Q4 2024 RLJ Lodging Trust Earnings Call
Speaker Change: Welcome to the RLJ Lodging Trust's fourth quarter 2024 earnings call. As a reminder, all participants are in listen-only mode, and the conference is being recorded.
Speaker Change: After the presentation, there will be an opportunity to ask questions. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. I would now like to turn the call over to Nikhil Bhalla, RLJ's Senior Vice President, Finance and Treasurer. Please go ahead.
Nikhil Bhalla: Thank you, operator. Good morning and welcome to RLJ Lodging Trust 2024, fourth quarter and full year earnings call.
Speaker Change: On today's call, Leslie Hale, our President and Chief Executive Officer, will discuss key highlights for the quarter.
Nikhil Bhalla: our Executive Vice President and Chief Financial Officer will discuss the company's financial results.
Speaker Change: Tom Barnett, our Chief Operating Officer, will be available for Q&A.
Speaker Change: Forward-looking statements made on this call are subject to numerous risks and uncertainties that may lead the company's actual results to differ materially from what had been communicated. Factors that may impact the results of the company can be found in the company's 10-K and other reports filed with the SEC.
The company undertakes no obligation to update forward-looking statements.
Speaker Change: Also, as we discussed certain non-GAAP measures, it may be helpful to review the reconciliations to GAAP located in our press link.
Speaker Change: Finally, please refer to the Schedule of Supplemental Information, which includes Performer Operating Results for our current hotel portfolio for 2024.
I will now turn the call over to Leslie.
Leslie Hale: Thanks, Nikhil. Good morning, everyone, and thank you for joining us.
Leslie Hale: We are very pleased with our fourth quarter results, which once again demonstrates the consistent and positive momentum in our urban-centric portfolio.
Leslie Hale: Our overall performance in the quarter culminated a year where we accomplished a number of key objectives.
Leslie Hale: This year we achieved top four-tile rough part growth that outpaced the industry, also expanding market share.
Leslie Hale: We acquired the Hotel Teatro in Denver. We completed three conversions in Houston, New Orleans, and Pittsburgh, bringing our total completed conversions to six. These assets achieve robust red part growth of over 10% in 2024.
Leslie Hale: We also advance our next wave of conversions within our multi-year pipeline, including our Nashville and Boston assets.
Additionally, we address all of our 2025 debt maturity.
Leslie Hale: We creatively recycle disposition proceeds into share repurchases, and we enhance shareholder returns by increasing our quarterly dividends.
Leslie Hale: Our solid performance this year highlights our portfolio's strong positioning relative to our ability to capture the evolving travel dynamics.
Leslie Hale: While our capital allocation demonstrates the optionality that our strong balance sheet provides to pursue multiple channels of growth and enhance shareholder returns.
Now turning to our operating performance.
Leslie Hale: Our rep par grew by 2.2% over the prior year, led by our urban markets, which represent two-thirds of our portfolio, and achieved 3.7% rep par growth during the fourth quarter.
Leslie Hale: Urban markets continue to benefit from improving trends across all demand segments, including corporate travel, robust group demand, fueled by city-wide, as well as other entertainment related events.
Leslie Hale: Additionally, the evolving travel patterns derived from work flexibility are also driving urban leisure demand.
Leslie Hale: Benefiting our urban lifestyle hotels that represent 40% of our portfolio and achieve 4.5% rep park growth during the quarter. These positive trends allowed many of our top urban markets to generate double-digit rep park growth.
Leslie Hale: Within the quarter, November achieved positive results, enabled by better than expected performance against a muted outlook for group and business travel around the election.
Leslie Hale: December was especially strong and we were pleased to see this momentum carry into January, which achieved 3.2% red part growth over last year.
Leslie Hale: From a segmentation standpoint, BT was once again our best-performing segment, achieving 8% revenue growth over the prior year, driven by both improving demand and continued pricing power, resulting in a 7% ADR increase.
Leslie Hale: Our midweek urban Rev Park growth of 4.1% is further evidence of improving BT.
Leslie Hale: Robust demand from SMEs, the broadening of corporate travel among large national accounts, and the increasing return to office mandates continues to be a tailwind for this segment.
Leslie Hale: Relative to group, despite the timing of the Jewish holidays in October and the muted demand around the election in November, our group segment performed well during the fourth quarter.
Leslie Hale: Group revenues grew by 3%, led by a 1% improvement in demand and a 2% increase in ADR.
Leslie Hale: Our group segment benefited from the continuing growth of small groups, as well as increases in corporate meetings and strong citywide volume in many of our key markets, such as Houston, New Orleans, South Florida, and Southern California.
Leslie Hale: Our group segment also benefited from incremental demand created by the remixing of our customer base from several transformational conversions and renovations in key markets such as Southern California.
Leslie Hale: Additionally, we were pleased with the recent performance in leisure that we saw during in the quarter as our leisure revenues grew by a strong 6% balance between rate and demand growth.
Leslie Hale: Our urban leisure revenues had a stronger pace of growth at 8%, disproportionately benefiting from special events in a number of markets.
Leslie Hale: We were encouraged to see strong leisure demand, particularly around the holidays, demonstrating the continuing desire to travel by consumers.
Leslie Hale: Collectively, these trends enabled our out-of-room spend to achieve robust growth of 6.3%, leading total revenues to grow by 3%, which once again outpaced our Red Park growth.
Leslie Hale: This top-line growth, combined with our focused approach to managing operating expenses, allowed our EBITDA to increase over the prior year for the second consecutive quarter.
Leslie Hale: With respect to capital allocation, during the fourth quarter, we officially relaunched the former Wyndham-Pittsburgh as a Courtyard Pittsburgh University Center.
Leslie Hale: We completed this conversion ahead of schedule and are already seeing early success, with its fourth quarter rep part increasing by 14% year-over-year, which is 24% ahead of 2019 levels.
Leslie Hale: We expect this hotel to generate outsized growth as it benefits from its prime location on the university's campus and by joining the Marriott system.
Leslie Hale: During the fourth quarter, we also advanced our Nashville and downtown Pittsburgh conversions, keeping us on pace with our cadence of completing two conversions per year.
Leslie Hale: And finally, we continue to ramp our conversions in Charleston, Mandalay Beach, Santa Monica, Houston, and New Orleans, which collectively achieved robust red part growth of 21% in the fourth quarter.
Leslie Hale: Additionally, during the year, we utilize the flexibility of our strong balance sheet to acquire the Wyndham-Boston Beacon Hill and the Hotel Teatro using existing liquidity.
Leslie Hale: to redeploy disposition proceeds, to accretively repurchase $22 million in stock, to raise our quarterly dividend by 50%, and to improve our debt maturity ladder by addressing our 2025 maturities.
Leslie Hale: Our balance sheet will continue to provide us with optionality in 2025 and beyond. As it relates to external growth, we expect the transaction market to improve throughout the year. That said, as we have demonstrated, we will remain disciplined and thoughtful with respect to capital allocation.
Leslie Hale: Now, looking ahead, while we expect headline volatility to persist, we are encouraged by the potential for lodging fundamentals to accelerate in a more business-friendly economic environment, assuming less regulation, lower taxes, and positive momentum in return to office mandates.
Leslie Hale: However, under our baseline assumptions, we expect the lodging industry to achieve low single-digit repertoire growth with moderating operating expense growth.
Leslie Hale: We believe that urban markets will remain especially well-positioned and should continue to outperform the industry and light a broad-based growth across multiple segments of demand.
Leslie Hale: Most notably, small groups, which represents the majority of our bookings.
Leslie Hale: We are encouraged that our 2025 group pace is mid-single digits ahead of 2024, with our first quarter pace up low double digits.
Leslie Hale: Business transient should continue to have positive momentum and improve as return to office mandates increase. And leisure is expected to remain stable in light of low unemployment and a general healthy consumer.
Leslie Hale: Against this backdrop, we believe that we have a favorable footprint, which positions us well for the year given markets such as Northern California, where citywide room nights are up over 60% above prior years.
Leslie Hale: Southern California should benefit from a strong San Diego citywide calendar and improving aerospace demand.
Leslie Hale: Boston should benefit from a robust citywide calendar and improving business travel with incremental lifts from industries such as biotech and higher education.
Leslie Hale: and Washington, D.C. and New Orleans, having benefited from the presidential inauguration and the Super Bowl so far this year.
Leslie Hale: As we look beyond the current year, we remain positive on the outlook for lodging fundamentals, given the broader consumer trends that continue to favor experiences over goods, and secular trends in BT as well as food presence.
Leslie Hale: These trends will disproportionately favor urban markets, especially against a prolonged period of limited new supply.
Leslie Hale: With respect to this backdrop, we are especially well-positioned given that our high-quality urban portfolio is built to capture outsized growth relative to the industry.
The continued ramp of our completed conversions.
Leslie Hale: our Future Pipeline of Conversion, and our Strong Free Cash Flow and Balance Sheet, which will continue to drive both internal and external growth in addition to enhancing shareholder returns.
Sean: I am incredibly proud of our entire team, including our dedicated operators, whose contributions have set us up to create shareholder value in the coming year ahead. With that, I'll turn the call over to Sean.
Sean.
Sean: Thanks, Leslie. To start, our comparable numbers include our 95 hotels owned at the end of the fourth quarter. Our reported corporate adjusted EBITDA and FFO include operating results from all sold and acquired hotels during RLJ's ownership period.
Sean: We are pleased to report solid fourth quarter operating results which demonstrated the strength and resiliency of our high-quality urban-centric portfolio.
Sean: Our fourth quarter REPAR growth of 2.2% was driven by a 2.5% increase in ADR, which was slightly offset by a 0.2% decline in occupancy.
Sean: Our business transient and midweek continues to outperform. Fourth quarter business transient REPAR grew 8% above 2023, including healthy ADR growth of 7% and occupancy growth of 1%.
Sean: Total revenue growth of 3% continued to outpace Red Park growth as a result of continued strength and out-of-room spend.
Threat part growth remained healthy in our urban market.
Sean: such as Norleen at 27%, Chicago CBD at 19%, Houston at 18%, New York at 11%, San Diego at 9%, Los Angeles at 8%, and Louisville at 7%.
Sean: Monthly RETPAR achieved positive growth during each month of the 4th quarter and was 2.2% in October.
Sean: 0.3% in November, which was constrained by the election, and 4.3% in December.
Sean: Our preliminary January red part growth is 3.2% above prior year.
Sean: Turning to the current operating cost environment, as we expected, our operating cost growth rates continued to moderate during the fourth quarter.
Sean: Our total hotel operating cost growth was only 3.9%, which underscores the benefits of our portfolio construct and our initiatives to manage our operating cost growth.
Sean: Drilling down further into hotel operating expenses, as expected, prior outsized growth and fixed costs, such as insurance and property taxes, benefited from the lapping of difficult comps during the first half of the year.
Sean: successful property tax appeals, and the renewal of our property insurance program in November, where annual premiums decreased over 10%.
Sean: During the fourth quarter, our portfolio achieved hotel EBITDA of $90.4 million, representing $0.5 million of growth above 2023 and hotel EBITDA margins of 27.4%.
Sean: We were pleased with our operating margin performance, which were only 67 basis points behind the fourth quarter of 2023.
Sean: Turning to the bottom line, our fourth quarter adjusted EBITDA was $81.1M and adjusted FFO per diluted share was $0.33.
Sean: We continue to actively manage our balance sheet to create additional flexibility and further lower our cost of capital.
Sean: During 2024, we addressed all of our 2024 and 2025 debt maturities, including entering into a new $500 million term loan. We will continue to take steps during 2025 to proactively address our 2026 debt maturities.
Thank you.
Sean: We ended the fourth quarter with a well-positioned balance sheet, with $500 million available under our corporate revolver, a current weighted average maturity of approximately 3.4 years.
87 of our 95 hotels unencumbered by debt.
Sean: an attractive weighted average interest rate of 4.6% and 69% of debt either fixed or hedged.
Sean: As it relates to our liquidity, we ended the fourth quarter with over $0.9 billion of liquidity and $2.2 billion of debt.
Sean: With respect to capital allocation, as we have demonstrated in the past, we intend to invest in projects to unlock the embedded value within our portfolio, while also remaining committed to returning capital to shareholders through both sharer purchases and dividends.
Sean: During 2024, we were active under our $250 million share purchase program.
and successfully recycled 100% of the non-core disposition proceeds.
Sean: towards their purchase of approximately 2.3 million shares for $22 million and an average price of $9.39 per share.
Sean: We've been active so far in 2025 and have repurchased approximately 1.2 million shares for $12 million and an average price of $9.77 per share.
Sean: Additionally, our quarterly dividend of $0.15 per share is well covered and supported by our free cash flow.
Sean: We will continue making prudent capital allocation decisions to position our portfolio to drive growth during the entire lodging cycle, while monitoring the financing markets to identify additional opportunities to improve the laddering of our debt maturities, reduce our weighted average cost of debt, and increase balance sheet flexibility.
Sean: Turning to our outlook, based on our current view, we are providing full year 2025 guidance that anticipates the continuation of the current operating and macroeconomic environment.
Sean: For 2025, we expect comparable REBPAR growth to range between 1% and 3%.
Comparable hotel EBITDA, between $378 million and $408 million.
Corporate adjusted EBITDA.
Sean: between $345 million and $375 million, and adjusted FFO per diluted share to be between $1.46 and $1.66, which incorporates shares repurchased to date, but no additional repurchases.
Our Outlook assumes no additional acquisitions, dispositions, or refinancing.
Sean: We estimate 2025 ROJ capital expenditures will be in the range of $80 million to $100 million.
Sean: Cash G&A will be in the range of $34 million to $35 million and Expect Net Interest Expense will be in the range of $94 million to $96 million.
Sean: We also expect total revenue growth will continue to outpace Red Park growth due to continued success in our initiatives to drive out-of-room spend.
Sean: Our 2025 Outlook Ranges incorporated anticipated displacement from scheduled 2025 renovations in certain high occupancy markets such as Waikiki, South Florida, and New York.
Sean: These renovations will be transformational and should create strong growth in 2026 and beyond.
Sean: Additionally, our Outlook ranges incorporate the second quarter closure of the Austin Downtown Convention Center, which is being significantly expanded to position Austin for long-term success.
Sean: With respect to the cadence for the year and to assist with modeling, we expect 2025 to follow similar quarterly seasonal patterns as 2024 and expect first quarter adjusted EBITDA to be between 74 million dollars and 77 million dollars.
Sean: Thank you and this concludes our prepared remarks. We will now open the line for Q&A. Operator?
Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions.
Speaker Change: Thank you. Our first question comes from the line of Michael Bellisario with Baird. Please proceed with your question.
Thank you. Good morning, everyone.
Sure.
Speaker Change: Mike, our high-end and low-end is really a derivative off of our base assumption. Our base assumption is that the momentum from 2024 continues in 2025.
Speaker Change: that we continue to see a mix of RATE and OCK.
Speaker Change: and that urban continues to outperform the industry as urban is benefiting from all the different segments.
Speaker Change: and it's got the most room for growth. So when we look at BT...
Speaker Change: Our base assumption is that who's traveling, the frequency of travel, the length of stay is benefiting mid-week trends and that's going to continue.
Speaker Change: from a group perspective that we mentioned in our prepared remarks that our pace is strong with mid-single digits and we have a favorable footprint that you articulated as well. We think that on the group side it's going to mostly be driven by rate and that leisure remains stable and that we're benefiting from urban leisure.
Speaker Change: and our conversions. So when we look at the high end and the low end, on the high end we assume that the macro conditions remain steady and that BT performs ahead of our baseline assumption both on rate and demand.
Speaker Change: and that group has a stronger demand growth in addition to rate growth, which is different from our base assumption.
Speaker Change: and that there's no real change in leisure on the high end. On the low end...
Speaker Change: You know, it assumes that the pace of growth for BT is slower and that group has less rate growth on the low end.
Speaker Change: And, you know, another variation could be if urban leisure, you know, softens relative to overall leisure. And then lastly, there's a scenario where we could have a little bit of incremental displacement from some of the renovations. But those are sort of the puts and takes, but it's all a derivative off of our, you know, off of our base assumption.
Speaker Change: Okay, that's helpful. And then just switching gears a little bit just on your capital allocation priorities, maybe what's the stack ranking for 25 as you sit here today and how might that differ from what your priorities were in 2024? Thank you.
Speaker Change: Mike, what I would say is is that I think we have to acknowledge that the current environment is not static and that the backdrop just continues to evolve and that requires us to be nimble as it relates to capital allocation and give and having a strong balance sheet gives us the optionality.
Speaker Change: So, you know, we have consistently demonstrated the ability to pick the right windows and use different tools.
Speaker Change: We've done it for the last couple of years, including 2024, where you saw us buy back stock with recycled proceeds from dispositions.
Speaker Change: We invested in our conversions that have yielded great results, as we've mentioned in our prepared remarks, they're up 10%.
Speaker Change: for the full year and 24% in the fourth quarter. We acquired two assets that have expanded our conversion pipeline and we increased our dividend.
Speaker Change: And so we're going to continue to be nimble. We're going to evaluate the windows, looking at the direction of the fundamentals, looking at the macro backdrop, and looking at, you know, keeping an eye on our balance sheet.
Speaker Change: But I think that we've demonstrated, you know, the ability to do that. Obviously, as we move into the year, we've continued to be active on the buybacks, given where stocks are trading today. But you're going to still see us be nimble and look for the right windows, as we've done for the last couple of years.
Thanks, that's all for me.
Speaker Change: Our next question comes from the line of Jonathan Jenkins with Oppenheimer. Please proceed with your question.
Jonathan Jenkins: Good morning. Thank you for taking my questions. Just following up on that capital allocation discussion, the conversions continue to perform very well, and you talked in the past about your cadence of, I think, to a year and around potentially on the 10, potentially on the radar.
Jonathan Jenkins: Does that continued strength change the formula in terms of how aggressive you think about that annual cadence and potentially maybe leaning into and accelerating that pipeline going forward?
Jonathan Jenkins: Yeah, no, I think, you know, great question. We appreciate that. I think from a Cayden standpoint, the way we view is layering in a couple per year is the right thing from both, you know, how we think about, you know, allocating our capex dollars, but also, you know, how the, the, our contracts that provide us the optionality line up. And so, you know, from a standpoint of just making sure that we have built a portfolio that is, that we are constantly sprinkling in incremental growth catalysts.
Thanks for joining us.
Jonathan Jenkins: Very, very helpful. And then switching gears, can you help us think about the transaction market more recently, you know, how buyers' and sellers' expectations have evolved as of late, and then maybe dive into your outlook of an improving market in 2025 and the key drivers of that view?
Jonathan Jenkins: Yeah, look, I would say that if I look at last year, clearly, you know, interest rates improved and access to debt, you know, improved as well.
Jonathan Jenkins: But there's really no clear themes through the transactions. You really have to look at things on an asset-by-asset basis, transaction-by-transaction in terms of what's the catalyst.
Jonathan Jenkins: and so while I think there's some general optimism that the back half of the year will be better than the beginning of this year you know I think you have to just remain opportunistic you know in this in this climate which our balance sheet gives us ability to do I think that as the headline volatility reduces and we see some improvement on the stabilization of margins I think that's going to help bode well for you know for transaction market.
Speaker Change: Okay, that's very helpful. Thank you for all the color. That's all for me.
Great, thank you and good morning everybody.
Speaker Change: You highlighted in the fourth quarter that ADR was true, you know, REVPAR was really driven entirely by ADR growth.
levels are tracking today.
Speaker Change: It's the extent we stay in a little bit of a slower...
Rep for Growth Environment.
Speaker Change: Yeah, awesome. Thanks for the question. You know, our general perspective is that the rate momentum will continue and that it's been, you know, broad-based across all of our markets.
It's largely coming from group and BT.
Speaker Change: And it's really a function of, you know, who's traveling, right? So we've seen the increase in national counts. They are your, you know, least price-sensitive, highest-rated customer that's coming back. And we're seeing an increase across the GDS.
You know...
Speaker Change: BT revenues overall using special corporate as a proxy were at about 81% of 2019 levels So there's still room to growth and I think the other thing is that when you look historically at where?
You know ET rate sits relative to group
Speaker Change: Right now, today, it's 15% below group, but historically it was 15% above. Now what I'll tell you is that this time last year, BT was 20% below group, and so you saw a 500 basis point pickup in the year. We expect that gap will continue to close. We don't know where it's going to settle or what degree, but we think there's opportunity and room for rate to grow on BT's side.
Speaker Change: We also think that, you know, group has shown real strength on the, you know, on the rate side. It was up 2% in the fourth quarter, 3% for the year. And that's really a function of corporate group being strong, small group being strong, and driving rates.
Speaker Change: And so each incremental amount of demand is going to help push that rate. So we feel pretty good, you know, about the rate, trajectory, and pricing power.
Speaker Change: And then, Austin, one incremental data point, we gave the REV PAR growth for January at 3.2%. That was all driven by rate as well, and so that's carried forward into 2025, which is a good data point from a momentum perspective.
Speaker Change: Yeah, that's all really helpful detail. So I guess given the assumption and guidance for Rev-Park growth to be a mix of rate-
occupancy to the
Thank you for your attention and guidance.
Speaker Change: I mean, our margin range is anywhere from, you know, sort of 30 basis points at the low end down to, you know, high ones at the low end, sort of 100 basis points in the middle.
Speaker Change: stating the obvious, rate-driven red part growth is going to flow more to the bottom line than occupancy. I think our view is that if rate takes more center stage, that would allow us to get to the lower end of that margin range, which is, as I said, about 30 basis points down at 24.
Speaker Change: Let me just clarify on that last comment, if you hit the midpoint of rev par around call it 2% I believe, but it's all rate driven, does that enough to get you to the low end without rev par outperforming initial expectations?
Speaker Change: No, that would likely get us between the low end and the midpoint.
Understood, thank you.
Speaker Change: Our next question comes from the line of Gregory Miller with Truist. Please proceed with your question.
Thanks. Good morning. Good morning all.
Speaker Change: I'd like to start off with a market-specific question and ask about LA. I'm curious how impactful, if impactful, the LA fires were to your Pearside Hotel and perhaps others in the greater LA area like Zucari Dunes.
Speaker Change: Yeah, look I would say that in general we obviously mentioned that January was a strong, you know, month for us and that's a function of a lot of markets but LA was one of those that benefited from, you know, obviously some of the fire relief you know we saw that in our market from a positive perspective.
Speaker Change: Yeah, Greg, we participated in the program, if you recall, when Hilton announced.
Speaker Change: primarily trying to, you know, capture some of the folks that were dislocated. And so whether it was the Zachary Dunes up in, you know, Oxnard to avoid the PCH.
Speaker Change: Pearside as well as LAX and Hollywood which we had to evacuate we did see some demand come from that and we'll continue to see additional demand through February a little bit as well through that so unfortunate but yes we did have quite a few of the folks that were displaced.
And maybe sticking with that topic, what are your expectations?
Speaker Change: for the rest of the year in terms of the degree of fall off you might see from transient leisure or transient corporate related fires or is the expectation that that
Speaker Change: That concern and the headlines that we're seeing in the news might have a dissipated impact in terms of potential demand loss to those hotels.
Speaker Change: Yeah, what I would say, Greg, is that our budgets were not built around, you know, the fire. And so, you know, our performance and our assumptions don't include
Speaker Change: It's obviously improving in terms of the conditions for individuals on the ground as they find permanent housing, so it's not baked into our broader numbers.
Okay, thanks, appreciate it.
Speaker Change: Our next question comes from Dory Keston with Wells Fargo. Please proceed with your question.
Dory Keston: Thanks, good morning. What are your expectations for urban leisure versus resort leisure on the demand and rate side this year if they're materially different?
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Speaker Change: You know, we have a favorable setup in a number of markets relative to special events.
Speaker Change: You know, we've got Mardi Gras and NOLA, which is, the timing of it is slightly different than normal years, so we'll benefit from that. So I think when we look across our markets, there's a lot of benefit on the special event side that our footprint has a favorable disposition towards.
Speaker Change: And is there any update that you provided regarding the lease negotiation out in San Diego?
Speaker Change: We're obviously still in active discussions, but what I would say is that it's moving very in a favorable way, and we are pleased with the direction and hope to be able to give an update later this year.
Okay, great. Thanks so much.
Speaker Change: Our next question comes from the line of Flores Van Dykem with Compass Point. Please proceed with your question.
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Thank you.
Nikhil Bhalla: Morning. Leslie, I have a question for you on your conversions. You've got six conversions that you've completed. In terms of stabilized, I don't know how many of those you would deem as being stabilized today, but what's the range of returns on stabilized projects?
And 24 over 23 was up 24%.
Nikhil Bhalla: You know, Red Par was up about 12% for those three assets. And so we're continuing to ramp on those assets, you know, even the ones that were converted a couple of years ago. And then the phase two conversions, and Tom can provide color as well on the ground. You know, Tenel and Orleans was, you know, Red Par was up 40% year over year. In Houston, Red Par was up 8%. So even though we're earlier in the ramp, they are all generating returns,
Nikhil Bhalla: access of what we initially underwrote. So super excited about them.
Nikhil Bhalla: And I think the common themes that we're seeing, Flores, is when you think about contribution from the brand, you know, we talked about the next three, which is Houston and the Hilton system.
Nikhil Bhalla: NOLA, which is Hotel Tenel, which is a tribute in the Marriott system, and then Pittsburgh, which is most recently, you know, converted a courtyard. They're all giving much more contribution, whether it's through the Marriott or Hilton system.
Nikhil Bhalla: You also see a change in the mix, you know, whether it's group or corporate, leisure, higher-end, redemptions in locations that are attractive, you know, when there's, you know, reasons to go there for leisure. And then less OTAs paying less percentage. So higher ADRs.
Nikhil Bhalla: higher REVPAR indexes, and then more importantly, what Sean mentioned, higher EBITDA returns. And that's where we're seeing the general theme, where rates moving to a place where it's already in the market, and now we're taking our rightful place.
Thank you.
Nikhil Bhalla: By the way, I think that one of the key things is not just higher REV-BAR, but higher EBITDA margins. I think it's important. Remind us as well what your current delta is in your, particularly in your urban portfolio relative to, I know that you've been talking about how most of the growth in REV-BAR right now is driven off of ADR, but what's the occupancy upside or delta still to get back
and other speakers.
Speaker Change: Yeah, let me start, Lars, and I'll kick it over to Tom. So within our total portfolio, we're at 94% of 19 levels of occupancy. Within the segments, special corporates, a little over 90% of 19 levels of occupancy and groups around 90%. So that's where we see the terrific ramp and opportunity as you return to office and groups continue to travel.
Indian Island News, ISSN and Outlook.
Speaker Change: and just to drill down a little further and that is when you look at day a week
Leslie Hale: And I think when we layer in group, depending upon positioning, we also have that opportunity to influence weekends, in addition to what Leslie mentioned about corporate group coming back.
Speaker Change: And when Corporate Group comes back, Flores, we get banquets, we get room rental, we're seeing F&B profit margin go up, and a lot of our renovations that were beverage-centric, you know, creating that light meal, a bar experience in these new spaces, that's what's helping us on the profitability side as well.
Thank you.
Thanks, guys.
Speaker Change: Our next question comes from line of Chris Rocha with Deutsche Bank. Please receive your question.
Good morning, everyone. Thanks for taking the question.
Chris Rocha: I just wanted, for a minute, if we could circle back to the January commentary, especially with the rate growth. I'm curious if you kind of isolated San Francisco and New Orleans, which I know had some benefits in them.
Chris Rocha: you know, a different run rate that we'd be looking at. I mean, I know we've seen February has, you know, been a little bit different for the industry than January. So just if there's anything you think is a better run rate next to those markets that had benefits. Thanks.
Speaker Change: I mean we had a number of markets that performed well in January but I appreciate your comment obviously DC you know outperformed because the inauguration but you know the other markets because of for example Pittsburgh where we have a conversion ramping up you know Atlanta had the NCAA championships you know so there was a number of markets that helped us but to your point there were some out outsized markets on that what I would say from a you know cadence perspective
and the panel.
Speaker Change: and then you've got some key markets with CityWise and the better in the back half.
Speaker Change: If we drill down on Q1, obviously January being the strongest month, I think that we think that February is going to come in line with the midpoint of our...
Speaker Change: of our guidance, and March is going to be positive, but the spring break is going to be spread over March and April.
Speaker Change: And the one additional color is that February will have one less day and so that won't impact REVPAR but will impact profitability compared to last year.
Speaker Change: Gotcha, thanks for all the color and just as a follow-up this is a question about the
Speaker Change: and Nick. I don't know if we've reached peak yet of brand companies.
Speaker Change: writing checks for big conversions, but it feels like we're a little closer. Any updated thoughts either towards a branding or just a non-encumbered sale, given how strongly the New York market has recovered?
Speaker Change: Yeah, I mean while the New York market is strong, definitely from an operating perspective, the fact of the matter is the transaction market, as I mentioned before, remains choppy. It's not the right backdrop to sell an asset of that irreplaceable, you know, real estate location. But, you know, point taken in terms of how the market is performing. You know, I would say in terms of brands, you know, there is an opportunity to always, you know, have conversations with brands, and we have those from time to time.
Speaker Change: It just hasn't made sense to put a brand on that hotel as we sit today. We've had tremendous success as a team walk through on our brands. We are very good at identifying what brand should sit on a hotel, how that brand will perform and what the box can be. And at this junction, we haven't found a brand that we think makes sense for the NIC.
Okay, fair enough. Thanks, Leslie.
Thank you. Thank you.
Speaker Change: Our next question comes from a line of Chris Darling with Green Street Advisors. Please proceed with your question.
Chris Darling: I'm going to be talking about the the the the the the the the the the the the the the
Chris Darling: Leslie, I just want to circle back to the comment you made earlier about BT rates still being about 15% below group. I was curious, is that pretty consistent across the portfolio, or do you see noticeable differences by market? And to the extent you do, I'd be curious to know what's driving that, whether it's return to office or something else.
at Aggregate Demand.
Chris Darling: What we always knew that the puts and takes would be slightly differently. So I think the point isn't so much that we're projecting that BT is going to get back to its historical relationship. What we're saying is that there's room to grow and we don't know exactly where it's going to land, but we think it's going to improve from where it's at today.
That's the last thing I would add to Leslie's comments.
Chris Rocha: If you think about dynamic pricing, Chris, the one shift that's taken place...
Chris Rocha: significantly for the SMEs is they're buying at what's called bar or retail.
Chris Rocha: and that's our highest percentage of our mix within the transient category.
Chris Rocha: And so that's where you have your highest rate. So that's replaced some of the BT that used to go to corporate under fixed.
where that customer is coming back at that level.
Chris Rocha: The other thing we're noticing and monitoring is how they book.
Leslie Hale: And so when Leslie was talking about corporate coming back, we're seeing global distribution systems starting to rise up. And that's because of the national corporate accounts that go through that category.
Leslie Hale: and then lastly brand.com. We're seeing more and more people going direct.
Leslie Hale: So those are the, you know, factors that we kind of see is room in the tank and how they're booking and the channels of how they, you know, see us.
Leslie Hale: Okay, understood. That's all helpful to hear. And then just one more quick one for me. What's embedded in your outlook for the Bay Area this year? Fair to say that, you know, we should be expecting REVPAR sort of above the midpoint of your overall guidance range?
that have rotated back from Las Vegas.
to San Francisco, most notably Microsoft and Workday.
Leslie Hale: Additionally, the return to office mandates from some major tech companies like Google, Amazon, and Salesforce, and so we're thinking collectively those things will help San Francisco, but yes, you're right, you would look at San Francisco being above the midpoint.
Speaker Change: Ms. Hale, we have no further questions at this time. I would like to turn the floor back over to you for closing comments.
Leslie Hale: Well we want to thank everybody for joining us today and we look forward to seeing many of you in the coming weeks at various conferences. We'll be able to provide further update. Thank you guys.
Speaker Change: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.