renovation of its function space last summer and the addition of new leadership on the sales team focused on strategic group opportunities. As a result, this slopeside luxury resort increased group room revenue by 250% over the prior year period, generating an incremental $1.2 million in rooms revenue. Turning the booking volume, we secured $61 million in future group revenue during the fourth quarter, a notable increase from the $41 million during the third quarter and $42 million during the second quarter. These results highlight the strength of our group business strategy and reinforce our positive outlook for 2025 as we continue optimizing revenue opportunities across our portfolio.
Chris: The Ritz Carlton Lake Tahoe experienced an 18% growth in lead volume year over year, driven by the renovation of its function space last summer and the addition of new leadership on the sales team focused on strategic group opportunities.
Chris: As a result, this slopeside luxury resort increased group room revenue by 250% over the prior year period, generating an incremental $1 $2 million in rooms revenue.
Speaker Change: Turning to booking volume, we secured $61 million in future group revenue during the fourth quarter. A notable increase from the $41 million during the third quarter and $43 million during the second quarter.
Speaker Change: These results highlight the strength of our group business strategy and reinforce our positive outlook for 2025, as we continue optimizing revenue opportunities across our portfolio.
Chris Nixon: Alongside revenue growth, our teams have remained highly focused on expense controls, driving margin improvements across multiple areas of our hotel. We achieved a 30 basis point increase in gross operating profit margin compared to 2019, excluding the Ritz-Carlton St. Thomas, which was undergoing reconstruction following the 2017 hurricane. Our iconic luxury Caribbean property, the Ritz-Carlton Reserve Dorado Beach, delivered significant financial gains in the fourth quarter, increasing its gross operating profit margins by over 1,100 basis points compared to 2019. This growth was fueled by strategic pricing adjustments, operational efficiencies, and targeted revenue optimization initiatives. A key driver was the refinement of the amenity fee structure.
Speaker Change: Alongside revenue growth. Our teams have remained highly focused on expense controls driving margin improvements across multiple areas of our hotels, we achieved a 30 basis point increase in gross operating profit margin compared to 2019, excluding the Ritz Carlton St. Thomas which is undergoing reconstruction following the 2017 hurricanes.
Speaker Change: Our iconic luxury Caribbean property, the Ritz Carlton Reserve Dorado Beach delivered significant financial gains in the fourth quarter, increasing its gross operating profit margins by over 1100 basis points compared to 2019.
Speaker Change: This growth was fueled by strategic pricing adjustments operational efficiencies and targeted revenue optimization initiatives.
Speaker Change: A key driver with a refinement of the amenity fee structure. Shortly after acquiring the property in 2022, the resort fee increase from 125 million to $150 at our property manager focused on increasing the capture rate in the group segment opt.
Chris Nixon: Shortly after acquiring the property in 2022, the resort fee increased from $125 to $150, and our property manager focused on increasing the capture rate in the group segment. Operational efficiencies also played a critical role in margin expansion. Consolidating PBX and room service operations improve productivity while maintaining guest satisfaction. The residential rental program saw notable growth with enhanced marketing and the addition of two new residential units, driving a 13% increase in residential room nights sold over the prior year period. Housekeeping Optimization, including a shift away from contract labor, enhanced service quality and generated over $200,000 in payroll savings.
Speaker Change: Operational efficiencies also played a critical role in margin expansion consolidated PBX and room service operations improved productivity, while maintaining guest satisfaction.
Speaker Change: The residential rental programs on notable growth with enhanced marketing and the addition of two new residential units driving a 13% increase in residential room nights sold over the prior year period.
Housekeeping optimization, including a shift away from contract labor enhanced service quality and generated over $200000 in payroll savings.
Chris Nixon: Additionally, bringing valet parking operations in-house in 2024 resulted in a $76,000 increase in parking revenue for the full year. These initiatives have positioned the Ritz-Carlton Reserve directly for sustained profitability, reinforcing our ability to drive meaningful performance improvements.
Speaker Change: Additionally, bringing valet parking operations in house in 2024 resulted in a $76000 increase in parking revenue for the full year. These.
Speaker Change: These initiatives have positioned the Ritz Carlton reserve to royalties for sustained profitability reinforcing our ability to drive meaningful performance improvement.
Chris Nixon: Following its transformative renovation, the Ritz-Carlton Lake Tahoe delivered a strong fourth quarter performance with a 49% increase in total hotel revenue over the prior year quarter. This growth was largely driven by rooms revenue and food and beverage revenue, which grew 48% and 58% over the prior year period respectively. This was the result of increased group and event business, strategic pricing adjustments, and a successful menu engineering analysis. The hotel's full-scale renovation included relocating and expanding the living room bar, upgrading meeting space, restaurants, and the fitness center, and adding outdoor cabanas overlooking the pool. Strong group demand, including two full group sellouts in October combined with early snowfall, compelling promotional packages, and a targeted marketing plan focused on luxury consortia contributed to significant transient revenue growth.
Speaker Change: Following its transformative renovation of the Ritz Carlton Lake Tahoe delivered a strong fourth quarter performance with a 49% increase in total hotel revenue over the prior year quarter. This growth was largely driven by rooms revenue and food and beverage revenue, which grew 48% and 58% over the prior year period, respectively.
Speaker Change: This was the result of increased group and event business strategic pricing adjustments and a successful menu engineering analysis.
Speaker Change: The hotels full scale renovation included relocating and expanding the living room bar upgrading meeting space restaurants, and the fitness center and adding outdoor cabanas overlooking the pool strong group demand, including two full group sellouts in October combined with early snowfall compelling promotional packages and a targeted marketing plan folks.
Speaker Change: On luxury consortia contributed to significant transient revenue growth from.
Chris Nixon: From an expense control standpoint, our asset management team remained highly focused on labor efficiencies and managing controllable costs per occupied room. This exceptional quarter underscores the effectiveness of our strategic enhancements and operational improvements, positioning our portfolio for continued success in the coming year.
Speaker Change: From an expense control standpoint, our asset management team remains highly focused on labor efficiencies and managing controllable cost per occupied room. This.
Speaker Change: This exceptional quarter underscores the effectiveness of our strategic enhancements and operational improvements positioning our portfolio for continued success in the coming year.
Chris Nixon: Looking ahead to 2025, we will launch several key renovations to enhance our luxury offerings. In the first quarter, we will begin guest room renovations at Hotel Yonville, further elevating its luxury positioning in the heart of Napa Valley. At the Ritz Carlton in St. Thomas, we plan to add five luxury beachside cabanas, enhancing the beachfront experience and driving incremental revenue.
Speaker Change: Looking ahead to 2025, we will launch several key renovations to enhance our luxury offerings in the first quarter. We will begin guestroom renovations at hotel Yountville further elevating its luxury positioning in the Heartland Napa Valley at.
Speaker Change: At the Ritz Carlton St. Thomas We plan to add five luxury beach cabanas, enhancing the beachfront experience and driving incremental revenue.
Chris Nixon: Later this year, we will initiate renovations to support the strategic transformation of Cameo Beverly Hills into a luxury Hilton LXR hotel. We will also begin a comprehensive guest room renovation at Park Heights Beaver Creek, further refining the resort's world-class alpine experience. For 2024, we invested approximately $70 million in capital expenditures and expect to spend between $75 million and $95 million in 2025 as we continue to enhance and elevate our luxury portfolio.
Speaker Change: Later this year, we will initiate renovations to support the strategic transformation of <unk> Beverly Hills and to a luxury Hilton <unk> Hotel we were.
Speaker Change: We'll also begin a comprehensive guestroom renovation of park Hyatt Beaver Creek further refining the resort's world class Alpine experience for.
Speaker Change: For 2024, we invested approximately $70 million in capital expenditures and expect to spend between $75 million and $95 million in 2025, as we continue to enhance and elevate our luxury portfolio.
Richard Stockton: I will now turn the call back over to Richard for final remarks. Thank you, Chris. In summary, I'd like to reiterate that we continue to be pleased with the performance of our hotels, in particular, the continued strong performance of our urban properties. We also remain well-positioned with a solid balance sheet and promising outlook.
Richard Stockton: I will now turn the call back over to Richard for final remarks.
Richard Stockton: Chris in summary, I'd like to reiterate that we continue to be pleased with the performance of our hotels in particular the continued strong performance of our urban properties. We also remain well positioned with a solid balance sheet and promising outlook.
Richard Stockton: We look forward to updating you on our progress in the quarters ahead.
Richard Stockton: Forward updating you on our progress in the quarters ahead. This concludes our prepared remarks, and we will now open the call for Q&A. Thank you.
Richard Stockton: This concludes our prepared remarks, and we will now open the call for Q&A. Thank you.
Operator: At this time, if you'd like to ask a question, press star 1 on your telephone keypad and our first question will come from the line of Michael Bellisario with Baird.
Speaker Change: At this time, if you'd like to ask a question press star one on your telephone keypad and our first question will come from the line of Michael Bellisario with Baird. Please go ahead.
Michael Bellisario: Please go ahead. Thanks. Good morning, everyone. I'm just first question is on CapEx. Can you just remind us where you're at with the development in Tahoe? And then how much of any spending you're going to have in twenty five relative to that seventy five to ninety five million dollar range that you guys just provided. Yes, so the question, the second part of the question is how much of the $75 to $95 is related to Tahoe? Correct. Or where? Is that right? Yeah.
Michael Bellisario: Thanks, Good morning, everyone.
Speaker Change: Good morning.
Michael Bellisario: Just first question is on Capex can you just.
Michael Bellisario: Minus where you're at with the development in Tahoe, and then how much if any spending youre going to have in 'twenty five relative to that 75% to $95 million range that you guys just provided.
Michael Bellisario: Yes, so the question and the second part of the question is how much of the 75% to 90 hospitalized.
Michael Bellisario: Correct.
Michael Bellisario: Alright.
Richard Stockton: Well, Tahoe, it's finished. So... We've got, well, with one small project. So we did the guest rooms in 2023. between June and October. We did the public spaces, the kind of off-season last year. which included refreshing the restaurant, the living room area, and relocating the bar.
Michael Bellisario: While tahoe.
Michael Bellisario: Incentives so.
Michael Bellisario: We've got wells with one small project. So we did the guest rooms in 2023 between June and October.
Michael Bellisario: We did a public spaces neat.
Michael Bellisario: Kind of off season last year.
Michael Bellisario: Which included refreshing the restaurants.
Speaker Change: Our living room area.
Speaker Change: And relocating the bar.
Richard Stockton: And going forward, next year, we'll have a small F&B outlet called Cafe Blue that we're going to be renovating for under $2 million, and that's the last remaining project.
Speaker Change: And.
Speaker Change: Going forward next year.
Speaker Change: A small F&B outlet called the cafe blew that we're going to be renovating.
Speaker Change: For under $2 million.
Speaker Change: And Thats the last remaining project as for the branded residences development that is a project, we're still pursuing entitlements with placer County.
Richard Stockton: As for the branded residences development, that is a project we're still pursuing entitlements with Placer County, and there continues to be questions and comments. It's a very, very slow process that we're going through. Once we get those entitlements, we'll be sure to let everybody know.
Speaker Change: And there continues to be questions and comments, it's a very very slow process that we're going through.
Speaker Change: Once we get those entitlements will be sure to let everybody know I would not anticipate.
Richard Stockton: I would not anticipate any expenditure on that project in 2025. I just kind of give them when the grading window opens and where we sit in the entitlements process. Got it. That's helpful. And then just on your shareholder value plan, it's fair to assume you're still restricted from repurchasing common stock. If not, maybe how are you thinking about balancing the common versus preferred repurchases at this point in time? No, that's correct. We are restricted. We'll look at common stock as and when it's available. So it's difficult to know exactly when that might be.
Speaker Change: Any expenditure.
Speaker Change: That project in 2025.
Speaker Change: And I, just kind of given one the greater trading window opens and where we sit in the entitlement process.
Speaker Change: Yeah.
Speaker Change: Got it that's helpful. And then just on your shareholder value plan fair to assume you are still restricted from repurchasing common stock if not maybe how are you.
Speaker Change: Im thinking about balancing the common versus preferred repurchases at this point in time.
Speaker Change: No Thats correct, we are restricted.
Speaker Change: We.
Speaker Change: We'll we'll look at common stock as and when.
Speaker Change: It's available so it's difficult to know exactly when that might be.
Jonathan Jenkins: Our next question comes from the line of Jonathan Jenkins with Oppenheimer. Please go ahead. Good morning. Thank you for taking my questions and congrats on the quarter. First one from me, hoping to drill down on kind of the run par strength in January, which seemed pretty broad based.
Speaker Change: Our next question comes from the line of Jonathan Jenkins with Oppenheimer. Please go ahead.
Jonathan Jenkins: Good morning, Thank you for taking my questions and congrats on the quarter first one for me was hoping to drill down on kind of the revpar strength in January we've.
Jonathan Jenkins: We're seeing pretty broad based and so if I understood correctly. Despite calendar shift headwinds can you maybe provide some additional color on what you think is driving that demand inflection and how sustainable.
Richard Stockton: And if I understood correctly, despite calendar shift headwinds, can you maybe provide some additional color on what you think is driving that demand inflection and how sustainable, you know, that could be longer term? Yeah, thanks for the question, Jonathan. So we've been very, very happy with January performance. Richard cited a number of calendar shifts in his opening remarks, which had a negative effect on the festive period in Q4 of 2024, but is having a positive effect on the festive period in Q1 of 2025. That festive period is our highest demand period of the year. It's where our hotels do a significant amount of revenue given the resort properties that we have.
Jonathan Jenkins: Could be longer term.
Speaker Change: Yes. Thanks for the question Jonathan So we've been very very happy with January performance, Richard cited a number of calendar shifts in his opening remarks, which.
Jonathan Jenkins: <unk> had.
Jonathan Jenkins: A negative effect on the festive period in Q4 of 2024, but it is having a positive effect on the festive period in Q1 of 2025.
Jonathan Jenkins: That festive period, our highest demand period of the year, it's where our hotels do a significant amount of revenue given the resort properties that we have and so we've done a number of things to kind of position the hotel as well.
Richard Stockton: And so we've done a number of things to kind of position the hotels well, from a revenue management standpoint, yielding and pricing. We've done a number of things to get some higher end units in terms of into the rental program for some of our hotels, which has generated significant revenue during this period. And then we're also benefiting from some of the capital investments we've made across the portfolio. And some of the renovations we've done, Lake Tahoe, we're seeing very positive forward pace coming out of that rooms renovation and all the work we've done to transform that property.
Jonathan Jenkins: From a revenue management standpoint, yielding in pricing, we've done a number of things to get some higher end units in terms of into the rental program for some of our hotels, which is generate significant revenue. During this period and then we're also benefiting from some of the capital investments we've made across the portfolio and some of the renovations we've done Lake Tahoe.
Jonathan Jenkins: We're seeing.
Jonathan Jenkins: Positive forward pace coming out of that room's renovation and all the work we've done to transform that property. We are very encouraged by that.
Richard Stockton: We're very encouraged by that.
Jonathan Jenkins: So it's broad-based, but we're very encouraged by the outlook as we look ahead. Okay, I appreciate the color there, Chris.
Jonathan Jenkins: So it's broad based but we're very encouraged by the outlook.
Jonathan Jenkins: As we look ahead.
Speaker Change: Okay I appreciate the color there Chris.
Richard Stockton: And then maybe on a similar line, Richard, in your prepared remarks, you mentioned about the return of steady growth in resort markets. When you think about that return, is that kind of a long-term average for resorts or can you outperform? How are you thinking about that just in broad strokes? Yeah, no, thanks. Good question. Look, I think the environment we're in, the performance should be skewed to the upside only because we're in a period here with historically low supply growth over the next few years, right? So, there's about 6 million hotel rooms in the country.
Jonathan Jenkins: Maybe on a similar line.
Richard in your prepared remarks, you mentioned about the return of steady growth in resort markets. When you think about about that return is that kind of a long term average serves Arthur can you outperform how are you thinking about that just in broad strokes.
Jonathan Jenkins: Yes. Thanks. Good question look I think the environment we're in.
Jonathan Jenkins: The performance should be skewed to the upside.
Jonathan Jenkins: Only because we're in a period here with historically low supply growth over the next few years right. So there is about 6 million hotel rooms in the country. We are typically you are adding 2% new rooms inventory net new rooms, a year right now the.
Richard Stockton: Typically, you're adding 2% new rooms inventory, net new rooms a year. Right now, the construction pipeline for new hotels is about 3%. of existing stock that's expected to be completed over the next three years. So call that 1% a year. And then you have certain rooms that are removed from inventory each year. So the forward projection is more like 0.8%. So we'll get 0.8% supply growth over the next three years compared to a historical mean of 2%. That is an incredible setup to drive REVPAR growth. I think it's further accentuated when you look at the resort segment, because the resort segment has higher barriers to entry, typically because of where the resorts are located, but also because there's only so many locations where you can build a destination resort.
Jonathan Jenkins: <unk> pipeline for new hotels is about 3%.
Jonathan Jenkins: Of existing stock that's expected to be completed over the next three years, so call that 1% a year and then you have certain rooms that are removed from inventory each year. So the forward projection is more like 8%. So we're looking at four 8% supply growth over the next three years.
Jonathan Jenkins: To the historical mean of 2%.
Jonathan Jenkins: That is an incredible set up to drive Revpar growth.
Jonathan Jenkins: I think it is further accentuated when you look at the resort segment because of the resorts segment has higher barriers to entry typically because of where they have resorts are located but also because there is only so many locations we can build a destination resort.
Richard Stockton: I think we're set up to really perform well the next couple of years, and as I said, I think it's skewed to the upside when you look at that performance relative to historical resort performance. Okay, that's great.
Jonathan Jenkins: So I think we're set up.
Jonathan Jenkins: So really performed well the next couple of years and as I said I think it's skewed to the upside when we look at that performance relative to historical resort performance.
Jonathan Jenkins: Okay.
Richard Stockton: And then maybe last one for me, if I could, I don't want to leave Deric out. So question for Deric or maybe Richard, but can you talk about the transaction market broadly? You know, in terms of volume and pricing, has there been any closing of the gap between buyers and sellers expectations? Or any other moves as late for the kind of high quality assets you own, given that move in rates that you talked about there?
Speaker Change: Okay. That's great and then maybe last one from me if I could I don't want to leave Derek out. So a question for Derek maybe Richard but can you talk about the transaction market broadly and then in terms of volume and pricing has there been any closing of the gap between buyers and sellers expectations or any other moves.
Speaker Change: <unk> for the kind of high quality assets, you own given that move in rates that you're talking about there.
Richard Stockton: Yeah, I think I'll step in for Deric on this one only because I tend to be a little bit more active in spending my time on that particular topic. Look, I think the bid for hotels right now is relatively strong. There's a lot of interested parties. You know, we were in the market last year with Hilton La Jolla, Torrey Pines. We recently launched two hotels for sale here this year, and there are two of our upper scale hotels, and we're getting a very, very positive reception, right? So really, literally upwards of 100 confidentiality agreements being signed.
Speaker Change: Yes, I think I'll step in for Derek on this one only because I tend to be a little bit more active in spending my time on that particular topic.
Speaker Change: Look I think the bid for hotels right now is relatively strong there's a lot of interested parties.
Speaker Change: We're in the market last year with Illinois, Torrey Pines.
Speaker Change: We recently launched two hotels for sale here this year.
Speaker Change: There are two of our upper upscale hotels, and we're getting a very very positive reception right. So.
Speaker Change: Really literally.
Speaker Change: Words of a 100 confidentiality agreements being signed so there are certainly well capitalized buyers out there that are ready to transact.
Richard Stockton: So there are certainly well-capitalized buyers out there that are ready to transact. I think you've got a little bit more certainty of the interest rate environment, which means, you know, the pace of rate cuts has certainly slowed, but at least you have certainty. Spreads on debt have continued to come in. You know, we're, as I said in my remarks, refinancing the $293 million CMBS loan right now. We're finding the bid for new CMBS is quite attractive. So that's all helping to fuel the transactions market. And yeah, I think you also have. business climate out there politically, which I think is giving people some amount of confidence Certainly, there's a lot of change, and change introduces some uncertainty, but I think there are a lot of potential buyers out there that are welcoming that change, thinking that it can really result in ultimately a strong economic environment for the country over the next few years.
Speaker Change: I think you've got a little bit more certainty on the interest rate environment.
Speaker Change: Which means he has the pace of rate cuts and certainly slowed by at least you have certainty.
Speaker Change: Spreads on debt have continued to come in.
Speaker Change: We're as I said.
Speaker Change: In my remarks, we are refinancing of 230, sorry $293 million of MBS loan right now we're finding.
Speaker Change: The bid for <unk> is quite attractive.
Speaker Change: So thats all helping to fuel.
Speaker Change: The transactions market.
Speaker Change: And I think you also have.
Speaker Change: A very kind of pro business climate out there politically, which I think is giving people some amount of confidence.
Speaker Change: Certainly there is a lot of change and change introduces some uncertainty.
Speaker Change: But I think there are there are a lot of potential buyers out there that are welcoming that change thinking that it can really result in.
Speaker Change: Ultimately a strong environment economic environment for the country over the next few years.
Richard Stockton: So yeah, I think transaction volumes are going to be higher than last year.
Speaker Change: So yes, so constructive I think transaction volumes are going to be higher than last year.
Richard Stockton: If you want exact percentages, go to our brokers. But there's certainly a bid for assets. I think that will result in some cap rate compression as well and some interesting trades. So watch this space.
Speaker Change: Yes, if you want exact percentages go to go to our brokers.
Speaker Change: Yes.
Speaker Change: There is certainly is a bid for assets I think that will result in some.
Speaker Change: Cap rate compression as well.
Speaker Change: And some interesting trades so watch this space.
Speaker Change: Yes.
Operator: That's excellent, Kyla.
Michael Bellisario: Thank you for all that for the time. That's all.
Speaker Change: Okay. That's excellent color. Thank you for all of it for the time Thats all from me.
Operator: And that concludes our question-and-answer session.
Speaker Change: And that concludes our question and answer session I will now turn the call back over to management for closing remarks.
Richard Stockton: I will now turn the call back over to management for a closing remark. Thanks for joining our year-end earnings call, and we look forward to speaking with you again next quarter.
Speaker Change: Thanks for joining our year end earnings call and we look forward to speaking with you again next quarter.
Operator: This concludes our call today. Thank you all for joining.
Speaker Change: This concludes our call today. Thank you all for joining you may now disconnect.
Operator: You may now disconnect.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Sure.